UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

(Mark one)

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

For the quarterly period ended June 30, 2014

 

OR

 

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

For the transition period from                      to

 

COMMISSION FILE NUMBER: 333-147447

 

SALAMANDER INNISBROOK, LLC

(Exact name of registrant as specified in its charter)

 

Florida		26-0442888
(State of incorporation)		(IRS employer identification no.)

 

36750 US Highway 19 North, Palm Harbor, FL 34684

(Address of principal executive offices)

727-942-2000

(Registrant’s 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 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 the Regulation S-T (229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES o      NO x

 

 

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 definition 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 Exchange Act). YES o      NO x

 

The Rental Pool operated by the Registrant has 528 condominium rental pool units owned by approximately 382 condominium owners as of June 30, 2014

 

 

INDEX

		Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Salamander Innisbrook, LLC
Condensed Balance Sheets as of June 30, 2014 (Unaudited) and December 31, 2013		4
Condensed Statements of Operations and Changes in Member’s Equity (Unaudited) for the three and six months ended June 30, 2014 and 2013		5
Condensed Statements of Cash Flows (Unaudited) for the six months ended June 30, 2014 and 2013		6
Notes to Condensed Financial Statements (Unaudited)		7
Innisbrook Rental Pool Lease Operation
Condensed Balance Sheets as of June 30, 2014 (Unaudited) and December 31, 2013		10
Condensed Statements of Operations (Unaudited) for the three and six months ended June 30, 2014 and 2013		11
Condensed Statements of Changes in Participants’ Fund Balances (Unaudited) for the three and six months ended June 30, 2014 and 2013		12
Notes to Condensed Financial Statements (Unaudited)		13
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		14
Item 3. Quantitative and Qualitative Disclosures about Market Risk		15
Item 4. Controls and Procedures		15
PART II — OTHER INFORMATION
Item 1.     Legal Proceedings		17
Item 1A. Risk Factors		17
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds		17
Item 3.    Defaults Upon Senior Securities		17
Item 4.    Mine Safety Disclosures		17
Item 5.    Other Information		17
Item 6.    Exhibits		17
Signatures		18
EX-31.1
EX-31.2
EX-32.1
EX-32.2

 

 

 

Cautionary Note Regarding Forward-Looking Statements

 

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

 

 

 

 

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

 

SALAMANDER INNISBROOK, LLC

CONDENSED BALANCE SHEETS

 

		June 30,				December 31,
		2014				2013
		(unaudited)
Assets
Current assets:
Cash		$	2,093,591			$	1,795,042
Accounts receivable, net			1,390,360				1,813,644
Inventories and supplies			844,558				805,072
Prepaid expenses and other			557,765				833,893
Due from affiliates			200,121				-
Total current assets			5,086,395				5,247,651
Property, buildings and equipment, net			36,375,913				37,222,588
Intangibles, net			4,330,001				4,330,001
Deposits and other assets			275,723				267,509
Total assets		$	46,068,032			$	47,067,749
Liabilities and Member's Equity
Current liabilities:
Accounts payable		$	733,719			$	1,673,842
Distribution payable to Rental Pool Lease Operation			886,746				617,487
Accrued liabilities			1,776,076				2,391,177
Deferred revenue			2,129,187				2,313,852
Due to affiliates			-				269,129
Total current liabilities			5,525,728				7,265,487
Deferred revenue			993,483				952,107
Total liabilities			6,519,211				8,217,594
Commitments and Contingencies (Note 5)
Member's equity			39,548,821				38,850,155
Total liabilities and member’s equity		$	46,068,032			$	47,067,749

 

See accompanying notes to unaudited condensed financial statements.

