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EX-32.1 - EXHIBIT 32.1 - Salamander Innisbrook, LLCtv489094_ex32-1.htm
EX-32.2 - EXHIBIT 32.2 - Salamander Innisbrook, LLCtv489094_ex32-2.htm
EX-31.2 - EXHIBIT 31.2 - Salamander Innisbrook, LLCtv489094_ex31-2.htm
EX-31.1 - EXHIBIT 31.1 - Salamander Innisbrook, LLCtv489094_ex31-1.htm
EX-10.1 - EXHIBIT 10.1 - Salamander Innisbrook, LLCtv489094_ex10-1.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

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

For the fiscal year ended December 31, 2017

 

Commission File No.  333-147447

 

SALAMANDER INNISBROOK, LLC

 

State of Organization: Florida   IRS Employer Identification No. 26-0442888
     
36750 US Highway 19 North, Palm Harbor, FL 34684
 
Telephone Number: (727) 942-2000

 

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

 

None

 

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

 

450 Condominium Rental Pool Units

 

  

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

 

Yes ¨     No x

 

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

 

Yes ¨     No x

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes x     No ¨

 

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

 

Yes ¨     No x

 

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

 

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

 

Large accelerated filer ¨ Accelerated filer ¨
   
Non-accelerated filer ¨ (Do not check if a smaller reporting company)   Smaller reporting company x
   
  Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

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

 

Yes ¨     No x

 

No established market exists for the Registrant’s membership interests, so there is no market value for such membership interests. There are no membership interests held by non-affiliates as of December 31, 2017.

 

Issuer has no common stock subject to this report.

 

 

 

 

 

SALAMANDER INNISBROOK, LLC

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2017

 

TABLE OF CONTENTS

 

PART I  
  ITEM 1. BUSINESS 4
  ITEM 1A. RISK FACTORS 6
  ITEM 1B. UNRESOLVED STAFF COMMENTS 6
  ITEM 2. PROPERTIES 6
  ITEM 3. LEGAL PROCEEDINGS 6
  ITEM 4. MINE SAFETY DISCLOSURES 6
       
PART II  
  ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

7

  ITEM 6. SELECTED FINANCIAL DATA 7
  ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

7

  ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 10
  ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 10
  ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 10

  ITEM 9A. CONTROLS AND PROCEDURES 10
  ITEM 9B. OTHER INFORMATION 11
       
PART III  
  ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 11
  ITEM 11. EXECUTIVE COMPENSATION 12
  ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

12

  ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE 13
  ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 14
  ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 14
       
SIGNATURES 35

 

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

 

ITEM 1. BUSINESS

 

Background

 

Salamander Innisbrook, LLC (the “Company”, “we”, “us”, or “our”) was formed June 14, 2007 by Salamander Farms, LLC under the laws of the state of Florida for the purpose of owning and operating Innisbrook Resort and Golf Club (the “Resort”). On July 16, 2007, we, together with our affiliates, Salamander Innisbrook Securities, LLC and Salamander Innisbrook Condominium, LLC, purchased the Resort and all of the equity interests in Golf Host Securities, Inc. from Golf Trust of America, Inc. and its subsidiaries and affiliates. The Resort is a full service 72-hole destination golf and conference facility located near Tampa, Florida. The Resort features 1,216 condominium rooms, all of which are owned by third parties or affiliates. Approximately 398 condominium owners (representing 450 hotel rooms) participate in a rental pool (the “Rental Pool”) operated by the Company.

 

Rental Pool Condominiums

 

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

 

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

 

Markets and Marketing

 

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

 

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

 

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

 

4 

 

 

Seasonality

 

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

 

PGA TOUR Event

 

On September 6, 2013, the PGA Tour and the tournament’s host organization, Copperhead Charities, announced a four year agreement for Valspar Corporation to become the title sponsor for the PGA Tour’s annual stop in Tampa Bay on the Copperhead Course at Innisbrook. Also, in 2013, BB&T Corporation signed a four year agreement to become the tournament’s local presenting sponsor. On March 9, 2016, Valspar Corporation announced a three-year sponsorship extension carrying the tournament through 2020.

 

Intellectual Property

 

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

 

Competition

 

Conveniently located near the Florida Gulf Coast and Tampa International Airport, this the Resort is located within 900 acres of a dramatically landscaped setting. The Resort competes using a unique price/value strategy through its offering of spacious accommodations, high levels of customer service, award-winning golf, and one of the largest conference facilities in the southeastern United States. The Resort’s major competitors are other similar golf and conference-oriented resorts in the southeastern United States.

 

Research and Development

 

We have no research and development expenses.

 

Environmental Matters

 

Operations of the golf courses at the Resort involve the use and storage of various hazardous materials such as herbicides, pesticides, fertilizers, motor oils and gasoline. Under various federal, state and local laws, ordinances and regulations, an owner or operator of real property may become liable for the costs of removal or remediation of certain hazardous substances released on or in its property. These laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release of hazardous substances. As of December 31, 2017, there were no violations imposed against the Company.

 

Government Regulation

 

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

 

5 

 

 

Employees

 

As of December 31, 2017, there were approximately 619 employees, with approximately 433 full time and approximately 186 part time or casual laborers who are engaged as needed.

 

Code of Ethics

 

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

 

ITEM 1A. RISK FACTORS

 

Not required for Smaller Reporting Company.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

None.

 

ITEM 2. PROPERTIES

 

The Resort is situated on approximately 900 acres of land located in the northern portion of Pinellas County, Florida, near the Gulf of Mexico. It is approximately 9 miles north of Clearwater and approximately 20 miles west of Tampa. There are 938 condominium units, 36 of which are strictly residential, with the balance eligible for Rental Pool participation. Of the 902 remaining eligible units, 363, on average, participate in the Rental Pool on a year-to-year basis. See additional discussion in Item 1 under the caption “Rental Pool Condominiums.” These condominium units are leased by us from the condominium owners and used as hotel accommodations for the Resort. Salamander Innisbrook Condominium, LLC, a related party, owns three condominium units, two of which participate in the Rental Pool in the same fashion as all other Rental Pool participants. Approximately 20% of the units have lockout master bedroom units, which allow the rental of the condominium unit as two hotel rooms. As a result of the potential use of lockout master bedroom units, the total number of rooms at the resort is 1,216 and the average of 363 units participating in the Rental Pool at any one time is equivalent to approximately 450 hotel rooms. The Resort complex includes 72 holes of golf; practice ranges; three clubhouses with retail, golf, and food and beverage outlets; three conference and exhibit buildings; a full service spa and fitness center; six swimming pools including a themed water attraction; a recreation facility; a tennis facility and numerous administrative and support structures. These amenities are owned by the Company and have undergone substantial renovation and improvements since we purchased the Resort in 2007.

