SADDLEBROOK RESORTS INC - Annual Report: 2009 (Form 10-K)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

(Mark one)

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

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

COMMISSION FILE NUMBER: No 1934 act file number assigned
(1933 act file no. 2-65481)

SADDLEBROOK RESORTS, INC.

(Exact name of registrant as specified in its charter)

Florida		59-1917822
(State of incorporation)		(IRS employer identification no.)

5700 Saddlebrook Way, Wesley Chapel, Florida 33543-4499
(Address of principal executive offices)

813-973-1111

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES o NO þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. YES o NO þ

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 þ NO o

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 (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES o NO o

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 amendment to the Form 10-K. Not applicable

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

Large accelerated filer o		Accelerated Filer o		Non-accelerated filer þ		Smaller reporting company o

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

The aggregate market value of the voting and nonvoting common equity held by non-affiliates of the Registrant as of the last business day of the Registrant’s most recently completed second fiscal quarter was zero, as all of the common equity of the Registrant is held by an affiliate of the Registrant.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: Not applicable

 

 

PART I

Item 1.		Business

Saddlebrook Resorts, Inc., (the “Company”) was incorporated in the State of Florida on June 20, 1979. It was formed to acquire an existing golf course and tennis club located in Pasco County, Florida, and develop it into a condominium resort and residential homes project named Saddlebrook Resort (the “Resort”). In November 1988, the Company transferred its real estate development division to its prior parent company and retained only its operation of the Resort.

The Company is currently owned by Saddlebrook Holdings, Inc., which is ultimately owned by Thomas L. Dempsey and his family. Mr. Dempsey acquired the Company from its prior parent company in November 1988.

Based on its numerous awards, the Resort has a reputation as a world-class facility that caters to corporate meeting planners and sports enthusiasts at all skill levels. As a destination resort, it offers luxury accommodations, convention facilities, restaurants, two golf courses, tennis courts, a spa and other recreational areas. An accredited preparatory school at the Resort and an on-site real estate sales office are operated by affiliates of the Company.

The Resort’s accommodations are condominium units that have been sold to third parties or to affiliates of the Company. The majority of the condominium units participate in a rental-pooling program (the “Rental Pool”) that provides its owners with a percentage distribution of related room revenues minus certain fees and expenses. The remainder of the condominium units participate in a non-pooling rental program, are owner-occupied or are designated as hospitality suites or housing for young athletes independent of the rental programs.

All of the Resort’s condominium units are governed by the Saddlebrook Resort Condominium Association, Inc. (the “Association”) in accordance with Florida statutes. The Board of Directors for the Association is elected by the condominium unit owners. The condominium unit owners also approve an annual budget of common expenses for the Association that determines their quarterly assessments that must be paid regardless of the units’ participation in rental programs.

A Resort condominium unit’s participation in a rental program also requires a club membership at the Resort with its separate initiation fees and quarterly dues. The club membership is directed by a Board of Governors appointed by the Company’s management.

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.

The Resort’s business is considered to be seasonal with a higher volume of sales during the winter and spring seasons.

Although the Resort’s reputation in the conference-hosting industry is excellent, the market for these services is extremely competitive. Consequently, it aggressively competes against numerous resort hotels and convention facilities both in central Florida and nationwide.

At December 31, 2009, there were approximately 525 persons employed by the Company. The Company’s management relationship with its employees is excellent and there are no collective bargaining agreements.

Item 1A.		Risk Factors

The Company is subject to operating risks common to the hotel industry which could adversely affect our results of operations.

Common hotel industry risks outside of our control include (but are not limited to) terrorism (including threatened terrorist activity), the uncertainty of military conflicts, outbreaks of contagious diseases and the cost and availability of travel options.

Continued weakness and further weakening in economic conditions may adversely affect consumer and corporate spending and tourism trends which could have a negative impact on our results of operation.

We are vulnerable to the risk of unfavorable weather conditions and the impact of natural disasters. There is no way for us to predict future weather patterns or the impact weather patterns may have on our results of operation or visitation.

Item 2.		Properties

Saddlebrook Resort is located in Wesley Chapel, Florida, which is in south central Pasco County, immediately north of Tampa, Florida.

The Resort is inside the gated community of Saddlebrook. The Resort’s property includes approximately 480 acres of land that are owned by the Company and an affiliate. Located on the Resort’s property are convention facilities with over 95,000 square feet of meeting and function space, three restaurants, two 18-hole golf courses, 45 tennis courts, a 7,000-square foot luxury health spa, a 7,500-square foot fitness center, three swimming pools, shops and other operational and recreation areas.

A total of 556 condominium units are at the Resort comprised of one-, two- and three-bedroom suites. Of these condominium units, 408 are designed for hotel occupancy and located in an area called the Walking Village. The remaining 148 are slightly larger, designed for longer-termed rental, and are located in an area called the Lakeside Village. At December 31, 2009, there were 537 hotel accommodations participating in the Rental Pool. The three-bedroom condominium units become hotel accommodations as a two-bedroom suite with a separate adjoining hotel room. Some two-bedroom condominium units become hotel accommodations as a one-bedroom suite with a separate adjoining hotel room.

Item 3.		Legal Proceedings

The Company is involved in litigation in the ordinary course of business. In the opinion of the Company’s management, insurance or indemnification from other third parties adequately covers these matters. The effect, if any, of these claims is considered immaterial to the Company’s financial condition and results of operations.

Item 4.		Reserved

PART II

Item 5.		Market for the Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities

The Company’s stock is privately held and there is no established market for the stock.

The right to participate in a rental pool that accompanies the condominium units that were developed and sold by the Company is deemed to be a security. However, there is no market for such securities other than the normal real estate market.

Since the security is the participation right in a rental pool, no dividends have been paid or will be paid to condominium unit owners. However, the condominium unit owners participating in the Rental Pool receive a contractual distribution of rent from the Company quarterly.

Item 6.		Selected Financial Data

The following selected financial data should be read in conjunction with the financial statements and related notes in Item 8 hereof.

		Year ended December 31,
		2009				2008				2007				2006				2005
Resort
Resort revenues		$	26,756,000			$	45,766,000			$	43,616,000			$	43,608,000			$	40,674,000
Interest expense			360,000				599,000				861,000				808,000				661,000
Net (loss) income			(1,014,000	)			2,571,000				531,000				1,833,000				1,221,000
Total assets			30,781,000				36,684,000				35,447,000				36,429,000				33,227,000
Total debt			9,805,000				11,167,000				11,217,000				11,267,000				11,067,000
Capital leases			292,000				—				128,000				282,000				470,000
Rental Pool
Rental Pool revenues			7,089,000				13,497,000				12,260,000				12,005,000				11,590,000
Total assets			544,000				674,000				905,000				692,000				720,000
Net income			2,824,000				5,347,000				4,909,000				4,841,000				4,672,000
Average distribution per Rental Pool participant			5,259				9,983				9,125				8,981				8,620

Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

The Company operates the Resort, which contains condominium units that have been sold to third parties or to affiliates of the Company. The majority of the condominium units are hotel accommodations that participate in the Rental Pool. Other resort facilities owned by the Company and its affiliates include golf courses, tennis courts, a spa, restaurants and a conference center.

Recent Accounting Pronouncements

The Financial Accounting Standards Board (“FASB”) issued SFAS No. 168, “The FASB Accounting Standards Codification (“ASC”) and the Hierarchy of Generally Accepted Accounting Principles” (“SFAS No. 168” or Accounting Standards Update No. 2009-01 (“ASU No. 2009-01”)), on June 29, 2009 and, in doing so, authorized the Codification as the sole source for authoritative U.S. GAAP, aside from those issued by the SEC. The Company adopted ASU 2009-01 during the three months ended September 30, 2009 and its adoption did not have any impact on the Company’s financial statements.

