UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

(Mark one)

 

þ

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

For the quarterly period ended September 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 514 condominium rental pool units owned by approximately 421 condominium owners as of September 30, 2015.

 

 

INDEX

 

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

 

		September 30,				December 31,
		2015				2014
		(Unaudited)
Assets
Current assets:
Cash		$	707,831			$	1,063,338
Accounts receivable, net			810,303				1,587,499
Inventories and supplies			741,964				760,389
Prepaid expenses and other			1,241,623				715,972
Total current assets			3,501,721				4,127,198
Property, buildings and equipment, net			40,031,099				35,577,286
Intangibles, net			4,330,001				4,330,001
Due from affiliates			-				51,165
Deposits and other assets			269,983				262,142
Total assets		$	48,132,804			$	44,347,792
Liabilities and Member's Equity
Current liabilities:
Accounts payable		$	1,486,669			$	1,909,907
Accrued liabilities			3,173,659				2,079,632
Deferred revenue			2,694,607				2,824,369
Current portion - capital leases			399,005				-
Due to affiliates			425,766				-
Total current liabilities			8,179,706				6,813,908
Deferred revenue			1,041,671				1,215,180
Capital leases net of current portion			1,427,267				-
Total liabilities			10,648,644				8,029,089
Commitments and Contingencies (Note 4)
Member's equity			37,484,160				36,318,703
Total liabilities and member’s equity		$	48,132,804			$	44,347,792

 

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 September 30,								Nine months ended September 30,
		2015				2014				2015				2014
Resort revenues		$	5,138,030			$	5,336,298			$	29,669,258			$	27,327,237
Costs and expenses:
Operating costs and expenses			3,276,817				3,190,902				12,812,423				12,282,550
General and administrative			3,919,959				3,925,550				15,195,054				14,540,348
Depreciation			650,434				526,519				1,666,006				1,587,049
Total costs and expenses			7,847,210				7,642,971				29,673,483				28,409,947
Operating (loss)			(2,709,180	)			(2,306,673	)			(4,225	)			(1,082,710	)
Interest expense, net			(16,961	)			(3,410	)			(44,855	)			(23,385	)
Net (loss)			(2,726,141	)			(2,310,083	)			(49,080	)			(1,106,095	)
Member's equity, beginning of period			37,756,561				39,548,821				36,318,703				38,850,155
Member's contributions/(distributions), net			2,453,740				(1,799	)			1,214,537				(507,121	)
Member's equity, end of period		$	37,484,160			$	37,236,939			$	37,484,160			$	37,236,939

 

 

See accompanying notes to unaudited condensed financial statements.

 

 

SALAMANDER INNISBROOK, LLC

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

 

		Nine months ended September 30,
		2015				2014
Cash flows from operating activities:
Net (loss)		$	(49,080	)		$	(1,106,095	)
Adjustments to reconcile net (loss) to net cash provided by (used in) operating activities:
Provision for bad debts			24,583				1,570
Depreciation			1,666,006				1,589,050
Deposits and other assets			(7,841	)			5,307
Other changes in operating assets and liabilities			1,089,835				(520,956	)
Net cash provided by (used in) operating activities			2,723,503				(31,124	)
Cash flows from investing activities:
Purchases of property and equipment			(4,060,576	)			(347,159	)
Cash used in investing activities			(4,060,576	)			(347,159	)
Cash flows from financing activities:
Repayment of capital lease obligations			(232,971	)			-
Member contributions (distributions), net			1,214,537				(507,121	)
Cash provided by (used in) financing investing activities			981,566				(507,121	)
Net change in cash			(355,507	)			(885,404	)
Cash, beginning of period			1,063,338				1,795,042
Cash, end of period		$	707,831			$	909,638
Supplemental disclosure of cash flow information:
Cash paid for interest		$	44,855			$	23,385
Non-cash investing and financing activities:
Acquisition of equipment with capital leases		$	2,059,243			$	-

