UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

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

For the fiscal year ended December 31, 2011

 

Commission File No.  333-147447

 

SALAMANDER INNISBROOK, LLC

 

State of Organization: Florida

IRS Employer Identification No. 26-0442888

 36750 US 19 N., Innisbrook, FL 34684

Telephone Number: (727) 942-2000

 

 

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

None

 

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

 552 Condominium Rental Pool Units

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

 Yes o No x

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act

 Yes o No x

 

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 x No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  

 Yes o No x

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. ý

 

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

 

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o

Smaller Reporting Company x

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

 Yes o No ý

 

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 December 31, 2011.

 

Issuer has no common stock subject to this report.

 

Salamander Innisbrook, LLC

Annual Report on Form 10-K for the Year Ended December 31, 2011

 

TABLE OF CONTENTS

 

 

PART I
	ITEM 1.	BUSINESS	4
	ITEM 1A.	RISK FACTORS	5
	ITEM 1B.	UNRESOLVED STAFF COMMENTS	5
	ITEM 2.	PROPERTIES	6
	ITEM 3.	LEGAL PROCEEDINGS	6
	ITEM 4.	MINE SAFETY DISCLOSURES	6
PART II
	ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	6
	ITEM 6.	SELECTED FINANCIAL DATA	6
	ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	6
	ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	9
	ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	9
	ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	9
	ITEM 9A.	CONTROLS AND PROCEDURES	9
	ITEM 9B.	OTHER INFORMATION	10
PART III
	ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	10
	ITEM 11.	EXECUTIVE COMPENSATION	10
	ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	11
	ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE	11
	ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	11
PART IV
	ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	12
SIGNATURES			34

 

 

Cautionary Note Regarding Forward-Looking Statements

 

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

 

PART I

 

ITEM 1. BUSINESS

 

Background

 

On June 14, 2007, Salamander Innisbrook, LLC (the “Company”, “we”, “us”, or “our”), was organized under the laws of the state of Florida. On July 16, 2007, Salamander Innisbrook, LLC, together with its affiliates, Salamander Innisbrook Securities, LLC and Salamander Innisbrook Condominium, LLC (collectively, the “Buyer”), completed the purchase of the Innisbrook Resort and Golf Club (the “Resort”) and all of the equity interest in Golf Host Securities, Inc. from Golf Trust of America, Inc. and its subsidiaries and affiliates. The Resort is a 72-hole destination golf and conference facility located near Tampa, Florida. The Resort features 1216 condominium rooms, all of which are owned by third parties or affiliates. Approximately 416 condominium owners (representing 552 units) participate in a rental pool (the “Rental Pool”) operated by the Company.

 

Rental Pool Condominiums

 

Condominium ownership is a realty subdivision in which the individual “lots” are deemed apartment units. Instead of owning a plot of ground, the condominium owners own the space where their condominium units are located. This leaves substantial properties in interest which are not individually owned, such as the underlying land, driveways, parking lots, building foundations, exterior walls and roofs, garden areas and utility lines. These areas are termed common property or common elements. Each condominium owner has an undivided fractional interest in the common property.

 

The condominium owners at the Resort have established an Association of Condominium Owners (the “Association”), to administer and maintain this common property and to conduct the business of the condominium owners. In particular, the Association is responsible for maintaining insurance on the real property, upkeep of the structures, maintenance of the grounds, electricity for the common areas, water/sewer and security services. The Association assesses fees to defray these expenses and to establish necessary reserves. An assessment, if not timely paid, may result in a lien being placed upon the unit of a delinquent condominium owner. Each condominium owner must pay ad valorem property taxes, contents insurance, interior maintenance and to such other matters independent of the other unit owners. These expenses are incurred by each owner of condominium units whether or not the unit participates in the Rental Pool at the Resort. With respect to governing the affairs of the Association, the participating condominium owners are accorded one vote per condominium unit owned. State statutes also impact the way in which the Association’s affairs are administered.

 

Markets and Marketing

 

The Resort is located in Innisbrook, Florida and is a destination golf resort that appeals to group convention business and leisure travelers within all market segments. The Resort caters to corporate meeting planners and sports enthusiasts within a variety of industries, the majority of which are located in the central and eastern United States. The Resort markets through most of the typical channels utilizing e-commerce, print media, 3^rd party representation firms, travel agents and wholesalers.

 

The Resort provides condominium accommodations, four dining locations, room service, over 65,000 square feet of banquet and catering space, 72 holes of golf, golf instruction, a full service spa and fitness center, tennis center and recreational entertainment to members, business meeting attendees, group meeting guests, leisure guests and their families. The Resort offers room-only rates, golf packages, and family vacation packages. Larger golf or conference groups typically involve contractual agreements. Accordingly, we do not expect that the loss of a single conference or even a few conferences of average size would have a significant adverse impact on our business taken as a whole.

 

The Resort’s accommodations are condominium units that are owned by third parties or affiliates of the Company. These units are sold by registered securities brokers, including Golf Host Securities, Inc., an affiliate of the Company.

 

Seasonality

 

The Florida resort industry is seasonal in nature and historically, the Resort’s business levels are stronger in the winter and spring months as guests come from the northeast and other colder regions to enjoy the warm weather. In contrast, there is a decline in business levels during the summer months as the hot summer weather makes Florida less appealing for group golf outings and vacation destination golfers. The Resort uses seasonal pricing (peak, shoulder and off-peak) to maximize revenues. The Resort may also experience reduced bookings as a result of hurricane-related concerns.

  

PGA TOUR Event

 

Innisbrook Resort has been the site of a PGA TOUR event since 1990. The annual event typically takes place in March, our peak demand month. Transitions Optical, presenting sponsor of the PGA TOUR event for the past three years, did not exercise its option as sponsor beyond the March 2012 event. Because the Innisbrook Resort event is so highly regarded by the United States and foreign-based PGA TOUR players (strength of the Copperhead Golf Course, superior accommodations, place in the PGA TOUR’s “Florida Swing” schedule), those associated with the event are confident that a viable sponsor will be in place well in advance of the 2013 event. It should be noted that the combined resources of the PGA TOUR, the Copperhead Charities and Salamander Hotels and Resorts and Innisbrook Resort have been deployed in a concerted effort to secure a new partner. We fully expect to continue to be the site of a PGA TOUR event for many years to come. Because the PGA TOUR event is held during our peak demand month, we do not anticipate any adverse financial impact in the unlikely event that the PGA TOUR event is not held at Innisbrook Resort in future years.

 

Intellectual Property

 

The Resort has registered service marks, and domain names that are necessary for the Resort to effectively conduct business. Service marks include: “Innisbrook” # 955489, registered March 13, 1973, and the Innisbrook shield logo #955488 registered March 13, 1973. The Company’s operation of the Resort is not considered to be dependent upon the availability of raw materials, nor the effect of the duration of patents, licenses, franchises or concessions held.

 

Competition

 

Conveniently located near the Florida Gulf Coast and Tampa International Airport, this full-service Resort is located within 900 acres of a dramatically landscaped setting. The Resort competes using a unique price/value strategy through its offering of spacious accommodations, high levels of customer service, award-winning golf, and one of the largest conference facilities in the southeast. Competition within the conference-related group segment of the industry is also quite competitive and typically involves similar properties within the state of Florida and throughout the southeastern United States. The Resort’s major competitors, our competitive set, are other golf and conference-oriented resorts in the southeast.

 

Research and Development

 

We have no research and development expenses.