In January 2010, the FASB issued new guidance for fair value measurements and disclosures. The new guidance, which is now part of ASC 820, Fair Value Measurements and Disclosures, clarifies existing disclosure requirements regarding the level of desegregation and inputs and valuation techniques and provides new disclosure requirements about, among other things, transfer in and out of levels 1 and 2 of the fair value hierarchy and details of the activity in level 3 of the fair value hierarchy. The new guidance is effective for fiscal years beginning after December 15, 2009 for the level 1 and 2 disclosures and for fiscal years beginning after December 15, 2010 for level 3 disclosures. The disclosure requirements will be applied prospectively to the Company’s fair value disclosure subsequent to the effective date and are not expected to have a significant effect on the financial statements.

Critical Accounting Policies and Estimates

The following accounting policies are considered critical by the Company’s management. These and other accounting policies require that estimates be made based on assumptions and judgment, that affect revenues, expenses, assets, liabilities and disclosure of contingencies in the Company’s financial statements. These estimates and assumptions are based on historical experience and on various other factors that are believed to be reasonable under the circumstances. However, actual results may differ from these estimates due to different conditions.

Asset Impairments — The Company’s management periodically evaluates whether there has been a permanent impairment of long-lived assets. The Company’s management believes that the accounting estimates related to asset impairments are critical estimates for the following reasons: (1) the ongoing changes in management’s expectations regarding future utilization of assets; and (2) the impact of an impairment on reported assets and earnings could be material. During the year ended December 31, 2009, the Company’s management evaluated assets for impairment and concluded that the sum of the undiscounted expected future cash flows (excluding interest charges) from its assets exceeded their then current carrying values. Accordingly, the Company did not recognize an impairment charge.

Depreciation Expense — The Company provides for depreciation by the straight-line method at annual rates that amortize the original costs, net of salvage values, of depreciable assets over their estimated useful lives. Management’s estimation of assets’ useful lives are critical estimates for the following reasons: (1) forecasting the salvage value for long-lived assets over a long period of time is subjective; (2) changes may take place that could render an asset obsolete or uneconomical; and (3) a change in the useful life of a long-lived asset could have a material impact on reported results of operations and reported asset values. The Company’s management believes the estimated useful life corresponds to the anticipated physical life for most assets. Although it is difficult to predict values far into the future, the Company has a long history of actual costs and values that are considered in reaching a conclusion as to the appropriate useful life of an asset.

Revenue Recognition — The Company’s revenues are derived from a variety of sources including, but not limited to, hotel operations, food and beverage operations, retail sales, golf course greens fees, and are recognized as products are delivered or services are performed. Revenues from membership initiation fees are recognized over the average life of the memberships.

Allowance for Doubtful Accounts — The Company establishes an allowance for doubtful accounts for accounts receivable based upon factors surrounding specific customers, historical trends and other information.

See the Notes to the Financial Statements for Saddlebrook Resorts, Inc. in Item 8 hereof for additional accounting policies used in the preparation of the financial statements.

Impact of Current Economic Conditions

Businesses appear to have altered their spending patterns in response to the current economic conditions, resulting in fewer corporate bookings.

In response to this trend, although overall marketing expenses have decreased, the Company has increased its marketing efforts toward the social clientele by developing packages designed to target more social guests, including families. These social packages are being promoted through the Company’s website as well as through travel wholesalers and with emphasis on e-commerce sites.

Given these economic conditions the Company has increased its focus on managing costs. The Company will continue to review costs to identity future opportunities for cost reduction.

Liquidity and Capital Resources

Future operating costs and planned expenditures for minor capital additions and improvements are expected to be adequately funded by the Company’s current cash reserves, or cash generated by the Resort’s operations. The Company’s current debt agreement contains a line of credit for additional financing from the lender for amounts up to $2,500,000, subject to specific covenants. As of December 31, 2009 there were no outstanding borrowings under this line of credit.

The Company’s operation of the Resort is not considered to be dependent on any individual or small group of customers, the loss of which would have a material adverse effect on the Company’s business or financial condition.

Results of Operations

The following chart highlights changes in the sources of Company revenues:

		Year ended December 31,
		2009				2008				2007
Rental Pool Revenues			26	%			29	%			28	%
Food and beverage			31				34				35
Resort facilities and other			43				37				37
			100	%			100	%			100	%

2009 Compared to 2008

The Company’s total revenue decreased $19,010,000, which is approximately 42%, from the prior year. Rental Pool revenue decreased $6,408,000, or approximately 47% from the prior year. Both of these decreases are directly related to the reduced occupancy levels in units participating in the rental pool program, when comparing the two fiscal periods. Total paid unit nights decreased by 41%, and the average room rate also decreased by about 13%. Food and Beverage revenue was also negatively impacted by the reduction in resort guests, decreasing by approximately 47% from the prior year.

The Company’s costs and expenses decreased by $15,198,000, or about 35%. This decrease is related to the reduction in revenues and also a result of the Company’s focus on managing it’s costs as a result of the current economic conditions, and was partially offset by the net gain on the sale of assets of approximately $403,000 discussed in Note 4 of the accompanying financial statements. Costs and expenses of the Rental Pool Operation decreased by $1,771,000 and this decrease is directly related to the reduction in Rental Pool revenues.

The Company’s net loss for the year of $1,014,000 was a change of about $3,585,000 from the prior year’s net income of $2,571,000. Amounts available for distribution to participants in the Rental Pool decreased by $2,523,000.

2008 Compared to 2007

The Company’s total revenues increased $2,150,000, which was approximately 5% over the prior year. Paid room nights decreased slightly, (less than 1%), however the average room rate increased by about 10%, resulting in an increase of $1,237,000 in Rental Pool revenues.

The Company’s costs and expenses increased $433,000, a 1% increase over the prior year. Expenses of the Rental Pool Operation increased $452,000, or about 14% over the prior year. This increase was directly related to the increase in Rental Pool revenues, along with increases in commissions paid to third party travel agents.

The Company’s net income for the year 2008 of $2,571,000 was a $2,039,000 increase from the prior year. The Rental Pools’ increase in amounts available for distribution to participants was $438,000.

The Company is currently a member of a Qualified Subchapter S Subsidiary Group. Accordingly, no income tax expense was reflected in the Company’s operating results as the tax is assessed to the shareholders of its parent company. Income tax expense was not reflected in the Company’s Rental Pool financial statements as the related income tax is assessed to its participating condominium unit owners.

Off-Balance Sheet Arrangements

The Company does not have any material Off-Balance Sheet Arrangements that have or are reasonably likely to have a current or future effect on the financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources as defined in Regulation S-K Item 303(a)(4).

Contractual Obligations

Payments Due By Period as of December 31, 2009

		Less than				1-3				3-5				More than
		1 year				years				years				5 years				Total
Long-term debt		$	1,060,000			$	3,180,000			$	5,565,000			$	0			$	9,805,000
Interest on long-term debt			255,000				424,000				206,000				0				885,000
Capital lease			90,000				203,000				0				0				293,000
Interest on capital lease			13,000				12,000				0				0				25,000
Operating leases			66,000				0				0				0				66,000
Total		$	1,484,000			$	3,819,000			$	5,771,000			$	0			$	11,074,000

Item 7A.		Quantitative and Qualitative Disclosures about Market Risk

The Company’s primary market risk exposure is to changes in interest rates as a result of its variable interest rate long term debt.