 

ITEM 3. LEGAL PROCEEDINGS

 

The Company is periodically involved in litigation in the ordinary course of business. In the opinion of the Company’s management, the effect of these claims, if any, is not material to the Company’s financial condition 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, which approximated $350,000, is being divided equally among the three-year period with no rollover of unused amounts from one year to another. The liability approximated $56,871 at December 31, 2017.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

None.

 

6 

 

 

PART II

 

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

 

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

 

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

 

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

 

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

 

ITEM 6. SELECTED FINANCIAL DATA

 

Not required for Smaller Reporting Company.

 

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

 

Salamander Innisbrook, LLC (the “Company”, “we”, “us”, or “our”), was formed June 14, 2007 by Salamander Farms, LLC (the “Member”). The Company, together with its affiliates, Salamander Innisbrook Securities, LLC and Salamander Innisbrook Condominium, LLC, own and operate Innisbrook Resort and Golf Club (the “Resort”) in Palm Harbor, Florida. The Resort is a full service 72-hole destination golf and conference facility, with a private club component.

 

Critical Accounting Policies and Estimates

 

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

 

Revenue Recognition

 

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

 

7 

 

 

Intangible Assets

 

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

 

Our intangible assets consist of: (i) the water contract; and (ii) the trademark and the trade name. The valuation of the water contract is based on the projected annual savings associated with having this contract. The valuation of the trademark and trade name is derived from the residual revenue stream from the Resort revenues that is attributed to the Innisbrook trade name. We attribute an indefinite life to both of these intangible assets.

 

During the fourth quarter of 2017, we reviewed our intangible assets, and based on the results, we determined that no impairment of intangible assets existed at December 31, 2017, and there has been no indication of impairment since that date.

 

Impairment of Long-Lived Assets

 

We review our long-lived assets for impairment if a significant event occurs or circumstances indicate that the assets may not be recoverable by comparing the carrying values of the assets with their estimated future undiscounted cash flows. In reviewing for impairment of our long-lived assets, we reviewed the recent operating and pricing trends with the financial performance of the Resort in the aggregate for material variances from our expectations of the Resort’s revenues which was not evident. For the year ended December 31, 2017, the Company continues to see growth in our major revenue segments and did not suffer a material loss during the late summer hurricane. Damage to the infrastructure was minimal with loss of complete service of just over one day. Had it been determined that an impairment loss has occurred, the loss would be recognized during the period of occurrence.

 

At December 31, 2017, we believe the carrying values of our other long-lived assets are recoverable.

 

Loss Contingencies

 

We estimate loss contingencies in accordance with FASB ASC 450-20 Loss Contingencies, which states that a loss contingency shall be accrued by a charge to income if both of the following conditions are met: (a) information available before the financial statements are issued or are available to be issued indicates that it is probable that a liability had been incurred at the date of the financial statements and (b) the amount of loss can be reasonably estimated. There have been no adjustments for loss contingencies to the accompanying financial statements as of and for the year ended December 31, 2017.

 

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.

 

Results of operations were as follows:

 

   Year ended December 31, 
   2017   %   2016   %   Inc/(dec)   % Chg 
                         
Resort Revenues  $43,516,114    100.0%  $41,179,846    100.0%  $2,336,268    5.7%
Costs and Expenses:                              
Operating costs and expenses   19,241,254    44.2%   18,138,855    44.0%   1,102,399    6.1%
General and administrative   21,830,647    50.2%   20,595,817    50.0%   1,234,830    6.0%
Depreciation and amortization   2,443,889    5.6%   2,491,475    6.1%   (47,586)   -1.9%
Total costs and expenses   43,515,790    100.0%   41,226,147    100.1%   2,289,643    5.6%
Operating income (loss)   324    0.0%   (46,301)   -0.1%   46,625    -100.7%
Interest expense   (484,849)   -1.1%   (53,712)   -0.1%   (431,137)   -802.7%
Net loss  $(484,525)   -1.1%  $(100,013)   -0.2%  $(384,512)   384.5%

 

8 

 

 

For the year ended December 31, 2017, our Resort revenues overall increased 5.7% with growth in both average spending and rate. All Rooms related segments showed a strong growth over last year; package leisure increased 3.0%, leisure with an increase of 13.4% and our group market at 5.6%. The growth in overall rooms revenue was 8.2%. With the increasing revenues, operating expenses increased year over year 6.1%.

 

The Food and Beverage revenues, including ancillary revenue, increased 8.3% year over year. Our Banquets and Catering had the strongest growth, 14.1%, which is directly attributed to the increase in group business.

 

The Golf operation finished with a modest increase of 1.7% year over year. Golf rounds were up 2.6% but the golf fees were flat compared to last year. All expenses were in line with the projected spending for 2017.

 

General & administrative expenses increased 6% in the areas of sales & marketing, credit card commissions and utilities.

 

The Resort finished the year with a small increase in operating income however, interest expense increased approximately $431,000 due to the new note payable entered into on March 28, 2017.

 

Legal Entity Structure

 

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

 

Income Tax Status

 

We are a single member limited liability company and therefore our member is responsible for income taxes on our operating income/losses. Therefore, no provision or liability for federal or state income taxes has been included in our financial statements presented in this report.

 

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

 

We evaluate the validity of our conclusions regarding uncertain income tax positions on an annual basis to determine if facts or circumstances have arisen that might cause us to change our judgment regarding the likelihood of a tax position’s sustainability under examination. Our member files income tax returns in the U.S. federal jurisdiction and the State of Virginia. We remain subject to examination by tax authorities for years ended on or after December 31, 2014.

 

Liquidity and Capital Resources

 

Our reported net loss increased $384,512 compared to the same period last year resulting in a $484,525 net loss. Revenue growth year over year was 5.7%. $2,443,889 of the 2017 net loss was attributable to depreciation and amortization. Our operating costs and planned expenditures for capital additions and improvements were expected to be adequately funded by cash on hand at December 31, 2017, 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 one customer would not have a material adverse effect on the Company’s business or financial condition.

 

On March 28, 2017, the Company and Salamander Innisbrook Condominium, LLC, a related party, obtained a loan in the amount of fifteen million dollars ($15,000,000) from Branch Banking and Trust Company (BB&T). The loan is to be repaid over a five (5) year period in monthly installments of principal plus interest based on a 15 year amortization schedule which commenced on May 5, 2017, with the remaining unpaid balance due in full at the end of the five (5) year period. The interest for the loan is the One Month LIBOR Rate plus two and one quarter percent (2.25%) per annum adjusted monthly on the first day of each LIBOR interest period. The loan is collateralized by the real and personal property of the Company and Salamander Innisbrook Condominium, LLC, the assignment and/or subordination of leases and our management agreement with an affiliate and guarantees by certain affiliates. We distributed proceeds from the loan to our Member as a partial return of the capital it has invested.