 

Environmental Matters

 

Operations of the golf courses at the Resort involve the use and storage of various hazardous materials such as herbicides, pesticides, fertilizers, motor oils and gasoline. Under various federal, state and local laws, ordinances and regulations, an owner or operator of real property may become liable for the costs of removal or remediation of certain hazardous substances released on or in its property. These laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release of hazardous substances. As of December 31, 2011, there were no violations imposed against the Company.

 

Government Regulation

 

The Resort, like most businesses, is subject to the Americans with Disabilities Act of 1990. The ADA has separate compliance requirements for “public accommodations” and “commercial facilities,” but generally requires public facilities such as clubhouses and recreation areas to be accessible to people with disabilities. Noncompliance could result in imposition of fines or an award of damages to private litigants. We are responsible for compliance costs incurred at the Resort.

 

Employees

 

As of December 31, 2011, there were approximately 564 employees, with approximately 351 full time and approximately 213 part time or casual laborers who are engaged as needed.

 

Code of Ethics

 

See Part III, Item 10 for discussion of our Code of Business Conduct.

 

ITEM 1A. RISK FACTORS

 

Not required for Smaller Reporting Company.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

None.

 

ITEM 2. PROPERTIES

 

The Resort is situated on approximately 900 acres of land located in the northern portion of Pinellas County, Florida, near the Gulf of Mexico. It is approximately 9 miles north of Clearwater and approximately 20 miles west of Tampa. There are 938 condominium units, 36 of which are strictly residential, with the balance eligible for Rental Pool participation. Of the 902 remaining eligible units, 443, on average, participate in the Rental Pool on a year-to-year basis. See additional discussion in Item 1 under the caption “Rental Pool Condominiums.” These condominium units are leased by us from the condominium owners and used as hotel accommodations for the Resort. Salamander Innisbrook Condominium, LLC, owns three condominium units, two of which participate in the rental pool in the same fashion as all other Rental Pool participants. Approximately 20% of the units have lockout master bedroom units, which allow the rental of the condominium unit as two hotel rooms. As a result of the potential use of lockout master bedroom units, the total number of rooms at the resort is 1216 and the average of 443 units participating in the Rental Pool at any one time is equivalent to approximately 552 hotel rooms. The Resort complex includes 72 holes of golf; practice ranges; three clubhouses with retail, golf, and food and beverage outlets; three conference and exhibit buildings; a full service spa and fitness center; six swimming pools including a themed water attraction; a recreation facility; a tennis facility and numerous administrative and support structures. These amenities are owned by the Company and have undergone substantial renovation and improvements during 2008 and 2009.

 

ITEM 3. LEGAL PROCEEDINGS

 

In the normal course of our operations, we are subject to claims and lawsuits. Our former insurance carrier has requested reimbursement of monies from us that they paid in 2010 to settle certain claims asserted against us. We believe the request for reimbursement has no basis and, through our legal counsel, have denied the insurance carrier’s request for reimbursement and we intend to fully defend our position. The outcome of this matter cannot be determined at this time. We believe this matter will not have a material effect on our financial condition and results of operations, and accordingly, there have been no adjustments to the accompanying financial statements as of December 31, 2011 for the effects of this matter.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

None.

 

PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

We are a single member limited liability company and do not have any stock. Our membership interests are not publicly traded.

 

There are a total of 902 deeded condominium units allowing Rental Pool participation by their owners, of which three are owned by our affiliate, Salamander Innisbrook Condominium, LLC.

 

The condominium units sold by Golf Host Securities, Inc, which allow Rental Pool participation, are deemed to be securities because of the Rental Pool feature. These units are referenced in this report as Rental Pool securities. While the Rental Pool securities are deemed securities pursuant to the Securities Act of 1933, as amended, there is no market for such securities other than the normal real estate market.

 

Because the Rental Pool securities are real estate, no dividends have been paid or will be paid to their owners. However, the Rental Pool lease agreements provide that the Rental Pool participants are entitled to a contractual distribution paid quarterly in exchange for our right to use their condominium units in the Rental Pool.

 

ITEM 6. SELECTED FINANCIAL DATA

 

Not required for Smaller Reporting Company.

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Salamander Innisbrook, LLC (the “Company”, “we”, “us”, or “our”), was formed June 14, 2007 by Salamander Farms, LLC (the “Member”). The Company, together with its affiliates, Salamander Innisbrook Securities, LLC and Salamander Innisbrook Condominium, LLC, purchased the Innisbrook Resort and Golf Club (the “Resort”) in Innisbrook, Florida, on July 16, 2007. The Resort is a 72-hole destination golf and conference facilities, with a private club component.

 

 

Critical Accounting Policies and Estimates

 

The following accounting policies are considered critical by our management. These and other accounting policies require that estimates be made based on assumptions and judgment, which affect revenues, expenses, assets, liabilities and disclosure of contingencies in our financial statements. These estimates and assumptions are based on historical experience and on various other factors that are believed to be reasonable under the circumstances. However, actual results may differ from these estimates under different and/or future circumstances.

 

Revenue Recognition

 

Our revenue is derived from a variety of sources including, but not limited to, hotel operations, food and beverage operations, retail sales and golf course operations. With the exception of membership dues and initiation fees, all revenues are recognized as products are delivered or services are performed. The membership dues are recognized ratably over the applicable period (three months to a year depending on type of membership). The membership initiation fees at the Resort are nonrefundable and are initially recorded to deferred revenue and amortized over the average life of a membership which, based on historical information, is deemed to be ten years for full golf memberships and five years for resort and executive golf memberships.

 

Intangible Assets

 

We evaluate intangible assets for impairment annually or if a significant event occurs or circumstances indicate that the assets may not be recoverable. Factors we consider important, and which could indicate impairment, include the following: (i) significant underperformance relative to historical or projected future operating results; (ii) significant changes in the manner of our use of the acquired assets or the strategy for our overall business; and (iii) significant negative industry or economic trends.

 

We place our intangible assets in the following categories: (i) the water contract; (ii) club memberships; (iii) the trademark and the trade name; (iv) the Rental Pool; and (v) guest bookings. The valuation of the water contract is based on the projected annual savings associated with having this contract. The water contract has an indefinite life. The valuation of the trademark and trade name is derived from the residual revenue stream from the Resort revenues that is attributed to the Innisbrook trade name. We attribute an indefinite life to the trademark and trade name. The valuation of the Rental Pool is based on estimates of revenue derived by us from our Rental Pool operations. During 2011, certain intangible assets related to guest bookings and club memberships that we acquired in connection with our acquisition of the Resort were exhausted. These intangible assets were fully amortized and realized.

 

During the fourth quarter of 2011, we reviewed our intangible assets, and based on the results, we determined that no impairment of intangible assets existed at December 31, 2011, and there has been no indication of impairment since that date.

 

Impairment of Other Long-Lived Assets

 

We review our other long-lived assets for impairment by comparing the carrying values of the assets with their estimated future undiscounted cash flows. In reviewing for impairment of our other long-lived assets, we review the financial performance of the Resort in the aggregate for material variances from our expectations of the Resort’s revenues. If it is determined that an impairment loss has occurred, the loss is recognized during that period. The impairment loss is calculated as the difference between asset carrying values and fair value as determined by discounted cash flow analysis, giving consideration to recent operating performance and pricing trends. At December 31, 2011, we believe the carrying values of our other long-lived assets are recoverable.

