Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2021

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Principles of Consolidation - The accompanying consolidated financial statements include the accounts and balances of the Company and its wholly owned subsidiaries, Salamander Innisbrook Securities, LLC and Salamander Innisbrook Condominium, LLC (hereinafter collectively referred to as “we”, “us”, or “our”). All significant intercompany balances and transactions have been eliminated in consolidation.

Statements of Cash Flows - For purposes of the statements of cash flows, we consider all liquid investments purchased with an original maturity of three months or less to be cash equivalents.

In November 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-18, “Statement of Cash Flows” which requires that amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. As a result, changes in restricted cash are required to be classified as either operating activities, investing activities, or financing activities depending on the nature of the activities that gave rise to the restrictions. Restricted cash consists primarily of funds held in a reserve account as required under a note payable agreement executed March 28, 2017 with Truist Bank (formerly known as Branch Banking and Trust Company (“BB&T”)) (Note 10).

The following tables provide additional detail, by consolidated financial statement line item, of the ASU 2016-18 impacts in the accompanying statements of cash flows for the years ended December 31, 2021 and 2020.


	2021		2020
Cash	$	3,226,557	$	2,010,377
Restricted cash		2,041,193		2,031,044
Total cash and restricted cash, shown in statements of cash flows	$	5,267,750	$	4,041,421

Revenues, Deferred Revenue and Accounts Receivable - Revenues are derived from a variety of sources including, but not limited to, hotel, food and beverage operations, retail sales, golf course operations and commissions on real estate transactions. With the exception of initiation fees and membership dues, all revenues net of any sales and other taxes collected are recognized as products are delivered or services are performed.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account under the new revenue recognition standard. The transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The majority of our revenue is transactional and the contracts performance obligation is generally satisfied at the time of the transaction.

Revenues from performance obligations satisfied over time include membership dues, annual fees and initiation fees. 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. Membership dues and annual fees are recognized over the applicable membership period (three months to one year depending on type of membership).

Accounts receivable represent amounts due from our memberships, resort guests and companies or individuals that held conferences or group stays at the Resort, net of the allowance for doubtful accounts. We perform periodic credit evaluations of our customers and members and generally do not require collateral because we believe we have procedures in place to minimize the possibility of significant losses occurring. 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.

We review accounts receivable monthly to determine if any receivables are uncollectible. Any receivable considered to be doubtful of collection is included in the allowance for doubtful accounts. The balances in the allowance for doubtful accounts were $31,314 and $32,772 as of December 31, 2021 and 2020, respectively. After all attempts to collect the receivable have failed, the receivable is written off against the allowance.

In addition, gift card purchases and advanced event deposits are collected and deferred and recognized as income as the service is performed at a future date. Deferred revenue includes unrecognized initiation fee liabilities, unearned member dues, gift card liability and advanced events deposits. Deferred revenue was as follows as of December 31:


	2021		2020
Current portion of deferred revenues	$	4,416,271	$	3,592,589
Deferred revenues, net of current portion		1,390,155		1,086,508
	$	5,806,426	$	4,679,097

Practical Expedients and Exemption - There are several practical expedients and exemptions allowed under ASC 606 that impact timing of revenue recognition and our disclosures. In our adoption and application of ASC 606, we elected to treat similar contracts (primarily initiation fee contracts) as part of a portfolio of contracts, primarily initiation fee contracts. The contracts have the same provisions and we believe our revenues would not be materially different if we had chosen to treat each contract separately.

Use of Estimates - The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States ("U.S. GAAP") requires us 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates that are critical to the accompanying consolidated financial statements include our beliefs that all of our long-lived assets, are recoverable, that our estimates of the average lives of memberships from which we base our revenue recognition are reasonable and that no significant loss will result from the resolution of the litigation discussed in Note 5. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the periods they are determined to be necessary. It is at least reasonably possible that our estimates could change in the near term with respect to these matters.

Concentrations of Credit Risk - Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and accounts receivable. Cash consists of bank deposits which may, at times, exceed federally insured limits. No losses have been experienced in such accounts.

We used the following methods and assumptions in estimating the fair values of our financial instruments:

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Accounts receivable and accounts payable: Due to their short-term nature, the carrying amounts reported on the accompanying consolidated balance sheets for these accounts approximate their fair values.

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Deferred revenues: The carrying amounts of these accounts approximate their fair values because they approximate their net present values considering relevant risk factors.

