SADDLEBROOK RESORTS INC - Quarter Report: 2021 March (Form 10-Q)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended March 31, 2021

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

For the transition period from to

COMMISSION FILE NUMBER: 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

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically 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 ☒ NO ☐

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

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

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

Registrant has 100,000 shares of common stock outstanding, all of which are held by an affiliate of the Registrant.

INDEX


	Page

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Saddlebrook Resorts, Inc.

Balance Sheets at March 31, 2021 and December 31, 2020		3

Statements of Operations and (Accumulated Deficit) Retained Earnings for the three months ended March 31, 2021 and 2020		4

Statements of Cash Flows for the three months ended March 31, 2021 and 2020		5

Notes to Financial Statements		6

Saddlebrook Rental Pool Operation

Balance Sheets at March 31, 2021 and December 31, 2020		11

Statements of Operations for the three months ended March 31, 2021 and 2020		12

Statements of Changes in Participants’ Fund Balance for the three months ended March 31, 2021 and 2020		13

Notes to Financial Statements		14

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		15

Item 3. Quantitative and Qualitative Disclosures About Market Risk		17

Item 4. Controls and Procedures		17

PART II—OTHER INFORMATION

Item 1. Legal Proceedings		17

Item 6. Exhibits		18

Signature		19

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

SADDLEBROOK RESORTS, INC.

BALANCE SHEETS


	March 31, 2021 (Unaudited)			December 31, 2020
Assets
Current assets
Cash and cash equivalents	$	1,744,560		$	235,245
Escrowed cash		942,488			977,391
Trade accounts receivable, net		654,559			483,561
Due from related parties		3,048,250			2,539,401
Resort inventory and supplies		801,223			847,527
Prepaid expenses and other assets		356,942			542,233

Total current assets		7,548,022			5,625,358
Property, buildings and equipment, net		12,739,819			13,106,914
Operating lease right-of-use assets		54,507			73,573

Total assets	$	20,342,348		$	18,805,845

Liabilities and Shareholder’s equity
Current liabilities
Current portion of long-term debt	$	6,654,621		$	6,664,219
Current portion of Paycheck Protection Program loan		2,784,746			1,474,278
Current portion of finance lease liabilities		104,326			102,649
Current portion of operating lease liabilities		54,507			73,573
Escrowed deposits		942,488			977,391
Accounts payable		506,424			477,024
Accrued rental distribution		766,913			221,528
Accrued expenses and other liabilities		1,204,025			1,007,001
Current portion of deferred income		585,777			696,544
Guest deposits		1,233,527			2,002,139
Due to related parties		1,475,620			1,186,165

Total current liabilities		16,312,974			14,882,511
Long-term portion of Economic Injury Disaster loan		150,000			150,000
Long-term portion of Paycheck Protection Program loan		2,163,806			1,474,278
Long-term finance lease liabilities		121,521			149,714
Deferred income		710,280			643,307

Total liabilities		19,458,581			17,299,810

Commitments and contingencies (Note 11)
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
(Accumulated deficit) retained earnings		(229,360	)		392,908

Total shareholder’s equity		883,767			1,506,035

Total liabilities and shareholder’s equity	$	20,342,348		$	18,805,845

The accompanying Notes to Financial Statements are an integral part of these financial statements

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SADDLEBROOK RESORTS, INC.

STATEMENTS OF OPERATIONS

AND (ACCUMULATED DEFICIT) RETAINED EARNINGS

(Unaudited)


	Three Months ended March 31,
	2021			2020
Resort revenues	$	4,312,338		$	7,251,566

Costs and expenses:
Operating costs of resort		3,741,586			5,707,139
Sales and marketing		78,360			350,781
General and administrative		611,616			693,187
Depreciation		368,780			498,027

Total costs and expenses		4,800,342			7,249,134


Net operating (loss) income before other (income) expense		(488,004	)		2,432

Other (income) expense:
Other income		(5,466	)		(5,312	)
Interest expense		139,730			90,472

Total other expenses, net		134,264			85,160

Net loss		(622,268	)		(82,728	)
Retained earnings at beginning of period		392,908			4,929,385

(Accumulated deficit) retained earnings at end of period	$	(229,360	)	$	4,846,657

The accompanying notes are an integral part of these financial statements

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SADDLEBROOK RESORTS, INC.

STATEMENTS OF CASH FLOWS

(Unaudited)


	Three months ended March 31,
	2021			2020
Operating activities:
Net loss	$	(622,268	)	$	(82,728	)
Non-cash items included in net loss:
Depreciation		368,780			498,027
Gain on the disposal of assets		-			(6,000	)
Bad debt expense		-			3,143
Amortization of debt financing costs		89,152			2,881
Amortization of operating lease right-of-use assets		19,066			18,048
Interest paid on finance leases		3,670			(5,161	)
Decrease (increase) in:
Accounts receivable		(170,998	)		(159,616	)
Inventory and supplies		46,304			15,313
Prepaid expenses and other assets		185,291			(116,620	)
(Decrease) increase in:
Checks issued in excess of cash and cash equivalents		-			301,116
Escrowed deposits		(34,903	)		(147,586	)
Accounts payable		29,400			14,409
Accrued rental distribution		545,385			428,389
Guest deposits		(768,612	)		(871,190	)
Accrued expenses and other liabilities		197,020			(206,748	)
Deferred income		(43,794	)		7,836
Operating lease liabilities		(19,066	)		(18,048	)

Cash flows from operating activities		(175,573	)		(324,535	)