 

9 

 

 

Environmental Matters

 

None.

 

Off Balance Sheet Arrangements

 

As of December 31, 2017, we have no unconsolidated subsidiaries.

 

We do not have any relationships with unconsolidated entities or unconsolidated financial partnerships of the type often referenced as structured finance or special purpose entities, i.e., unconsolidated entities established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Further, we have not guaranteed any obligations of unconsolidated entities nor do we have any commitment or intent to provide additional funding to any such entities. Accordingly, we believe we are not materially exposed to any market, credit, liquidity or financing risk that could arise if we had engaged in such relationships.

 

Contractual Commitments and Contingencies

 

The following is a summary of our contractual obligations as of December 31, 2017:

 

Contractual Obligations  Total   2018   2019-2020   2021 - 2022 
Long term debt obligation (1)  $14,479,179   $792,377   $1,670,303   $12,016,499 
Interest payments on outstanding debt obligation (2)  1,898,077   511,878   933,858   452,341
                     
Total  $16,377,256   $1,304,255  $2,604,161   $12,468,840 

 

(1)Amounts include principal payments only
(2)Projected interest payments are based on the outstanding principal amounts and interest rates at December 31, 2017

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Market risks arise from changes in interest rates, foreign currency exchange rates and other market changes that affect market sensitive instruments. Our exposure is an interest rate risk.

 

We have entered into a mortgage note payable and the interest on the loan is the One Month LIBOR rate plus two and a quarter percent (2.25%) per annum adjusted monthly on the first day of each LIBOR interest period. The loan is collateralized by the real and personal property of the Company and Salamander Innisbrook Condominium, LLC.

 

As of December 31, 2017, our notes payable consisted of the following:

 

Mortgage Loan  Principal as of
December 31,
2017
   Interest Rate as
of December 31,
2017
   Maturity Date
Branch Banking and Trust Company (BB&T)  $14,479,179    3.625%  May 5, 2022
Less unamortized debt issuance costs   (270,536)        
              
Total Notes Payable less unamortized issuance costs  $14,208,643         

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

See Financial Statements and Supplementary Data starting on page 15.

 

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

 

None.

 

ITEM 9A. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures (as defined in Rule 15d -15 under the Securities Exchange Act of 1934, as amended) that are designed to provide reasonable assurance that information required to be reported in the Company’s SEC filings is recorded, processed, summarized and reported within the periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. As of December 31, 2017, under the direction of our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures and concluded that our disclosure controls and procedures were effective.

 

10 

 

 

 

Management’s Report Internal Controls Over Financial Reporting

 

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2017 based on the framework stated by the Committee of Sponsoring Organizations of the Treadway Commission.

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes, in accordance with generally accepted accounting principles. Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to change in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Based on the assessment, management concluded that, as of December 31, 2017, the Company’s internal control over financial reporting was effective.

 

This annual report does not include an attestation report of the Company’s registered certified public accounting firm regarding internal control over financial reporting.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in the Company’s internal controls over financial reporting during the year ended December 31, 2017, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

ITEM 9B. OTHER INFORMATION

 

None.

 

PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

Set forth below is information about our executive officers:

 

Name   Age   Position
Prem Devadas   61   Manager
Dale Pelletier   59   CFO, Salamander Hospitality LLC

 

Biographical Information

 

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

  

11 

 

 

 

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

 

Directors and Officers Insurance

 

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

 

Indemnification

 

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

 

Code of Ethics

 

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

 

ITEM 11. EXECUTIVE COMPENSATION

 

Summary Compensation Table

 

The following tables set forth the remuneration paid, distributed or accrued by us during the years ended December 31, 2017 and 2016 to our executive officers.

 

Name and Principal Position        Salary and
Commission
    Bonus    Other Annual
Compensation
    All Other
Compensation
 
Prem Devadas    2017   $   $   $   $ 
Manager (1)   2016   $   $   $   $ 
Dale Pelletier   2017   $   $   $   $ 
Chief Financial Officer (1)   2016   $   $   $   $ 

 

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

 

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

 

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

 

12 

 

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

 

(a)Transactions with Management and Others

 

None.

 

(b)Certain Business Relationships

 

Under the Agreement with the Rental Pool Participants, the Resort pays the participant a quarterly distribution, as defined in the Master Lease Agreement (“MLA”), 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.

 

We paid management fees to an affiliate of approximately $1,305,000 and $1,235,000 for the years ended December 31, 2017 and 2016, respectively. These fees are included in general and administrative expenses in the Statements of Operations and changes in Member’s Equity.

 

Pursuant to the terms of the Master Lease Agreement, the Rental Pool paid the Company approximately $385,500 and $381,000 as reimbursement for maintenance and housekeeping labor, use of the telephone lines, and other supplies during the years ended December 31, 2017 and 2016, respectively.

 

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

 

The Company had amounts due from Salamander Innisbrook Condominium, LLC of $442,855 and $422,288, at December 31, 2017 and 2016, respectively.

 

At December 31, 2017 and 2016, the Company had amounts due from affiliates of $430,282 and $120,104, respectively, which are non-interest bearing and are due on demand.

 

Golf Host Securities, Inc. is an on-site real estate broker/dealer for the resale of the Resort’s condominium units owned by Salamander Farms, LLC. Approximately $31,000 was paid to the Company for rent and related accounting services for the years ended December 31, 2017 and 2016.

 

(c)Indebtedness of Management

 

None.

 

(d)Transactions with Promoters

 

Not applicable.

  

13 

 

 

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

 

The following fees were incurred from Frazier & Deeter, LLC for services related to the years ended December 31, 2017 and 2016.

 

Audit Fees: $76,000 and $74,000 for each of the fiscal years ended December 31, 2017 and 2016, respectively, for professional services rendered for the audit of our annual financial statements, review of the interim financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the auditors in connection with statutory filings or engagements for those fiscal years.

 

Audit-Related Fees: None.

 

Tax Fees: None.

 

All other fees: None.

 

PART IV

 

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

Financial Statements and Schedules

 

The financial statements and exhibits filed as part of this annual report on Form 10-K are listed on pages 15 and 36.