 

 

SALAMANDER INNISBROOK, LLC

CONDENSED STATEMENTS OF OPERATIONS AND CHANGES IN MEMBER’S EQUITY

(Unaudited)

 

		Three months ended June 30,								Six months ended June 30,
		2014				2013				2014				2013
Resort revenues		$	9,304,241			$	8,450,066			$	21,990,939			$	22,424,163
Costs and expenses:
Operating costs and expenses			4,283,713				3,809,400				9,089,648				9,069,124
General and administrative			4,812,727				4,498,755				10,614,798				10,104,461
Depreciation and amortization			531,649				827,559				1,062,530				1,651,815
Total costs and expenses			9,628,089				9,135,714				20,766,976				20,825,400
Operating income (loss)			(323,848	)			(685,648	)			1,223,963				1,598,763
Interest expense, net			(3,389	)			(3,283	)			(19,975	)			(7,426	)
Net income (loss)			(327,237	)			(688,931	)			1,203,988				1,591,337
Member's equity, beginning of period			40,379,240				42,252,058				38,850,155				41,581,466
Member distributions			(503,182	)			(682,027	)			(505,322	)			(2,291,703	)
Member's equity, end of period		$	39,548,821			$	40,881,100			$	39,548,821			$	40,881,100

 

See accompanying notes to unaudited condensed financial statements.

 

 

SALAMANDER INNISBROOK, LLC

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

		Six months ended June 30,
		2014				2013
Cash flows from operating activities:
Net income		$	1,203,988			$	1,591,337
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for bad debts			1,510				30,556
Depreciation and amortization			1,062,531				1,651,815
Deposits and other assets			(8,214	)			8,325
Other changes in operating assets and liabilities			(1,240,088	)			(1,143,549	)
Net cash provided by operating activities			1,019,727				2,138,484
Cash flows from investing activities:
Purchases of property and equipment			(215,856	)			(214,795	)
Cash used in investing activities			(215,856	)			(214,795	)
Cash flows from financing activities:
Member distributions			(505,322	)			(2,291,703	)
Cash used in financing activities			(505,322	)			(2,291,703	)
Net change in cash			298,549				(368,014	)
Cash, beginning of period			1,795,042				1,585,902
Cash, end of period		$	2,093,591			$	1,217,888
Supplemental disclosure of cash flow information:
Cash paid for interest		$	19,975			$	7,426

 

See accompanying notes to unaudited condensed financial statements.

  

 

 

SALAMANDER INNISBROOK, LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)

 

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

 

Nature of business

 

Salamander Innisbrook, LLC (the “Company”, “we”, “us”, or “our”), together with our affiliates, Salamander Innisbrook Securities, LLC, and Salamander Innisbrook Condominium, LLC owns and operates the Innisbrook Resort and Golf Club (the “Resort”).

 

The Company controls and operates the Rental Pool Lease Operation (the “Rental Pool”); a securitized pool of condominiums owned by participating condominium owners (the “Participating Owners”) and rented as hotel rooms to guests of the Resort (an average of 423 units or 526 hotel rooms participate at any given time). Pursuant to the new Innisbrook Rental Pool Master Lease Agreement, dated January 1, 2014 (the “Master Lease” or “MLA”), the Company is obligated to make quarterly distributions of a percentage of room revenues. Other resort facilities include four 18-hole golf courses, four restaurants, three convention facilities, a health spa, fitness center, tennis and recreation facilities, themed water park and five swimming pools.

 

Basis of presentation

 

The accompanying interim condensed financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America and  the instructions to Quarterly Report on Form 10-Q. Consequently, they do not include all disclosures normally provided in the Company’s Annual Report on Form 10-K.  Accordingly, these condensed financial statements and related notes should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. 

 

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

 

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

 

Note 2. Accounts Receivable

 

Accounts receivable consist of the following as of June 30, 2014 and December 31, 2013:

 

		June 30, 2014				December 31, 2013
Trade accounts receivable		$	1,274,157			$	1,718,605
Other receivables			180,766				158,680
Less allowance for bad debts			(64,563	)			(63,641	)
		$	1,390,360			$	1,813,644

 

 

 

Note 3. Property, Buildings and Equipment

 

Property, buildings and equipment consist of the following as of June 30, 2014 and December 31, 2013:

 

 

		June 30, 2014				December 31, 2013
Land and land improvements		$	16,938,305			$	16,911,879
Buildings			25,314,765				25,306,395
Furniture, fixtures and equipment			8,577,945				8,454,852
Contruction in progress			57,967				-
			50,888,982				50,673,126
Less accumulated depreciation			(14,513,069	)			(13,450,538	)
		$	36,375,913			$	37,222,588

 

Note 4. Long-term Obligations

 

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.

