UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark one)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2021
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: 2-65481
SADDLEBROOK RESORTS, INC.
(Exact name of registrant as specified in its charter)
Florida | 59-1917822 | |
(State of incorporation) | (IRS employer identification no.) |
5700 Saddlebrook Way, Wesley Chapel, Florida 33543-4499
(Address of principal executive offices)
813-973-1111
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES ☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of accelerated filer, large accelerated filer, smaller reporting company and emerging growth company in Rule 12b-2 of the Exchange Act.:
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒
Registrant has 100,000 shares of common stock outstanding, all of which are held by an affiliate of the Registrant.
INDEX
Page | ||||
PART I - FINANCIAL INFORMATION |
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Item 1. Financial Statements |
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Saddlebrook Resorts, Inc. |
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3 | ||||
4 | ||||
Statements of Cash Flows for the three months ended March 31, 2021 and 2020 |
5 | |||
6 | ||||
Saddlebrook Rental Pool Operation |
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11 | ||||
Statements of Operations for the three months ended March 31, 2021 and 2020 |
12 | |||
13 | ||||
14 | ||||
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |
15 | |||
Item 3. Quantitative and Qualitative Disclosures About Market Risk |
17 | |||
17 | ||||
PART IIOTHER INFORMATION |
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17 | ||||
18 | ||||
19 |
- 2 -
Item 1. Financial Statements
SADDLEBROOK RESORTS, INC.
BALANCE SHEETS
March 31, 2021 (Unaudited) |
December 31, 2020 |
|||||||
Assets |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 1,744,560 | $ | 235,245 | ||||
Escrowed cash |
942,488 | 977,391 | ||||||
Trade accounts receivable, net |
654,559 | 483,561 | ||||||
Due from related parties |
3,048,250 | 2,539,401 | ||||||
Resort inventory and supplies |
801,223 | 847,527 | ||||||
Prepaid expenses and other assets |
356,942 | 542,233 | ||||||
|
|
|
|
|||||
Total current assets |
7,548,022 | 5,625,358 | ||||||
Property, buildings and equipment, net |
12,739,819 | 13,106,914 | ||||||
Operating lease right-of-use assets |
54,507 | 73,573 | ||||||
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|
|
|
|||||
Total assets |
$ | 20,342,348 | $ | 18,805,845 | ||||
|
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|
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Liabilities and Shareholders equity |
||||||||
Current liabilities |
||||||||
Current portion of long-term debt |
$ | 6,654,621 | $ | 6,664,219 | ||||
Current portion of Paycheck Protection Program loan |
2,784,746 | 1,474,278 | ||||||
Current portion of finance lease liabilities |
104,326 | 102,649 | ||||||
Current portion of operating lease liabilities |
54,507 | 73,573 | ||||||
Escrowed deposits |
942,488 | 977,391 | ||||||
Accounts payable |
506,424 | 477,024 | ||||||
Accrued rental distribution |
766,913 | 221,528 | ||||||
Accrued expenses and other liabilities |
1,204,025 | 1,007,001 | ||||||
Current portion of deferred income |
585,777 | 696,544 | ||||||
Guest deposits |
1,233,527 | 2,002,139 | ||||||
Due to related parties |
1,475,620 | 1,186,165 | ||||||
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|
|
|
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Total current liabilities |
16,312,974 | 14,882,511 | ||||||
Long-term portion of Economic Injury Disaster loan |
150,000 | 150,000 | ||||||
Long-term portion of Paycheck Protection Program loan |
2,163,806 | 1,474,278 | ||||||
Long-term finance lease liabilities |
121,521 | 149,714 | ||||||
Deferred income |
710,280 | 643,307 | ||||||
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|
|
|
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Total liabilities |
19,458,581 | 17,299,810 | ||||||
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|
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Commitments and contingencies (Note 11) |
||||||||
Shareholders equity |
||||||||
Common stock, $1 par, 100,000 shares authorized, issued and outstanding |
100,000 | 100,000 | ||||||
Additional paid-in capital |
1,013,127 | 1,013,127 | ||||||
(Accumulated deficit) retained earnings |
(229,360 | ) | 392,908 | |||||
|
|
|
|
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Total shareholders equity |
883,767 | 1,506,035 | ||||||
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|
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Total liabilities and shareholders equity |
$ | 20,342,348 | $ | 18,805,845 | ||||
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The accompanying Notes to Financial Statements are an integral part of these financial statements
- 3 -
STATEMENTS OF OPERATIONS
AND (ACCUMULATED DEFICIT) RETAINED EARNINGS
(Unaudited)
Three Months ended March 31, |
||||||||
2021 | 2020 | |||||||
Resort revenues |
$ | 4,312,338 | $ | 7,251,566 | ||||
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|
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|
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Costs and expenses: |
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Operating costs of resort |
3,741,586 | 5,707,139 | ||||||
Sales and marketing |
78,360 | 350,781 | ||||||
General and administrative |
611,616 | 693,187 | ||||||
Depreciation |
368,780 | 498,027 | ||||||
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|
|
|
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Total costs and expenses |
4,800,342 | 7,249,134 | ||||||
|
|
|
|
|||||
Net operating (loss) income before other (income) expense |
(488,004 | ) | 2,432 | |||||
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|
|
|
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Other (income) expense: |
||||||||
Other income |
(5,466 | ) | (5,312 | ) | ||||
Interest expense |
139,730 | 90,472 | ||||||
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|
|
|
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Total other expenses, net |
134,264 | 85,160 | ||||||
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|
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Net loss |
(622,268 | ) | (82,728 | ) | ||||
Retained earnings at beginning of period |
392,908 | 4,929,385 | ||||||
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|
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(Accumulated deficit) retained earnings at end of period |
$ | (229,360 | ) | $ | 4,846,657 | |||
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|
The accompanying notes are an integral part of these financial statements
- 4 -
STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended March 31, |
||||||||
2021 | 2020 | |||||||
Operating activities: |
||||||||
Net loss |
$ | (622,268 | ) | $ | (82,728 | ) | ||
Non-cash items included in net loss: |
||||||||
Depreciation |
368,780 | 498,027 | ||||||
Gain on the disposal of assets |
- | (6,000 | ) | |||||
Bad debt expense |
- | 3,143 | ||||||
Amortization of debt financing costs |
89,152 | 2,881 | ||||||
Amortization of operating lease right-of-use assets |
19,066 | 18,048 | ||||||
Interest paid on finance leases |
3,670 | (5,161 | ) | |||||
Decrease (increase) in: |
||||||||
Accounts receivable |
(170,998 | ) | (159,616 | ) | ||||
Inventory and supplies |
46,304 | 15,313 | ||||||
Prepaid expenses and other assets |
185,291 | (116,620 | ) | |||||
(Decrease) increase in: |
||||||||
Checks issued in excess of cash and cash equivalents |
- | 301,116 | ||||||
Escrowed deposits |
(34,903 | ) | (147,586 | ) | ||||
Accounts payable |
29,400 | 14,409 | ||||||
Accrued rental distribution |
545,385 | 428,389 | ||||||
Guest deposits |
(768,612 | ) | (871,190 | ) | ||||
Accrued expenses and other liabilities |
197,020 | (206,748 | ) | |||||
Deferred income |
(43,794 | ) | 7,836 | |||||
Operating lease liabilities |
(19,066 | ) | (18,048 | ) | ||||
|
|
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|
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Cash flows from operating activities |
(175,573 | ) | (324,535 | ) | ||||
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|
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Investing activities: |
||||||||
Capital expenditures |
(1,685 | ) | (56,369 | ) | ||||
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|
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Cash flows from investing activities |
(1,685 | ) | (56,369 | ) | ||||
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|
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Financing activities: |
||||||||
Payments on long-term debt |
(98,750 | ) | (88,141 | ) | ||||
Proceeds from Paycheck Protection Program loan |
2,000,000 | - | ||||||
Payments on finance lease obligations |
(30,186 | ) | (19,782 | ) | ||||
Net (payments to) advances from related parties |
(219,394 | ) | 15,545 | |||||
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|
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Cash flows from financing activities |
1,651,670 | (92,378 | ) | |||||
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|
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Net change in cash, cash equivalents, and escrowed cash |
1,474,412 | (473,282 | ) | |||||
Cash, cash equivalents, and escrowed cash at beginning of period |
1,212,636 | 1,449,770 | ||||||
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|
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Cash, cash equivalents, and escrowed cash at end of period |
$ | 2,687,048 | $ | 976,488 | ||||
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Supplemental disclosure of cash flow information: |
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Cash paid for interest |
$ | 29,239 | $ | 87,591 | ||||
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The accompanying notes are an integral part of these financial statements
- 5 -
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
Saddlebrook Resorts, Inc. (the Company) developed and operates Saddlebrook Resort, which is a condominium hotel and resort located in Wesley Chapel, Florida.