 

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 412 units or 514 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 to the participating owners. 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 September 30, 2015 and December 31, 2014:

 

`		September 30, 2015				December 31, 2014
Trade accounts receivable		$	718,544			$	1,554,626
Other receivables			109,520				77,267
Less allowance for bad debts			(17,761	)			(44,394	)
		$	810,303			$	1,587,499

 

 

Note 3. Property, Buildings and Equipment

 

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

 

		September 30, 2015				December 31, 2014
Land and land improvements		$	16,998,660			$	16,998,660
Buildings			25,460,387				25,460,387
Furniture, fixtures and equipment			10,970,149				8,802,853
Contruction in progress			3,952,523				-
			57,381,719				51,261,900
Less accumulated depreciation			(17,350,620	)			(15,684,614	)
		$	40,031,099			$	35,577,286

 

 

During the nine months ended September 30, 2015, we acquired approximately $2.1 million of equipment under capital 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. As mentioned above we entered into certain capital leases in 2015. Future principal payments under all capital leases, are approximately as follows for the 12 month periods ending September 30, 2016 to 2020:

 

		2016				2017				2018				2019				2020
Capital
Grounds equipment leases		$	399,000			$	461,000			$	461,000			$	461,000			$	44,000

 

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 4. 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 nine months ended September 30, 2015, our 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 restorations of the Resort’s Copperhead Course. The total amount of the contract is approximately $4.0 million of which we had paid approximately $3,600,000 as of September 30, 2015. The restoration began in April and is expected to be complete by December, 2015.

 

Note 5. Related Party Transactions

 

We incurred management fees to an affiliate of $154,106 and $159,987 for the respective three month periods ended September 30, 2015 and 2014 and $890,082 and $819,822 for the nine months ended September 30, 2015 and 2014, respectively. These fees are included in general and administrative expenses in the Condensed Statements of Operations.

 

At September 30, 2015 and December 31, 2014, amounts due (to)/ from affiliates were $(425,766) and $51,165, respectively, which balances are non-interest bearing, unsecured and due on demand.

 

 

The Innisbrook Rental Pool Lease Operation paid us $107,185 and $62,123 for the three months ended and $266,741 and $227,296 for the nine months ended September 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.

 

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 OPERATION

CONDENSED BALANCE SHEETS

 

DISTRIBUTION FUND

 

		September 30,				December 31,
		2015				2014
		(unaudited)
ASSETS
RECEIVABLE FROM SALAMANDER INNSIBROOK, LLC
FOR DISTRIBUTION		$	553,758			$	736,445
INTEREST RECEIVABLE FROM MAINTENANCE
ESCROW FUND			398				494
		$	554,156			$	736,939
LIABILITIES AND PARTICIPANTS' FUND BALANCES
DUE TO PARTICIPANTS FOR DISTRIBUTION		$	554,156			$	736,939
		$	554,156			$	736,939
MAINTENANCE ESCROW FUND
ASSETS
CASH		$	180,055			$	227,980
CASH EQUIVALENTS			550,000				600,000
INTEREST RECEIVABLE			5,409				5,641
		$	735,464			$	833,621
LIABILITIES AND PARTICIPANTS' FUND BALANCES
ACCOUNTS PAYABLE		$	66,515			$	44,794
INTEREST PAYABLE TO DISTRIBUTION FUND			398				494
TOTAL LIABILITIES			66,913				45,288
CARPET CARE RESERVE			36,569				44,158
PARTICIPANTS' FUND BALANCES			631,982				744,175
		$	735,464			$	833,621

 

See accompanying notes to unaudited condensed financial statements.