 

Note 5. Commitments and Contingencies

 

Contingencies

 

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. We and CNA and our respective lawyers went through a day of mediation on May 22, 2014. We were not able to come to a resolution at this meeting. The mediator continues to work with both parties to arrive at a mutually agreeable resolution. No further meetings have been scheduled at this time.

 

The outcome of this matter cannot be determined at this time. We do not believe this matter will have a material effect on our financial condition and results of operations, and accordingly, there have been no adjustments to the accompanying condensed financial statements as of June 30, 2014 for the effects of this matter.

  

Note 6. Related Party Transactions

 

We paid management fees to an affiliate of $279,160 and $250,470 for the three months ended; $659,835 and $672,725 for the six months ended June 30, 2014 and 2013, respectively. These fees are included in general and administrative expenses in the Condensed Statements of Operations.

 

At June 30, 2014 and December 31, 2013, amounts due to/(from) affiliates were $(200,121) and $269,129, respectively, which balances are non-interest bearing, unsecured and due on demand.

 

The Innisbrook Rental Pool Lease Operation paid us $80,500 and $105,517 for the three months ended; $172,234 and $188,700 for the six months ended June 30, 2014 and 2013, respectively as reimbursement for maintenance and housekeeping labor, use of the telephone lines and other supplies. These reimbursements are included in general and administrative expenses in the Condensed Statements of Operations.

 

 

RENTAL POOL LEASE OPERATION

 

The operation of the Rental Pool is tied closely to the Resort’s operations. The Rental Pool Master Lease Agreement provides for a quarterly distribution of a percentage of the Company’s room revenues to participating condominium owners (“Participants”), as defined in the agreement (see Note 1 of the Rental Pool Lease Operation financial statements). Because the Rental Pool participants share in a percentage of the room revenues, the condominium units allowing Rental Pool participation are deemed to be securities. However, there is no market for such securities other than 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 Member’s interest.

 

 

 

INNISBROOK RENTAL POOL LEASE OPERATIONS
CONDENSED BALANCE SHEETS
		June 30,				December 31,
		2014				2013
		(unaudited)
DISTRIBUTION FUND
ASSETS
RECEIVABLE FROM SALAMANDER INNISBROOK, LLC FOR DISTRIBUTION		$	886,746			$	617,487
INTEREST RECEIVABLE FROM RENTAL POOL
ESCROW FUND			373				543
		$	887,119			$	618,030
LIABILITIES AND PARTICIPANTS' FUND BALANCES
DUE TO PARTICIPANTS FOR DISTRIBUTION		$	887,119			$	618,030
		$	887,119			$	618,030
MAINTENANCE ESCROW FUND
ASSETS
CASH		$	260,929			$	258,991
CASH EQUIVALENTS			650,000				840,000
INTEREST RECEIVABLE			5,598				5,809
		$	916,527			$	1,104,800
LIABILITIES AND PARTICIPANTS' FUND BALANCES
ACCOUNTS PAYABLE		$	7,091			$	58,698
INTEREST PAYABLE TO DISTRIBUTION FUND			373				543
TOTAL LIABILITIES			7,464				59,241
CARPET CARE RESERVE			51,637				54,984
PARTICIPANTS' FUND BALANCES			857,426				990,575
		$	916,527			$	1,104,800

See accompanying notes to unaudited condensed financial statements                

 

CONDENSED STATEMENTS OF OPERATIONS

DISTRIBUTION FUND

(unaudited)

 

