Attached files

file filename
EX-31.1 - EXHIBIT 31.1 - Salamander Innisbrook, LLCv417917_ex31-1.htm
EX-32.1 - EXHIBIT 32.1 - Salamander Innisbrook, LLCv417917_ex32-1.htm
EX-32.2 - EXHIBIT 32.2 - Salamander Innisbrook, LLCv417917_ex32-2.htm
EX-31.2 - EXHIBIT 31.2 - Salamander Innisbrook, LLCv417917_ex31-2.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

(Mark one)

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

For the quarterly period ended June 30, 2015

 

OR

 

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

For the transition period from                      to

 

COMMISSION FILE NUMBER: 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 ¨  

 

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 ¨      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 ¨      Accelerated filer ¨    Non-accelerated filer ¨ Smaller reporting company þ

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨      NO þ

 

The Rental Pool operated by the Registrant has 516 condominium rental pool units owned by approximately 422 condominium owners as of June 30, 2015.

 

 

 

  

INDEX

 

  Page
PART I — FINANCIAL INFORMATION  
   
Item 1. Financial Statements  
   
Salamander Innisbrook, LLC  
   
Condensed Balance Sheets as of June 30, 2015 (Unaudited) and December 31, 2014 4
Condensed Statements of Operations and Changes in Member’s Equity (Unaudited) for the three and six months ended June 30, 2015 and 2014 5
Condensed Statements of Cash Flows (Unaudited) for the six months ended June 30, 2015 and 2014 6
Notes to Condensed Financial Statements (Unaudited) 7
   
Innisbrook Rental Pool Lease Operation  
   
Condensed Balance Sheets as of June 30, 2015 (Unaudited) and December 31, 2014 10
Condensed Statements of Operations (Unaudited) for the three and six months ended June 30, 2015 and 2014 11
Condensed Statements of Changes in Participants’ Fund Balances (Unaudited) for the three and six months ended June 30, 2015 and 2014 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 16
   
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

 

 2 

 

  

Cautionary Note Regarding Forward-Looking Statements

 

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

 

 3 

 

  

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

SALAMANDER INNISBROOK, LLC

CONDENSED BALANCE SHEETS

 

   June 30,   December 31, 
   2015   2014 
   (Unaudited)     
Assets          
Current assets:          
Cash  $1,613,499   $1,063,338 
Accounts receivable, net   1,071,814    1,587,499 
Inventories and supplies   775,159    760,389 
Prepaid expenses and other   505,649    715,972 
Total current assets   3,966,121    4,127,198 
           
Property, buildings and equipment, net   38,256,288    35,577,286 
Intangibles, net   4,330,001    4,330,001 
Due from affiliates   -    51,165 
Deposits and other assets   262,171    262,142 
Total assets  $46,814,581   $44,347,792 
           
Liabilities and Member's Equity          
Current liabilities:          
Accounts payable  $496,174   $1,909,907 
Accrued liabilities   3,056,034    2,079,632 
Deferred revenue   2,280,846    2,824,369 
Current portion - capital leases   396,933    - 
Due to affiliates   170,055    - 
Total current liabilities   6,400,042    6,813,908 
           
Deferred revenue   1,130,171    1,215,180 
Capital leases net of current portion   1,527,807    - 
           
Total liabilities   9,058,020    8,029,089 
           
Commitments and Contingencies (Note 5)          
           
Member's equity   37,756,561    36,318,703 
Total liabilities and member’s equity  $46,814,581   $44,347,792 

 

See accompanying notes to unaudited condensed financial statements.