The Companys accompanying balance sheet for March 31, 2021, and its statements of operations and accumulated earnings and cash flows for the three month periods ended March 31, 2021 and 2020, are unaudited but reflect all adjustments which are, in the opinion of management, necessary for the fair presentation of the results for the interim periods presented. All such adjustments are of a normal recurring nature. The balance sheet at December 31, 2020 has been derived from the audited financial statements as of that date.
The Companys business is seasonal. Therefore, the results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for future interim periods or the full fiscal year.
These financial statements and related notes are presented for interim periods in accordance with the requirements of Form 10-Q and Article 10 of Regulation S-X, and, consequently, do not include all disclosures normally required by accounting principles generally accepted in the United States. Accordingly, these financial statements and related notes should be read in conjunction with the Companys Annual Report on Form 10-K for the year ended December 31, 2020.
- 6 -
Note 2. Revenue
Revenue Recognition
Resort revenues are recognized as services are performed or products are delivered with the exception of initiation fee revenue, which is recognized over the average life of the memberships. Resort revenues also include rental revenues for condominium units owned by third parties participating in the Rental Pool. If these rental units were owned by the Company, normal costs associated with ownership such as depreciation, real estate taxes, unit maintenance and other costs would have been incurred.
Contract Balances
Timing differences among revenue recognition may result in contract assets or liabilities. Contract liabilities consists of guest deposits and deferred income and totaled approximately $2,530,000 and $3,342,000 as of March 31, 2021 and December 31, 2020, respectively. Contract assets consist of escrowed cash relating to rental pool owner deposits for the maintenance reserve fund and long-term security deposits and totaled approximately $942,000 and $977,000 as of March 31, 2021 and December 31, 2020, respectively.
The Companys net trade accounts receivables were $655,000 and $484,000 as of March 31, 2021 and December 31, 2020, respectively. Trade accounts receivable are stated in the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through a charge to earnings and a credit to the allowance of doubtful accounts based on its assessment of the current status of individual accounts. Balances still outstanding after management has used reasonable collection efforts are written off through a charge to the allowance of doubtful accounts and a credit to trade accounts receivable. Changes in the allowance for doubtful accounts have not been material to the consolidated financial statements.
Performance Obligations
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 transactional and the contracts performance obligation is generally satisfied at the time of the transaction.
Note 3. Trade Accounts Receivable
Actual | ||||||||
3/31/2021 | 12/31/2020 | |||||||
Trade accounts receivable |
$ | 655,176 | $ | 484,178 | ||||
Less reserve for bad debts |
(617 | ) | (617 | ) | ||||
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|
|
|
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$ | 654,559 | $ | 483,561 | |||||
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|
- 7 -
Note 4. Managements Plans Regarding Liquidity and Capital Resources
The Company experienced a significant decrease in revenue for the quarter ending March 31, 2021 compared to the previous year. The Company is optimistic the trend will improve during 2021; however, actual results may differ from expectations. The decrease in expenses for the quarter ending March 31, 2021 as compared to the prior year is a result of decreased occupancy and reductions in wages, benefits, and operating expenses.
The Company continues its marketing efforts toward the social clientele by developing packages designed to target more social guests, including families. These social packages are being promoted through the Companys website as well as through travel wholesalers and with emphasis on e-commerce sites. Management has implemented programs and measures to help the Company get back to positive operating income. These programs and measures include cost control programs, consolidation of restaurant operations and efforts to increase brand awareness and recognition of the Resort.
Towards the end of December 2019, an outbreak of a novel strain of coronavirus (COVID-19) emerged globally. The COVID-19 outbreak in the United States has resulted in a reduction of hotel occupancy and cancellations of future reservations. It is difficult to estimate the length or severity of this outbreak; however, a significant reduction in occupancy caused by COVID-19 is expected to affect the Companys results of operations and financial position.
These financial statements have been prepared on a going concern basis, which implies the Company will continue to meet its obligations and continue its operations for the next fiscal year. The continuation of the Company as a going concern is dependent upon financial support from the Companys current stockholder and the Companys ability to generate sufficient cash flows from operations. As there can be no assurance that the Company will be able to achieve positive cash flows (become profitable), there is substantial doubt about the Companys ability to continue as a going concern.
These financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.
Note 5. Operating Leases
The Company leases certain equipment under non-cancellable operating leases, which begin to expire in 2021. The leases are classified as operating leases in conformity with the provisions of Topic 842. Accordingly, the Company recorded a right-of-use asset and related operating lease liability totaling approximately $217,000 upon adoption of Topic 842 as of January 1, 2019. Aggregated information regarding the leases as of and for the three months ended March 31, 2021 is as follows:
Lease costs (included in operating costs) |
$ | 19,032 | ||
Incremental borrowing rate |
5.32 | % |
Note 6. Property, Buildings and Equipment
March 31, 2021 (Unaudited) |
December 31, 2020 |
|||||||
Land and land improvements |
$ | 8,830,867 | $ | 8,830,867 | ||||
Buildings and recreational facilities |
32,105,124 | 32,105,124 | ||||||
Machinery and equipment |
21,807,186 | 21,805,495 | ||||||
Construction in progress |
96,235 | 96,235 | ||||||
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|
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62,839,412 | 62,837,721 | |||||||
Less accumulated depreciation |
(50,099,593 | ) | (49,730,807 | ) | ||||
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$ | 12,739,819 | $ | 13,106,914 | |||||
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The Companys property, buildings and equipment are pledged as security for its debt (see Note 7).
- 8 -
Note 7. Notes Payable and Finance Lease Liabilities
On December 6, 2015 the Companys financing agreement with a third-party lender was modified to include renewal for the existing principal balance of $4,875,000, along with an advance of an additional $2,000,000. The term note required monthly principal payments of $29,380 plus interest of 3% over the one month LIBOR. In April 2020, the Companys lender deferred interest and principal payments from April 6, 2020 through June 6, 2020 (the deferral period) and monthly payments resumed in July 6, 2020. There was no change to interest rate or maturity date as part of the deferral. In December 2020, this term loan was modified and consolidated with the existing revolving line of credit as described below.