 

Loss Contingencies

 

We estimate loss contingencies in accordance with FASB ASC 450-20 Loss Contingencies, which states that a loss contingency shall be accrued by a charge to income if both of the following conditions are met: (a) information available before the financial statements are issued or are available to be issued indicates that it is probable that a liability had been incurred at the date of the financial statements and (b) the amount of loss can be reasonably estimated. There have been no adjustments for loss contingencies to the accompanying financial statements as of and for the year ended December 31, 2011.

  

 

Results of Operations

 

		Year ended December 31,
		2011								2010
Resort revenues		$	34,509,009				100.0	%		$	32,140,525				100.0	%
Costs and Expenses :
Operating costs and expenses			15,271,649				44.3	%			14,520,185				45.2	%
General and administrative			17,862,187				51.8	%			17,786,049				55.3	%
Depreciation and amortization			3,467,648				10.0	%			4,090,334				12.7	%
Total costs and expenses			36,601,484				106.1	%			36,396,568				113.2	%
Loss before Interest			(2,092,475	)			-6.1	%			(4,256,043	)			-13.2	%
Interest expense, net			(21,915	)			-0.1	%			(36,140	)			-0.1	%
Net loss		$	(2,114,390	)			-6.1	%		$	(4,292,183	)			-13.4	%

  

Innisbrook Resort and Golf Club continued to experience positive financial growth in 2011 with an overall revenue increase of 7.4% reaching $34,509,009 in sales for the year ended December 31, 2011. In a year-over-year comparison the growth was primarily a result of increases within occupancy, up 15.9%. Revenue per available room also grew by 15.5%.

 

Expenses continue to be well controlled throughout the year; operating costs and expenses fell 1% as a percentage of revenues, general and administrative expenditures were flat despite the increased revenue, and depreciation and amortization declined by $622,686 or 15.2% mostly due to certain intangible assets becoming fully amortized in 2011. Overall costs and expenses, which include depreciation and amortization, were down as a percentage of revenue from 113.2% to 106.1%. Increased revenues and operating efficiencies resulted in a 51% positive change in the Resort’s bottom line as the Net loss was $2,114,390 in 2011 versus the net loss of $4,292,183 in 2010.

 

Legal Entity Structure

 

Salamander Innisbrook, LLC is a single member limited liability company with Salamander Farms, LLC as the sole member.

 

Income Tax Status

 

We have not elected to be taxed as a corporation. As a result, the single member is responsible for income taxes on our operating income/losses. Therefore, no provision or liability for federal or state income taxes has been included in our financial statements presented in this report.

 

We have adopted the provisions of FASB ASC 740-10, Accounting for Uncertainty in Income Taxes. Under this topic, we are required to evaluate each of our tax positions to determine if they are more likely than not to be sustained if the taxing authority examines the respective position. A tax position includes an entity’s tax status, including its status as a pass through entity, and the decision not to file a tax return. We have evaluated each of our tax positions and have determined that no provision or liability for income taxes is necessary.

 

We evaluate the validity of our conclusions regarding uncertain income tax positions on an annual basis to determine if facts or circumstances have arisen that might cause us to change our judgment regarding the likelihood of a tax position’s sustainability under examination. We file income tax returns in the U.S. federal jurisdiction and the State of Virginia. We remain subject to examination by tax authorities for all years since our inception on June 14, 2007.

 

Liquidity and Capital Resources

 

Operating losses in 2011 and 2010 were funded by operations. Future operating costs and planned expenditures for capital additions and improvements are expected to be adequately funded by cash generated by the Resort’s operations, funding from our sole member or affiliates’ current cash reserves.

 

The operation of the Resort is not considered to be dependent on any individual or small group of customers, the loss of which would not have a material adverse effect on the Company’s business or financial condition.

  

Environmental Matters

 

None

 

Off Balance Sheet Arrangements

 

As of December 31, 2011, we have no 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.

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We do not have significant market risk with respect to foreign currency exchanges or other market rates.

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

See Financial Statements and Supplementary Data starting on page 13.

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None.

 

ITEM 9A (T) CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures (as defined in Rule 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 the Company’s SEC filings is recorded, processed, summarized and reported within the periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. As of December 31, 2011, 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 and concluded that our disclosure controls and procedures were effective.

 

Management’s Report Internal Controls Over Financial Reporting

 

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 control over financial reporting as of December 31, 2011 based on the framework stated by the Committee of Sponsoring Organizations of the Treadway Commission.

 

Our management is 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 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.

 

Based on the assessment, management concluded that, as of December 31, 2011, the Company’s internal controls over financial reporting were effective.

 

This annual report does not include an attestation report of the Company’s registered certified public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered certified public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in the Company’s internal controls over financial reporting during the quarter ended December 31, 2011, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

ITEM 9B. OTHER INFORMATION

 

None.

 

PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

Set forth below is information about our executive officers:

 

Name		Age		Position
Prem Devadas		54		Manager
Dale Pelletier		52		CFO, Salamander Hospitality LLC

 

 

Biographical Information

 

Prem Devadas, Manager, is a twenty-nine year veteran of the hospitality industry. After ten years with The Potomac Hotel Group in Washington, DC, he left the Regional Director of Operations position to manage the lodging portfolio for CCA Industries whose holdings include The Jefferson Hotel in Richmond, VA, The Hermitage Hotel in Nashville, TN and Kiawah Island Resort near Charleston, SC. As Managing Director, he re-positioned the Jefferson Hotel and the Hermitage Hotel through extensive renovations and achieved Mobil 5-Star and AAA Five-Diamond awards for the respective properties. At Kiawah Island he directed the development and successful opening of the Sanctuary at Kiawah Island, the new 255 room ultra luxury hotel opened in August, 2004.

 

Dale Pelletier, Chief Financial Officer, is a thirty-four year veteran of the hospitality industry. Mr. Pelletier oversees the company’s financial, accounting, tax, information systems, treasury, planning and reporting activities. His extensive experience with over seventy hotels includes full service, limited service, all suites, resorts and condominium hotels both at the property and corporate levels. He also served as Chief Financial Officer for MEI Hotels, a hotel development, ownership, management and investment group. He was responsible for all financial activities for the company’s managed and asset managed hotels, construction and development projects and three private equity funds. Prior to MEI, Mr. Pelletier was Chief Financial Officer for the US operations of City Hotels, an international hotel and airline company listed on the Brussels stock exchange, with hotels in the US and Europe.

 

Directors and Officers Insurance

 

Salamander Innisbrook, LLC maintains directors and officers liability insurance that insures our officers, managers and committee members from claims arising out of an alleged wrongful act by such persons while acting as executive officers, managers or committee members of our company, and it insures our company to the extent that we have indemnified our officers, managers and committee members for such loss.

 

Indemnification

 

Our organizational documents provide that we shall indemnify our officers, committee members and managers against certain liabilities to the fullest extent permitted under applicable law. Our organizational documents also provide that our officers, committee members and managers shall be exculpated from monetary damages to us to the fullest extent permitted under applicable law.

 

Code of Ethics

 

The Code of Business Conduct applies to all of our officers and other employees. Salamander Innisbrook, LLC’s Code of Business conduct was filed as Exhibit 14.1 to its Annual Report on Form 10-K filed with the SEC on April 4, 2011. You may also obtain a free copy of our Code of Ethics by writing to our attention at 36750 US Highway 19 North, Palm Harbor, FL 34684.

 

ITEM 11. EXECUTIVE COMPENSATION

 

Summary Compensation Table

 

The following tables set forth the remuneration paid, distributed or accrued by us during the year ended December 31, 2011 to our executive officers.