 

 4 

 

  

SALAMANDER INNISBROOK, LLC

CONDENSED STATEMENTS OF OPERATIONS AND CHANGES IN MEMBER’S EQUITY

(Unaudited)

 

   Three months ended June 30,   Six months ended June 30, 
   2015   2014   2015   2014 
                 
Resort revenues  $9,003,170   $9,304,241   $24,531,228   $21,990,939 
                     
Costs and expenses:                    
Operating costs and expenses   4,055,782    4,283,713    9,535,606    9,089,648 
General and administrative   4,760,317    4,812,727    11,275,095    10,614,798 
Depreciation   489,053    531,649    1,015,572    1,062,530 
Total costs and expenses   9,305,152    9,628,089    21,826,273    20,766,976 
                     
Operating income (loss)   (301,982)   (323,848)   2,704,955    1,223,963 
                     
Interest income (expense), net   (12,700)   (3,389)   (27,894)   (19,975)
                     
Net income (loss)   (314,682)   (327,237)   2,677,061    1,203,988 
                     
Member's equity, beginning of period   38,074,489    40,379,240    36,318,703    38,850,155 
Member's distributions   (3,246)   (503,182)   (1,239,203)   (505,322)
Member's equity, end of period  $37,756,561   $39,548,821   $37,756,561   $39,548,821 

 

See accompanying notes to unaudited condensed financial statements.

 

 5 

 

  

SALAMANDER INNISBROOK, LLC

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

 

   Six months ended June 30, 
   2015   2014 
         
Cash flows from operating activities:          
Net income  $2,677,061   $1,203,988 
Adjustments to reconcile net income to net cash provided by  operating activities:          
Provision for bad debts   24,583    1,510 
Depreciation   1,015,572    1,062,531 
Deposits and other assets   (29)   (8,214)
Other changes in operating assets and liabilities   (157,989)   (1,240,088)
Net cash provided by (used in) operating activities   3,559,198    1,019,727 
           
Cash flows from investing activities:          
Purchases of property and equipment   (1,635,331)   (215,856)
Cash used in investing activities   (1,635,331)   (215,856)
           
Cash flows from financing activities:          
Repayment of capital lease obligations   (134,503)   - 
Member distributions   (1,239,203)   (505,322)
Cash provided by (used in) financing investing activities   (1,373,706)   (505,322)
           
Net change in cash   550,161    298,549 
           
Cash, beginning of period   1,063,338    1,795,042 
Cash, end of period  $1,613,499   $2,093,591 
           
Supplemental disclosure of cash flow information:          
Cash paid for interest  $27,894   $19,975 
           
Non-cash investing and financing activities:          
Acquisition of equipment with capital leases  $2,059,243   $- 

 

See accompanying notes to unaudited condensed financial statements.

 

 6 

 

  

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 414 units or 516 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 audited financial statements included in our 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, 2014. 

 

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, 2015 and December 31, 2014:

 

   June 30, 2015   December 31, 2014 
         
Trade accounts receivable  $938,236   $1,554,626 
Other receivables   160,573    77,267 
Less allowance for bad debts   (26,995)   (44,394)
   $1,071,814   $1,587,499 

 

 7 

 

  

Note 3. Property, Buildings and Equipment

 

Property, buildings and equipment consist of the following as of June 30, 2015 and December 31, 2014:

 

   June 30, 2015   December 31, 2014 
         
Land and land improvements  $16,998,660   $16,998,660 
Buildings   25,460,388    25,460,387 
Furniture, fixtures and equipment   10,970,149    8,802,853 
Contruction in progress   1,527,277    - 
    54,956,474    51,261,900 
Less accumulated depreciation   (16,700,186)   (15,684,614)
   $38,256,288   $35,577,286 

  

During the six months ended June 30, 2015, we acquired approximately $2.1 million of equipment under capital leases. We incurred $0 of depreciation expense for the three and six months ended June 30, 2015 for such equipment, as it has not yet been placed in service.

 

Note 4. Long-term Obligations

 

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. As mentioned above we entered in certain capital leases in 2015. Future payments under all capital leases, are as follows:

 

2015   2016   2017   2018   2019 
                       
$396,933   $433,331   $433,331   $433,331   $227,814 

 

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

 

In the normal course of our operations, we are subject to claims and lawsuits. We do not believe that the ultimate resolution of such matters will materially impair operations or have an adverse effect on our financial position and results of operations.