On April 24, 2017, the Company entered into a revolving line of credit agreement with the same third-party lender with maximum borrowings of $1,500,000 to be used as working capital as needed. The agreement was cross collateralized with the existing term note under the same terms and conditions. Amounts borrowed under the revolving line of credit bears interest at 3% over the one month LIBOR index. In April 2020, the Companys lender deferred interest and principal payments from April 24, 2020 through June 24, 2020 (the deferral period) and monthly payments resumed on July 24, 2020. There was no change to interest rate or maturity date as part of the deferral. In December 2020, this revolving line of credit was modified and consolidated with the existing term loan as described below.
On December 6, 2020, the Company entered into a Renewal and Consolidation Promissory Note (the renewal note) with the same third-party lender, which consolidated the existing balances on the term note and revolving line of credit. The renewal note requires monthly principal payments of $28,040 plus interest of 3% over the Prime Rate with a minimum interest rate of no lower than 6.25% (6.25% at December 31, 2020). The renewal term note is collateralized by all current and subsequently acquired real and personal property. The renewal term note requires the Company to maintain a Debt Service Ratio, as defined, of 1.25%. The Company was in default of this covenant as of December 31, 2020; however, the Company received a waiver for this default from its lender. Effective on March 6, 2021, the Company entered into a loan modification and forbearance agreement with the lender which extended the maturity date to June 6, 2021, at which any unpaid principal and interest will be due. The loan modification requires monthly principal payments of $28,040 plus interest of 4% over the Prime Rate with a minimum interest rate of no lower than 7.25%.
On May 25, 2021, the third-party lender assigned the renewal note to a separate third-party lender. Effective the same day, the Company and the assignee entered into a loan extension and modification agreement which extended the maturity date to December 6, 2021, at which any unpaid principal and interest will be due. The loan modification requires interest-only payments through maturity at a rate of 4% over the Prime rate with a minimum interest rate of no lower than 7.50%. At March 31, 2021, $6,701,661 was outstanding under the extended and modified note.
In April 2020, the Company entered into a term note agreement with the same third-party lender for approximately $2,949,000 funded under the Paycheck Protection Program (PPP) as part of the Coronavirus Aid, Relief and Economic Security Act (CARES Act). The note bears interest of 1% per annum, matures in April 2022, and requires a monthly interest and principal payments of $165,529 beginning in November 2020 and through maturity. The currently issued guidelines of the program allow for the loan proceeds to be forgiven if certain requirements are met. The Company applied for forgiveness with the SBA in which on June 10, 2021, the SBA had forgiven the PPP loan in full. As a result, the Company recognized approximately $2,949,000 of gain on debt forgiveness in June 2021.
In March 2021, the Company entered into a term note agreement with the same third-party lender for a second draw Paycheck Protection Program loan (PPP2) for $2,000,000. The note bears interest of 1% per annum, matures in March 2026, and requires monthly interest and principal payments after the ten-month deferral period. The currently issued guidelines of the program allow for the loan proceeds to be forgiven if certain requirements are met. At March 31, 2021, $2,000,000 was outstanding under the note.
On September 25, 2020, the Company entered into an Economic Injury Disaster Loan (EIDL) for $150,000 funded by the U.S. Small Business Administration. The note bears interest at 3.75% per annum, matures in September 2050, and requires monthly interest and principal payments of $731 beginning in September 2021 and through maturity. At March 31, 2021, $150,000 was outstanding under the note.
On March 1, 2018, the Company entered into a finance lease liability for equipment in the amount of $332,206. The assets associated with this lease cost $461,506, of which $129,300 was reduced through the Companys trade-in of existing equipment. This finance lease is secured by the equipment purchased, matures in February 2023 and requires monthly payments of $6,500, including interest at 6.5%. At March 31, 2021, the amount due on this finance lease liability was $140,205.
On April 1, 2018, the Company entered into a finance lease liability for equipment in the amount of $156,942. The assets associated with this lease cost $178,942, of which $22,000 was reduced through the Companys trade-in of existing equipment. This finance lease is secured by the equipment purchased, matures in March 2023 and requires monthly payments of $3,071, including interest at 6.5%. At March 31, 2021, the amount due on this finance lease liability was $68,934.
- 9 -
Note 8. Related Party Receivables
Related party receivables at March 31, 2021 and December 31, 2020 are the result of net intercompany transactions and cash transfers between the Company and its shareholder and affiliated companies. Related party receivables are unsecured and non-interest bearing.
Note 9. Income Taxes
The Company is currently a member of a Qualified Subchapter S Subsidiary Group. Accordingly, no income tax expense was reflected in the Companys operating results as the tax is assessed to the shareholders of the Companys parent company.
- 10 -
SADDLEBROOK RENTAL POOL OPERATION
BALANCE SHEETS
DISTRIBUTION FUND
March 31, 2021 (Unaudited) |
December 31, 2020 |
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Assets |
||||||||
Receivable from Saddlebrook Resorts, Inc. |
$ | 766,912 | $ | 221,527 | ||||
|
|
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|
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Liabilities and Participants Fund Balance |
||||||||
Due to participants for rental pool distribution |
$ | 638,043 | $ | 184,099 | ||||
Due to maintenance escrow fund |
128,869 | 37,428 | ||||||
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|
|
|
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$ | 766,912 | $ | 221,527 | |||||
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MAINTENANCE ESCROW FUND
March 31, 2021 (Unaudited) |
December 31, 2020 |
|||||||
Assets |
||||||||
Cash and cash equivalents |
$ | 928,512 | $ | 964,616 | ||||
Receivables: |
||||||||
Distribution fund |
128,869 | 37,428 | ||||||
Prepaid expenses and other assets |
113,865 | 60,018 | ||||||
Linen Inventory |
14,531 | | ||||||
Furniture Inventory |
39,651 | 41,433 | ||||||
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|
|||||
$ | 1,225,428 | $ | 1,103,495 | |||||
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|
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Liabilities and Participants Fund Balance |
||||||||
Due to Saddlebrook Resorts, Inc. |
$ | 179,988 | $ | 106,689 | ||||
Participants fund balance |
1,045,440 | 996,806 | ||||||
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$ | 1,225,428 | $ | 1,103,495 | |||||
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- 11 -
SADDLEBROOK RENTAL POOL OPERATION
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended March 31, |
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2021 | 2020 | |||||||
Rental pool revenues |
$ | 1,861,970 | $ | 1,975,818 | ||||
|
|
|
|
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Deductions: |
||||||||
Marketing fee |
139,648 | 148,186 | ||||||
Management fee |
232,746 | 246,977 | ||||||
Travel agent commissions |
15,938 | 69,230 | ||||||
Credit card expense |
55,765 | 58,349 | ||||||
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|
|||||
444,097 | 522,742 | |||||||
|
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|
|||||
Net rental income |
1,417,873 | 1,453,076 | ||||||
Less operator share of net rental income |
(638,043 | ) | (653,884 | ) | ||||
Other revenues (expenses): |
||||||||
Complimentary room revenues |
4,680 | 6,251 | ||||||
Minor repairs and replacements |
(17,598 | ) | (32,686 | ) | ||||
|
|
|
|
|||||
Amount available for distribution |