		Three months ended June 30,								Six months ended June 30,
		2014				2013				2014				2013
GROSS REVENUES		$	6,066,150			$	2,041,181			$	6,066,150			$	6,115,842
DEDUCTIONS:
Agents' commissions			202,354				69,521				202,354				183,887
Credit card fees			171,612				57,464				171,612				171,922
Audit fees			30,000				15,000				30,000				30,000
Linen replacements			40,637				16,773				40,637				44,524
Uncollected room rents			3,894				2,515				3,894				2,515
Rental pool complimentary fees			13,469				5,774				13,469				14,456
			461,966				167,047				461,966				447,304
ADJUSTED GROSS REVENUES			5,604,184				1,874,134				5,604,184				5,668,538
AMOUNT RETAINED BY LESSEE			(1,359,479	)			(1,124,481	)			(3,362,510	)			(3,401,123	)
GROSS INCOME DISTRIBUTION			4,244,705				749,653				2,241,674				2,267,415
ADJUSTMENTS TO GROSS
INCOME DISTRIBUTION:
General pooled expense			(3,302	)			(1,447	)			(3,302	)			(3,340	)
Miscellaneous pool adjustments			(412	)			719				(412	)			719
Corporate complimentary
occupancy fees			5,214				1,814				5,214				6,914
Occupancy fees			(313,932	)			(283,607	)			(681,938	)			(709,912	)
Advisory Committee expenses			(62,828	)			(34,260	)			(62,828	)			(67,248	)
NET INCOME DISTRIBUTION			3,869,445				432,872				1,498,408				1,494,548
ADJUSTMENTS TO NET INCOME
DISTRIBUTION:
Occupancy fees			313,932				283,607				681,938				709,912
Hospitality suite fees			1,607				364				1,607				1,157
Associate room fees			29,694				12,397				29,694				19,894
AVAILABLE FOR DISTRIBUTION
TO PARTICIPANTS		$	4,214,678			$	729,240			$	2,211,647			$	2,225,511

 

See accompanying notes to unaudited condensed financial statements                                

 

 

INNISBROOK RENTAL POOL LEASE OPERATION

CONDENSED STATEMENTS OF CHANGES IN PARTICIPANTS' FUND BALANCES

 

DISTRIBUTION FUND

(unaudited)

 

		Three months ended June 30,								Six months ended March 31,
		2014				2013				2014				2013
BALANCE, beginning of period		$	-			$	-			$	-			$	-
ADDITIONS:
Amounts available for distribution			886,746				729,240				2,211,647				2,225,511
Interest received or receivable
from Maintenance Escrow Fund			373				812				888				1,798
REDUCTIONS:
Amounts accrued or paid
to participants			(887,119	)			(730,052	)			(2,212,535	)			(2,227,309	)
BALANCE, end of period		$	-			$	-			$	-			$	-

  

MAINTENANCE ESCROW FUND

(unaudited)  

 

		Three months ended June 30,								Six months ended June 30,
		2014				2013				2014				2013
BALANCE, beginning of period		$	907,308			$	1,259,484			$	990,575			$	1,349,272
ADDITIONS:
Interest earned			-				5,799				-				11,805
Charges to participants to establish
or restore escrow balances			78,544				122,726				163,421				216,972
REDUCTIONS:
Maintenance charges			(118,530	)			(177,367	)			(230,735	)			(336,593	)
Interest accrued or paid to Distribution Fund			-				(5,799	)			-				(11,805	)
Refunds to participants as
prescribed by the master lease
agreements			(9,896	)			(5,185	)			(65,835	)			(29,993	)
BALANCE, end of period		$	857,426			$	1,199,658			$	857,426			$	1,199,658

 

See accompanying notes to the unaudited condensed financial statements.                                

 

  

 

INNISBROOK RENTAL POOL LEASE OPERATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

1. Rental Pool Lease Operation

 

Organization and Operations

 

Salamander Innisbrook, LLC (the “Company”) follows accounting policies that require estimates that are based on assumptions and judgments, which affect revenues, expenses, assets, liabilities and disclosure of contingencies in our financial statements. These estimates and assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. However, actual results may differ from these estimates due to different conditions.

 

The Rental Pool 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.