 

On January 16, 2015, the Company entered into a settlement agreement and release with our former insurance carrier whereby the parties mutually released and resolved all disputes. The Company has agreed to provide a credit to be used over a three-year period commencing March 1, 2015 through March 1, 2018. The credit will be divided equally among the three-year period with no rollover of unused amounts from one year to another. We estimate the value of our liability to be approximately $350,000 and recorded the liability at December 31, 2014. During the second quarter ended June 30, 2015, this carrier utilized a substantial portion of the amount allocated for the first year.

 

On April 15, 2015, we entered into an agreement with a contractor for the restoration of the Resort’s Copperhead Course. The total amount of the contract is approximately $3.8 million of which we had paid approximately $2,211,125 at June 30, 2015. The restoration began in April and is expected to be complete by October, 2015. As of this reporting period construction is on schedule.

 

Note 6. Related Party Transactions

 

We incurred management fees to an affiliate of $270,593 and $279,160 for the three months ended and $735,976 and $659,835 for the six months ended June 30, 2015 and 2014, respectively. These fees are included in general and administrative expenses in the Condensed Statements of Operations.

 

At June 30, 2015 and December 31, 2014, amounts due (to)/ from affiliates were $(170,055) and $51,165, respectively, which balances are non-interest bearing, unsecured and due on demand.

 

The Innisbrook Rental Pool Lease Operation paid us $83,929 and $80,500 for the three months ended; and $159,556 and $165,173 for the six months ended June 30, 2015 and 2014, 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.

  

 8 

 

  

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.

 

 9 

 

 

INNISBROOK RENTAL POOL LEASE OPERATION

CONDENSED BALANCE SHEETS

(UNAUDITED)

 

DISTRIBUTION FUND

 

   June 30,   December 31, 
   2015   2014 
   (unaudited)     
         
ASSETS          
          
RECEIVABLE FROM SALAMANDER INNSIBROOK, LLC FOR DISTRIBUTION  $893,156   $736,445 
INTEREST RECEIVABLE FROM MAINTENANCE ESCROW FUND   467    494 
   $893,623   $736,939 
           
LIABILITIES AND PARTICIPANTS' FUND BALANCES          
           
DUE TO PARTICIPANTS FOR DISTRIBUTION  $893,623   $736,939 
   $893,623   $736,939 

 

MAINTENANCE ESCROW FUND

 

   June 30,   December 31, 
   2015   2014 
   (unaudited)     
         
ASSETS          
           
CASH  $225,075   $227,980 
CASH EQUIVALENTS   550,000    600,000 
INTEREST RECEIVABLE   5,450    5,641 
   $780,525   $833,621 
           
LIABILITIES AND PARTICIPANTS' FUND BALANCES          
           
ACCOUNTS PAYABLE  $53,659   $44,794 
INTEREST PAYABLE TO DISTRIBUTION FUND   467    494 
TOTAL LIABILITIES   54,126    45,288 
           
CARPET CARE RESERVE   40,975    44,158 
PARTICIPANTS' FUND BALANCES   685,424    744,175 
   $780,525   $833,621 

 

See accompanying notes to unaudited condensed financial statements.

 

 10 

 

  

INNISBROOK RENTAL POOL LEASE OPERATION

CONDENSED STATEMENTS OF OPERATIONS

DISTRIBUTION FUND

(unaudited)

 

   Three months ended June 30,   Six months ended June 30, 
   2015   2014   2015   2014 
                 
GROSS REVENUES  $2,463,610   $2,474,148   $7,007,361   $6,066,150 
                     
DEDUCTIONS:                    
Agents' commissions   84,338    85,775    216,479    202,354 
Credit card fees   69,589    69,832    197,649    171,612 
Audit fees   16,500    15,000    33,000    30,000 
Linen replacements   19,312    27,577    53,251    40,637 
Uncollected room rents   4,362    3,894    4,362    3,894 
Rental pool complimentary fees   7,363    6,272    17,442    13,469 
    201,464    208,350    522,183    461,966 
                     