The Company’s invested cash, including investments escrowed on behalf of the condominium unit owners in the Rental Pool’s Maintenance Escrow Fund, are subject to changes in market interest rates. Otherwise, the Company does not have significant market risk with respect to foreign currency exchanges or other market rates.

Item 8.		Financial Statements and Supplementary Data

The financial statements, including the Reports of Independent Registered Certified Public Accountants, for Saddlebrook Resorts, Inc. are included on pages 19 to 33 and for Saddlebrook Rental Pool Operation on pages 34 to 38. An index to the financial statements is on page 18.

Financial statement schedules have been omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

Item 9.		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A(T).		Controls and Procedures

The Company maintains 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 principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. As of December 31, 2009, under the direction of our chief executive officer and principal 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 at the reasonable assurance level.

In addition, management is responsible for establishing and maintaining adequate internal controls over financial reporting. The Company’s internal control framework and processes are designed to provide reasonable assurance to management and the Board of Directors regarding the reliability of financial reporting and the preparation of the Company’s consolidated financial statements in accordance with generally accepted accounting principles accepted in the United States.

As of December 31, 2009, management conducted an assessment of the Company’s internal control over financial reporting based on the criteria established in the Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the assessment, management concluded that, as of December 31, 2009, the Company’s internal control over financial reporting was effective.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

The Company’s management, including its Chief Executive Officer and Chief Financial Officer, does not expect that its disclosure controls and procedures and internal controls over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must be considered relative to its cost. Because of the inherent limitation in all control systems, no evaluation of controls can provide absolute assurance that all control issues within the Company have been detected.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal controls over financial reporting during the quarter ended December 31, 2009, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART III

Item 10.		Directors and Executive Officers of the Registrant

The Directors and Executive Officers of the Company are as follows:

Name		Position and Background
Thomas L. Dempsey Age 83		Chairman of the Board and Chief Executive Officer of the Company for more than five years. President of the Company until November 2000. Chairman of the Board and President of Saddlebrook Holdings, Inc. for more than five years.
Eleanor Dempsey		Vice Chairman of the Board of the Company for more than five years. Director and Executive Vice President of Saddlebrook Holdings, Inc. for more than five years. Wife of Thomas Dempsey.
Gregory R. Riehle Age 53		Director, Vice President and Secretary of the Company for more than five years. Director and Executive Vice President of Saddlebrook Holdings, Inc. for more than five years. Son-in- law of Thomas Dempsey.
Maureen Dempsey Age 51		Director, Vice President and Assistant Secretary of the Company for more than five years. Director and Executive Vice President of Saddlebrook Holdings, Inc. for more than five Years. Daughter of Thomas Dempsey.
Diane L. Riehle Age 49		Director, Vice President and Assistant Secretary of the Company for more than five years. Director and Executive Vice President of Saddlebrook Holdings, Inc. for more than five Years. Daughter of Thomas Dempsey.
Donald L. Allen Age 70		Vice President and Treasurer of the Company for more than five years.

Code of Ethics

The Board of Directors of the Company has adopted a Code of Ethics that covers the Company’s principal financial officer, principal accounting officer and controller, as well as its Executive Committee. The Board did not provide for the Code to cover the Company’s principal executive officer, Mr. Thomas Dempsey, as Mr. Dempsey is the controlling shareholder of Saddlebrook Holdings, Inc., which owns all of the stock in the Company. All of the capital stock of Saddlebrook Holdings, Inc. is owned by Mr. Dempsey and trusts for the benefit of his two daughters, Maureen Dempsey and Diane L. Riehle, and their children, therefore, it is primarily for the benefit of Mr. Dempsey that the Code has been adopted.

Audit Committee Financial Expert

The Board of Directors of the Company has determined that it does not have an “audit committee financial expert,” as defined by the rules of the Securities and Exchange Commission, serving on the Board of Directors. The Board and Mr. Thomas Dempsey, the Company’s principal shareholder, believe that there is adequate financial expertise on the Board and within the senior management of the Company to serve the interests of the shareholders of Saddlebrook Holdings, Inc., which owns all of the stock of the Company, such shareholders being Mr. Dempsey and trusts for the benefit of his daughters and grandchildren.

Item 11.		Executive Compensation

The following table sets forth the remuneration paid to the Company’s executive officers by the Company and its parent, Saddlebrook Holdings, Inc. consolidated, during the three years ended December 31, 2009.

Summary Compensation Table

		Fiscal												Other annual
Name and Principal Position		year				Salary				Bonus				compensation (1)				Total
Thomas L. Dempsey			2009			$	107,692			$	—			$	15,291			$	122,983
Chairman of the Board and			2008				200,000				—				16,555				216,555
Chief Executive Officer			2007				200,000				—				16,584				216,584
Eleanor Dempsey			2009				76,498				—				22,931				99,429
Vice Chairman of the Board			2008				141,000				—				24,736				165,736
			2007				141,000				—				24,736				165,736
Donald Allen			2009				57,690				—				76				57,766
Vice President and Treasurer			2008				55,000				7,860				705				63,565
			2007				76,154				7,830				916				84,900
Gregory R. Riehle			2009				122,152				4,778				16,581				143,511
Vice President, Secretary and			2008				150,288				59,756				20,207				230,251
General Manager			2007				120,000				31,914				27,194				179,108
Maureen Dempsey			2009				118,798				—				26,379				145,177
Vice President and Assistant			2008				141,000				—				23,168				164,168
Secretary			2007				141,000				—				18,926				159,926
Diane L. Riehle			2009				118,798				—				29,776				148,574
Vice President and Assistant			2008				141,000				—				27,340				168,340
Secretary			2007				141,000				—				20,954				161,954

Vehicle Allowances

Tax Preparation Fees

Health Insurance premiums paid on behalf of greater than 2% shareholders

Group Term Life Insurance

401K Matching Contributions

The following table shows the amounts for each category received by each named executive.

										Health
Executive		Vehicle				Tax Prep.				Premium				GTL				401K Match
Thomas L. Dempsey		$	—			$	7,800			$	5,093			$	2,398				—
Eleanor Dempsey			21,250				—				—				1,681				—
Donald Allen			—				—				—				76				—
Gregory R. Riehle			16,581				—				—				—				—
Maureen Dempsey			17,594				4,280				4,196				309				—
Diane L. Riehle			18,057				5,400				6,319				—				—

Director Compensation and Independence

All of the Company’s directors are executive officers of the Company and their compensation is described in the summary compensation table above.

Compensation Committee; Compensation Committee Interlocks and Insider Participation

The entire board of directors of the Company serves as the compensation committee.

Item 12.		Security Ownership of Certain Beneficial Owners and Management

All of the outstanding shares of the Company’s capital stock are owned by Saddlebrook Holdings, Inc. All of the capital stock of Saddlebrook Holdings, Inc. is owned by Thomas L. Dempsey and trusts for the benefit of his two daughters, Maureen Dempsey and Diane L. Riehle, and their children. Thomas L. Dempsey is the controlling shareholder of Saddlebrook Holdings, Inc.

Item 13.		Certain Relationships and Related Transactions

The Company currently funds (through intercompany loans) a portion of the expenditures for Saddlebrook Holdings, Inc. (”SHI”), its sole shareholder, which is offset by dividends declared thereto, if necessary. SHI’s expenditures include dividends to its shareholders, which are primarily amounts that approximate their income taxes related to the operations of SHI and its subsidiaries.