 

 

INNISBROOK RENTAL POOL LEASE OPERATION

CONDENSED STATEMENTS OF OPERATIONS

DISTRIBUTION FUND

(unaudited)

 

		Three months ended September 30,								Nine months ended September 30,
		2015				2014				2015				2014
GROSS REVENUES		$	1,621,043			$	1,559,439			$	8,628,404			$	7,625,589
DEDUCTIONS:
Agents' commissions			70,701				38,583				287,180				240,937
Credit card fees			49,311				44,043				246,960				215,655
Audit fees			16,500				15,000				49,500				45,000
Linen replacements			21,483				18,704				74,734				59,341
Uncollected room rents			-				-				4,362				3,894
Rental pool complimentary fees			5,137				3,723				22,579				17,192
			163,132				120,053				685,315				582,019
ADJUSTED GROSS REVENUES			1,457,911				1,439,386				7,943,089				7,043,570
AMOUNT RETAINED BY LESSEE			(874,746	)			(863,632	)			(4,765,853	)			(4,226,142	)
GROSS INCOME DISTRIBUTION			583,165				575,754				3,177,236				2,817,428
ADJUSTMENTS TO GROSS INCOME DISTRIBUTION:
General pooled expense			(1,064	)			(1,978	)			(4,166	)			(5,279	)
Miscellaneous pool adjustments			(75	)			-				(75	)			(412	)
Corporate complimentary occupancy fees			1,319				1,272				8,424				6,486
Occupancy fees			(255,448	)			(246,059	)			(1,056,604	)			(921,176	)
Advisory Committee expenses			(37,385	)			(27,482	)			(96,177	)			(90,311	)
NET INCOME DISTRIBUTION			290,512				301,507				2,028,638				1,806,736
ADJUSTMENTS TO NET INCOME DISTRIBUTION:
Occupancy fees			255,448				246,059				1,056,604				921,176
Hospitality suite fees			-				-				8,584				1,607
Associate room fees			7,798				8,232				36,022				37,926
AVAILABLE FOR DISTRIBUTION TO ARTICIPANTS		$	553,758			$	555,798			$	3,129,848			$	2,767,445

 

See accompanying notes to unaudited condensed financial statements.

 

 

INNISBROOK RENTAL POOL LEASE OPERATION

CONDENSED STATEMENTS OF CHANGES IN PARTICIPANTS' FUND BALANCES

 

DISTRIBUTION FUND

(unaudited)

 

		For the three months ended September 30,								For the nine months ended September 30,
		2015				2014				2015				2014
BALANCE, beginning of period		$	-			$	-			$	-			$	-
ADDITIONS:
Amounts available for distribution			553,758				555,798				3,129,847				2,767,445
Interest received or receivable from Maintenance Escrow Fund			398				360				1,320				1,248
REDUCTIONS:
Amounts accrued or paid to participants			(554,156	)			(556,158	)			(3,131,167	)			(2,768,693	)
BALANCE, end of period		$	-			$	-			$	-			$	-

 

MAINTENANCE ESCROW FUND

 

		For the three months ended September 30,								For the nine months ended September 30,
		2015				2014				2015				2014
BALANCE, beginning of period		$	685,424			$	857,426			$	744,175			$	990,575
ADDITIONS:
Charges to participants to establish or restore escrow balances			105,479				99,332				295,634				262,753
REDUCTIONS:
Maintenance charges			(150,086	)			(161,147	)			(374,909	)			(391,882	)
Member accounts & miscellaneous			(45	)			-				(2,558	)			-
Refunds to participants as prescribed by the master lease agreements			(8,790	)			(11,377	)			(30,360	)			(77,212	)
BALANCE, end of period		$	631,982			$	784,234			$	631,982			$	784,234

 

See accompanying notes to unaudited condensed financial statements.

 

 

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”, the “Resort”, ”we”, “us”, or “our”) 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 the following year. Under the MLA, the Company 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 primarily 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 Company 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.