$ | 766,912 | $ | 772,757 | ||||
|
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|
|
The accompanying notes are an integral part of these financial statements
- 12 -
SADDLEBROOK RENTAL POOL OPERATION
STATEMENTS OF CHANGES IN PARTICIPANTS FUND BALANCES
(Unaudited)
DISTRIBUTION FUND
Three months ended March 31, |
||||||||
2021 | 2020 | |||||||
Balance at beginning of period |
$ | | $ | | ||||
Additions: |
||||||||
Amount available for distribution |
766,912 | 772,757 | ||||||
Reductions: |
||||||||
Amount withheld for maintenance escrow fund |
(128,869 | ) | (118,873 | ) | ||||
Amount accrued or paid to participants |
(638,043 | ) | (653,884 | ) | ||||
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|
|
|
|||||
Balance at end of period |
$ | | $ | | ||||
|
|
|
|
MAINTENANCE ESCROW FUND
Three months ended March 31, |
||||||||
2021 | 2020 | |||||||
Balance at beginning of period |
$ | 996,806 | 1,081,140 | |||||
Additions: |
||||||||
Amount withheld from distribution fund |
128,869 | 118,873 | ||||||
Unit owner payments |
25,444 | 120,777 | ||||||
Interest earned |
48 | 2,617 | ||||||
Reductions: |
||||||||
Escrow account refunds |
(28,611 | ) | (94,419 | ) | ||||
Maintenance charges |
(68,796 | ) | (80,974 | ) | ||||
Unit renovations |
| (8,393 | ) | |||||
Linen replacement |
(8,320 | ) | (30,002 | ) | ||||
|
|
|
|
|||||
Balance at end of period |
$ | 1,045,440 | $ | 1,109,619 | ||||
|
|
|
|
The accompanying notes are an integral part of these financial statements
- 13 -
SADDLEBROOK RENTAL POOL OPERATION
(Unaudited)
Note 1. Rental Pool Operations and Rental Pool Agreement
Condominium units are provided as rental (hotel) accommodations by their owners under the Rental Pool and Agency Appointment Agreement (the Agreement) with Saddlebrook Resorts, Inc. (collectively, the Rental Pool). Saddlebrook Resorts, Inc. (Saddlebrook) acts as operator of the Rental Pool which provides for the distribution of a percentage of net rental income, as defined, to the owners.
The Saddlebrook Rental Pool Operation consists of two funds: the Rental Pool Income Distribution Fund (Distribution Fund) and the Maintenance and Furniture Replacement Escrow Fund (Maintenance Escrow Fund). The operations of the Distribution Fund reflect the earnings of the Rental Pool. The Distribution Fund balance sheets reflect amounts due from Saddlebrook for the rental pool distribution payable to participants and amounts due to the Maintenance Escrow fund. The amounts due from Saddlebrook are required to be distributed no later than forty-five days following the end of each calendar quarter. The Maintenance Escrow Fund reflects the accounting for escrowed assets used to maintain unit interiors and replace furniture as it becomes necessary.
Rental pool participants and Saddlebrook share rental revenues according to the provisions of the Agreement. Net Rental Income shared consists of rentals received less a marketing surcharge of 7.5%, a 12.5% management fee, travel agent commissions, credit card expenses and provision for bad debts, if warranted. Saddlebrook receives 45% of Net Rental Income as operator of the Rental Pool. The remaining 55% of Net Rental Income, after adjustments for complimentary room revenues (ten percent of the normal unit rental price paid by Saddlebrook for promotional use of the unit) and certain minor repair and maintenance charges, is available for distribution to the participants and Maintenance Escrow Fund based upon each participants respective participation factor (computed using the value of a furnished unit and the number of days it was available to the pool). Quarterly, 45% of Net Rental Income is distributed to participants and 10%, as adjusted for complimentary room revenues and minor interior maintenance and replacement charges, is deposited in an escrow account until a maximum of 20% of the set value of the individual owners furniture package has been accumulated. Excess escrow balances are refunded to participants.
Note 2. Summary of Significant Accounting Policies
Basis of Accounting
The accounting records of the funds are maintained on the accrual basis of accounting.
Income Taxes
No federal or state taxes have been reflected in the accompanying financial statements as the tax effect of fund activities accrues to the rental pool participants and Saddlebrook.
- 14 -
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
General
The Company operates Saddlebrook Resort (the Resort) in Wesley Chapel, Florida, which contains condominium units that have been sold to third parties or to affiliates of the Company. The majority of the condominium units are hotel accommodations that participate in a rental-pooling program (the Rental Pool) that provides its owners with a percentage distribution of related room revenues minus certain fees and expenses. The remainder of the condominium units participate in a non-pooling rental program, are owner-occupied or are designated as hospitality suites or housing for young athletes independent of the rental programs. Other resort property owned by the Company and its affiliates include golf courses, tennis courts, a spa, restaurants and conference center facilities.
Results of Operations
Three months ended March 31, 2021 compared to three months ended March 31, 2020
The Companys total revenues decreased approximately $2,939,000 or about 41%, for the three months ended March 31, 2021 compared to the same period in the prior year. Total revenues for the Rental Pool decreased about $114,000, or about 6%.
Total costs and expenses decreased approximately $2,449,000 or about 34%, for the Company, and approximately $79,000 or about 15%, for the Rental Pool Operation.
The Company experienced a net loss for the quarter in the amount of approximately $622,000 compared to the net loss of the prior comparable quarter of approximately $83,000. Amounts available for distribution for the Rental Pool Operation decreased approximately $6,000 from the comparable period last year.
Impact of Current Economic Conditions
The Company experienced a significant decrease in revenue for the period ending March 31, 2021 compared to the previous year.
The Company continues its marketing efforts toward the social clientele by developing packages designed to target more social guests, including families. These social packages are being promoted through the Companys website as well as through travel wholesalers and with emphasis on e-commerce sites. Management has implemented programs and measures to help the Company get back to positive operating income. These programs and measures include cost control programs, consolidation of restaurant operations and efforts to increase brand awareness and recognition of the Resort.
Toward the end of December 2019, an outbreak of a novel strain of coronavirus (COVID-19) emerged globally. The COVID-19 outbreak in the United States has resulted in a reduction of hotel occupancy and cancellations of future reservations. It is difficult to estimate the length or severity of the outbreak; however, a significant reduction in occupancy caused by COVID-19 is expected to affect the Companys results of operations and financial position.
- 15 -
Liquidity and Capital Resources
Net loss for the 3 months ended March 31, 2021 was $622,000. Excluding non-cash expenses such as Depreciation and Amortization of $369,000 the companys actual operating cash deficit was $253,000.
Future operating costs and planned expenditures for minor capital additions and improvements are expected to be adequately funded by the Company and its affiliates current cash reserves and cash generated by the Resorts operations.
On December 6, 2015 the Companys financing agreement with a third-party lender was modified to include renewal for the existing principal balance of $4,875,000, along with an advance of an additional $2,000,000. The term note required monthly principal payments of $29,380 plus interest of 3% over the one month LIBOR. In April 2020, the Companys lender deferred interest and principal payments from April 6, 2020 through June 6, 2020 (the deferral period) and monthly payments resumed in July 6, 2020. There was no change to interest rate or maturity date as part of the deferral. In December 2020, this term loan was modified and consolidated with the existing revolving line of credit as described below.