 

Name and Principal Position					Salary and Commission				Bonus				Other Annual Compensation				All Other Compensation
Prem Devadas		2011		$	—			$	—			$	—			$	—
Manager (1)		2010		$	—			$	—			$	—			$	—
Dale Pelletier		2011		$	—			$	—			$	—			$	—
Chief Financial Officer (1)		2010		$	—			$	—			$	—			$	—

 

Messrs. Devadas and Pelletier are not compensated directly by us for services as our executive officers; however, they receive compensation from an affiliate of the single member, to whom we pay management fees, for service as its executive officers.

 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

We are wholly owned by Salamander Farms, LLC which has sole voting and dispositive power over our interests.

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

 

(a)

Transactions with Management and Others

 

None.

 

(b)

Certain Business Relationships

 

Pursuant to the terms of the Master Lease Agreement, the Rental Pool paid the Company approximately $398,400 and $500,000 as reimbursement for maintenance and housekeeping labor, use of telephone lines, and other supplies during the years ended December 31, 2011 and 2010, respectively.

 

Salamander Innisbrook Condominium, LLC, a wholly owned subsidiary of Salamander Farms, LLC, owns three condominiums which were acquired from the former owner. Its condominiums participated in the Rental Pool under the MLA in the same manner as all other Rental Pool participants.

 

At December 31, 2011and 2010, the Company had amounts due from affiliates of $84,003 and $80,507 respectively, which are non-interest bearing and due on demand.

 

Golf Host Securities, Inc. is an on-site real estate broker/dealer for the resale of the Resort’s condominium units owned by Salamander Farms, LLC. Approximately $31,000 was paid to the Company for rent and related accounting services for the years ended December 31, 2011 and 2010.

 

(c)

Indebtedness of Management

 

None.

 

(d)

Transactions with Promoters

 

Not applicable.

 

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

 

Kingery & Crouse, PA served as our independent registered public accounting firm for the years ended December 31, 2011 and 2010.

 

The following fees were incurred for Kingery & Crouse, PA services related to years ended December 31, 2011 and 2010.

 

Audit Fees: $60,000 and $67,601 for the fiscal years ended December 31, 2011 and 2010 for professional services rendered for the audit of our annual financial statements, review of the financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the auditors in connection with statutory filings or engagements for those fiscal years.

 

Audit-Related Fees: None.

 

Tax Fees: None.

 

All other fees: None.

 

PART IV

 

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

Financial Statements and Schedules

 

The financial statements and exhibits filed as part of this annual report on Form 10-K are listed on pages 13 and 35, and are incorporated herein by reference.

INDEX TO FINANCIAL STATEMENTS

 

	Page
Financial Statements of Salamander Innisbrook, LLC
Report of Independent Registered Certified Public Accounting Firm	14
Balance Sheets as of December 31, 2011 and 2010	15
Statements of Operations and Changes in Member’s Equity for the years ended December 31, 2011 and 2010	16
Statements of Cash Flows for the years ended December 31, 2011 and 2010	17
Notes to Financial Statements	18
Introduction to Financial Statements of the Rental Pool Lease Operation—Historical Summary	24
Financial Statements of the Rental Pool Lease Operation
Report of Independent Registered Certified Public Accounting Firm	25
Balance Sheets—Distribution Fund as of December 31, 2011 and 2010	26
Balance Sheets—Maintenance Escrow Fund as of December 31, 2011and 2010	27
Statements of Operations—Distribution Fund for the years ended December 31, 2011 and 2010	28
Statements of Changes in Participants’ Fund Balances—Distribution Fund for the years ended December 31, 2011 and 2010	29
Statements of Changes in Participants’ Fund Balances—Maintenance Escrow Fund for the years ended December 31, 2011 and 2010	30
Notes to Financial Statements	31

 

REPORT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM

 

To the Sole Member and Manager of Salamander Innisbrook, LLC:

 

We have audited the accompanying balance sheets of Salamander Innisbrook, LLC (the “Company”) as of December 31, 2011 and 2010, and the related statements of operations and changes in member’s equity, and of cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2011 and 2010, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

 

/s/ Kingery & Crouse, P.A.

Certified Public Accountants

Tampa, FL

April 3, 2012

 

 SALAMANDER INNISBROOK, LLC

BALANCE SHEETS

December 31, 2011 and 2010

		2011				2010
Assets
Current assets:
Cash		$	943,216			$	1,168,250
Accounts receivable, net			1,983,012				1,812,522
Inventories and supplies			826,625				850,562
Prepaid expenses and other			729,341				806,701
Due from affiliates			84,003				80,507
Total current assets			4,566,197				4,718,542
Property, buildings and equipment, net			40,551,300				42,627,245
Intangibles, net			6,474,862				7,547,292
Deposits and other assets			286,550				270,115
Total assets		$	51,878,909			$	55,163,194
Liabilities and Member's Equity
Current liabilities:
Accounts payable		$	956,503			$	947,478
Accrued liabilities			2,091,856				1,862,232
Deferred revenue			2,741,979				2,579,403
Current portion of refurbishment obligation			36,250				27,761
Current portion of capital lease obligations			30,532				116,387
Total current liabilities			5,857,120				5,533,261
Deferred revenue			1,100,491				1,170,612
Refurbishment obligation, net of current portion			-				35,365
Capital lease obligations, net of current portion			-				20,431
Total liabilities			6,957,611				6,759,669
Member's equity			44,921,298				48,403,525
Total liabilities and member’s equity		$	51,878,909			$	55,163,194

 

See notes to financial statements.

 

SALAMANDER INNISBROOK, LLC

STATEMENTS OF OPERATIONS AND CHANGES IN MEMBER’S EQUITY

For the Years Ended December 31, 2011 and 2010

`		2011				2010
Resort revenues		$	34,509,009			$	32,140,525
Costs and expenses:
Hotel			3,447,450				3,262,313
Food and beverage			7,401,120				7,015,007
Golf			2,643,701				2,533,361
Other			1,779,378				1,709,504
General and administrative			17,862,187				17,786,049
Depreciation and amortization			3,467,648				4,090,334
Total costs and expenses			36,601,484				36,396,568
Loss before interest			(2,092,475	)			(4,256,043	)
Interest expense, net			(21,915	)			(36,140	)
Net loss			(2,114,390	)			(4,292,183	)
Member's equity, beginning of year			48,403,525				52,761,136
Member distributions			(1,367,837	)			(65,428	)
Member's equity, end of year		$	44,921,298			$	48,403,525

  

See notes to financial statements.

 

SALAMANDER INNISBROOK, LLC

STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2011 and 2010

		2011				2010
Cash flows from operating activities:
Net loss		$	(2,114,390	)		$	(4,292,183	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Provision for bad debt			19,564				9,000
Depreciation and amortization			3,467,655				4,090,334
Loss on disposal of assets			-				13,068
Net increase (decrease) in cash flows from changes in:
Accounts receivable			(190,054	)			194,464
Inventories and supplies			23,937				153,244
Prepaid expenses and other			77,360				(75,508	)
Due (to) from affiliates			(3,496	)			114,097
Deposits and other assets			(16,435	)			47,125
Accounts payable			9,025				4,540
Accrued liabilities			229,624				9,969
Deferred revenue			92,455				387,747
Net cash provided by operating activities			1,595,245				655,897
Cash flows from investing activities:
Purchases of property and equipment			(319,280	)			(294,290	)
Proceeds from sale of property and equipment			-				5,250
Net cash used in investing activities			(319,280	)			(289,040	)
Cash flows from financing activities:
Member distributions			(1,367,837	)			(65,428	)
Repayment of capital lease obligations			(106,286	)			(108,137	)
Repayment of refurbishment obligation			(26,876	)			(22,694	)
Net cash used in financing activities			(1,500,999	)			(196,259	)
Net increase (decrease) in cash			(225,034	)			170,598
Cash, beginning of year			1,168,250				997,652
Cash, end of year		$	943,216			$	1,168,250
Supplemental disclosure of cash flow information:
Cash paid for interest		$	21,915			$	36,140

 

Supplemental disclosure of non cash investing and financing activities:

 

Property and equipment of approximately $128,600 was transferred to an affiliated entity during 2010, resulting in an increase in amounts due from affiliates.