ADJUSTED GROSS REVENUES   2,262,146    2,265,798    6,485,178    5,604,184 
                     
AMOUNT RETAINED BY LESSEE   (1,357,288)   (1,359,479)   (3,891,107)   (3,362,510)
                     
GROSS INCOME DISTRIBUTION   904,858    906,319    2,594,071    2,241,674 
                     
ADJUSTMENTS TO GROSS INCOME DISTRIBUTION:                    
General pooled expense   (1,475)   (1,423)   (3,103)   (3,302)
Miscellaneous pool adjustments   -    (412)   -    (412)
Corporate complimentary occupancy fees   3,481    1,573    7,105    5,214 
Occupancy fees   (332,383)   (313,932)   (785,467)   (681,938)
Advisory Committee expenses   (30,432)   (33,622)   (58,793)   (62,828)
                     
NET INCOME DISTRIBUTION   544,049    558,503    1,753,813    1,498,408 
                     
ADJUSTMENTS TO NET INCOME DISTRIBUTION:                    
Occupancy fees   332,383    313,932    785,467    681,938 
Hospitality suite fees   897    493    8,584    1,607 
Associate room fees   15,827    13,818    28,224    29,694 
                    
AVAILABLE FOR DISTRIBUTION TO PARTICIPANTS  $893,156   $886,746   $2,576,088   $2,211,647 

 

See accompanying notes to unaudited condensed financial statements.

 

 11 

 

  

INNISBROOK RENTAL POOL LEASE OPERATION

CONDENSED STATEMENTS OF CHANGES IN PARTICIPANTS' FUND BALANCES

(unaudited)

DISTRIBUTION FUND

 

   For the three months ended June 30,   For the six months ended June 30, 
   2015   2014   2015   2014 
                 
BALANCE, beginning of period  $-   $-   $-   $- 
                     
ADDITIONS:                    
Amounts available for distribution   893,156    886,746    2,576,088    2,211,647 
Interest received or receivable  from Maintenance Escrow Fund   467    373    923    888 
REDUCTIONS:                    
Amounts accrued or paid  to participants   (893,623)   (887,119)   (2,577,011)   (2,212,535)
BALANCE, end of period  $-   $-   $-   $- 

 

MAINTENANCE ESCROW FUND

 

   For the three months ended June 30,   For the six months ended June 30, 
   2015   2014   2015   2014 
                 
BALANCE, beginning of period  $723,041   $907,308   $744,175   $990,575 
                     
ADDITIONS:                    
Charges to participants to establish  or restore escrow balances   86,678    78,544    190,155    163,421 
REDUCTIONS:                    
Maintenance charges   (121,063)   (118,530)   (224,734)   (230,735)
Member accounts & miscellaneous   (383)   -    (2,603)   - 
Refunds to participants as prescribed by the master lease  agreements   (2,849)   (9,896)   (21,569)   (65,835)
BALANCE, end of period  $685,424   $857,426   $685,424   $857,426 

 

 

See accompanying notes to unaudited condensed financial statements.

 

 12 

 

  

INNISBROOK RENTAL POOL LEASE OPERATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

1. Rental Pool Lease Operation

 

Basis of Accounting

 

The Rental Pool funds are accounted for using the accrual method of accounting

 

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 owner (the “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 such 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 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 to Participants for such distribution. 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 generally held in certificates of deposits.

 

 13 

 

  

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. 516 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 remainders 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, 2015 and 2014 (unaudited)

 

   Three months ended June 30, 
   2015   %   2014   %   Inc/(dec)   % Chg 
                         
Resort Revenues  $9,003,170    100.0%  $9,304,241    100.0%  $(301,071)   -3.2%
Costs and Expenses:                              
Operating costs and expenses   4,055,782    45.0%   4,283,713    46.0%   (227,931)   -5.3%
General and administrative   4,760,317    52.9%   4,812,727    51.7%   (52,410)   -1.1%
Depreciation and amortization   489,053    5.4%   531,649    5.7%   (42,596)   -8.0%
Total costs and expenses   9,305,152    103.4%   9,628,089    103.5%   (322,937)   -3.4%
Loss before interest   (301,982)   -3.4%   (323,848)   -3.5%   21,866    -6.8%
Interest (expense), net   (12,700)   -0.1%   (3,389)   0.0%   (9,311)   -274.7%
Net loss  $(314,682)   -3.5%  $(327,237)   -3.5%  $12,555    -3.8%