On April 24, 2017, the Company entered into a revolving line of credit agreement with the same third-party lender with maximum borrowings of $1,500,000 to be used as working capital as needed. The agreement was cross collateralized with the existing term note under the same terms and conditions. Amounts borrowed under the revolving line of credit bears interest at 3% over the one month LIBOR index. In April 2020, the Companys lender deferred interest and principal payments from April 24, 2020 through June 24, 2020 (the deferral period) and monthly payments resumed on July 24, 2020. There was no change to interest rate or maturity date as part of the deferral. In December 2020, this revolving line of credit was modified and consolidated with the existing term loan as described below.
On December 6, 2020, the Company entered into a Renewal and Consolidation Promissory Note (the renewal note) with the same third-party lender, which consolidated the existing balances on the term note and revolving line of credit. The renewal note requires monthly principal payments of $28,040 plus interest of 3% over the Prime Rate with a minimum interest rate of no lower than 6.25% (6.25% at December 31, 2020). The renewal term note is collateralized by all current and subsequently acquired real and personal property. The renewal term note requires the Company to maintain a Debt Service Ratio, as defined, of 1.25%. The Company was in default of this covenant as of December 31, 2020; however, the Company received a waiver for this default from its lender. Effective on March 6, 2021, the Company entered into a loan modification and forbearance agreement with the lender which extended the maturity date to June 6, 2021, at which any unpaid principal and interest will be due. The loan modification requires monthly principal payments of $28,040 plus interest of 4% over the Prime Rate with a minimum interest rate of no lower than 7.25%.
On May 25, 2021, the third-party lender assigned the renewal note to a separate third-party lender. Effective the same day, the Company and the assignee entered into a loan extension and modification agreement which extended the maturity date to December 6, 2021, at which any unpaid principal and interest will be due. The loan modification requires interest-only payments through maturity at a rate of 4% over the Prime rate with a minimum interest rate of no lower than 7.50%. At March 31, 2021, $6,701,661 was outstanding under the extended and modified note.
In April 2020, the Company entered into a term note agreement with the same third-party lender for approximately $2,949,000 funded under the Paycheck Protection Program (PPP) as part of the Coronavirus Aid, Relief and Economic Security Act (CARES Act). The note bears interest of 1% per annum, matures in April 2022, and requires a monthly interest and principal payments of $165,529 beginning in November 2020 and through maturity. The currently issued guidelines of the program allow for the loan proceeds to be forgiven if certain requirements are met. The Company applied for forgiveness with the SBA in which on June 10, 2021, the SBA had forgiven the PPP loan in full. As a result, the Company recognized approximately $2,949,000 of gain on debt forgiveness in June 2021.
In March 2021, the Company entered into a term note agreement with the same third-party lender for a second draw Paycheck Protection Program loan (PPP2) for $2,000,000. The note bears interest of 1% per annum, matures in March 2026, and requires monthly interest and principal payments after the ten-month deferral period. The currently issued guidelines of the program allow for the loan proceeds to be forgiven if certain requirements are met. At March 31, 2021, $2,000,000 was outstanding under the note.
On September 25, 2020, the Company entered into an Economic Injury Disaster Loan (EIDL) for $150,000 funded by the U.S. Small Business Administration. The note bears interest at 3.75% per annum, matures in September 2050, and requires monthly interest and principal payments of $731 beginning in September 2021 and through maturity. At March 31, 2021, $150,000 was outstanding under the note.
The current economic conditions, expected effect on the Companys results of operations and financial position, and uncertainty of the length or severity of the outbreak raise substantial doubt about the Companys ability to continue as going concern.
The Companys ultimate shareholder has the financial ability and intent to continue to fund operations through affiliated companies that are 100% owned by the Companys ultimate shareholder to the extent required to support the Companys operations. In addition to the shareholders financial ability, these affiliated Companies are expected to continue to generate positive cash flows during fiscal year 2021 should additional funding be required to support the Companys operations.
- 16 -
The Companys operation of the Resort is not considered to be dependent on any individual or small group of customers, the loss of which would have a material adverse effect on the Companys business or financial condition.
Seasonality
The Companys operations are seasonal with the highest volume of revenue generally occurring in the first quarter of each calendar year.
Due to the seasonal business of the Company, the results of operations for the interim period shown in this report are not necessarily indicative of results to be expected for the full fiscal year.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Companys invested cash is subject to changes in market interest rates. Otherwise, the Company does not have significant market risk with respect to foreign currency exchanges or other market rates.
The Companys term note bears interest at 4.0% over the Prime Rate with a minimum interest rate of no lower than 7.25% and matures on June 6, 2021.
Item 4. Controls and Procedures
The Companys management, including the Chief Executive Officer and the Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the disclosure controls and procedures as of March 31, 2021, pursuant to Exchange Act Rule 15d-15. Based upon that evaluation, the Companys Chief Executive Officer and the Chief Financial Officer concluded that the Companys disclosure controls and procedures were effective as of March 31, 2021 in timely alerting them to material information required to be included in the Companys periodic SEC filings.
The Companys management, including its Chief Executive Officer and Chief Financial Officer, does not expect that its disclosure controls and procedures over internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must be considered relative to their costs. Because of the inherent limitation in all control systems, no evaluation of controls can provide absolute assurance that all control issues within the Company have been detected.
There were no changes in the Companys internal controls over financial reporting during the three months ended March 31, 2021 that materially affected, or are reasonably likely to materially affect, the Companys internal controls over financial reporting.
PART II - OTHER INFORMATION
The Company is involved in litigation in the ordinary course of business. In the opinion of the Companys management, insurance or indemnification from other third parties adequately covers these matters. Accordingly, the effect, if any, of these claims is considered immaterial to the Companys financial condition and results of operations.
- 17 -
The following exhibits are included in this Form 10-Q:
31.1 - | Chief Executive Officer Rule 15d-14(a) Certification | |
31.2 - | Chief Financial Officer Rule 15d-14(a) Certification | |
32.1 - | Chief Executive Officer Section 1350 Certification | |
32.2 - | Chief Financial Officer Section 1350 Certification | |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
- 18 -
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SADDLEBROOK RESORTS, INC. | ||||||
(Registrant) | ||||||
Date: August 11, 2021 | /s/ Donald L. Allen | |||||
Donald L. Allen | ||||||
Vice President and Treasurer | ||||||
(Principal Financial and Accounting Officer) |
- 19 -
Exhibit 31.1
CHIEF EXECUTIVE OFFICER SECTION 15d-14(a) CERTIFICATION
I, Thomas L. Dempsey, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Saddlebrook Resorts, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: August 11, 2021 | /s/ Thomas L. Dempsey | |||
Thomas L. Dempsey | ||||
Chairman of the Board and Chief Executive Officer |
Exhibit 31.2
CHIEF FINANCIAL OFFICER SECTION 15d-14(a) CERTIFICATION
I, Donald L. Allen, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Saddlebrook Resorts, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: August 11, 2021 | /s/ Donald L. Allen | |||
Donald L. Allen | ||||
Vice President and Treasurer |
Exhibit 32.1
CHIEF EXECUTIVE OFFICER SECTION 1350 CERTIFICATION
I, Thomas L. Dempsey, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q for Saddlebrook Resorts, Inc. for the period ended March 31, 2021 fully complies with the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 and that the information contained therein fairly presents, in all material respects, the financial condition and results of operations of Saddlebrook Resorts, Inc.