 

 

See notes to financial statements.

SALAMANDER INNISBROOK, LLC

NOTES TO FINANCIAL STATEMENTS

 

1. Nature of Business

 

On July 16, 2007, Salamander Innisbrook, LLC (the “Company”, “we”, “us”, or “our”), together with its affiliates, Salamander Innisbrook Securities, LLC, and Salamander Innisbrook Condominium, LLC (collectively, the “Buyer”) completed the purchase of the Innisbrook Resort and Golf Club (the “Resort”) and all of the equity interest in Golf Host Securities, Inc.

 

The Company assumed control and operation of the Rental Pool Lease Operations (the “Rental Pool”) which is 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 443 units or 552 hotel rooms participate at any given time. The Rental Pool obligated the Company to make quarterly distributions of a percentage of room revenues under the Amended and Restated Innisbrook Rental Pool Master Lease Agreement, dated January 1, 2004 (the “Master Lease” or “MLA”). Other resort facilities include four 18-hole golf courses, four restaurants, three convention facilities, a health spa, fitness center, tennis and recreation facilities, themed waterpark and five swimming pools.

 

2. Summary of Significant Accounting Policies

  

Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates that are critical to the accompanying financial statements include our belief that long-lived assets, including intangibles, are recoverable, and 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 period they are determined to be necessary. It is at least reasonably possible that our estimates could change in the near term. Future results could be materially affected if actual results differ from these estimates and assumptions.

 

Concentrations of Credit Risk - Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, accounts receivable, accounts payable and long term obligations. We frequently maintain cash balances in excess of federally insured limits. We have not experienced any losses in such accounts. The Company performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral. Although due dates of receivables vary based on contract terms, credit losses have been within management’s estimates in determining the level of allowance for doubtful accounts. Overall financial strategies are reviewed periodically.

 

The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:

 

•

Accounts receivable and accounts payable: Due to their short term nature, the carrying amounts reported in the balance sheet for accounts receivable and accounts payable approximate their fair value. The Company provides for any losses through its allowance for doubtful accounts.

 

•

Long-term obligations: The carrying amount of the Company’s refurbishment obligations, capital leases and long-term liabilities approximate their fair value because they have been recorded at their net present values considering relevant risk factors.

Liquidity – The Company believes that with the cash on hand, cash available from operations and funding available from our sole member or affiliates’ current cash reserves will be sufficient to fund our operations for the foreseeable future.

 

Revenue Recognition and Deferred Revenue - Revenue from rooms, green fees, food and beverage sales and other merchandise sales are generally recognized at the time of sale. Membership dues and annual fees are recognized ratably over the applicable period. The following table sets forth the percentage of the Resort’s total revenues attributable to the categories listed for the years ended December 31, 2011 and 2010.

 

		2011				2010
Revenues
Rental pool revenues			26.1	%			24.5	%
Resort facilities and other resort revenue			73.9	%			75.5	%
Total			100.0	%			100.0	%

 

The membership initiation fees at the Resort are nonrefundable and are initially recorded when received as deferred revenue and amortized over the average life of a membership which, based on historical information, is deemed to be ten years for full golf members and five years for resort and executive memberships.

 

Accounts Receivable Trade, net - Accounts receivable trade represent amounts due from our membership, Resort guests and companies or individuals that held conferences or group stays at the Resort, net of the allowance for doubtful accounts. The Company performs credit evaluations of its membership’s financial condition. Companies with a recent prior direct billing positive history with the Resort are granted credit for billing. If companies have not been to the Resort within the past two years, an updated credit evaluation is conducted. Terms are negotiable by group contract, but invoices are typically due 30 days from the receipt of invoice.

 

The Company’s management reviews accounts receivable monthly to determine if any receivables are uncollectible. Any receivable considered to be doubtful is included in the allowance for doubtful accounts. The balance in the allowance for doubtful accounts was $111,083 and $91,519 as of December 31, 2011 and 2010, respectively. After all attempts to collect the receivable have failed, the receivable is written off against the allowance.

 

Inventories and Supplies - Inventories and supplies are recorded at the lower of cost, on a first-in, first-out basis, or market.

 

Property, Buildings and Equipment, net – Property, buildings and equipment are stated at cost less accumulated depreciation. The Company capitalizes any asset purchase of $1,000 or more with an estimated useful life of at least three years. Depreciation is recorded using the straight line basis over the estimated useful lives of the assets. Estimated useful lives are presented in the following table:

 

Category		Average Lives (in Years)
Buildings		40
Land improvements		20
Machinery and equipment		3 to 10
Assets recorded under capital leases		3 to 4

 

Costs of maintenance and repairs of property and equipment used in operations are charged to expense as incurred, while renewals and betterments are capitalized. When property and equipment are replaced, retired or otherwise disposed of, the costs are deducted from the asset and accumulated depreciation accounts. Gains or losses on sales or retirements of equipment are recorded in operating income.

 

Impairment of Long-Lived Assets - The Company regularly reviews its long-lived assets for impairment by comparing the carrying values of the assets with their estimated future undiscounted cash flows. If it is determined that an impairment loss has occurred, the loss is recognized during that period. The impairment loss is calculated as the difference between asset carrying values and fair value as determined by prices of similar items and other valuation techniques, giving consideration to recent operating performance and pricing trends. There were no impairment losses related to long-lived assets for the periods included herein.

Intangibles - The Company evaluates intangible assets for impairment annually or earlier if a significant event occurs or circumstances indicate that the assets may not be recoverable. Factors the Company considers important, which could indicate impairment, include the following: (1) significant under-performance relative to historical or projected future operating results; (2) significant changes in the manner of the Company’s use of the acquired assets or the strategy for the Company’s overall business; and (3) significant negative industry or economic trends. During the fourth quarter of 2011, the Company completed its annual intangible impairment assessment, and based on the results, the Company determined that no impairment of intangible assets existed at December 31, 2011.

 

Advertising - Advertising costs are expensed as incurred and amounted to $582,282 and $389,536 for the years ended December 31, 2011 and 2010, respectively.

 

Leases - Leases, which transfer substantially all of the benefits and risks of ownership of property, are classified as capital leases. Assets and liabilities are recorded at amounts equal to the present value of the minimum lease payments at the beginning of the lease term. Interest expense relating to the lease liabilities is recorded to affect constant rates of interest over the terms of the leases.

 

Leases, which do not transfer substantially all of the benefits and risks of ownership of property, are classified as operating leases, and the related rentals are charged to expense as incurred.

  

Income Taxes - The Company is a single-member limited liability company. The Company has not elected to be taxed as a corporation; therefore, no provision or liability for federal or state income taxes has been included in the accompanying financial statements.