Saddlebrook International Tennis, Inc. (“SIT”) operates a tennis training facility and preparatory school at the Resort and is solely owned by SHI. SIT owns 10 condominium units at the Resort, two of which participate in the Rental Pool Operation. The Company receives revenue for services provided to SIT’s guests. In addition, the Company is reimbursed for actual expenses and other costs incurred on behalf of SIT.

Saddlebrook Investments, Inc. is a broker/dealer for the Resort’s condominium units. Saddlebrook Realty, Inc. is a broker for sales of other general real estate in the area. Both companies are owned by Thomas L. Dempsey. These companies collectively operate an on-site real estate office at the Resort and the Company is reimbursed for actual expenses and other costs incurred on their behalf.

Dempsey and Daughters, Inc. holds certain tracts of real estate and owns 24 individual condominium units at the Resort, 10 of which participate in the Rental Pool Operation. This company is solely owned by SHI. The Company is reimbursed for actual expenses and other costs incurred on behalf of this company.

Saddlebrook Resort Condominium Association, Inc. is a nonprofit corporation whose membership is comprised of the Resort’s condominium unit owners pursuant to Florida statutes. The Company is compensated by this entity for various services provided and is reimbursed for actual expenses and other costs incurred on its behalf.

The Company’s management and ownership are involved with other related entities and operations that are considered minor.

Item 14.		Principal Accounting Fees and Services

Cherry, Bekaert & Holland, L.L.P. served as the Company’s independent registered certified public accounting firm for the fiscal years ended December 31, 2009 and December 31, 2008.

The following fees were paid for services rendered during the Company’s last two fiscal years:

Audit Fees: $107,000 and $100,000 for the fiscal years ended December 31, 2009 and 2008, respectively, for professional services rendered for the audit of the Company’s annual financial statements, review of financial statements included in its Forms 10-Q and services that are normally provided by the auditors in connection with statutory and regulatory filings or engagements for those fiscal years.

Audit-Related Fees: None

Tax Fees: None

All Other Fees: None

Effective May 6, 2003, the Board of Directors has implemented a policy requiring the Board of Directors, which functions as the Company’s audit committee, to approve the engagement of the Company’s independent auditors prior to the engagement of the independent auditor to render audit or non-audit related services in accordance with the rules of the Securities and Exchange Commission. The Board of Directors has not adopted any pre-approval policies or procedures.

PART IV

Item 15.		Exhibits and Financial Statement Schedules

(a)

Financial statements and schedules required to be filed are listed in Item 8 of this Form 10-K.

(b)

Exhibits:

	3.1			Articles of Incorporation of Saddlebrook Resorts, Inc., a Florida corporation (incorporated by reference to Exhibit A*).
	3.2			Corporate By-laws of Saddlebrook Resorts, Inc. (incorporated by reference to Exhibit B*).
	4.			Declaration of Condominium, together with the following:
				(1) Articles of Incorporation of the Saddlebrook Association of Condominium Owners, Inc. a Florida non-profit corporation; (2) By-laws of the Saddlebrook Association of Condominium Owners, Inc., and (3) Rules and Regulations of the Saddlebrook Association of Condominium Owners, Inc. (incorporated by reference to Exhibit C*).
	10.1			Management Contract between Saddlebrook Resorts, Inc. and the Saddlebrook Association of Condominium Owners, Inc.(incorporated by reference to Exhibit C*).
	10.2			Saddlebrook Rental Pool and Agency Appointment Agreement. (incorporated by reference to Registrant’s Form 10-K for the annual period ended December 31, 2003)

	10.3			Saddlebrook Rental Management Agency Employment (incorporated by reference to Exhibit E*).
	10.4			Form of Purchase Agreement (incorporated by reference to Exhibit H*).
	10.5			Form of Deed (incorporated by reference to Exhibit I*).
	10.6			Form of Bill of Sale (incorporated by reference to Exhibit J*).
	10.7			Loan Agreement between the Registrant and SunTrust Bank, dated November 1, 2004 (incorporated by reference from the Registrant’s Form 10-Q for the quarterly period ended September 30, 2004).
	10.8			Second Amended and Restated Mortgage, Security Agreement and Fixture Filing, between the Registrant and SunTrust Bank, dated November 1, 2004 (incorporated by reference to Registrants Form 10-Q for the quarterly period ended September 30, 2004).
	10.9			Promissory Note ($12 million) made by the Registrant and payable to SunTrust Bank, dated November 1, 2004 (incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended September 30, 2004).
	10.10			Revolving Line of Credit Promissory Note ($5 million) made by the Registrant and payable to SunTrust Bank, dated January 31, 2007 (incorporated by reference to Registrant’s Form 10-K for the fiscal year ending December 31, 2006).
	10.11			Notice of Future Advance and Fifth Amended and Restated Mortgage, Security Agreement and Fixture Filing dated March 12, 2009 (incorporated by Reference to Registrant’s Form 10-K for the fiscal year ending December 31, 2009).
	10.12			Third Amendment to Loan Agreement dated March 12, 2009 (incorporated by reference to Registrant’s Form 10-K for the fiscal year ending December 31, 2009).
	10.13			Consolidated, Amended and Restated Promissory Note dated March 12, 2009 (incorporated by reference to Registrant’s Form 10-K for the fiscal year ending December 31, 2009).
	10.14			Future Advance Promissory Note dated March 12, 2009 (incorporated by reference to Registrant’s Form 10-K for the fiscal year ending December 31, 2009).
	10.15			Revolving Line of Credit Promissory Note dated March 12, 2009 (incorporated by reference to Registrant’s Form 10-K for the fiscal year ending December 31, 2009).
	14.1			Code of Ethics

	31.1			Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2			Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32.1			Chief 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 Act of 2002.

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.

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 Company and in the capacities indicated on March 31, 2010.

/s/ Thomas L. Dempsey		/s/ Maureen Dempsey
Thomas L. Dempsey		Maureen Dempsey
Chairman of the Board and		Director, Vice President
Chief Executive Officer		and Assistant Secretary
(Principal Executive Officer)
/s/ Gregory R. Riehle		/s/ Diane L. Riehle
Gregory R. Riehle		Diane L. Riehle
Director, Vice President		Director, Vice President
and Secretary		and Assistant Secretary
/s/ Donald L. Allen
Donald L. Allen
Vice President and Treasurer

Saddlebrook Resorts, Inc.
Index
December 31, 2009, 2008 and 2007

Saddlebrook Resorts, Inc.
Report of Independent Registered Certified Public Accounting Firm			19
Financial Statements
Balance Sheets as of December 31, 2009 and 2008			20
Statements of Operations for the years ended December 31, 2009, 2008 and 2007			21
Statements of Changes in Shareholder’s Equity for the years ended December 31, 2009, 2008 and 2007			22
Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007			23
Notes to Financial Statements			24-33
Saddlebrook Rental Pool Operation
Report of Independent Registered Certified Public Accounting Firm			34
Financial Statements
Balance Sheets as of December 31, 2009 and 2008			35
Statements of Operations for the years ended December 31, 2009, 2008 and 2007			36
Statements of Changes in Participants’ Fund Balance for the years ended December 31, 2009, 2008 and 2007			37
Notes to Financial Statements			38

REPORT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholder of
Saddlebrook Resorts, Inc.

We have audited the accompanying balance sheets of Saddlebrook Resorts, Inc. (the “Company”) as of December 31, 2009 and 2008 and the related statements of operations, changes in shareholder’s equity, and cash flows for the years ended December 31, 2009, 2008 and 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2009 and 2008, and the results of their operations and their cash flows for the years ended December 31, 2009, 2008 and 2007, in conformity with accounting principles generally accepted in the United States of America.