 

14 

 

 

INDEX TO FINANCIAL STATEMENTS

 

  Page
Financial Statements of Salamander Innisbrook, LLC  
Report of Independent Registered Certified Public Accounting Firm 16
Balance Sheets as of December 31, 2017 and 2016 17
Statements of Operations and Changes in Member’s Equity for the years ended December 31, 2017 and 2016 18
Statements of Cash Flows for the years ended December 31, 2017 and 2016 19
Notes to Financial Statements 20
Introduction to Financial Statements of the Rental Pool Lease Operation—Historical Summary 26
Financial Statements of the Rental Pool Lease Operation  
Report of Independent Registered Certified Public Accounting Firm 27
Balance Sheets—Distribution Fund as of December 31, 2017 and 2016 28
Balance Sheets—Maintenance Escrow Fund as of December 31, 2017 and 2016 29
Statements of Operations—Distribution Fund for the years ended December 31, 2017 and 2016 30

Statements of Changes in Participants’ Fund Balances—Distribution Fund for the years ended December 31, 2017 and 2016

31
Statements of Changes in Participants’ Fund Balances—Maintenance Escrow Fund for the years ended December 31, 2017 and 2016 32
Notes to Financial Statements 33

 

15 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Sole Member and Manager

Salamander Innisbrook, LLC

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheets of Salamander Innisbrook, LLC (the “Company”) as of December 31, 2017 and 2016, and the related statements of operations and changes in member’s equity, and cash flows for the years then ended and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for the years then ended, in conformity U.S. generally accepted accounting principles.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we been engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

/s/ Frazier & Deeter, LLC

 

We or our predecessor firms have served as the Company’s auditor since 2009.

 

Tampa, Florida

April 26, 2018  

 

16 

 

 

SALAMANDER INNISBROOK, LLC

BALANCE SHEETS

December 31, 2017 and 2016

 

   2017   2016 
         
Assets          
Current assets:          
Cash  $787,554   $1,141,869 
Accounts receivable, net   1,991,844    1,714,624 
Inventories and supplies   959,396    909,599 
Prepaid expenses and other   782,800    803,480 
Total current assets   4,521,594    4,569,572 
           
Property, buildings and equipment, net   36,130,652    38,106,125 
Intangibles   4,330,001    4,330,001 
Due from affiliates   430,282    120,104 
Deposits and other assets   270,613    267,054 
Restricted cash   1,505,642    - 
Total assets  $47,188,784   $47,392,856 
           
Liabilities and Member's Equity          
Current liabilities:          
Accounts payable  $2,360,876   $1,541,263 
Accrued liabilities   2,729,073    2,491,209 
Deferred revenue   3,082,512    3,310,280 
Current portion - capital leases   417,524    425,837 
Current portion - note  payable   792,377    - 
Total current liabilities   9,382,362    7,768,589 
           
Deferred revenue   916,940    918,020 
Capital leases, net of current portion   533,404    934,198 

Note payable, net of current portion and unamortized
deferred financing costs

   13,416,266    - 
           
Total liabilities   24,248,972    9,620,807 
           
Commitments and Contingencies (Notes 6 and 7)          
           
Member's equity   22,939,812    37,772,049 
Total liabilities and member’s equity  $47,188,784   $47,392,856 

 

See notes to financial statements.

 

17 

 

 

SALAMANDER INNISBROOK, LLC

STATEMENTS OF OPERATIONS AND CHANGES IN MEMBER’S EQUITY

For the Years Ended December 31, 2017 and 2016

 

   2017   2016 
         
Resort revenues  $43,516,114   $41,179,846 
           
Costs and expenses:          
Operating costs and expenses   19,241,254    18,138,855 
General and administrative   21,830,647    20,595,817 
Depreciation and amortization   2,443,889    2,491,475 
Total costs and expenses   43,515,790    41,226,147 
           
Operating income (loss)   324    (46,301)
           
Interest expense   (484,849)   (53,712)
           
Net loss   (484,525)   (100,013)
           
Member's equity, beginning of year   37,772,049    38,883,918 
Member distributions   (14,347,712)   (1,011,856)
Member's equity, end of year  $22,939,812   $37,772,049 

 

See notes to financial statements.

 

18 

 

 

SALAMANDER INNISBROOK, LLC

STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2017 and 2016

 

   2017   2016 
           
Cash flows from operating activities:          
Net loss  $(484,525)  $(100,013)
Adjustments to reconcile net loss to net cash provided          
   by operating activities:          
          Provision for bad debts   25,020    37,750 
          Depreciation and amortization   2,443,889    2,491,475 
          Deposits and other assets   (3,559)   - 
          Amorization of deferred financing costs   47,742    - 
          Other changes in operating assets and liabilities   187,094    (672,176)
Net cash provided by operating activities   2,215,661    1,757,036 
           
Cash flows from investing activities:          
    Purchases of property and equipment   (468,416)   (633,841)
Net cash used in investing activities   (468,416)   (633,841)
           
Cash flows from financing activities:          
    Proceeds from note payable   15,000,000    - 
    Payment to cash reserve   (1,505,642)   - 
    Repayment of note payable   (520,821)   - 
    Payment of deferred financing costs   (318,278)   - 
    Repayment of capital lease obligations   (409,107)   (399,186)
    Member distributions   (14,347,712)   (1,011,856)
Net cash used in financing activities   (2,101,560)   (1,411,042)
           
Net change in cash   (354,315)   (287,847)
           
Cash, beginning of year   1,141,869    1,429,716 
Cash, end of year  $787,554   $1,141,869 
           
Supplemental disclosure of cash flow information:          
Cash paid for interest  $400,167   $53,712 

 

See notes to financial statements.

 

19 

 

 

SALAMANDER INNISBROOK, LLC

NOTES TO FINANCIAL STATEMENTS

December 31, 2017 and 2016

  

1. 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 is owned by a sole member who does not have any personal liability for any of the Company’s obligations except as expressly provided by law and/or contract obligation.

 

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 363 units or 450 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.

 

2. Summary of Significant Accounting Policies

 

Cash - Cash consists of bank deposits which may, at times, exceed federally insured limits. No losses have been experienced in such accounts.

 

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

 

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

 

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

 

Accounts receivable, and accounts payable and accrued liabilities: Due to their short term nature, the carrying amounts reported in the balance sheets for these amounts approximate their fair value.
Deferred revenues: The carrying amount of these amounts approximate their fair value because they have been recorded at their net present values considering relevant risk factors.
Note payable: The carrying amount of the note payable approximates its fair value because the interest rate adjusts with current market conditions.

 

20 

 

 

Revenue Recognition and Deferred Revenue - Revenue from rooms, green fees, food and beverage sales and other merchandise sales are generally recognized at the time of sale. Membership dues and annual fees are recognized ratably over the applicable period. The following table sets forth the percentage of the Resort’s total revenues attributable to the categories listed for the years ended December 31, 2017 and 2016.

 

   2017   2016 
Revenues          
Rental pool revenues   27.8%   27.2%
Resort facilities and other resort revenue   72.2%   72.8%
Total   100.0%   100.0%

 

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

 

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

 

The Company’s management reviews accounts receivable monthly to determine if any receivables are uncollectible. Any receivable considered to be doubtful is included in the allowance for doubtful accounts. The balance in the allowance for doubtful accounts was $31,843 and $15,141 as of December 31, 2017 and 2016, respectively. After all attempts to collect the receivable have failed, the receivable is written off against the allowance.