 

We have adopted the provisions of FASB ASC 740-10, Accounting for Uncertainty in Income Taxes.  Under ASC 740-10, we are required to evaluate each of our tax positions to determine if they are more likely than not to be sustained if the taxing authority examines the respective position.  A tax position includes an entity’s tax status, including its status as a pass through entity, and the decision not to file a tax return.  We have evaluated each of our tax positions and have determined that no provision or liability for income taxes is necessary.

 

We evaluate the validity of our conclusions regarding uncertain income tax positions on an annual basis to determine if facts or circumstances have arisen that might cause us to change our judgment regarding the likelihood  of a tax position’s sustainability under examination.  We file income tax returns in the U.S. federal jurisdiction and the State of Virginia.  We remain subject to examination by tax authorities for all years since our inception on June 14, 2007.

 

Recently Issued Accounting Pronouncements- The Financial Accounting Standards Board has recently issued several Financial Accounting Standards.

 

The Company has determined that all recently issued accounting standards will not have a material impact on its financial statements, or do not apply to its operations.

 

3. Accounts Receivable

 

Accounts receivable consist of the following as of December 31, 2011 and 2010:

		December 31, 2011				December 31, 2010
Trade accounts receivable		$	1,591,984			$	1,576,821
Other receivables			502,111				327,220
Less allowance for bad debts			(111,083	)			(91,519	)
		$	1,983,012			$	1,812,522

 

Other receivables include related party receivables of $293,027 and $176,630 due from Innisbrook Condominium Association and $33,647 and $32,428 due from the Lessors’ Advisory Committee at December 31, 2011 and 2010, respectively.

  

4. Property, Buildings and Equipment

 

Property, buildings, and equipment consist of the following as of December 31, 2011 and 2010:

 

		December 31, 2011				December 31, 2010
Land and land improvements		$	16,645,171			$	16,555,593
Buildings			24,961,772				24,948,272
Furniture, fixtures and equipment			7,952,997				7,754,059
Contruction in progress			37,685				20,421
			49,597,625				49,278,345
Less accumulated depreciation			(9,046,325	)			(6,651,100	)
		$	40,551,300			$	42,627,245

 

Included in furniture, fixtures and equipment is certain equipment including golf course maintenance equipment and computer equipment that are recorded under capital leases and that have a net book value at December 31, 2011 and 2010 of $30,533 and $134,674, respectively. Depreciation expense of $2,395,225 and $2,402,539 was recorded for the years ended December 31, 2011 and 2010, respectively.

  

5. Intangibles

 

Intangible assets represent the value of the following contractual relationships acquired in connection with the acquisition of the Resort. The intangible assets are being amortized over the specific term or benefit period of each related contract.

 

As discussed in Note 10, a letter of agreement was entered into on September 10, 2009 extending the term of the Rental Pool MLA an additional two years through December 31, 2013. As a result, the Company determined that the remaining useful life of the intangible asset derived from the Rental Pool MLA was also extended an additional two years, and effective September 10, 2009, the remaining carrying amount of this intangible asset is being amortized over the extended term and will be fully amortized in December 2013.

 

				December 31,				December 31,
Intangible Assets		Amortization Period		2011				2010
Water Contract		None since renewable in perpetuity		$	2,030,000			$	2,030,000
Rental Pool		77.5 months			9,481,717				9,481,717
Guest Bookings		36 months			-				1,378,000
Club Memberships		41.5 months			-				1,268,000
Trade Name		None since renewable in perpetuity			2,300,000				2,300,000
					13,811,717				16,457,717
Less accumulated amortization					(7,336,855	)			(8,910,425	)
				$	6,474,862			$	7,547,292

 

 

During 2011, certain intangible assets related to guest bookings and club memberships that we acquired in connection with our acquisition of the Resort were exhausted. These intangible assets were fully amortized and realized. Amortization expense amounted to $1,072,430 and $1,687,785 for the years ended December 31, 2011 and 2010, respectively.

 

Anticipated amortization expense is illustrated in the table below:

 

Year		Amount
2012		$	1,072,430
2013			1,072,430
		$	2,144,860

 

 

 

6. Accrued Liabilities

 

Accrued liabilities consist of the following at December 31, 2011 and 2010:

		2011				2010
Rental pool lease distribution payable		$	638,125			$	507,813
Accrued payroll costs			991,351				920,676
Other			462,380				433,743
		$	2,091,856			$	1,862,232

 

 

7. Refurbishment Obligation

 

Master Lease Refurbishment Obligation

 

The Company agreed to provide a refurbishment reimbursement to the condominium owners for units placed into the Rental Pool during 2005. The owners of these units will be paid 25% of their refurbishment investment, with interest at 2.5% per annum. The owners of these units currently receive interest and will receive principal payments beginning in 2008 and ending in 2012 for total principal payments of approximately $36,300.

  

Our obligation to reimburse the Rental Pool Participants for their refurbishment expenses is contingent on the units remaining in the Rental Pool from the time of their refurbishment through the pay out period. If the unit does not remain in the Rental Pool during the reimbursement periods discussed above, the owner or successor owner will forfeit any unpaid installments at the time the unit is removed from the Rental Pool.

 

8. Leases

 

The Company leases equipment under capital and operating leases. On November 1, 2011, we entered into a master lease agreement with Agricredit Acceptance, LLC for vehicles supplied by Club Car, LLC. The agreement replaced our expired lease agreement and provides for two leases, golf carts and utility vehicles, with payments commencing in January 2012. The term of each lease is 48 months and the monthly lease payments are approximately $20,760 and $11,080, respectively. Lease expense amounted to $454,000 and $442,172 for the years ended December 31, 2011 and 2010, respectively. Future minimum lease payments under leases in excess of one year are as follows:

 

		Capital				Operating
2012		$	30,990			$	381,697
2013			---				381,697
2014			---				381,697
2015			---				381,697
Subtotal			30,990				1,526,788
Less amount representing interest			(458	)			---
Total		$	30,532			$	1,526,788

 

9. Commitments and Contingencies

 

Contingency

 

In the normal course of our operations, we are subject to claims and lawsuits. Our former insurance carrier has requested reimbursement of monies from us that they paid in 2010 to settle certain claims asserted against us. We believe the request for reimbursement has no basis and, through our legal counsel, have denied the insurance carrier’s request for reimbursement and we intend to fully defend our position. The outcome of this matter cannot be determined at this time. We believe this matter will not have a material effect on our financial condition and results of operations, and accordingly, there have been no adjustments to the accompanying financial statements as of December 31, 2011 for the effects of this matter.

 

Employee Benefit Plans

 

The Company sponsors a defined contribution retirement plan, which provides retirement benefits for all eligible employees. Employees must fulfill a 90-day service requirement to be eligible to participate in this plan. The Company currently matches one half of the first 6% of the contributions of each employee. The Company made matching contributions of approximately $140,900 and $165,000 for the years ended December 31, 2011 and 2010, respectively.

 

10. Rental Pool Operations

 

Historically, there had been several different Rental pool programs offered to the condominium owners. Effective January 1, 2002, a new Master Lease Agreement (“NMLA”) was offered to all condominium owners. Each condominium owner may elect to participate in the NMLA. If an owner elected to participate in the NMLA, the owner was prohibited from returning to any previous agreement. As of January 1, 2004, all condominium owners participating in the rental pool are participating pursuant to the NMLA. The NMLA provides for Adjusted Gross Revenues, as defined, to be divided 40% to the Innisbrook Rental Pool participants and 60% to the Company. In addition, the Company has agreed, as part of the NMLA, to reimburse Rental Pool participants in the NMLA for certain refurbishment costs as described in Note 7. The NMLA was scheduled to expire in 2011, however, on September 10, 2009, a letter of agreement was signed extending the agreement two additional years, expiring December 31, 2013.