 

The Rental Pool consists of condominiums at the Resort which are leased by the Company from their owners and used as hotel accommodations for the Resort. The Master Lease Agreement (“MLA”) provides that on an annual basis each Participant may elect to participate in the Rental Pool for the following year by signing an Annual Lease Agreement (“ALA”). Any condominium unit owner who does not sign the ALA is not permitted to participate in the Rental Pool for the following year. Under the MLA, the Resort pays the participant a quarterly distribution equal to 40% of the Adjusted Gross Revenues on the first $10 million of Adjusted Gross Revenues; 45% between $10 million and $11 million to the Lessee and 50% above $11 million. 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 the unit is occupied. After allocation of occupancy fees and the payment of general Rental Pool expenses, the balance is allocated proportionally to the Participants, based on the Participation Factor as defined in the Agreement. Additionally, occupancy fees are paid by the Resort to Participants as rental fees for complimentary rooms unrelated to the Rental Pool operations. Associate room fees are also paid by the Resort to Participants for total room revenues earned from the rental of condominiums by Company employees.

 

The Lessors’ Advisory Committee (“LAC”) consists of nine Participants who are elected by the Participants to advise the Company of Rental Pool Matters and to negotiate amendments to the ALA and MLA.

 

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 the Maintenance Escrow Fund. The operations of the Distribution Fund reflect Participants’ earnings in the Rental Pool. The Maintenance Escrow Fund 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 due from the Distribution Fund to meet minimum escrow requirements, fund the carpet care reserve and maintain the interior of the units.

 

The LAC, subject to the restriction in the MLA, invests the Maintenance Escrow Fund on behalf of the Participants. Income earned on the investments of the Maintenance Escrow Funds is allocated proportionately to the respective Maintenance Escrow Fund accounts and paid quarterly through the Distribution Fund. The funds are held in certificates of deposits.

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

General

 

We operate Innisbrook Resort and Golf Club (the “Resort”) in Palm Harbor, Florida, containing 1,216 condominium units; all of which have been sold to third parties or to affiliates of the Company. 423 of the condominium units are hotel accommodations that participate in a rental-pooling program (the “Rental Pool”) that provides owners with a percentage distribution of related room revenues minus certain fees and expenses. The remainder of the condominium units are owner-occupied. Other resort property owned by the Company and its affiliates include golf courses, restaurants, tennis courts, a spa and fitness center, swimming pools, conference center facilities and administrative offices.

 

Results of Operations

 

The Resort is a destination golf resort that appeals to group and transient guests within all market segments. The Resort provides condominium accommodations, food and beverage dining locations (three restaurants, room service, banquet and/or catering options) and recreational entertainment to members, business meetings, group guests, leisure guests and their families. The Resort offers room-only rates, golf packages, and family vacation packages.

 

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

 

Results of operations for the three months ended June 30, 2014 and 2013 (unaudited)

 

		Three months ended								Three months ended
		June 30, 2014				%				June 30, 2013				%				Inc/(dec)				% Chg
Resort Revenues		$	9,304,241				100.0	%		$	8,450,066				100.0	%		$	854,175				10.1	%
Costs and Expenses:
Operating costs and expenses			4,283,713				46.0	%			3,809,400				45.1	%			474,313				12.5	%
General and administrative			4,812,727				51.7	%			4,498,755				53.2	%			313,972				7.0	%
Depreciation and amortization			531,649				5.7	%			827,559				9.8	%			(295,910	)			-35.8	%
Total costs and expenses			9,628,089				103.5	%			9,135,714				108.1	%			492,375				5.4	%
Loss before interest			(323,848	)			-3.5	%			(685,648	)			-8.1	%			361,800				-52.8	%
Interest  expense, net			(3,389	)			0.0	%			(3,283	)			0.0	%			(106	)			3.2	%
Net loss		$	(327,237	)			-3.5	%		$	(688,931	)			-8.2	%		$	361,694				-52.5	%

  

For the second quarter 2014, Resort Revenues increased 10.1% as compared to the same period last year. Both Group and Package markets were strong increasing revenues $219,806 and $153,684 or 32.6% and 27.1%, respectively over the same quarter last year. Our Transient market had modest growth year over year of $59,348 or 7.2%.

 

Cost and Expenses had an overall increase due to the increased activity predominantly in our Sales & Marketing efforts. The decrease in depreciation and amortization expense year over year is the result of fully amortizing certain intangible assets.