 

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

 

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

 

Category   Average Lives
(in Years)
Buildings   40
Land improvements   20
Machinery and equipment   3 to 7
Assets recorded under capital leases   3 to 4

 

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

 

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

 

Loss Contingencies

 

We estimate loss contingencies in accordance with FASB ASC 450-20 Loss Contingencies, which states that a loss contingency shall be accrued by a charge to income if both of the following conditions are met: (a) information available before the financial statements are issued or are available to be issued indicates that it is probable that a liability had been incurred at the date of the financial statements and (b) the amount of loss can be reasonably estimated. There have been no adjustments for loss contingencies to the accompanying financial statements as of and for the year ended December 31, 2017.

 

Intangibles - Our indefinite life intangibles consist of our trade name valued at $2,300,000 and a water contract valued at $2,030,001. The Company evaluates intangible assets for impairment annually or earlier if a significant event occurs or circumstances indicate that the assets may not be recoverable. Factors the Company considers important, which could indicate impairment, include the following: (1) significant under-performance relative to historical or projected future operating results; (2) significant changes in the manner of the Company’s use of the acquired assets or the strategy for the Company’s overall business; and (3) significant negative industry or economic trends. During the fourth quarter of 2017, the Company completed its annual intangible impairment assessment, and based on the results, the Company determined that no impairment of intangible assets existed at December 31, 2017 or 2016.

 

21 

 

 

Advertising - Advertising costs are expensed as incurred and amounted to $792,306 and $628,869 for the years ended December 31, 2017 and 2016, respectively.

 

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

 

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

 

Income Taxes - The Company is a single-member limited liability company, and therefore, no provision or liability for federal or state income taxes has been included in the accompanying financial statements as our results of operations are included in the income tax return of our Member. We remain subject to examination by tax authorities for years ended on or after December 31, 2014.

 

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

 

We evaluate the validity of our conclusions regarding uncertain income tax positions on an annual basis to determine if facts or circumstances have arisen that might cause us to change our judgment regarding the likelihood  of a tax position’s sustainability under examination.  Our member files income tax returns in the U.S. federal jurisdiction and the State of Virginia. At December 31, 2017, we do not believe that any uncertain tax positions exist. We remain subject to examination by tax authorities for all years since 2014.

 

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

 

In May 2014, the Financial Accounting Standards Board, or the FASB, issued Accounting Standards Update, or 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 GAAP when it becomes effective. The standard permits the use of either the full retrospective or modified retrospective adoption. We completed our evaluation of the effect that ASU No. 2014-09 will have on our financial statements and our evaluation of our revenue streams (ie: Rooms, Food & Beverage, Golf and Membership) under the new standard. Because of the short-term day-to-day nature of our hotel revenues as well as the future treatment of revenues related to future events and membership, we determined that the pattern of revenue recognition will not change significantly. We finalized our expanded disclosure for the notes to the financial statements pursuant to the new requirements. We adopted this standard on its effective date of January 1, 2018 under the cumulative effect transition method. No adjustment will be recorded to our opening balance of retained earnings on January 1, 2018 as there was no impact to our net income. Additionally, comparative information beginning in 2018 will not be restated and will continue to be reported under Revenue Recognition (Topic 605). We also expect that the effect of ASU No. 2014-09 will be immaterial to us on an on-going basis.

 

In February 2016, the FASB issued ASU No. 2016-02, Leases, requiring lessees to recognize a right-of-use asset and a lease liability on the balance sheet for all leases with the exception of short-term leases. For lessees, leases will continue to be classified as either operating or finance leases in the income statement. Lessor accounting is similar to the current model but updated to align with certain changes to the lessee model. Lessors will continue to classify leases as operating, direct financing or sales-type leases. The effective date of the new standard for public companies is for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition and requires application of the new guidance at the beginning of the earliest comparative period presented. We are currently evaluating the effect that the updated standard will have on our financial statements and related disclosures.

 

22 

 

 

3. Accounts Receivable

 

Accounts receivable consist of the following as of December 31, 2017 and 2016:

 

   2017   2016 
         
Trade accounts receivable  $1,812,660   $1,477,231 
Other receivables   211,027    252,534 
Less allowance for bad debts   (31,843)   (15,141)
   $1,991,844   $1,714,624 

 

Other receivables include related party receivables of approximately $89,309 and $107,610 due from Innisbrook Condominium Association at December 31, 2017 and 2016, respectively. Other receivables are included in accounts receivable in the accompanying balance sheets.

 

4. Property, Buildings and Equipment

 

Property, buildings, and equipment consist of the following as of December 31, 2017 and 2016:

 

   2017   2016 
         
Land and land improvements  $21,603,610   $21,422,543 
Buildings   25,460,387    25,460,387 
Furniture, fixtures and equipment   12,014,451    11,758,250 
Construction in progress   52,269    21,121 
    59,130,717    58,662,301 
Less accumulated depreciation   (23,000,065)   (20,556,176)
   $36,130,652   $38,106,125 

 

Depreciation expense was $2,443,889 and $2,491,475 for the years ended December 31, 2017 and 2016, respectively. The cost of assets under capital leases for equipment was $2,059,243 as of December 31, 2017 and 2016. Depreciation expense and related accumulated depreciation for assets under capital leases was $423,333 and $1,229,035, respectively, as of and for the year ended December 31, 2017 and $423,333 and $805,702 as of and for the year ended December 31, 2016, respectively.

 

5. Accrued Liabilities

 

Accrued liabilities consist of the following at December 31, 2017 and 2016:

 

   2017   2016 
Rental pool lease distribution payable  $961,654   $835,000 
Accrued payroll costs   1,218,904    1,163,379 
Other   548,515    492,830 
   $2,729,073   $2,491,209 

 

23 

 

 

6. Leases

 

On August 1, 2015, we entered into a new master lease agreement with Agricredit-Acceptance, LLC for vehicles by Club Car, LLC. The agreement replaced our expired lease agreement and provides for two leases, golf carts and utility vehicles, with payments commencing in December 2015. The term of each lease is 48 months and the monthly lease payments are approximately $21,200 and $11,100, respectively. Lease expense amounted to approximately $387,600 for the years ended December 31, 2017 and 2016.