 

11. Related Party Transactions

 

We paid management fees to an affiliate of approximately $1,035,300 and $964,100 for the years ended December 31, 2011 and 2010, respectively.

 

At December 31, 2011 and 2010, the amounts due from affiliates amounted to $84,003 and $80,507 respectively, which are due on demand.

 

The Innisbrook Rental Pool Lease Operation paid us $398,400 and $500,000 as reimbursement for maintenance and housekeeping labor, use of the telephone lines and other supplies during the years ended December 31, 2011 and 2010, respectively.

 

RENTAL POOL LEASE OPERATION—HISTORICAL SUMMARY

 

The following financial statements of the Innisbrook Rental Pool Lease Operation (the “Rental Pool”) are for the years ended December 31, 2011 and 2010.

 

The operation of the Rental Pool is tied closely to the Resort operations. The Rental Pool Master Lease Agreements provide for a quarterly distribution of a percentage of the Company’s 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 Company’s room revenues, the condominium units allowing Rental Pool participation are deemed to be securities. However, there is no market for such securities other than the normal real estate market. Since the security is real estate, no dividends have been paid or will be paid.

 

The Company is a single-member limited liability company, wholly owned by Salamander Farms, LLC. There is no established market for the Company’s membership interests.

 

REPORT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM

 

To the Sole Member of Salamander Innisbrook, LLC and
the Lessors of the Innisbrook Rental Pool Lease Operation:

 

We have audited the accompanying balance sheets (comprised of the Distribution Fund and the Maintenance Escrow Fund) of the Innisbrook Rental Pool Lease Operation (“Rental Pool”) as of December 31, 2011 and 2010, and the related statements of operations and changes in participants’ fund balances for the years then ended. These financial statements are the responsibility of the Rental Pool’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Rental Pool is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Rental Pool’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Innisbrook Rental Pool Lease Operation as of December 31, 2011 and 2010, and the results of its operations and changes in the participants’ fund balances for the years then ended in conformity with accounting principles generally accepted in the United States of America.

 

/s/Kingery & Crouse, P.A.

Certified Public Accountants

Tampa, FL

April 3, 2012

 

Innisbrook Rental Pool Lease Operation

Balance Sheets—Distribution Fund

 

			December 31,
			2011				2010
ASSETS
RECEIVABLE FROM SALAMANDER INNSIBROOK, LLC FOR DISTRIBUTION		$	621,480			$	489,077
INTEREST RECEIVABLE FROM RENTAL POOL ESCROW FUND			3,254				2,462
		$	624,734			$	491,539
LIABILITIES AND PARTICIPANTS' FUND BALANCES
DUE TO PARTICIPANTS FOR DISTRIBUTION		$	624,734			$	313,617
DUE TO MAINTENANCE ESCROW FUND			-				177,922
		$	624,734			$	491,539

 

See notes to financial statements. 

Innisbrook Rental Pool Lease Operation

Balance Sheets—Maintenance Escrow Fund

 

		December 31,
		2011				2010
ASSETS
CASH		$	217,859			$	185,231
CASH EQUIVALENTS			1,745,000				2,035,000
RECEIVABLE FROM DISTRIBUTION FUND			-				177,922
RECEIVABLE FROM SALAMANDER INNISBROOK LLC			-				6,227
INTEREST RECEIVABLE			3,971				3,432
		$	1,966,830			$	2,407,812
LIABILITIES AND PARTICIPANTS' FUND BALANCES
ACCOUNTS PAYABLE		$	78,840			$	87,805
INTEREST PAYABLE TO DISTRIBUTION FUND			3,254				2,462
TOTAL LIABILITIES			82,094				90,267
CARPET CARE RESERVE			70,044				87,914
PARTICIPANTS' FUND BALANCES			1,814,692				2,229,631
		$	1,966,830			$	2,407,812

  

See notes to financial statements.

 

 

Innisbrook Rental Pool Lease Operation 

Statements of Operations—Distribution Fund

 

		For the year ended December 31,
		2011				2010
GROSS REVENUES		$	8,899,318			$	7,772,460
DEDUCTIONS:
Agents' commissions			244,029				206,456
Credit card fees			251,163				219,340
Audit fees			60,000				89,003
Uncollectible & model room rents			3,182				11,773
Linen replacements			62,951				55,876
Rental pool complimentary fees			28,232				29,073
			649,557				611,521
ADJUSTED GROSS REVENUES			8,249,761				7,160,939
AMOUNT RETAINED BY LESSEE			(4,950,258	)			(4,289,408	)
GROSS INCOME DISTRIBUTION			3,299,503				2,871,531
ADJUSTMENTS TO GROSS
INCOME DISTRIBUTION:
General pooled expense			(3,560	)			48,986
Miscellaneous pool adjustments			(1,860	)			1,399
Corporate complimentary occupancy fees			11,474				9,730
Occupancy fees			(1,208,747	)			(1,029,770	)
Advisory Committee expenses			(130,662	)			(121,850	)
NET INCOME DISTRIBUTION			1,966,148				1,780,026
ADJUSTMENTS TO NET INCOME
DISTRIBUTION:
Occupancy fees			1,208,747				1,029,770
Hospitality suite fees			2,714				3,060
Associate room fees			49,245				46,697
AVAILABLE FOR DISTRIBUTION
TO PARTICIPANTS		$	3,226,854			$	2,859,553

 

See notes to financial statements.

 

   

Innisbrook Rental Pool Lease Operation

Statement of Changes in Participants’ Fund Balances—Distribution Fund

 

		For the year ended December 31,
		2011				2010
BALANCE, beginning of year		$	-			$	-
ADDITIONS:
Amounts available for distribution			3,226,854				2,859,553
Interest received or receivable from Maintenance Escrow Fund			3,971				11,478
REDUCTIONS:
Amounts withheld for Maintenance Escrow Fund			-				(929,714	)
Amounts accrued or paid to participants			(3,230,825	)			(1,941,317	)
BALANCE, end of year		$	-			$	-

 

 

See notes to financial statements.

Innisbrook Rental Pool Lease Operation

Statements of Changes in Participants’ Fund Balances—Maintenance Escrow Fund

 

		For the year ended December 31,
		2011				2010
BALANCE, beginning of period		$	2,229,631			$	1,955,469
ADDITIONS:
Amounts withheld from occupancy fees			-				929,714
Interest earned			3,971				11,478
Charges to participants to establish
or restore escrow balances			1,205,885				187,326
REDUCTIONS:
Maintenance charges			(1,509,013	)			(761,692	)
Carpet care reserve deposit			-				(15,450	)
Interest accrued or paid to
Distribution Fund			(3,971	)			(11,478	)
Refunds to participants as
prescribed by the master lease
agreements			(111,811	)			(65,736	)
BALANCE, end of period		$	1,814,692			$	2,229,631

  

See notes to financial statements.

 

 

Innisbrook Rental Pool Lease Operation

 Notes to Financial Statements

 

NOTE 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”), which commenced on January 1, 2002 and expired December 31, 2011, replacing all lease agreements previously in existence. On September 10, 2009, a letter of agreement was signed extending the MLA two additional years, expiring December 31, 2013.