/s/ Cherry, Bekaert & Holland, L.L.P.

March 31, 2010

Saddlebrook Resorts, Inc.

Balance Sheets

December 31, 2009 and 2008

		2009				2008
Assets
Current assets
Cash and cash equivalents		$	1,044,573			$	3,752,278
Escrowed cash			777,729				121,801
Short-term investments			—				175,000
Short-term escrowed investments			—				399,205
Trade accounts receivable, net of allowance for doubtful accounts of $55,227 and $44,791			1,872,364				1,362,339
Due from related parties			1,319,304				2,112,747
Resort inventory and supplies			1,566,950				1,832,820
Prepaid expenses and other assets			704,088				648,660
Total current assets			7,285,008				10,404,850
Property, buildings and equipment, net			23,448,520				24,743,737
Due from related parties, net of current portion			—				1,500,000
Deferred charges, net			47,482				35,670
Total assets		$	30,781,010			$	36,684,257
Liabilities and Shareholder’s Equity
Current liabilities
Current portion of long-term debt		$	1,060,000			$	1,361,667
Current portion of capital lease obligation			89,697				—
Escrowed deposits			777,729				521,006
Accounts payable			687,585				770,811
Accrued rental distribution			544,090				674,147
Accrued expenses and other liabilities			1,622,891				2,045,784
Current portion of deferred income			852,864				823,223
Guest deposits			1,266,157				2,453,431
Total current liabilities			6,901,013				8,650,069
Long-term debt			8,745,000				9,804,983
Long-term capital lease obligation			202,648				—
Deferred income			1,371,871				1,512,483
Other liabilities			149,000				—
Total liabilities			17,369,532				19,967,535
Commitments and contingencies (Note 9)
Shareholder’s equity
Common stock, $1 par, 100,000 shares authorized, issued and outstanding			100,000				100,000
Additional paid-in capital			1,013,127				1,013,127
Retained earnings			14,589,264				15,603,595
Due from related parties			(2,290,913	)			—
Total shareholder’s equity			13,411,478				16,716,722
Total liabilities and shareholder’s equity			30,781,010				36,684,257

The accompanying notes are an integral part of these financial statements.

Saddlebrook Resorts, Inc.

Statements of Operations

Years ended December 31, 2009, 2008 and 2007

		2009				2008				2007
Resort revenues (Note 7)		$	26,756,142			$	45,765,908			$	43,615,917
Costs and expenses:
Operating costs of resort (Note 7)			21,523,014				33,686,206				33,214,157
Sales and marketing			1,449,793				2,881,335				2,813,049
General and administrative			3,042,547				4,166,773				4,338,598
Net (gain) loss on assets sold			(403,008	)			2,149				63,894
Depreciation			2,036,837				2,110,455				1,984,502
Total costs and expenses			27,649,183				42,846,918				42,414,200
Net operating (loss) income before other expenses and (income)			(893,041	)			2,918,990				1,201,717
Other expenses and (income):
Interest expense			359,704				598,583				860,914
Interest income			(8,747	)			(45,918	)			(49,571	)
Other income			(229,667	)			(204,211	)			(140,688	)
Total other expense			121,290				348,454				670,655
Net (loss) income		$	(1,014,331	)		$	2,570,536			$	531,062

The accompanying notes are an integral part of these financial statements.

Saddlebrook Resorts, Inc.

Statements of Changes in Shareholder’s Equity

Years ended December 31, 2009, 2008 and 2007

						Additional												Total
		Common				Paid-In				Retained				Due from				Shareholder’s
		Stock				Capital				Earnings				Related Party				Equity
Balances at December 31, 2006		$	100,000			$	1,013,127			$	12,501,997			$	—			$	13,615,124
Net income			—				—				531,062				—				531,062
Balances at December 31, 2007			100,000				1,013,127				13,033,059				—				14,146,186
Net income			—				—				2,570,536				—				2,570,536
Balances at December 31, 2008			100,000				1,013,127				15,603,595				—				16,716,722
Net loss			—				—				(1,014,331	)			—				(1,014,331	)
Due from related party (Note 8)			—				—				—				(2,290,913	)			(2,290,913	)
Balances at December 31, 2009		$	100,000			$	1,013,127			$	14,589,264			$	(2,290,913	)		$	13,411,478

The accompanying notes are an integral part of these financial statements.

Saddlebrook Resorts, Inc.

Statements of Cash Flows

Years ended December 31, 2009, 2008 and 2007

		2009				2008				2007
Cash flows from operating activities
Net (loss) income		$	(1,014,331	)		$	2,570,536			$	531,062
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities
Depreciation and amortization			2,079,069				2,130,754				2,000,810
(Gain) loss on disposal of property, buildings and equipment			(403,008	)			2,149				63,894
Additions (reductions) to allowance for doubtful accounts			10,436				270				(3,026	)
Change in assets and liabilities
(Increase) decrease in
Escrowed cash			(655,928	)			768,268				(353,819	)
Escrowed investments			399,205				(399,205	)			197,561
Trade accounts receivable			(520,461	)			1,837,976				(745,767	)
Resort inventory and supplies			265,870				(153,175	)			(130,298	)
Prepaid expenses and other assets			(55,428	)			108,296				87,416
(Decrease) increase in
Escrowed deposits			256,723				(369,063	)			156,259
Accounts payable			(83,226	)			(897,239	)			495,080
Accrued rental distribution			(130,057	)			(231,087	)			214,801
Accrued expenses and other liabilities			(273,893	)			(365,782	)			18,567
Deferred income			(110,971	)			(88,787	)			36,645
Guest deposits			(1,187,274	)			796,237				258,743
Net cash (used in) provided by operating activities			(1,423,274	)			5,710,148				2,827,928
Cash flows from investing activities
Proceeds from sales of property, buildings and equipment			510,387				9,396				7,050
Capital expenditures			(476,606	)			(1,372,596	)			(2,844,837	)
Proceeds from investments			175,000				—				200,000
Net cash provided by (used in) investing activities			208,781				(1,363,200	)			(2,637,787	)
Cash flows from financing activities
Proceeds from long-term debt			—				750,000				750,000
Principal payments on long-term debt			(1,361,650	)			(800,004	)			(800,004	)
Payments on capital leases			(78,197	)			(127,845	)			(154,645	)
Debt issue costs			(55,895	)			(23,946	)			—
Net collections from (advances to) related parties			2,530				(1,384,195	)			27,979
Net cash used in financing activities			(1,493,212	)			(1,585,990	)			(176,670	)
Net (decrease) increase in cash and cash equivalents			(2,707,705	)			2,760,958				13,471
Cash and cash equivalents, beginning of year			3,752,278				991,320				977,849
Cash and cash equivalents, end of year		$	1,044,573			$	3,752,278			$	991,320
Supplemental disclosure
Cash paid for interest		$	315,621			$	578,284			$	844,606
Non-cash investing activities
In February 2009, the Company acquired vehicles for $370,542 through a capital lease obligation

The accompanying notes are an integral part of these financial statements.

Saddlebrook Resorts, Inc.

Notes to Financial Statements

December 31, 2009 and 2008

1.