 

Future minimum lease payments under operating leases are as follows:

 

   2018   2019   Total 
                
Agri Credit - golf & utility carts  $376,191   $250,794   $626,985 

  

During the fourth quarter of 2014, the Company entered into a master lease agreement with PNC Equipment Finance, LLC for the lease of golf course equipment. The Company is obligated under five capital leases that were recorded in the first quarter 2015 when all of the equipment was received. The term of each lease is 60 months, with interest rates ranging from 2% to 4.45%, and the monthly lease payments vary in amount. The leases contain bargain purchase options that allow us to purchase the leased equipment for a minimal amount upon the expiration of the lease term. Equipment acquired under capital leases is pledged as collateral to secure the performance of the future minimum lease payments. Future minimum lease payments under capital lease obligations are as follows at December 31, 2017:

 

Years ending December 31,    
2018  $462,160 
2019  462,160 
2020   111,700 
      
Total future minimum lease payments   1,036,020 
      
Less amount representing interest   (85,092)
      
Present value of future minimum lease payments   950,928 
      
Less current maturities   (417,524)
      
Obligations under capital leases - long term  $533,404 

 

7. Commitments and Contingencies

 

The Company may be involved in litigation in the ordinary course of business from time to time. In the opinion of the Company’s management, insurance or indemnification from other third parties adequately covers these matters, if any, and the effect, if any, of these claims is not material to the Company’s financial condition 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 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. As of December 31, 2017 and 2016, the liability related to the settlement credit is $56,871 and $178,259, respectively.

 

24 

 

 

8. Retirement Plan

 

The Company sponsors a defined contribution retirement plan, which provides retirement benefits for all eligible employees. Employees must fulfill a 90-day service requirement to be eligible to participate in this plan. The Company currently matches one half of the first 6% of the contributions of each employee. The Company made matching contributions of approximately $222,906 and $207,982 for the years ended December 31, 2017 and 2016, respectively.

 

9. Rental Pool Operations

 

In December 2013, a new Master Lease Agreement (“MLA” or “Ageement”) was agreed upon by both Management and the Lessors Advisory Committee (“LAC”). Under the new Agreement, the Resort pays the participant a quarterly distribution equal to 40% of the Adjusted Gross Revenues on the first $10 million; 45% between $10 million and $11 million and 50% above $11 million. The Lessors are also entitled to 35 nights in-season, complimentary gift certificates for golf & food & beverage, and their guests, when occupying the participants units, will be entitled to the same privileges as the Lessors.

 

10. Related Party Transactions

 

Salamander Innisbrook Condominium, LLC, a wholly owned subsidiary of Salamander Farms, LLC, owns three Condominiums which were acquired from the former owner. Its condominiums participated in the Rental Pool under the MLA in the same manner as all other Rental Pool participants. The Company had amounts due from Salamander Innisbrook Condominium, LLC of $442,855 and $422,288 at December 31, 2017 and 2016, respectively.

 

Golf Host Securities, Inc. is an on-site real estate broker/dealer for the resale of the Resort’s condominium units owned by Salamander Farms, LLC. Approximately $31,000 was paid to the Company for rent and related accounting services for the years ended December 31, 2017 and 2016.

 

We paid management fees to an affiliate of approximately $1,305,000 and $1,235,000 for the years ended December 31, 2017 and 2016, respectively. These fees are included in general and administrative expenses in the Statements of Operations.

 

At December 31, 2017 and 2016, the amounts due from affiliates amounted to $430,282 and $120,104, respectively, which are non-interest bearing, unsecured and due on demand.

 

The Innisbrook Rental Pool Lease Operation paid us approximately $385,500 and $381,100 as reimbursement for maintenance and housekeeping labor, use of the telephone lines and other supplies during the years ended December 31, 2017 and 2016, respectively. These reimbursements are included in general and administrative expenses in the Statements of Operations. The Company has amounts due to the Innisbrook Rental Pool Lease Operation for the quarterly distribution of $961,654 at December 31, 2017 and $835,000 for December 31, 2016.

 

11. Note Payable

 

On March 28, 2017, the Company and Salamander Innisbrook Condominium, LLC, a related party, obtained a loan in the amount of fifteen million dollars ($15,000,000) from Branch Banking and Trust Company (BB&T). The loan is to be repaid over a five (5) year period in monthly installments of principal plus interest based on a 15 year amortization schedule commencing on May 5, 2017, with the remaining unpaid balance due in full on May 5, 2022. The interest for the loan is the One Month LIBOR Rate plus two and one quarter percent (2.25%) per annum adjusted monthly on the first day of each LIBOR interest period (3.625% as of December 31, 2017). The loan is collateralized by the real and personal property of the Company and Salamander Innisbrook Condominium, LLC, the assignment and/or subordination of leases and our management agreement with an affiliate and guarantees by certain affiliates. We have distributed these funds to our Member as a partial return of the capital it has invested. As of December 31, 2017, the carrying value of the Note Payable approximates fair value.

 

The loan agreement contains customary financial covenants, including a covenant to maintain a debt service coverage ratio of at least 1.10 to 1.0, measured annually at the end of each fiscal year and a covenant to maintain a tangible net worth of not less than $15,000,000 at all times.

 

As part of our loan agreement, we deposited $1,500,000 into a cash reserve account in March 2017. On February 27, 2018, we deposited an additional $1,000,000 into such account as required. The reserve account is restricted and may not be used to service the loan.

 

We incurred financing costs of $318,278, which are deferred and are being amortized over the term of the loan using a method that approximates the effective interest method. These costs have been reflected as a reduction of the note payable.

 

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Below is a table of scheduled maturities of our note payable for the years ending December 31,

 

2018  $792,377 
2019   820,559 
2020   849,744 
2021   879,967 
2022   11,136,532 
    14,479,179 
Less unamortized deferred financing costs   (270,536)
   $14,208,643 

 

RENTAL POOL LEASE OPERATION—HISTORICAL SUMMARY

 

The following financial statements of the Innisbrook Rental Pool Lease Operation (the “Rental Pool”) are for the years ended December 31, 2017 and 2016.

 

The operation of the Rental Pool is tied closely to the Resort operations. The Rental Pool Master Lease Agreements provide for a quarterly distribution of a percentage of the Company’s room revenues to participating condominium owners (“Participants”), as defined in the agreements (see Note 1 of the Rental Pool Lease Operation financial statements). Because the Rental Pool participants share in a percentage of the Company’s room revenues, the condominium units allowing Rental Pool participation are deemed to be securities. However, there is no market for such securities other than the normal real estate market. Since the security is real estate, no dividends have been paid or will be paid.

 

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

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Sole Member and Manager

Salamander Innisbrook, LLC and

the Lessors of the Innisbrook Rental Pool Lease Operation

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheets of the Distribution Fund and the Maintenance Escrow Fund of the Innisbrook Rental Pool Lease Operation (the “Rental Pool”) as of December 31, 2017 and 2016, and the related statements of operations and changes in participants’ fund balances of the Distribution Fund and changes in participants fund balances of the Maintenance Escrow Fund for the years then ended and the related notes. In our opinion, the financial statements present fairly, in all material respects, the financial position of the Rental Pool as of December 31, 2017 and 2016, and the results of its operations and its cash flows of the Distribution Fund and changes in participants fund balances of the Maintenance Escrow Fund for the years then ended, in conformity with U.S. generally accepted accounting principles.