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Debt: The carrying values of variable rate debt financing reflected in the balance sheets at December 31, 2021 and 2020 approximates their fair values as the changes in their associated interest rates reflect the current market and credit risk is similar to when the loans were originally obtained.

Liquidity – Our consolidated financial statements are prepared in accordance with U.S. GAAP applicable to a going concern, which contemplate the realization of assets and liquidation of liabilities in the normal course of business. We suffered a significant net loss in 2020 primarily as a result of the COVID- 19 pandemic which forced us to temporarily close the Resort in 2020 and resulted in numerous cancellations. While this pandemic remains a rapidly evolving situation, our results of operations and financial position have improved considerably in 2021 as various restrictions resulting from the pandemic have been relaxed, and we are hopeful that such trend will continue throughout the remainder of 2022 and beyond. However, the extent of the impact of COVID‐19 on our business and financial results will depend on future developments, including the duration and spread of the outbreak within the markets in which we operate, government actions and programs, and the related impact on consumer confidence and spending, all of which are highly uncertain.

Irrespective of the above, we believe that our cash on hand and additional cash generated from operations will be adequate to meet our operating and capital obligations for the next twelve months, and that if any short-term cash needs are necessary that our member will continue to provide capital to fund some needs.

We also have a debt obligation that requires a balloon payment of approximately $10,746,000 in July 2022. On April 4, 2022, the loan maturity date was extended to July 5, 2022. We are currently in negotiations with the lender to refinance the indebtedness and anticipate being able to consummate a long-term refinancing. Accordingly, the accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.

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

Property, Buildings and Equipment, net – Property, buildings and equipment are stated at cost less accumulated depreciation and amortization. We capitalize 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 shorter of the estimated useful lives of the assets, or if applicable, the lease terms. Estimated useful lives are generally as follows:


		Average Lives
Category		(in Years)
Buildings		40
Land improvements		20
Machinery and equipment		3 to 7
Assets recorded under finance 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 - We regularly review 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. Any impairment loss would be 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 for the years ended December 31, 2021 and 2020.

Intangibles - Our indefinite life intangibles consist of our trade name valued at $2,300,000 and a water contract valued at $2,030,001. We evaluate intangible assets for impairment annually (or earlier if a significant event occurs that may indicate that the assets may not be recoverable). Factors we consider 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 use of the acquired assets or the strategy for our overall business; and (3) significant negative industry or economic trends. During the years ending

December 31, 2021 and 2020, we completed our annual intangible impairment assessment, and determined that no impairment of intangible assets existed at either of such dates.

Deferred Financing Costs – Deferred financing costs, which arose from costs incurred to originate the financing discussed at Note 10, are being amortized to interest expense over the term of the related indebtedness. The unamortized portions of these costs are reflected as reductions of such debt.

Deferred contract costs, net – Deferred contract costs, which arose from the costs of obtaining long term commitments on rental pool agreements that we would not have incurred if the pool participants did not commit to five-year contracts, are being amortized over the contract lives using the straight-line method.

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 consolidated 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 consolidated financial statements and (b) the amount of loss can be reasonably estimated.

Advertising - Advertising costs, which are expensed as incurred, were $522,665 and $452,640 for the years ended December 31, 2021 and 2020, respectively.

Leases - Leases are classified as finance leases or operating leases dependent on whether the lease transfers substantially all of the benefits and risks of ownership of property. 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.

Income Taxes With the exception of an entity owned by Salamander Innisbrook Securities, LLC for which income taxes have been minimal the Company, and its subsidiaries are single-member limited liability companies, and therefore, no provision or liability for federal or state income taxes has been included in the accompanying consolidated financial statements. The results of our consolidated operations are included in the income tax return of our member.

Under FASB 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, 2021, we do not believe that any uncertain tax positions exist.

Innisbrook Rental Pool Lease Operation [Member]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Accounting -The accounting records of the funds are maintained on the accrual basis of accounting.

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

Revenue - All room revenue net of any sales and other taxes collected are recognized as services are 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, 2021 and 2020, were collected in 2022 and 2021, respectively. As such, an allowance for doubtful accounts was not considered necessary as of December 31, 2021 or 2020.

Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 2016. The Rental Pool and related Trust have adopted the Financial Accounting Standards Board 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, 2021, the Innisbrook Rental Pool Trust believes that no uncertain tax positions exist.

Salamander Innisbrook, LLC 10-K