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 June 30, 2016

 

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 ¨

 

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 409 condominium rental pool units owned by approximately 421 condominium owners as of June 30, 2016.

 

 

INDEX

 

	Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Salamander Innisbrook, LLC
Condensed Balance Sheets as of June 30, 2016 (Unaudited) and December 31, 2015	4
Condensed Statements of Operations and Changes in Member’s Equity (Unaudited) for the three and six months ended June 30, 2016 and 2015	5
Condensed Statements of Cash Flows (Unaudited) for the six months ended June 30, 2016 and 2015	6
Notes to Condensed Financial Statements (Unaudited)	7
Innisbrook Rental Pool Lease Operation
Condensed Balance Sheets as of June 30, 2016 (Unaudited) and December 31, 2015	10
Condensed Statements of Operations (Unaudited) for the three and six months ended June 30, 2016 and 2015	11
Condensed Statements of Changes in Participants’ Fund Balances (Unaudited) for the six months ended June 30, 2016 and 2015	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	16
Item 1A. Risk Factors	16
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	16
Item 3. Defaults Upon Senior Securities	16
Item 4. Mine Safety Disclosures	16
Item 5. Other Information	17
Item 6. Exhibits	17
Signatures
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,
		2016				2015
		(unaudited)
Assets
Current assets:
Cash		$	1,280,363			$	1,429,716
Accounts receivable, net			1,826,660				1,368,462
Inventories and supplies			839,860				897,360
Prepaid expenses and other			435,861				733,020
Total current assets			4,382,744				4,428,558
Property, buildings and equipment, net			39,068,495				39,963,759
Intangibles, net			4,330,001				4,330,001
Due from affiliates			243,509				-
Deposits and other assets			286,447				282,176
Total assets		$	48,311,196			$	49,004,494
Liabilities and Member's Equity
Current liabilities:
Accounts payable		$	591,610			$	1,697,966
Accrued liabilities			2,609,206				2,147,101
Deferred revenue			2,783,848				3,375,697
Current portion - capital leases			437,504				400,375
Due to affiliates			-				144,938
Total current liabilities			6,422,168				7,766,077
Deferred revenue			1,008,257				995,653
Capital leases net of current portion			1,123,771				1,358,846
Total liabilities			8,554,196				10,120,576
Commitments and Contingencies (Note 4)
Member's equity			39,757,000				38,883,918
Total liabilities and member’s equity		$	48,311,196			$	49,004,494

 

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,
		2016				2015				2016				2015
Resort revenues		$	9,647,781			$	9,003,170			$	23,979,956			$	24,531,228
Costs and expenses:
Operating costs and expenses			4,328,105				4,055,782				9,483,930				9,535,606
General and administrative			4,988,595				4,760,317				11,365,455				11,275,095
Depreciation and amortization			617,679				489,053				1,222,168				1,015,572
Total costs and expenses			9,934,379				9,305,152				22,071,553				21,826,273
Operating income (loss)			(286,598	)			(301,982	)			1,908,403				2,704,955
Interest expense, net			(11,200	)			(12,700	)			(28,936	)			(27,894	)
Net income (loss)			(297,798	)			(314,682	)			1,879,467				2,677,061
Member's equity, beginning of period			41,061,183				38,074,489				38,883,918				36,318,703
Member distributions			(1,006,385	)			(3,246	)			(1,006,385	)			(1,239,203	)
Member's equity, end of period		$	39,757,000			$	37,756,561			$	39,757,000			$	37,756,561

 

See accompanying notes to unaudited condensed financial statements.

 

 

SALAMANDER INNISBROOK, LLC

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

 

		Six months ended June 30,
		2016				2015
Cash flows from operating activities:
Net income		$	1,879,467			$	2,677,061
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for bad debts			12,770				24,583
Depreciation and amortization			1,222,168				1,015,572
Other changes in operating assets and liabilities			(1,732,523	)			(158,018	)
Net cash provided by operating activities			1,381,882				3,559,198
Cash flows from investing activities:
Purchases of property and equipment			(326,904	)			(1,635,331	)
Net cash used in investing activities			(326,904	)			(1,635,331	)
Cash flows from financing activities:
Repayment of capital lease obligations			(197,946	)			(134,503	)
Member distributions			(1,006,385	)			(1,239,203	)
Net cash used in financing activities			(1,204,331	)			(1,373,706	)
Net change in cash			(149,353	)			550,161
Cash, beginning of period			1,429,716				1,063,338
Cash, end of period		$	1,280,363			$	1,613,499
Supplemental disclosure of cash flow information:
Cash paid for interest		$	28,936			$	27,894
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 Operations (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 409 units or 509 hotel rooms participate at any given time). Pursuant to the 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, 2015. 