 

 

  

Results of operations for the six months ended June 30, 2014 and 2013 (unaudited)

 

		Six months ended								Six months ended
		June 30, 2014				%				June 30, 2013				%				Inc/(dec)				% Chg
Resort Revenues		$	21,990,939				100.0	%		$	22,424,163				100.0	%		$	(433,224	)			-1.9	%
Costs and Expenses:
Operating costs and expenses			9,089,648				41.3	%			9,069,124				40.4	%			20,524				0.2	%
General and administrative			10,614,798				48.3	%			10,104,461				45.1	%			510,337				5.1	%
Depreciation and amortization			1,062,530				4.8	%			1,651,815				7.4	%			(589,285	)			-35.7	%
Total costs and expenses			20,766,976				94.4	%			20,825,400				92.9	%			(58,424	)			-0.3	%
Income before interest			1,223,963				5.6	%			1,598,763				7.1	%			(374,800	)			-23.4	%
Interest  expense, net			(19,975	)			-0.1	%			(7,426	)			0.0	%			(12,549	)			169.0	%
Net income		$	1,203,988				5.5	%		$	1,591,337				7.1	%		$	(387,349	)			-24.3	%

  

For the six months ended June 30, 2014, revenues were down $433,224 or 1.9% over the same period last year. Overall, costs and expenses are down 0.3% after increased spending in General & Administrative was offset by the decrease in Depreciation and Amortization due to certain intangible assets becoming fully amortized.

 

Liquidity and Capital Resources

 

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 and funding from our sole member or affiliates’ current cash reserves.

 

Our revenue stream is not considered to be dependent on any individual or small group of customers.

 

Critical Accounting Policies

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions and to select accounting policies that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These accounting policies have been described on our Annual Report on Form 10-K for the year ended December 31, 2013, and there have been no material changes during the six months ended June 30, 2014.

  

Recent Accounting Pronouncements

 

From time to time, new accounting pronouncements are issued by the FASB that are adopted by the Company as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s financial statements upon adoption.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Not applicable.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act (defined below)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended (the "Exchange Act") is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

 

 

 

Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures, or our internal controls, will prevent all error or 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 reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. However, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.

 

Changes in Internal Control Over Financial Reporting

  

In addition, our management with the participation of our Principal Executive Officer and Principal Financial Officer, have determined that no change in our internal control over financial reporting occurred during or subsequent to the quarter ended June 30, 2014 that has materially affected, or is (as that term is defined in Rules 13(a)-15(f) and 15(d)-15(f) of the Securities Exchange Act of 1934) reasonably likely to materially affect, our internal control over financial reporting.

 

 

  

 

PART II — OTHER INFORMATION

 

Item 1. 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. We and CNA and our respective lawyers went through a day of mediation on May 22, 2014. We were not able to come to a resolution at this meeting. The mediator continues to work with both parties to arrive at a mutually agreeable resolution. No further meetings have been scheduled at this time.

 

The outcome of this matter cannot be determined at this time. We do not believe this matter will have a material effect on our financial condition and results of operations, and accordingly, there have been no adjustments to the accompanying condensed financial statements as of June 30, 2014 for the effects of this matter.

  

Item 1A. Risk Factors

 

Not required

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

Not applicable

 

Item 3. Defaults Upon Senior Securities

 

Not applicable

 

Item 4. Mine Safety Disclosures

 

Not applicable

 

Item 5. Other information

 

Not applicable

 

Item 6. Exhibits

 

(a). Exhibits

Exhibit		Item
31.1		Certification of Principal Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
31.2		Certification of Principal Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
32.1*		Certification of Principal Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
32.2*		Certification of Principal Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
101		Interactive Data Files

 

* 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.

 

 

 

SIGNATURES

 

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.

 

		SALAMANDER INNISBROOK, LLC   (Registrant)
Date:  August 13, 2014	/s/	Prem Devedas
		Prem Devedas
		Manager (Chief Executive Officer)

 

 

Date:  August 13, 2014	/s/	Dale Pelletier
		Dale Pelletier
		Chief Financial Officer (Principal Financial and Accounting Officer)