 

Basis for Opinion

 

These financial statements are the responsibility of the Rental Pool's management. Our responsibility is to express an opinion on the Rental Pool’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Rental Pool in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Rental Pool is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Rental Pool’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

/s/ Frazier & Deeter, LLC

 

We or our predecessor firms have served as the Rental Pool’s auditor since 2009.

 

Tampa, Florida

April 26, 2018

 

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Innisbrook Rental Pool Lease Operation

Balance Sheets - Distribution Fund

December 31, 2017 and 2016

 

   2017   2016 
ASSETS
         
RECEIVABLE FROM SALAMANDER INNSIBROOK, LLC FOR DISTRIBUTION  $927,153   $849,189 
INTEREST RECEIVABLE FROM MAINTENANCE ESCROW FUND   1,214    607 
   $928,367   $849,796 
           
LIABILITIES AND PARTICIPANTS' FUND BALANCES
           
DUE TO PARTICIPANTS FOR DISTRIBUTION  $928,367   $849,796 
   $928,367   $849,796 

 

See notes to financial statements.

 

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Innisbrook Rental Pool Lease Operation

Balance Sheets - Maintenance Escrow Fund

December 31, 2017 and 2016

 

   2017   2016 
         
ASSETS
         
CASH  $187,281   $124,885 
INVESTMENTS   350,000    500,000 
INTEREST RECEIVABLE   5,616    5,243 
   $542,897   $630,128 
           
LIABILITIES AND PARTICIPANTS' FUND BALANCES
           
ACCOUNTS PAYABLE  $43,703   $66,663 
INTEREST PAYABLE TO DISTRIBUTION FUND   1,214    607 
TOTAL LIABILITIES   44,917    67,270 
           
CARPET CARE RESERVE   14,154    26,641 
PARTICIPANTS' FUND BALANCES   483,826    536,217 
   $542,897   $630,128 

 

See notes to financial statements.

 

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INNISBROOK RENTAL POOL LEASE OPERATION

STATEMENTS OF OPERATIONS

DISTRIBUTION FUND

For the years ended December 31, 2017 and 2016

 

   2017   2016 
         
GROSS REVENUES  $12,110,044   $11,211,124 
           
DEDUCTIONS:          
Agents' commissions   558,396    439,816 
Credit card fees   341,274    320,157 
Audit fees   74,004    72,000 
Linen replacements   80,885    89,059 
Uncollected room rents   -    17,360 
Rental pool complimentary fees   33,896    28,691 
    1,088,455    967,083 
           
ADJUSTED GROSS REVENUES   11,021,589    10,244,041 
           
AMOUNT RETAINED BY LESSEE   (6,603,678)   (6,136,547)
           
GROSS INCOME DISTRIBUTION   4,417,911    4,107,494 
           
ADJUSTMENTS TO GROSS INCOME DISTRIBUTION:          
General pooled expense   (14,150)   (5,733)
Miscellaneous pool adjustments   1,519    2,139 
Corporate complimentary occupancy fees   9,724    6,911 
Occupancy fees   (1,482,836)   (1,437,216)
Advisory Committee expenses   (162,542)   (142,687)
           
NET INCOME DISTRIBUTION   2,769,626    2,530,908 
           
ADJUSTMENTS TO NET INCOME DISTRIBUTION:          
Occupancy fees   1,482,836    1,437,216 
Hospitality suite fees   3,773    2,391 
Associate room fees   25,620    20,490 
           
AVAILABLE FOR DISTRIBUTION TO PARTICIPANTS  $4,281,855   $3,991,005 

 

See notes to financial statements.

 

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INNISBROOK RENTAL POOL LEASE OPERATION

StatementS of Changes in Participants’ Fund Balances - Distribution Fund

For the Years Ended December 31, 2017 and 2016

 

   2017   2016 
         
BALANCE, beginning of year  $-   $- 
           
ADDITIONS:          
Amounts available for distribution   4,281,855    3,991,005 
Interest received or receivable from Maintenance Escrow Fund   2,000    2,496 
REDUCTIONS:          
Amounts accrued or paid to participants   (4,283,855)   (3,993,501)
BALANCE, end of year  $-   $- 

 

See notes to financial statements.

 

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INNISBROOK RENTAL POOL LEASE OPERATION

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

For the Years Ended December 31, 2017 and 2016

   

   2017   2016 
         
BALANCE, beginning of year  $536,217   $620,810 
           
ADDITIONS:          
Charges to participants to establish or restore escrow balances   598,024    499,180 
Member accounts & miscellaneous   204    (1,661)
REDUCTIONS:          
Maintenance charges   (599,363)   (548,662)
Refunds to participants as prescribed by the master lease agreements   (51,256)   (33,448)
BALANCE, end of year  $483,826   $536,217 

 

See notes to financial statements

 

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Innisbrook Rental Pool Lease Operation

Notes to Financial Statements

December 31, 2017 and 2016

 

NOTE 1 – NATURE OF THE RENTAL POOL LEASE OPERATION AND AGREEMENTS

 

Overview - The Innisbrook Rental Pool Lease Operation (the “Rental Pool”) consists of condominiums located on the premises of the Innisbrook Resort and Golf Club (the “Company”, “Resort” or “Innisbrook”), which are leased by their owners (the “participants”) to Innisbrook for the purpose of making such units available for resort accommodations. Salamander Innisbrook, LLC, as owner and operator of the Resort, administers the Rental Pool.

 

The Rental Pool operation is highly dependent upon the operations of the Resort, and likewise, the Resort is also dependent upon the continued participation of condominium owners in the Rental Pool. Additionally, the Rental Pool and Resort are both impacted by the general economic conditions related to the destination resort industry.

 

Rental Pool Agreements - The Rental Pool operates under the provisions of a Master Lease Agreement (the “MLA” or “Agreement”), which commenced on January 1, 2004 and expired December 31, 2011, replacing all lease agreements previously in existence. On September 10, 2009, a letter of agreement was signed extending the MLA two additional years. The new Master Lease Agreement was approved by both Management and the Lessors Advisory Committee and commenced on January 1, 2014, for a period of ten years.

 

Under the Agreement, the Resort pays the participant a quarterly distribution equal to 40% of the Adjusted Gross Revenues on the first $10 million of Adjusted Gross Revenues; 45% between $10 million and $11 million to 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.

 

Under the terms of the Agreement, each owner may elect to participate in the Rental Pool for the following year by signing and executing an Annual Lease Agreement (the “ALA”).