 

 

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

 

General

 

We operate Innisbrook Resort and Golf Club (the “Resort” or the “Company”) in Palm Harbor, Florida, containing 1,216 condominium units; all of which have been sold to third parties or to affiliates of the Company. 514 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 September 30, 2015 and 2014 (unaudited) were as follows:

 

		Three months ended September 30,
		2015				%		2014				%		Inc/(dec)				% Chg
Resort Revenues		$	5,138,030			100.0%		$	5,336,298			100.0%		$	(198,268	)		-3.7%
Costs and Expenses:
Operating costs and expenses			3,276,817			63.8%			3,190,902			59.8%			85,915			2.7%
General and administrative			3,919,959			76.3%			3,925,550			73.6%			(5,591	)		-0.1%
Depreciation and amortization			650,434			12.7%			526,519			9.9%			123,915			23.5%
Total costs and expenses			7,847,210			152.7%			7,642,971			143.2%			204,239			2.7%
Operating loss before interest			(2,709,180	)		-52.7%			(2,306,673	)		-43.2%			(402,507	)		17.4%
Interest (expense), net			(16,961	)		-0.3%			(3,410	)		0.1%			(13,551	)		-397.4%
Net loss		$	(2,726,141	)		-53.1%		$	(2,310,083	)		-43.3%		$	(416,058	)		18.0%

  

During the third quarter 2015, resort revenues decreased $(198,268) or 3.7% as compared to the same period last year. In the rooms grouping, our group segment experienced growth of $135,547 or 20.3% over the same period last year. Our Transient market produced similar results to that of last year remaining flat. The package segment, as anticipated, was down $53,707 or 42% due to the renovation of the Copperhead Course. The decreased revenue in our Golf Operations, $(335,132) or 39.8% was the major contributing factor to our operating loss.

 

Operating costs and expenses were slightly elevated during this period whereas, our General and Administrative expenses remained flat to the same period last year. Depreciation expense increased this quarter primarily because of depreciation of equipment under capital leases that was placed in service in the second and third quarters of 2015. Our interest expense has increased over last year due to the capital leases acquired during this year.

 

 

Results of operations for the nine months ended September 30, 2015 and 2014 (unaudited) were as follows:

 

		Nine months ended September 30,
		2015				%		2014				%		Inc/(dec)				% Chg
Resort Revenues		$	29,669,258			100.00%		$	27,327,237			100.00%		$	2,342,021			8.6%
Costs and Expenses:
Operating costs and expenses			12,812,423			43.18%			12,282,550			44.95%			529,873			4.3%
General and administrative			15,195,054			51.21%			14,540,348			53.21%			654,706			4.5%
Depreciation and amortization			1,666,006			5.62%			1,587,049			5.81%			78,957			5.0%
Total costs and expenses			29,673,483			100.01%			28,409,947			103.96%			1,263,536			4.4%
Operating loss before interest			(4,225	)		-0.01%			(1,082,710	)		-3.96%			1,078,485			-99.6%
Interest  expense, net			(44,855	)		-0.15%			(23,385	)		-0.09%			(21,470	)		-91.8%
Net loss		$	(49,080	)		-0.17%		$	(1,106,095	)		-4.05%		$	1,057,015			-95.6%

  

For the nine months ended September 30, 2015, our revenue increased $2,342,021 or 8.6% over the same time last year due to the increase in occupancy and ancillary spending. Operating costs and expenses are well controlled with operating efficiencies throughout the Resort. General and administrative cost is up due to increased distributions to our Rental Pool participants. Depreciation expense increased primarily because of new leased equipment placed in service in 2015. The impact of this new depreciation was partially offset by certain assets by becoming fully depreciated since September 14, 2014.

 

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 nine months ended September 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.

 

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 September 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.

 

 

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 September 30, 2015, the 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.

 

 

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:  November 16, 2015		/s/ Prem Devedas
		Prem Devedas
		Manager     (Chief Executive Officer)

 

Date:  November 16, 2015		/s/ Dale Pelletier
		Dale Pelletier
		Chief Financial Officer     (Principal Financial and Accounting Officer)