 

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”).

 

Under the Agreement, the Resort pays the owner a fee equal to 40% of the Adjusted Gross Revenues. Adjusted Gross Revenues are defined as Gross Revenues less agent’s commissions, audit fees, occupancy fees when the unit is used for Rental Pool Comps or as a model, linen replacements and credit card fees. Each participant receives a fixed occupancy fee, based upon apartment size, for each day unit is occupied. After allocation of occupancy fees and the payment of general Rental Pool expenses, the balance is allocated proportionally to the Participants, based on the Participation Factor as defined in the Agreement. Additionally, occupancy fees are paid by the Resort to Participants as rental fees for complimentary rooms unrelated to the Rental Pool operations. Associate room fees are also paid by the Resort to Participants for total room revenues earned from the rental of condominiums by Company employees.

 

As part of the Master Lease Agreement, the former Resort owner, GTA-IB, LLC, had agreed to reimburse Rental Pool participants in the MLA for up to 50% of the actual unit refurbishment costs, plus interest at a rate of 5% per annum on such amount, beginning in 2002, so long as the minimum participation threshold as defined, is maintained. Salamander Innisbrook, LLC assumed the refurbishment obligations under the Agreement when it acquired the Resort on July 16, 2007. As of December 31, 2009, these obligations were paid in full.

 

In addition, the Company agreed to provide a refurbishment reimbursement to the respective condominium owners for units placed into the Rental Pool during 2005. The owners of these units are reimbursed for up to 25% of their refurbishment costs, plus interest at 2.5% per annum.

 

Nature of Accounts and Fund Balances - The Rental Pool consists of the Distribution Fund and the Maintenance Escrow Fund. The Distribution Fund’s balance sheet primarily reflects amounts receivable from the Company for the Rental Pool distribution payable to Participants and amounts due to the Maintenance Escrow Fund. The operations of the Distribution Fund reflect the calculation of pooled earnings, management fees and adjustments, as defined.

 

The Maintenance Escrow Fund, which is managed by the Lessors’ Advisory Committee (“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 and maintain the interior 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 90% of the Occupancy Fees earned by each Participant are deposited in the Participant’s Maintenance Escrow Fund account. Beginning in 2011, by mutual agreement between the LAC and the Resort, until it is determined that the fund requires replenishment, both the occupancy fee (Paragraph 7.3 of the MLA) and the carpet care reserve (Paragraph 1.6 of the MLA) deposit amounts will be 0%. This account provides funds for payment of amounts that are due from Participants under the Agreements for maintenance and refurbishment services. Should a Participant’s balance fall below that necessary to provide adequate funds for maintenance and replacements, the Participant is required to restore the escrow balance to a defined minimum level. The MLA provides for specific fund balances to be maintained, by unit type, size and age of refurbishment, as defined in the Agreement. Under the MLA, a percentage of the Occupancy Fees are deposited into the carpet care reserve in the Maintenance Escrow Fund, which bears the expenses of carpet cleaning for all Participants. This percentage is estimated to provide the amount necessary to fund carpet cleaning expenses and may be adjusted annually. The amounts expended for carpet care were approximately $17,870 and $31,455 for the years ended December 31, 2011 and 2010, respectively.

 

The LAC invests the maintenance escrow funds on behalf of the Participants and in compliance with restrictions in the Agreements. The Lessors’ Advisory Committee 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.

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Accounting -The accounting records of the funds are maintained on the accrual basis of accounting.

 

Cash and Cash Equivalents - Cash consists of bank deposits which may, at times, exceed federally insured limits. No losses have been experienced in such accounts. The Rental Pool considers all short-term highly liquid investments with a maturity of less than a year to be cash equivalents.

 

Certificates of Deposit - The LAC invests amounts maintained in the maintenance escrow fund primarily in certificates of deposit held with various financial institutions. As of December 31, 2011, the certificates earned interest at rates ranging from .20% to .65% and have maturities ranging from four to twelve months. As of December 31, 2011 and 2010, accrued interest earned amounted to $3,971 and $3,432 and is included in the accompanying financial statements of the maintenance escrow fund. At December 31, 2011 and 2010, the cost of these investments approximates fair value.

 

Revenue Recognition - Revenue from Resort operations is recognized as the related service is performed.

 

Accounts Receivable - Receivables are presented net of any allowances for uncollectible amounts. All receivable balances reflected in the accompanying financial statements as of December 31, 2011 and 2010 were collected in subsequent periods. As such, an allowance for doubtful accounts is not considered necessary as of December 31, 2011 and 2010.

 

Use of Estimates - The preparation of the accompanying financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates, judgments and assumptions which affect the reported amounts of assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Income Taxes - No federal or state taxes have been reflected in the accompanying financial statements as the tax effect of fund activities accrue to the participants.  The Innisbrook Rental Pool Trust files an annual tax return, which remains subject to examination by taxing authorities for years on or after 2006.  Effective, January 1, 2009, the Rental Pool and related Trust adopted FASB Accounting Standards Codification Topic 740-10, “Accounting for Uncertainty in Income Taxes”.  This topic requires the Rental Pool and the related Trust to evaluate each of their tax positions and the information reported in the Trust’s tax return to determine if such information and positions are more likely than not to be sustained under examination by a taxing authority.   A tax position includes an entity’s tax status, which includes considerations as to the qualifications of the Trust and the decision that all fund activities pass through to the participants of the Rental Pool.

 

The Rental Pool and trustees of the Trust have evaluated their tax positions and have determined that no provision or liability for income taxes is necessary. Conclusions regarding uncertain tax positions are evaluated on an annual basis to determine if facts or circumstances have arisen that might cause a change in judgment regarding the likelihood of a tax position’s sustainability under examination. 

 

NOTE 3 -   RELATED PARTY TRANSACTIONS

 

Pursuant to the terms of the Master Lease Agreement, the Rental Pool paid Salamander Innisbrook, LLC approximately $398,400 and $500,000 as reimbursement for maintenance and housekeeping labor, use of telephone lines, and other supplies during the years ended December 31, 2011 and 2010, respectively. At December 31, 2011 and 2010, accounts payable included in the accompanying balance sheets of the Maintenance Escrow Fund include approximately $37,200 and $59,200 respectively, payable to Salamander Innisbrook, LLC for such items.

 

Salamander Innisbrook Condominium, LLC, a wholly owned subsidiary of Salamander Farms, LLC, owns three condominiums. Two of the three condominiums participated in the Rental Pool under the MLA in the same manner as all other Rental Pool participants.

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 : April 3, 2012
	By:	/s/ Prem Devadas
		Prem Devadas Manager (Principal 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 (Principal Executive Officer)		April 3, 2012
/s/ Dale Pelletier		Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)		April 3, 2012

 

 

 

EXHIBIT INDEX

 

Exhibit No.		Description
3.1		Articles of Organization of Salamander Innisbrook, LLC*
10.1		Letter of Agreement, By and Between Innisbrook Lessor’s Advisory Committee and Salamander Innisbrook, LLC dated September 10, 2009*
14.1		Code of Business Conduct*
31.1		Certification of the Registrant’s Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002
31.2		Certification of the Registrant’s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Principal Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section  906 of the Sarbanes-Oxley Act of 2002
32.2		Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section  906 of the Sarbanes-Oxley Act of 2002
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**

* Incorporated by Reference to Registrant’s Report on Form 10-K filed April 4, 2011

** This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 of the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.