Date: August 11, 2021 | /s/ Thomas L. Dempsey | |||
Thomas L. Dempsey | ||||
Chairman of the Board and Chief Executive Officer |
Exhibit 32.2
CHIEF FINANCIAL OFFICER SECTION 1350 CERTIFICATION
I, Donald L. Allen, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q for Saddlebrook Resorts, Inc. for the period ended March 31, 2021 fully complies with the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 and that the information contained therein fairly presents, in all material respects, the financial condition and results of operations of Saddlebrook Resorts, Inc.
Date: August 11, 2021 | /s/ Donald L. Allen | |||
Donald L. Allen | ||||
Vice President and Treasurer |
Cover Page |
3 Months Ended |
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Mar. 31, 2021
shares
| |
Cover [Abstract] | |
Document Type | 10-Q |
Amendment Flag | false |
Document Quarterly Report | true |
Document Transition Report | false |
Document Period End Date | Mar. 31, 2021 |
Document Fiscal Year Focus | 2021 |
Document Fiscal Period Focus | Q1 |
Entity Registrant Name | SADDLEBROOK RESORTS INC |
Entity Central Index Key | 0000313151 |
Current Fiscal Year End Date | --12-31 |
Entity Current Reporting Status | Yes |
Entity Filer Category | Non-accelerated Filer |
Entity Shell Company | false |
Entity Emerging Growth Company | false |
Entity Small Business | true |
Entity Common Stock, Shares Outstanding | 100,000 |
Entity Address, State or Province | FL |
Entity Interactive Data Current | Yes |
Balance Sheets (Parenthetical) - $ / shares |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Common stock, par value | $ 1 | $ 1 |
Common stock, shares authorized | 100,000 | 100,000 |
Common stock, shares issued | 100,000 | 100,000 |
Common stock, shares outstanding | 100,000 | 100,000 |
Statements of Operations and (Accumulated Deficit) Retained Earnings - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Income Statement [Abstract] | ||
Resort revenues | $ 4,312,338 | $ 7,251,566 |
Costs and expenses: | ||
Operating costs of resort | 3,741,586 | 5,707,139 |
Sales and marketing | 78,360 | 350,781 |
General and administrative | 611,616 | 693,187 |
Depreciation | 368,780 | 498,027 |
Total costs and expenses | 4,800,342 | 7,249,134 |
Net operating (loss) income before other (income) expense | (488,004) | 2,432 |
Other (income) expense: | ||
Other income | (5,466) | (5,312) |
Interest expense | 139,730 | 90,472 |
Total other expenses, net | 134,264 | 85,160 |
Net loss | (622,268) | (82,728) |
Retained earnings at beginning of period | 392,908 | 4,929,385 |
(Accumulated deficit) retained earnings at end of period | $ (229,360) | $ 4,846,657 |
Basis of Presentation |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 | ||
Accounting Policies [Abstract] | ||
Basis of Presentation | Note 1. Basis of Presentation Saddlebrook Resorts, Inc. (the “Company”) developed and operates Saddlebrook Resort, which is a condominium hotel and resort located in Wesley Chapel, Florida. The Company’s accompanying balance sheet for March 31, 2021, and its statements of operations and accumulated earnings and cash flows for the three month periods ended March 31, 2021 and 2020, are unaudited but reflect all adjustments which are, in the opinion of management, necessary for the fair presentation of the results for the interim periods presented. All such adjustments are of a normal recurring nature. The balance sheet at December 31, 2020 has been derived from the audited financial statements as of that date. The Company’s business is seasonal. Therefore, the results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for future interim periods or the full fiscal year. These financial statements and related notes are presented for interim periods in accordance with the requirements of Form 10-Q and Article 10 of Regulation S-X, and, consequently, do not include all disclosures normally required by accounting principles generally accepted in the United States. Accordingly, these 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, 2020. |
Revenue |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 | ||
Revenue from Contract with Customer [Abstract] | ||
Revenue | Note 2. Revenue Revenue Recognition Resort revenues are recognized as services are performed or products are delivered with the exception of initiation fee revenue, which is recognized over the average life of the memberships. Resort revenues also include rental revenues for condominium units owned by third parties participating in the Rental Pool. If these rental units were owned by the Company, normal costs associated with ownership such as depreciation, real estate taxes, unit maintenance and other costs would have been incurred. Contract Balances Timing differences among revenue recognition may result in contract assets or liabilities. Contract liabilities consists of guest deposits and deferred income and totaled approximately $2,530,000 and $3,342,000 as of March 31, 2021 and December 31, 2020, respectively. Contract assets consist of escrowed cash relating to rental pool owner deposits for the maintenance reserve fund and long-term security deposits and totaled approximately $942,000 and $977,000 as of March 31, 2021 and December 31, 2020, respectively. The Company’s net trade accounts receivables were $655,000 and $484,000 as of March 31, 2021 and December 31, 2020, respectively. Trade accounts receivable are stated in the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through a charge to earnings and a credit to the allowance of doubtful accounts based on its assessment of the current status of individual accounts. Balances still outstanding after management has used reasonable collection efforts are written off through a charge to the allowance of doubtful accounts and a credit to trade accounts receivable. Changes in the allowance for doubtful accounts have not been material to the consolidated financial statements. Performance Obligations 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 transactional and the contracts performance obligation is generally satisfied at the time of the transaction. |
Trade Accounts Receivable |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Trade Accounts Receivable | Note 3. Trade Accounts Receivable
|
Management's Plans Regarding Liquidity and Capital Resources |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 | ||
Managements Plans Regarding Liquidity and Capital Resources Disclosure [Abstract] | ||
Management's Plans Regarding Liquidity and Capital Resources | Note 4. Management’s Plans Regarding Liquidity and Capital Resources The Company experienced a significant decrease in revenue for the quarter ending March 31, 2021 compared to the previous year. The Company is optimistic the trend will improve during 2021; however, actual results may differ from expectations. The decrease in expenses for the quarter ending March 31, 2021 as compared to the prior year is a result of decreased occupancy and reductions in wages, benefits, and operating expenses. The Company continues its marketing efforts toward the social clientele by developing packages designed to target more social guests, including families. These social packages are being promoted through the Company’s website as well as through travel wholesalers and with emphasis on e-commerce sites. Management has implemented programs and measures to help the Company get back to positive operating income. These programs and measures include cost control programs, consolidation of restaurant operations and efforts to increase brand awareness and recognition of the Resort. Towards the end of December 2019, an outbreak of a novel strain of coronavirus (“COVID-19”) emerged globally. The COVID-19 outbreak in the United States has resulted in a reduction of hotel occupancy and cancellations of future reservations. It is difficult to estimate the length or severity of this outbreak; however, a significant reduction in occupancy caused by COVID-19 is expected to affect the Company’s results of operations and financial position. These financial statements have been prepared on a going concern basis, which implies the Company will continue to meet its obligations and continue its operations for the next fiscal year. The continuation of the Company as a going concern is dependent upon financial support from the Company’s current stockholder and the Company’s ability to generate sufficient cash flows from operations. As there can be no assurance that the Company will be able to achieve positive cash flows (become profitable), there is substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern. |