 

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.

 

Use of Estimates - The preparation of condensed financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates that are critical to the accompanying condensed financial statements include our belief that long-lived assets, including intangibles, are recoverable, and our estimates of the average lives of memberships from which we base our revenue recognition are reasonable. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the period they are determined to be necessary. It is at least reasonably possible that our estimates could change in the near term. Future results could be materially affected if actual results differ from these estimates and assumptions.

 

Note 2. Accounts Receivable

 

Accounts receivable consist of the following as of June 30, 2016 and December 31, 2015:

 

		June 30, 2016				December 31, 2015
Trade accounts receivable		$	1,623,261			$	1,221,629
Other receivables			211,647				176,892
Less allowance for bad debts			(8,248	)			(30,059	)
		$	1,826,660			$	1,368,462

 

 

Note 3. Property, Buildings and Equipment

 

Property, buildings and equipment consist of the following as of June 30, 2016 and December 31, 2015:

 

		June 30, 2016				December 31, 2015
Land and land improvements		$	21,393,643			$	21,329,563
Buildings			25,460,387				25,460,387
Furniture, fixtures and equipment			11,230,692				11,128,876
Contruction in progress			270,640				109,635
			58,355,362				58,028,461
Less accumulated depreciation			(19,286,867	)			(18,064,702	)
		$	39,068,495			$	39,963,759

 

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.

 

Note 5. Related Party Transactions

 

We incurred management fees to an affiliate of $287,990 and $270,593 for the three month periods ended June 30, 2016 and 2015, and $717,753 and $735,976 for the six month periods ended June 30, 2016 and 2015, respectively. These fees are included in general and administrative expenses in the Condensed Statements of Operations.

 

At June 30, 2016 and December 31, 2015, amounts due (to)/ from affiliates were $243,509 and $(144,938), respectively, which balances are non-interest bearing, unsecured and due on demand.

 

The Innisbrook Rental Pool Lease Operation paid us $80,963 and $91,015 for the three month periods ended June 30, 2016 and 2015, and $163,641 and $166,642 for the six month periods ended June 30, 2016 and 2015, 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

 

		June 30,				December 31,
		2016				2015
		(unaudited)
ASSETS
CASH		$	-			$	450,000
RECEIVABLE FROM SALAMANDER INNSIBROOK, LLC FOR DISTRIBUTION			859,639				275,882
INTEREST RECEIVABLE FROM MAINTENANCE ESCROW FUND			602				424
		$	860,241			$	726,306
LIABILITIES AND PARTICIPANTS' FUND BALANCES
DUE TO PARTICIPANTS FOR DISTRIBUTION		$	860,241			$	726,306
		$	860,241			$	726,306

 

MAINTENANCE ESCROW FUND

 

		June 30,				December 31,
		2016				2015
		(unaudited)
ASSETS
CASH		$	128,625			$	180,055
CASH EQUIVALENTS			550,000				550,000
INTEREST RECEIVABLE			5,305				5,409
		$	683,930			$	735,464
LIABILITIES AND PARTICIPANTS' FUND BALANCES
ACCOUNTS PAYABLE		$	31,008			$	66,515
INTEREST PAYABLE TO DISTRIBUTION FUND			603				398
TOTAL LIABILITIES			31,611				66,913
CARPET CARE RESERVE			32,290				36,569
PARTICIPANTS' FUND BALANCES			620,029				631,982
		$	683,930			$	735,464

 

See accompanying notes to unaudited condensed financial statements.