 

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

 

The Maintenance Escrow Fund, which is managed by the Lessors’ Advisory Committee (“LAC”), reflects the accounting for certain escrowed assets of the Participants and, therefore, has no operations. It consists primarily of amounts escrowed on behalf of Participants or amounts due from the Distribution Fund to meet minimum escrow requirements, fund the carpet care reserve and maintain the interior of the units. The Innisbrook Rental Pool Trust was established on February 1, 2002 to create a Trust, which holds certain assets maintained in such escrow accounts.

 

Maintenance Escrow Fund Accounts - The MLA provides that 90% of the Occupancy Fees earned by each Participant are deposited in the Participant’s Maintenance Escrow Fund account. Beginning in 2011, by mutual agreement between the LAC and the Resort, until it is determined that the fund requires replenishment, both the occupancy fee (Paragraph 7.3 of the MLA) and the carpet care reserve (Paragraph 1.6 of the MLA) deposit amounts will be 0%. This account provides funds for payment of amounts that are due from Participants under the Agreements for maintenance and refurbishment services. Should a Participant’s balance fall below that necessary to provide adequate funds for maintenance and replacements, the Participant is required to restore the escrow balance to a defined minimum level. The MLA provides for specific fund balances to be maintained, by unit type, size and age of refurbishment, as defined in the Agreement. Under the MLA, a percentage of the Occupancy Fees are deposited into the carpet care reserve in the Maintenance Escrow Fund, which bears the expenses of carpet cleaning for all Participants. This percentage is estimated to provide the amount necessary to fund carpet cleaning expenses and may be adjusted annually. The amounts expended for carpet care were approximately $12,500 and $7,100 for the years ended December 31, 2017 and 2016, respectively.

 

The LAC invests the maintenance escrow funds on behalf of the Participants and in compliance with restrictions in the Agreements. The LAC consists of nine Participants elected to advise the Resort owner in Rental Pool matters and negotiate amendments to the lease agreement. Income earned on these investments is allocated proportionately to Participants’ Maintenance Escrow Fund accounts and paid quarterly.

 

33 

 

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Accounting -The accounting records of the funds are maintained on the accrual basis of accounting in conformity with United States generally accepted accounting principles (U.S. GAAP).

 

Cash - Cash consists of bank deposits which may, at times, exceed federally insured limits. No losses have been experienced in such accounts.

 

Certificates of Deposit - The LAC invests amounts maintained in the maintenance escrow fund primarily in certificates of deposit held with various financial institutions. As of December 31, 2017, the certificates earned interest at rates ranging from .74% to 1.43% and have maturities ranging from six months to a year. As of December 31, 2017 and 2016, accrued interest earned amounted to approximately $3,500 and $2,500, respectively, and is included in the caption interest Receivable on the accompanying financial statements of the maintenance escrow fund. At December 31, 2017 and 2016, the cost of these investments approximates fair value.

 

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

 

Accounts Receivable - Receivables are presented net of any allowances for uncollectible amounts. All receivable balances reflected in the accompanying financial statements as of December 31, 2017 and 2016 were collected in 2018 and 2017, respectively. As such, an allowance for doubtful accounts is not considered necessary as of December 31, 2017 and 2016.

 

Use of Estimates - The preparation of the accompanying financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions which affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the financial statements and the reported revenues and expenses during the reporting period may be affected by the estimates and assumptions management is required to make. Actual results could differ from those estimates.

 

Income Taxes - No federal or state taxes have been reflected in the accompanying financial statements as the tax effect of fund activities accrue to the participants.  The Innisbrook Rental Pool Trust files an annual tax return, which remains subject to examination by taxing authorities for years on or after 2014.  Effective, January 1, 2009, the Rental Pool and related Trust adopted FASB Accounting Standards Codification Topic 740-10, “Accounting for Uncertainty in Income Taxes”.  This topic requires the Rental Pool and the related Trust to evaluate each of their tax positions and the information reported in the Trust’s tax return to determine if such information and positions are more likely than not to be sustained under examination by a taxing authority.   A tax position includes an entity’s tax status, which includes considerations as to the qualifications of the Trust and the decision that all fund activities pass through to the participants of the Rental Pool.

 

The Rental Pool and trustees of the Trust have evaluated their tax positions and have determined that no provision or liability for income taxes is necessary. Conclusions regarding uncertain tax positions are evaluated on an annual basis to determine if facts or circumstances have arisen that might cause a change in judgment regarding the likelihood of a tax position’s sustainability under examination.  At December 31, 2017, the Innisbrook Rental Pool Trust believes that no uncertain tax positions exits.

 

NOTE 3 -   RELATED PARTY TRANSACTIONS

 

Pursuant to the terms of the Master Lease Agreement, the Rental Pool paid Salamander Innisbrook approximately $385,500 and $381,100 as reimbursement for maintenance and housekeeping labor, use of telephone lines, and other supplies during the years ended December 31, 2017 and 2016, respectively. At December 31, 2017 and 2016, accounts payable included in the accompanying balance sheets of the Maintenance Escrow Fund include approximately $26,800 and $54,900, respectively, payable to Salamander Innisbrook, LLC for such items.

 

Salamander Innisbrook Condominium, LLC, a wholly owned subsidiary of Salamander Farms, LLC, owns three condominiums. That condominiums participated in the Rental Pool under the MLA in the same manner as other Rental Pool participants. At December 31, 2017 and 2016, from the operations of the three condominiums incurred operating loss of $(266,231) and $(272,268), respectively.

 

34 

 

 

SIGNATURES

 

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  SALAMANDER INNISBROOK, LLC
       
Date :  April 26, 2018 By: /s/ Prem Devadas  
    Prem Devadas
    Manager (Chief Executive Officer)

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Signatures

 

Title(s)

 

Date

         
 /s/ Prem Devadas                              

Manager

  April 26, 2018
    (Chief Executive Officer)    
         
 /s/ Dale Pelletier  

Chief Financial Officer

  April 26, 2018
    (Principal Financial Officer and
Principal Accounting Officer)
   

 

35 

 

 

EXHIBIT INDEX

 

Exhibit No.   Description  
10.1   Loan Agreement Dated as March 28, 2017 among Salamander Innisbrook, LLC and Salamander Innisbrook Condominium, LLC and Branch Banking and Trust Co. (filed herewith)
31.1   Certification of the Registrant’s Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002
31.2   Certification of the Registrant’s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1   Principal Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2   Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Actof 2002
Exhibit 101.   Interactive data files formatted in XBRL (eXensible Business Reporting Language): (i) the Balance Sheets, (ii)the Statement of Operations, (iii) the Statements of Cash Flows, and (iv) the Notes to the Financial Statements.
101.INS   XBRL Instance Document
101.SCH   XBRL Taxonomy Extension Scheme Document
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document
101.LAB   XBRL Taxonomy Extension Label Linkbase Document
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document

 

36