Organization and Business

Saddlebrook Resorts, Inc. (the “Company”), a wholly-owned subsidiary of Saddlebrook Holdings, Inc. (“SHI” or the “Parent Company”), was incorporated in the State of Florida in June 1979 at which time it purchased a golf course and tennis complex, as well as certain undeveloped land, located in Pasco County, Florida, which was developed as a resort-condominium and residential homes project. Property improvements for the resort include condominiums, most of which were sold to outside parties. The majority of the condominium units sold are provided as hotel accommodations by their owners under a Rental Pool and Agency Appointment Agreement (the “Rental Pool”). Other resort facilities include two 18-hole golf courses, 45 tennis courts, three swimming pools, three restaurants, a convention facility with approximately 95,000 square feet of meeting and function space, a health spa, a fitness center, shops and other facilities necessary for the operation of a resort.

2.

Significant Accounting Policies

A summary of the Company’s significant accounting policies are as follows:

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 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. Actual results could differ from those estimates.

Cash and Cash Equivalents and Escrowed Cash

All short-term highly liquid instruments purchased with an original maturity of three months or less are considered to be cash equivalents.

The Company places its cash and cash equivalents on deposit with financial institutions in the United States. In 2008, the Federal Deposit Insurance Corporation (“FDIC”) temporarily increased coverage to $250,000 for substantially all depository accounts and temporarily provides unlimited coverage for certain qualifying and participating non-interest bearing transaction accounts. The unlimited coverage for participating accounts expired on December 31, 2009 and the $250,000 increased coverage for other accounts is scheduled to expire on December 31, 2013, at which time it is anticipated amounts insured by the FDIC will return to $100,000. During the year, the Company from time to time may have had amounts on deposit in excess of the insured limits. As of December 31, 2009, the Company had approximately $947,000 which exceed these insured amounts.

Investments and Escrowed Investments

There were no investments held at December 31, 2009.

Investments held at December 31, 2008 consisted of a Certificate of Deposit yielding interest of 1.98%, which matured in March 2009 and escrowed investments consisting of U.S. Treasury Securities yielding interest between .25% and .46% and maturities through July 2009.

Saddlebrook Resorts, Inc.
Notes to Financial Statements
December 31, 2009 and 2008

Fair Value of Financial Instruments

The Company measures the fair value of financial assets and liabilities in accordance with GAAP which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

Effective January 1, 2008, the Company adopted provisions in accordance with GAAP related to financial assets and liabilities, as well as for any other assets and liabilities that are carried at fair value on a recurring basis. The adoption of the provisions did not materially impact the Company’s consolidated financial position and results of operations.

GAAP defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. GAAP also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. GAAP describes three levels of inputs that may be used to measure fair value:

Level 1 — Valuations based on quoted prices for identical assets and liabilities in active markets.

Level 2 — Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3 — Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

There were no assets or liabilities that were required to be measured at fair value on a recurring basis on December 31, 2009.

The following table summarizes assets measured at fair value on a recurring basis at December 31, 2008. These investments are recorded as short-term investments and short term-escrowed investments in the 2008 balance sheets.

		Fair Value Measurements Using:
		Level 1				Level 2				Level 3				Total
Assets:
Investments		$	175,000			$	—			$	—			$	175,000
Escrowed Investments		$	399,205			$	—			$	—			$	399,205
		$	574,205			$	—			$	—			$	574,205

The fair value of all of the Company’s other financial assets and liabilities approximate their carrying value due to their short-term nature or market rates of interest associated with long-term obligations.

Saddlebrook Resorts, Inc.
Notes to Financial Statements
December 31, 2009 and 2008

Accounts Receivable

Substantially all of the Company’s accounts receivable is due from direct billings to companies or individuals who hold conferences or large group stays at the resort. Other receivables include quarterly membership fees and credit card charges. The Company performs ongoing credit evaluations of its customers’ financial conditions and establishes an allowance for doubtful accounts based upon factors surrounding specific customers, historical trends and other information. The Company generally does not require collateral or other security to support accounts receivable, although advance deposits may be required in certain circumstances.

Resort Inventory and Supplies

Inventory includes operating materials and supplies, principally food and beverage, golf and tennis merchandise, and is accounted for at the lower of first-in, first-out average cost or market.

Property, Buildings and Equipment

Property, buildings and equipment are stated at cost. Depreciation is provided over the estimated useful lives of the assets on a straight-line basis.

Certain expenditures for renewals and improvements that significantly add to or extend the useful life of an asset are capitalized. Expenditures for repairs and maintenance are charged to expense as incurred. When property, buildings and equipment are retired or otherwise disposed, the cost of the assets and related accumulated depreciation amounts are removed from the accounts, and any resulting gains or losses are reflected in operations.

Asset Impairments

The Company’s management periodically evaluates whether there has been a permanent impairment of long-lived assets, in accordance with generally accepted accounting principles. The Company’s management believes that the accounting estimates related to asset impairments are critical estimates for the following reasons: (1) the ongoing changes in management’s expectations regarding future utilization of assets; and (2) the impact of an impairment on reported assets and earnings could be material. During the years ended December 31, 2009 and 2008, the Company’s management evaluated assets for impairment and concluded that the sum of the undiscounted expected future cash flows (excluding interest charges) from its assets exceeded their then current carrying values. Accordingly, the Company did not recognize an impairment charge.

Deferred Charges

During 2008, approximately $24,000 in additional financing costs were incurred with the renewal of the Company’s line of credit facility. The additional financing costs are being amortized over the remaining life of the debt outstanding. During 2009, approximately $56,000 in additional financing costs were incurred with the renewal of the note payable and the line of credit facility and are being amortized of the term of that renewal. The unamortized balance of the prior financing costs were expensed.

Amortization expense for deferred charges amounted to approximately $44,000, $20,000 and $16,000 for the years ended December 31, 2009, 2008 and 2007, respectively.

Saddlebrook Resorts, Inc.
Notes to Financial Statements
December 31, 2009 and 2008

Deferred Income

Deferred income includes deferred liabilities related to the sale of gift certificates, prepaid dues, and deferred income of membership initiation fees. Revenue from gift certificates is recorded when the certificate is redeemed. Revenue from dues is recorded over the annual membership period, and the deferred membership initiation fees are recognized over the historical average life of a membership which approximates 12 years.

Resort Revenues

Resort revenues are recognized as services are performed or products are delivered with the exception of initiation fee revenue, which is recognized over the average life of our memberships. Resort revenues also include rental revenues for condominium units owned by third parties participating in the Rental Pool. If these rental units were owned by the Company, normal costs associated with ownership such as depreciation, real estate taxes, unit maintenance and other costs would have been incurred. Instead, operating costs of resort for the years ended December 31, 2009, 2008 and 2007 include rental pool distributions to participants and maintenance escrow fund approximating $2,800,000, $5,300,000 and $4,900,000, respectively.

Advertising

The Company charges costs of advertising to sales and marketing as incurred. The Company incurred advertising costs of approximately $298,000, $535,000 and $593,000 during the years ended December 31, 2009, 2008 and 2007, respectively.

Income Taxes

The Company is currently a member of a Qualified Subchapter S Subsidiary Group. Accordingly, no income tax expense was reflected in the Company’s operating results as the tax is assessed to the shareholders of its parent company.

Management has determined that the Company had no uncertain income tax positions in accordance with ASC 740 that could have a significant effect on the financial statements for the year ended December 31, 2009. The parent company’s federal income tax returns for 2006, 2007 and 2008 are subject to examination by the Internal Revenue Service, generally for a period of three years after the federal income tax returns were filed.

Employee Benefit Plan

The Company sponsors a defined contribution plan (the “Plan”), which provides retirement benefits for all eligible employees who have elected to participate. Employees must fulfill a one year service requirement to be eligible. The Company matched one-half of the first 2% of an employee’s contribution through the year ended December 31, 2008. The Company indefinitely suspended future matching contributions effective with the year ending December 31, 2009. Company contributions approximated $46,000 and $48,000 for the years ended December 31, 2008 and 2007.