Operating Leases |
3 Months Ended | |||||||||||||||||
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Mar. 31, 2021 | ||||||||||||||||||
Leases [Abstract] | ||||||||||||||||||
Operating Leases | Note 5. Operating Leases The Company leases certain equipment under non-cancellable operating leases, which begin to expire in 2021. The leases are classified as operating leases in conformity with the provisions of Topic 842. Accordingly, the Company recorded a right-of-use asset and related operating lease liability totaling approximately $217,000 upon adoption of Topic 842 as of January 1, 2019. Aggregated information regarding the leases as of and for the three months ended March 31, 2021 is as follows:
|
Property, Buildings and Equipment |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Buildings and Equipment | Note 6. Property, Buildings and Equipment
The Company’s property, buildings and equipment are pledged as security for its debt (see Note 7). |
Notes Payable and Finance Lease Liabilities |
3 Months Ended | |
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Mar. 31, 2021 | ||
Debt Disclosure [Abstract] | ||
Notes Payable and Finance Lease Liabilities | Note 7. Notes Payable and Finance Lease Liabilities On December 6, 2015 the Company’s financing agreement with a third - party lender was modified to include renewal for the existing principal balance of $4,875,000, along with an advance of an additional $2,000,000. The term note required monthly principal payments of $29,380 plus interest of 3% over the one month LIBOR. In April 2020, the Company’s lender deferred interest and principal payments from April 6, 2020 through June 6, 2020 (the “deferral period”) and monthly payments resumed in July 6, 2020. There was no change to interest rate or maturity date as part of the deferral. In December 2020, this term loan was modified and consolidated with the existing revolving line of credit as described below. On April 24, 2017, the Company entered into a revolving line of credit agreement with the same third-party lender with maximum borrowings of $1,500,000 to be used as working capital as needed. The agreement was cross collateralized with the existing term note under the same terms and conditions. Amounts borrowed under the revolving line of credit bears interest at 3% over the one month LIBOR index. In April 2020, the Company’s lender deferred interest and principal payments from April 24, 2020 through June 24, 2020 (the “deferral period”) and monthly payments resumed on July 24, 2020. There was no change to interest rate or maturity date as part of the deferral. In December 2020, this revolving line of credit was modified and consolidated with the existing term loan as described below. On December 6, 2020, the Company entered into a Renewal and Consolidation Promissory Note (the “renewal note”) with the same third-party lender, which consolidated the existing balances on the term note and revolving line of credit. The renewal note requires monthly principal payments of $28,040 plus interest of 3% over the Prime Rate with a minimum interest rate of no lower than 6.25% (6.25% at December 31, 2020). The renewal term note is collateralized by all current and subsequently acquired real and personal property. The renewal term note requires the Company to maintain a Debt Service Ratio, as defined, of 1.25%. The Company was in default of this covenant as of December 31, 2020; however, the Company received a waiver for this default from its lender. Effective on March 6, 2021, the Company entered into a loan modification and forbearance agreement with the lender which extended the maturity date to June 6, 2021, at which any unpaid principal and interest will be due. The loan modification requires monthly principal payments of $28,040 plus interest of 4% over the Prime Rate with a minimum interest rate of no lower than 7.25%. On May 25, 2021, the third-party lender assigned the renewal note to a separate third-party lender. Effective the same day, the Company and the assignee entered into a loan extension and modification agreement which extended the maturity date to December 6, 2021, at which any unpaid principal and interest will be due. The loan modification requires interest-only payments through maturity at a rate of 4% over the Prime rate with a minimum interest rate of no lower than 7.50%. At March 31, 2021, $6,701,661 was outstanding under the extended and modified note.In April 2020, the Company entered into a term note agreement with the same third-party lender for approximately $2,949,000 funded under the Paycheck Protection Program (“PPP”) as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”). The note bears interest of 1% per annum, matures in April 2022, and requires a monthly interest and principal payments of $165,529 beginning in November 2020 and through maturity. The currently issued guidelines of the program allow for the loan proceeds to be forgiven if certain requirements are met. The Company applied for forgiveness with the SBA in which on June 10, 2021, the SBA had forgiven the PPP loan in full. As a result, the Company recognized approximately $2,949,000 of gain on debt forgiveness in June 2021. In March 2021, the Company entered into a term note agreement with the same third-party lender for a second draw Paycheck Protection Program loan (“PPP2”) for $2,000,000. The note bears interest of 1% per annum, matures in March 2026, and requires monthly interest and principal payments after the ten-month deferral period. The currently issued guidelines of the program allow for the loan proceeds to be forgiven if certain requirements are met. At March 31, 2021, $2,000,000 was outstanding under the note. On September 25, 2020, the Company entered into an Economic Injury Disaster Loan (“EIDL”) for $150,000 funded by the U.S. Small Business Administration. The note bears interest at 3.75% per annum, matures in September 2050, and requires monthly interest and principal payments of $731 beginning in September 2021 and through maturity. At March 31, 2021, $150,000 was outstanding under the note. On March 1, 2018, the Company entered into a finance lease liability for equipment in the amount of $332,206. The assets associated with this lease cost $461,506, of which $129,300 was reduced through the Company’s trade-in of existing equipment. This finance lease is secured by the equipment purchased, matures in February 2023 and requires monthly payments of $6,500, including interest at 6.5%. At March 31, 2021, the amount due on this finance lease liability was $140,205. On April 1, 2018, the Company entered into a finance lease liability for equipment in the amount of $156,942. The assets associated with this lease cost $178,942, of which $22,000 was reduced through the Company’s trade-in of existing equipment. This finance lease is secured by the equipment purchased, matures in March 2023 and requires monthly payments of $3,071, including interest at 6.5%. At March 31, 2021, the amount due on this finance lease liability was $68,934. |
Related Party Receivables |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 | ||
Related Party Transactions [Abstract] | ||
Related Party Receivables | Note 8. Related Party Receivables Related party receivables at March 31, 2021 and December 31, 2020 are the result of net intercompany transactions and cash transfers between the Company and its shareholder and affiliated companies. Related party receivables are unsecured and non-interest bearing. |
Income Taxes |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 | ||
Income Tax Disclosure [Abstract] | ||
Income Taxes | Note 9. Income Taxes The Company is currently a member of a Qualified Subchapter S Subsidiary Group. Accordingly, no |
Saddlebrook Rental Pool Operation |
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Saddlebrook Rental Pool Operation | SADDLEBROOK RENTAL POOL OPERATION BALANCE SHEETS DISTRIBUTION FUND
MAINTENANCE ESCROW FUND
SADDLEBROOK RENTAL POOL OPERATION STATEMENTS OF OPERATIONS (Unaudited)
The accompanying notes are an integral part of these financial statements SADDLEBROOK RENTAL POOL OPERATION STATEMENTS OF CHANGES IN PARTICIPANTS’ FUND BALANCES (Unaudited) DISTRIBUTION FUND
MAINTENANCE ESCROW FUND