 

 

INNISBROOK RENTAL POOL LEASE OPERATION

CONDENSED STATEMENTS OF OPERATIONS

DISTRIBUTION FUND

(unaudited)

 

		Three months ended June 30,								Six months ended June 30,
		2016				2015				2016				2015
GROSS REVENUES		$	2,486,309			$	2,463,610			$	6,685,049			$	7,007,361
DEDUCTIONS:
Agents' commissions			128,806				84,338				251,978				216,479
Credit card fees			70,013				69,589				187,539				197,649
Audit fees			18,000				16,500				36,000				33,000
Linen replacements			18,836				19,312				34,821				53,251
Uncollected room rents			16,766				4,362				16,766				4,362
Rental pool complimentary fees			5,373				7,363				13,190				17,442
			257,794				201,464				540,294				522,183
ADJUSTED GROSS REVENUES			2,228,515				2,262,146				6,144,755				6,485,178
AMOUNT RETAINED BY LESSEE			(1,337,109	)			(1,357,288	)			(3,686,853	)			(3,891,107	)
GROSS INCOME DISTRIBUTION			891,406				904,858				2,457,902				2,594,071
ADJUSTMENTS TO GROSS INCOME DISTRIBUTION:
General pooled expense			(1,248	)			(1,475	)			(3,491	)			(3,103	)
Miscellaneous pool adjustments			189				-				(55	)			-
Corporate complimentary occupancy fees			1,867				3,481				5,441				7,105
Occupancy fees			(341,813	)			(332,383	)			(774,873	)			(785,467	)
Advisory Committee expenses			(41,726	)			(30,432	)			(72,134	)			(58,793	)
NET INCOME DISTRIBUTION			508,675				544,049				1,612,790				1,753,813
ADJUSTMENTS TO NET INCOME DISTRIBUTION:
Occupancy fees			341,813				332,383				774,873				785,467
Hospitality suite fees			693				897				1,739				8,584
Associate room fees			8,458				15,827				12,040				28,224
AVAILABLE FOR DISTRIBUTION TO PARTICIPANTS		$	859,639			$	893,156			$	2,401,442			$	2,576,088

 

See accompanying notes to unaudited condensed financial statements.

 

 

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,
		2016				2015				2016				2015
BALANCE, beginning of period		$	-			$	-			$	-			$	-
ADDITIONS:
Amounts available for distribution			859,639				893,156				2,401,442				2,576,088
Interest received or receivable from Maintenance Escrow Fund			602				467				1,172				923
REDUCTIONS:
Amounts accrued or paid to participants			(860,241	)			(893,623	)			(2,402,614	)			(2,577,011	)
BALANCE, end of period		$	-			$	-			$	-			$	-

 

MAINTENANCE ESCROW FUND

 

		For the three months ended June 30,								For the six months ended June 30,
		2016				2015				2016				2015
BALANCE, beginning of period		$	621,449			$	723,041			$	620,809			$	744,175
ADDITIONS:
Charges to participants to establish or restore escrow balances			121,183				86,678				255,970				190,155
REDUCTIONS:
Maintenance charges			(120,284	)			(121,063	)			(231,133	)			(224,734	)
Member accounts & miscellaneous			(5	)			(383	)			(497	)			(2,603	)
Refunds to participants as prescribed by the master lease agreements			(2,314	)			(2,849	)			(25,120	)			(21,569	)
BALANCE, end of period		$	620,029			$	685,424			$	620,029			$	685,424

 

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 deposit.

 

 

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. 409 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, 2016 and 2015 (unaudited) were as follows:

 

		Three months ended June 30,
		2016				%				2015				%				Inc/(dec)				% Chg
Resort Revenues		$	9,647,781				100.0	%		$	9,003,170				100.0	%		$	644,611				7.2	%
Costs and Expenses:
Operating costs and expenses			4,328,105				44.9	%			4,055,782				45.0	%			272,323				6.7	%
General and administrative			4,988,595				51.7	%			4,760,317				52.9	%			228,278				4.8	%
Depreciation and amortization			617,679				6.4	%			489,053				5.4	%			128,626				26.3	%
Total costs and expenses			9,934,379				103.0	%			9,305,152				103.4	%			629,227				6.8	%
Operating loss			(286,598	)			-3.0	%			(301,982	)			-3.4	%			15,384				-5.1	%
Interest (expense), net			(11,200	)			-0.1	%			(12,700	)			0.1	%			1,500				11.8	%
Net loss		$	(297,798	)			-3.1	%		$	(314,682	)			-3.5	%		$	16,884				-5.4	%

 

For the second quarter 2016, resort revenues were higher by $644,611 or 7.2% as compared to the same period last year. Room revenues were up $22,000 due to increased occupancy. The leisure and package segment revenues lagged behind, consistent with the Florida market, last year for the quarter, but group activity more than made up for the shortfall. Food and Beverage total revenues exceed last year by $185,973. Golf revenues exceeded last year by $350,145, with the reopening of Copperhead in 2016.