Saddlebrook Resorts, Inc.
Notes to Financial Statements
December 31, 2009 and 2008

Recent Accounting Pronouncements

The Financial Accounting Standards Board (“FASB”) issued SFAS No. 168, “The FASB Accounting Standards Codification (“ASC”) and the Hierarchy of Generally Accepted Accounting Principles” (“SFAS No. 168” or Accounting Standards Update No. 2009-01 (“ASU 2009-01”)) on June 29, 2009 and, in doing so, authorized the Codification as the sole source for authoritative U.S. GAAP. SFAS No. 168 was effective for financial statements issued for reporting periods that ended after September 15, 2009. Upon effectiveness, it superseded all prior accounting standards in U.S. GAAP, aside from those issued by the SEC. The Company adopted ASU 2009-01 during the three months ended September 30, 2009 and its adoption did not have any impact on the Company’s financial statements.

In January 2010, the FASB issued new guidance for fair value measurements and disclosures. The new guidance, which is now part of ASC 820, Fair Value Measurements and Disclosures, clarifies existing disclosure requirements regarding the level of desegregation and inputs and valuation techniques and provides new disclosure requirements about, among other things, transfers in and out of levels 1 and 2 of the fair value hierarchy and details of the activity in level 3 of the fair value hierarchy. The new guidance is effective for fiscal years beginning after December 15, 2009 for levels 1 and 2 disclosures and for fiscal years beginning after December 15, 2010 for level 3 disclosures. The disclosure requirements will be applied prospectively to the Company’s fair value disclosure subsequent to the effective date and are not expected to have a significant effect on the financial statements.

3.

Escrowed Cash

Escrowed cash, restricted as to use, as of December 31, is comprised of the following:

		2009				2008
Rental pool unit owner deposits for maintenance reserve fund held in a bank account which bears an interest rate of 1.48%		$	761,829			$	104,601
Security deposits held on long-term rentals			15,900				17,200
		$	777,729			$	121,801

4.

Property, Buildings and Equipment, Net

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

		Estimated
		Useful
		Lives				2009				2008
Land and land improvements						$	6,802,067			$	6,809,179
Buildings and recreational facilities		10–40					29,702,374				29,475,098
Machinery and equipment		5–15					17,332,183				16,967,184
Construction in progress							194,960				350,737
							54,031,584				53,602,198
Accumulated depreciation							(30,583,064	)			(28,858,461	)
						$	23,448,520			$	24,743,737

Substantially all property, buildings and equipment are mortgaged, pledged or otherwise subject to lien under a loan agreement (Note 6).

Saddlebrook Resorts, Inc.
Notes to Financial Statements
December 31, 2009 and 2008

Depreciation expense amounted to approximately $2,037,000, $2,110,000 and $1,985,000, for the years ended December 31, 2009, 2008 and 2007, respectively.

The Company leased equipment under an agreement which is classified as a capital lease obligation. The equipment and obligation related to the lease are recorded at the present value of the minimum lease payments. During 2009, the Company acquired approximately $371,000 of assets through a capital lease obligation. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets. Total depreciation expense and accumulated depreciation on the assets under the leases was approximately $43,500 for the year ended December 31, 2009.

In August 2009, the Company recorded a gain of approximately $404,000 in connection with the transfer of a strip of land at the entrance to the resort property to the county in connection with a planned road widening project by the county. It is anticipated that the total settlement will be approximately $607,000, which includes proceeds for the land, land improvements and net damages and /or cost to cure such damages. Approximately $348,000 of the settlement has been received by the Company. The remaining $259,000 has been recorded in trade accounts receivable in the accompanying 2009 balance sheet.

5.

Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities as of December 31 consist of the following:

		2009				2008
Accrued payroll and related expenses		$	622,898			$	740,080
Accrued insurance			689,794				1,056,732
Other accrued expenses and liabilities			310,199				248,972
		$	1,622,891			$	2,045,784

6.

Long-term Debt and Capital Lease Obligation

Long-term debt at December 31 consists of the following:

		2009				2008
Note payable to lender, 5 year term (maturity date of March 12, 2014), interest rate at 2.5% over the one month LIBOR index, monthly principal and interest payments, collateralized by all current and subsequently acquired real and personal property		$	9,805,000			$	8,666,650
Less: Current portion			(1,060,000	)			(1,361,667	)
		$	8,745,000			$	7,304,983

Saddlebrook Resorts, Inc.
Notes to Financial Statements
December 31, 2009 and 2008

On March 12, 2009, the Company refinanced $10,600,000 (the remaining principal balance of a term note along with the outstanding balance of a line of credit facility). The new term note is due March 12, 2014, and requires monthly principal payments of $88,333, together with monthly payment of all accrued interest. The term note bears interest at 2.5% over the one month LIBOR index. The rate at December 31, 2009 was 2.74%. The note is collateralized by all current and subsequently acquired real and personal property. The Company has the ability to obtain an additional $2,500,000 under a line of credit facility from the same lender subject to meeting certain financial covenants on an annual basis. The line of credit expires in March 2011. At December 31, 2009, the Company has no borrowings on the line of credit.

Future maturities of long-term debt as of December 31, 2009 were as follows;

2010		$	1,060,000
2011			1,060,000
2012			1,060,000
2013			1,060,000
2014			5,565,000
		$	9,805,000

On February 11, 2009, the Company entered into a capital lease obligation for the purchase of equipment and vehicles in the amount of $370,542. The Capital lease is secured by the equipment and vehicles purchased, matures in January 2013 and requires monthly payments of $8,574, including interest at 5.24%.

Future minimum payments under the capital lease obligation at December 31, 2009 were as follows;

Years ending December 31,
2010		$	102,892
2011			102,892
2012			102,892
2013			8,537
			317,213
Less amount representing interest			(24,868	)
		$	292,345

Saddlebrook Resorts, Inc.
Notes to Financial Statements
December 31, 2009 and 2008

7.

Resort Revenues and Operating Costs of Resort

Resort revenues and operating costs of resort are comprised of the following:

		Year Ended December 31,
		2009				2008				2007
Resort Revenues
Room revenue subject to rental pool agreement		$	7,088,595			$	13,496,999			$	12,259,889
Food and beverage			8,256,144				15,549,305				15,117,109
Resort facilities and other			11,411,403				16,719,604				16,238,919
		$	26,756,142			$	45,765,908			$	43,615,917
Operating Costs of Resort
Distribution to rental pool participants		$	2,823,848			$	5,346,747			$	4,909,148
Food and beverage			7,791,128				13,724,644				12,897,162
Resort facilities and other			10,908,038				14,614,815				15,407,847
		$	21,523,014			$	33,686,206			$	33,214,157

8.

Related Party Transactions

Amounts due from related parties as of December 31, are comprised of the following:

		2009				2008
Saddlebrook Resort Condominium Association, Inc.		$	89,110			$	133,162
Saddlebrook Holdings, Inc.			3,290,913				—
Dempsey and Daughters, Inc.			141,954				159,292
Dempsey Resort Management, Inc.			9,665				30,062
Saddlebrook Properties LLC			4,061				3,908
Saddlebrook Realty, Inc.			64,579				8,429
Saddlebrook Investments, Inc.			4,750				—
Saddlebrook International Tennis, Inc.			—				3,262,885
Other			5,185				15,009
			3,610,217				3,612,747
Less reclassification of due from SHI to a reduction of shareholder’s equity			(2,290,913	)			—
		$	1,319,304			$	3,612,747

There were no amounts due to related parties as of December 31, 2009 and 2008.