The accompanying notes are an integral part of these financial statements Note 1. Rental Pool Operations and Rental Pool Agreement Condominium units are provided as rental (hotel) accommodations by their owners under the Rental Pool and Agency Appointment Agreement (the “Agreement”) with Saddlebrook Resorts, Inc. (collectively, the “Rental Pool”). Saddlebrook Resorts, Inc. (“Saddlebrook”) acts as operator of the Rental Pool which provides for the distribution of a percentage of net rental income, as defined, to the owners. The Saddlebrook Rental Pool Operation consists of two funds: the Rental Pool Income Distribution Fund (“Distribution Fund”) and the Maintenance and Furniture Replacement Escrow Fund (“Maintenance Escrow Fund”). The operations of the Distribution Fund reflect the earnings of the Rental Pool. The Distribution Fund balance sheets reflect amounts due from Saddlebrook for the rental pool distribution payable to participants and amounts due to the Maintenance Escrow fund. The amounts due from Saddlebrook are required to be distributed no later than forty-five days following the end of each calendar quarter. The Maintenance Escrow Fund reflects the accounting for escrowed assets used to maintain unit interiors and replace furniture as it becomes necessary. Rental pool participants and Saddlebrook share rental revenues according to the provisions of the Agreement. Net Rental Income shared consists of rentals received less a marketing surcharge of 7.5%, a 12.5% management fee, travel agent commissions, credit card expenses and provision for bad debts, if warranted. Saddlebrook receives 45% of Net Rental Income as operator of the Rental Pool. The remaining 55% of Net Rental Income, after adjustments for complimentary room revenues (ten percent of the normal unit rental price paid by Saddlebrook for promotional use of the unit) and certain minor repair and maintenance charges, is available for distribution to the participants and Maintenance Escrow Fund based upon each participant’s respective participation factor (computed using the value of a furnished unit and the number of days it was available to the pool). Quarterly, 45% of Net Rental Income is distributed to participants and 10%, as adjusted for complimentary room revenues and minor interior maintenance and replacement charges, is deposited in an escrow account until a maximum of 20% of the set value of the individual owner’s furniture package has been accumulated. Excess escrow balances are refunded to participants. Note 2. Summary of Significant Accounting Policies Basis of Accounting The accounting records of the funds are maintained on the accrual basis of accounting. Income Taxes No federal or state taxes have been reflected in the accompanying financial statements as the tax effect of fund activities accrues to the rental pool participants and Saddlebrook. |
Saddlebrook Rental Pool Operation (Policies) - Saddlebrook Rental Pool Operation [Member] |
3 Months Ended | |
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Mar. 31, 2021 | ||
Basis of Accounting | Basis of Accounting The accounting records of the funds are maintained on the accrual basis of accounting. |
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Income Taxes | Income Taxes No federal or state taxes have been reflected in the accompanying financial statements as the tax effect of fund activities accrues to the rental pool participants and Saddlebrook. |
Trade Accounts Receivable (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Trade Accounts Receivable |
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Operating Leases (Tables) |
3 Months Ended | ||||||||||||||||
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Mar. 31, 2021 | |||||||||||||||||
Leases [Abstract] | |||||||||||||||||
Schedule of lease cost |
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Property, Buildings and Equipment (Tables) |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Property, Buildings and Equipment |
|
Revenue - Additional Information (Detail) - USD ($) |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Revenue from Contract with Customer [Abstract] | ||
Contract liabilities | $ 2,530,000 | $ 3,342,000 |
Contract with customer assets | 942,000 | 977,000 |
Accounts receivables | $ 654,559 | $ 483,561 |
Trade Accounts Receivable - Accounts Receivable (Detail) - USD ($) |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Receivables [Abstract] | ||
Trade accounts receivable | $ 655,176 | $ 484,178 |
Less reserve for bad debts | (617) | (617) |
Accounts receivable, net | $ 654,559 | $ 483,561 |
Operating Leases - Additional information (Detail) - USD ($) |
Mar. 31, 2021 |
Dec. 31, 2020 |
Jan. 01, 2019 |
---|---|---|---|
Operating lease right-of-use assets | $ 54,507 | $ 73,573 | $ 217,000 |
Operating lease liability | $ 217,000 |
Operating Leases - Aggregated information regarding leases (Detail) |
3 Months Ended |
---|---|
Mar. 31, 2021
USD ($)
| |
Lease costs (included in operating costs) | $ 19,032 |
Incremental borrowing rate | 5.32% |
Property, Buildings and Equipment - Schedule of Property, Buildings and Equipment (Detail) - USD ($) |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Property, Plant and Equipment [Line Items] | ||
Property, buildings and equipment | $ 62,839,412 | $ 62,837,721 |
Less accumulated depreciation | (50,099,593) | (49,730,807) |
Property, buildings and equipment, net | 12,739,819 | 13,106,914 |
Land and Land Improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property, buildings and equipment | 8,830,867 | 8,830,867 |
Buildings and Recreational Facilities [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property, buildings and equipment | 32,105,124 | 32,105,124 |
Machinery and Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property, buildings and equipment | 21,807,186 | 21,805,495 |
Construction in Progress [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property, buildings and equipment | $ 96,235 | $ 96,235 |
Income Taxes - Additional Information (Detail) |
3 Months Ended |
---|---|
Mar. 31, 2021
USD ($)
| |
Income Tax Disclosure [Abstract] | |
Income tax expense recorded | $ 0 |
Saddlebrook Rental Pool Operation - Schedule of Financial Information - Statements of Operations (Detail) - Saddlebrook Rental Pool Operation [Member] - Distribution Fund [Member] - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Supplementary Financial Statements For Owners Participating In Condo Rental Pool Agreement [Line Items] | ||
Rental pool revenues | $ 1,861,970 | $ 1,975,818 |
Deductions: | ||
Marketing fee | 139,648 | 148,186 |
Management fee | 232,746 | 246,977 |
Travel agent commissions | 15,938 | 69,230 |
Credit card expense | 55,765 | 58,349 |
Rental expenses | 444,097 | 522,742 |
Net rental income | 1,417,873 | 1,453,076 |
Less operator share of net rental income | (638,043) | (653,884) |
Other revenues (expenses): | ||
Complimentary room revenues | 4,680 | 6,251 |
Minor repairs and replacements | (17,598) | (32,686) |
Amount available for distribution | $ 766,912 | $ 772,757 |
Saddlebrook Rental Pool Operation - Rental Pool Operations and Rental Pool Agreement - Additional Information (Detail) - Saddlebrook Rental Pool Operation [Member] |
3 Months Ended |
---|---|
Mar. 31, 2021
Fund
| |
Supplementary Financial Statements For Owners Participating In Condo Rental Pool Agreement [Line Items] | |
Number of funds consisted by variable interest entity | 2 |
Number of days for distribution of amount due | 45 days |
Marketing fees percentage | 7.50% |
Management fees percentage | 12.50% |
Rental income attributable to entity percentage | 45.00% |
Rental income attributable to parties other entity percentage | 55.00% |
Rental income net distributed to participants quarterly percentage | 45.00% |
Rental income net charged to complimentary room revenues and minor interior maintenance quarterly percent | 10.00% |
Rental income net charged to complimentary room revenues and minor interior maintenance quarterly maximum accumulation percentage | 20.00% |
Saddlebrook Rental Pool Operation - Summary of Significant Accounting Policies - Additional Information (Detail) |
3 Months Ended |
---|---|
Mar. 31, 2021
USD ($)
| |
Supplementary Financial Statements For Owners Participating In Condo Rental Pool Agreement [Line Items] | |
Income tax expense recorded | $ 0 |
Saddlebrook Rental Pool Operation [Member] | |
Supplementary Financial Statements For Owners Participating In Condo Rental Pool Agreement [Line Items] | |
Income tax expense recorded | $ 0 |
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