 

Operating costs and expenses were well managed during the quarter and were more efficient than last year by .1% Administrative expenses were higher due to the planned increase in spending in Sales and Marketing. Depreciation expense increased this quarter primarily because of depreciation of equipment under capital leases that were placed in service late in 2015. Our interest expense has decreased to last year by $1,500.

 

 

Results of operations for the six months ended June 30, 2016 and 2015 (unaudited) were as follows:

 

		Six months ended June 30,
		2016				%				2015				%				Inc/(dec)				% Chg
Resort Revenues		$	23,979,956				100.00	%		$	24,531,228				100.00	%		$	(551,272	)			-2.2	%
Costs and Expenses:
Operating costs and expenses			9,483,930				39.55	%			9,535,606				38.87	%			(51,676	)			-0.5	%
General and administrative			11,365,455				47.40	%			11,275,095				45.96	%			90,360				0.8	%
Depreciation and amortization			1,222,168				5.10	%			1,015,572				4.14	%			206,596				20.3	%
Total costs and expenses			22,071,553				92.04	%			21,826,273				88.97	%			245,280				1.1	%
Operating income			1,908,403				7.96	%			2,704,955				11.03	%			(796,552	)			-29.4	%
Interest expense, net			(28,936	)			-0.12	%			(27,894	)			-0.11	%			(1,042	)			-3.7	%
Net income		$	1,879,467				7.84	%		$	2,677,061				10.91	%		$	(797,594	)			-29.8	%

 

During the mid-year 2016, resort revenues decreased $(551,272) or -2.2% as compared to the same period last year. Reasons for the shortfall were due to the difficult first quarter 2016 and several last minute cancellations of group business. Room revenues were down $(323,650) or 4.6%. In all areas, leisure, group and packages, there was little mitigation of the first quarter’s shortfall. The decreased revenues in our Food and Beverage Division was softened slightly by the second quarter, but year to date, we are still down $(567,787) to last year. Golf Operations improved overall compared to last year, by $89,850 due to the re-opening of the Copperhead course.

 

Operating costs and expenses were less than last year by $51,676. Our General and Administrative expenses exceeded last year due to planned increases in the Sales and Marketing area. Depreciation expense increased this quarter primarily because of depreciation of equipment under capital leases that was placed in service late in 2015. Our interest expense has increased slightly over last year.

 

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.

 

The operation of the Resort is not considered to be dependent on any individual or small group of customers; accordingly the loss of any such individual or group 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, 2015, and there have been no material changes during the six months ended June 30, 2016.

 

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. In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU No. 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for us on January 1, 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. We are currently evaluating the effect that ASU No. 2014-09 will have on our financial statements and related disclosures.

 

In February 2016, the FASB issued ASU No. 2016 – 02, “Leases (Topic 842).” This standard establishes the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases. Upon implementation, lessees will need to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability. It will be critical to identify leases embedded in a contract to avoid misstating the lessee’s balance sheet. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Classification will be based on criteria that are largely similar to those applied in current lease accounting, but without explicit bright lines. Lessor accounting is similar to the current model, but updated to align with certain changes to the lessee model and the new revenue recognition standard. Existing sale-leaseback guidance, including guidance for real estate, is replaced with a new model applicable to both lessees and lessors. The new guidance is effective for fiscal years beginning after December 15, 2018,  including interim periods within those fiscal years. Early application is permitted.  We are currently evaluating the impact of adopting the new standard, but have not yet determined the impact of adoption on our financial statements.

 

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, 2016, 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, we entered into a settlement agreement and release with our former insurance carrier whereby the parties mutually released and resolved all disputes relating to certain arbitration. We agreed to provide a credit to be used over a three-year period that commenced on March 1, 2015. The credit is divided equally among the three-year period with no rollover of unused amounts from one year to another. At June 30, 2016, our remaining liability under this arrangement is approximately $246,000.

 

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 10, 2016		/s/ Prem Devedas
		Prem Devedas
		Manager  (Chief Executive Officer)

 

Date: August 10, 2016		/s/ Dale Pelletier
		Dale Pelletier
		Chief Financial Officer  (Principal Financial and Accounting Officer)