The Company currently funds expenditures for Saddlebrook Holdings, Inc. (“SHI”), the Company’s parent company. SHI’s expenditures include dividends to its shareholders, which are primarily income taxes related to the operations of SHI and its subsidiaries. During the year ended December 31, 2009, the Company continued to make advances on behalf of SHI; however, during 2009, the Company became uncertain when the due from SHI will be repaid. Subsequent to year ending December 31, 2009, SHI made repayment in the amount of $1,000,000. Until such time as definitive repayment terms of the remaining due from SHI are established and collectability of the due from SHI can be assessed, the Company has reclassified due from related parties in the amount of $2,290,913 as a component of shareholder’s equity in the accompanying 2009 balance sheet.

Saddlebrook International Tennis, Inc. (“SIT”) operates a tennis training facility and preparatory school at the resort. SIT is solely owned by SHI. SIT owns 10 condominium units at the Resort, two of which participate in the Rental Pool Operation. The Company received revenue from SIT for services provided to SIT and its guests, which amounted to approximately $1,046,000, $1,203,000 and $1,552,000, for the years ended December 31, 2009, 2008 and 2007, respectively. In addition, the Company was reimbursed for actual expenses and other costs incurred on behalf of SIT.

Saddlebrook Resorts, Inc.
Notes to Financial Statements
December 31, 2009 and 2008

Saddlebrook Investments, Inc. is a broker/dealer for sales of Saddlebrook Resort condominium units. Saddlebrook Realty, Inc. is a broker for the sale of other general real estate. These companies are solely owned by the shareholder of the Company’s parent. The Company is reimbursed for actual expenses and costs incurred on behalf of these entities.

Dempsey and Daughters, Inc. holds certain tracts of real estate and owns 24 individual condominium units at the Resort, 10 of which participate in the Rental Pool Operation. This company is solely owned by SHI. The Company was reimbursed for actual expenses incurred on behalf of Dempsey and Daughters, Inc.

The Company performs certain accounting and property management activities on behalf of the Saddlebrook Resort Condominium Association (the “Association”) and is reimbursed for expenses paid on behalf of the Association. Expenses paid on behalf of and services provided to the Association amounted to approximately $1,266,000, $1,281,000 and $1,650,000, for the years ended December 31, 2009, 2008 and 2007, respectively.

Other related party receivables and payables consist of transactions with several other entities, along with receivables from employees for resort charges and travel advances.

9.

Commitments and Contingencies

The Company is involved in litigation in the ordinary course of business. In the opinion of management, these matters are adequately covered by insurance or indemnification from other third parties and/or the effect, if any, of these claims is not material to the reported financial condition or results of operations of the Company as of December 31, 2009.

The Company also leases equipment under operating leases. Some of the leases contain annual renewal options after the initial lease term. Lease expense amounted to $82,000, $106,000 and $209,000 for the years ended December 31, 2009, 2008 and 2007, respectively.

Future minimum lease payments under non-cancelable operating leases with initial lease terms in excess of one year are as follows:

2010		$	66,000

Saddlebrook Resorts, Inc.
Notes to Financial Statements
December 31, 2009 and 2008

10.

Investment in Stock

In 1993, the Company invested in and formed a captive insurance company, Resort Hotel Insurance Company (RHIC), with other resorts participating in Resort Hotel Association (RHA), an insurance risk purchasing group. The Company retains an equity interest in and pays insurance premiums to RHIC. The Company’s ownership is less than 10% and all amounts contributed as capital ($132,866 as of December 31, 2009) and the increase in equity cumulative to date ($214,499 as of December 31, 2009) are recorded as a component of prepaid expenses and other assets. Any change in equity is reflected as a component of other income in the Statements of Operations. The Company’s investment approximates the proportionate net book value of the insurance company at December 31, 2009. The Company’s stock in RHIC is restricted and may not be sold in the open market. The Company may withdraw from RHA annually at the renewal date of any of its property or casualty policies.

11.

Insurance Claim

On August 12, 2007, the Company experienced damage to electrical facilities and the fire alarm system, which also resulted in the need to replace and upgrade the fire alarm system for the condominium units which are governed by Saddlebrook Resorts Condominium Association, Inc., (the “Association”). The Company and the Association filed an insurance claim. As of December 31, 2009, the Company and the Association together had incurred approximately $922,000 in cost for the repair of the damaged electrical facilities and fire alarm systems. Total reimbursement from the insurance company, adjusted by the $100,000 insurance deducible and some minor expenses not covered by the insurance policy amounted to $802,000. The Company’s share of the insurance proceeds, net of expenses not related to the replacement of the facilities and the alarm system, is recorded in other income in the accompanying 2009, 2008 and 2007 statements of operations.

REPORT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM

To the Board of Directors of Saddlebrook
Resorts, Inc., as Operators under the Saddlebrook
Rental Pool and Agency Appointment Agreement

We have audited the accompanying balance sheets of Saddlebrook Rental Pool Operation (funds created for participants who have entered into a rental pool agreement as explained in Note 1) as of December 31, 2009 and 2008 and the related statements of operations and changes in participants’ fund balance for the years ended December 31, 2009, 2008 and 2007. These financial statements are the responsibility of the rental pool operator’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material respects, the financial position of Saddlebrook Rental Pool Operation as of December 31, 2009 and 2008 and the results of their operations and changes in participants’ fund balance for the years ended December 31, 2009, 2008 and 2007, in conformity with accounting principles generally accepted in the United States of America.

/s/ Cherry, Bekaert & Holland, L.L.P.

March 31, 2010

Saddlebrook Rental Pool Operation

Balance Sheets

December 31, 2009 and 2008

		2009				2008
Distribution Fund
Assets
Receivable from Saddlebrook Resorts, Inc.		$	544,090			$	674,147
Liabilities and Participants’ Fund Balance
Due to participants for rental pool distribution		$	456,994			$	568,641
Due to maintenance escrow fund			87,096				105,506
		$	544,090			$	674,147
Maintenance Escrow Fund
Assets
Cash in bank		$	761,829			$	503,806
Receivables
Distribution fund			87,096				105,506
Interest			—				762
Prepaid expenses and other assets			7,816				2,301
Furniture inventory			60,174				—
		$	916,915			$	612,375
Liabilities and Participants’ Fund Balance
Due to Saddlebrook Resorts, Inc.		$	112,455			$	56,695
Participants’ fund balance			804,460				555,680
		$	916,915			$	612,375

The accompanying notes are an integral part of these financial statements.

Saddlebrook Rental Pool Operation

Statements of Operations

Years Ended December 31, 2009, 2008 and 2007

		2009				2008				2007
Distribution Fund
Rental pool revenues		$	7,088,595			$	13,496,999			$	12,259,889
Deductions
Marketing fee			531,645				1,012,275				919,491
Management fee			886,074				1,687,125				1,532,487
Travel agent commissions			243,082				624,878				451,747
Credit card expense			156,106				263,283				231,588
			1,816,907				3,587,561				3,135,313
Net rental income			5,271,688				9,909,438				9,124,576
Operator share of net rental income			(2,372,260	)			(4,459,247	)			(4,106,058	)
Other revenues (expenses)
Complimentary room revenues			43,845				62,287				73,453
Minor repairs and replacements			(119,425	)			(165,731	)			(182,823	)
Amounts available for distribution to participants and maintenance escrow fund		$	2,823,848			$	5,346,747			$	4,909,148