 

During the second quarter 2015, Resort Revenues decreased $(301,071) or 3.2% as compared to the same period last year. The Group revenue experienced the greatest decrease in market segments, 67.6% or $1,577,918 for the same period last year. Our Transient market was relatively flat over the same time last year. The Package segment was down 38% which was anticipated with the Copperhead course down for renovation.

 

Operating costs and expenses were in line with the decreased revenues during this period. General and Administrative expenses were down a percentage point. Depreciation expense continues to decline as older assets are now fully depreciated, and because the largest amount of additions are still in construction in process or have not yet been placed in service and were therefore not depreciated. Our interest expense has increased over last year due to the capital leases acquired during this period.

 

 14 

 

 

 

Results of operations for the six months ended June 30, 2015 and 2014 (unaudited)

 

   Six months ended June 30, 
   2015   %   2014   %   Inc/(dec)   % Chg 
                         
Resort Revenues  $24,531,228    100.00%  $21,990,939    100.00%  $2,540,289    11.6%
Costs and Expenses:                              
Operating costs and expenses   9,535,606    38.87%   9,089,648    41.33%   445,958    4.9%
General and administrative   11,275,095    45.96%   10,614,798    48.27%   660,297    6.2%
Depreciation and amortization   1,015,572    4.14%   1,062,530    4.83%   (46,958)   -4.4%
Total costs and expenses   21,826,273    88.97%   20,766,976    94.43%   1,059,297    5.1%
Income before interest   2,704,955    11.03%   1,223,963    5.57%   1,480,992    121.0%
Interest expense, net   (27,894)   -0.11%   (19,975)   -0.09%   (7,919)   -39.6%
Net income  $2,677,061    10.91%  $1,203,988    5.47%  $1,473,073    122.3%

 

For the six months ended June 30, 2015, our revenue increased $2,540,289 or 11.6% over the same time last year. This is consistent with the strong first quarter result. Operating costs and expenses are lower as a percentage of revenue due to operating efficiencies. Operating costs continues to run higher than last year due to the increase in course maintenance incurred during the first quarter. General and administrative cost are up due to increased distribution to our Rental Pool participants. Depreciation expense continues to decline as older assets are not fully depreciated, and because the larger amount of additions are still in construction in process or have not yet been placed in service.

 

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; accordingly, the loss of any such individual or group of customers would not have a material adverse effect on the Company’s business or financial condition.

 

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, 2014, and there have been no material changes during the three or six months ended June 30, 2015.

 

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.

 

 15 

 

  

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, 2015, 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.

 

 16 

 

  

PART II — OTHER INFORMATION

 

Item 1. Legal Proceedings

 

In the normal course of our operations, we are subject to claims and lawsuits. We do not believe that the ultimate resolution of such matters will materially impair operations or have an adverse effect on our financial position and results of operations.

 

On January 16, 2015, the Company entered into a settlement agreement and release with our former insurance carrier whereby the parties mutually released and resolved all disputes. The Company has agreed to provide a credit to be used over a three-year period commencing March 1, 2015 through March 1, 2018. The credit will be divided equally among the three-year period with no rollover of unused amounts from one year to another. We estimate the value of our liability to be approximately $350,000 and recorded the liability at December 31, 2014. During the second quarter ended June 30, 2015, this carrier utilized a substantial portion of the amount allocated for the first year.

 

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.

 

 17 

 

  

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 27, 2015   /s/ Prem Devedas  
      Prem Devedas  
      Manager  
      (Chief Executive Officer)

 

Date: August 27, 2015   /s/ Dale Pelletier
      Dale Pelletier
   

Chief Financial Officer (Principal Financial and Accounting Officer)

 

 18