Investing activities:
Capital expenditures		(1,685	)		(56,369	)

Cash flows from investing activities		(1,685	)		(56,369	)


Financing activities:
Payments on long-term debt		(98,750	)		(88,141	)
Proceeds from Paycheck Protection Program loan		2,000,000			-
Payments on finance lease obligations		(30,186	)		(19,782	)
Net (payments to) advances from related parties		(219,394	)		15,545

Cash flows from financing activities		1,651,670			(92,378	)


Net change in cash, cash equivalents, and escrowed cash		1,474,412			(473,282	)
Cash, cash equivalents, and escrowed cash at beginning of period		1,212,636			1,449,770

Cash, cash equivalents, and escrowed cash at end of period	$	2,687,048		$	976,488


Supplemental disclosure of cash flow information:
Cash paid for interest	$	29,239		$	87,591

The accompanying notes are an integral part of these financial statements

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SADDLEBROOK RESORTS, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Note 1. Basis of Presentation

Saddlebrook Resorts, Inc. (the “Company”) developed and operates Saddlebrook Resort, which is a condominium hotel and resort located in Wesley Chapel, Florida.

The Company’s accompanying balance sheet for March 31, 2021, and its statements of operations and accumulated earnings and cash flows for the three month periods ended March 31, 2021 and 2020, are unaudited but reflect all adjustments which are, in the opinion of management, necessary for the fair presentation of the results for the interim periods presented. All such adjustments are of a normal recurring nature. The balance sheet at December 31, 2020 has been derived from the audited financial statements as of that date.

The Company’s business is seasonal. Therefore, the results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for future interim periods or the full fiscal year.

These financial statements and related notes are presented for interim periods in accordance with the requirements of Form 10-Q and Article 10 of Regulation S-X, and, consequently, do not include all disclosures normally required by accounting principles generally accepted in the United States. Accordingly, these financial statements and related notes should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

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Note 2. Revenue

Revenue Recognition

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 the 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.

Contract Balances

Timing differences among revenue recognition may result in contract assets or liabilities. Contract liabilities consists of guest deposits and deferred income and totaled approximately $2,530,000 and $3,342,000 as of March 31, 2021 and December 31, 2020, respectively. Contract assets consist of escrowed cash relating to rental pool owner deposits for the maintenance reserve fund and long-term security deposits and totaled approximately $942,000 and $977,000 as of March 31, 2021 and December 31, 2020, respectively.

The Company’s net trade accounts receivables were $655,000 and $484,000 as of March 31, 2021 and December 31, 2020, respectively. Trade accounts receivable are stated in the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through a charge to earnings and a credit to the allowance of doubtful accounts based on its assessment of the current status of individual accounts. Balances still outstanding after management has used reasonable collection efforts are written off through a charge to the allowance of doubtful accounts and a credit to trade accounts receivable. Changes in the allowance for doubtful accounts have not been material to the consolidated financial statements.

Performance Obligations

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 transactional and the contracts performance obligation is generally satisfied at the time of the transaction.

Note 3. Trade Accounts Receivable


	Actual
	3/31/2021			12/31/2020
Trade accounts receivable	$	655,176		$	484,178
Less reserve for bad debts		(617	)		(617	)

	$	654,559		$	483,561

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Note 4. Management’s Plans Regarding Liquidity and Capital Resources

The Company experienced a significant decrease in revenue for the quarter ending March 31, 2021 compared to the previous year. The Company is optimistic the trend will improve during 2021; however, actual results may differ from expectations. The decrease in expenses for the quarter ending March 31, 2021 as compared to the prior year is a result of decreased occupancy and reductions in wages, benefits, and operating expenses.

The Company continues 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. Management has implemented programs and measures to help the Company get back to positive operating income. These programs and measures include cost control programs, consolidation of restaurant operations and efforts to increase brand awareness and recognition of the Resort.

Towards the end of December 2019, an outbreak of a novel strain of coronavirus (“COVID-19”) emerged globally. The COVID-19 outbreak in the United States has resulted in a reduction of hotel occupancy and cancellations of future reservations. It is difficult to estimate the length or severity of this outbreak; however, a significant reduction in occupancy caused by COVID-19 is expected to affect the Company’s results of operations and financial position.

These financial statements have been prepared on a going concern basis, which implies the Company will continue to meet its obligations and continue its operations for the next fiscal year. The continuation of the Company as a going concern is dependent upon financial support from the Company’s current stockholder and the Company’s ability to generate sufficient cash flows from operations. As there can be no assurance that the Company will be able to achieve positive cash flows (become profitable), there is substantial doubt about the Company’s ability to continue as a going concern.

These financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

Note 5. Operating Leases

The Company leases certain equipment under non-cancellable operating leases, which begin to expire in 2021. The leases are classified as operating leases in conformity with the provisions of Topic 842. Accordingly, the Company recorded a right-of-use asset and related operating lease liability totaling approximately $217,000 upon adoption of Topic 842 as of January 1, 2019. Aggregated information regarding the leases as of and for the three months ended March 31, 2021 is as follows:


Lease costs (included in operating costs)	$	19,032
Incremental borrowing rate		5.32	%

Note 6. Property, Buildings and Equipment


	March 31, 2021 (Unaudited)			December 31, 2020
Land and land improvements	$	8,830,867		$	8,830,867
Buildings and recreational facilities		32,105,124			32,105,124
Machinery and equipment		21,807,186			21,805,495
Construction in progress		96,235			96,235

		62,839,412			62,837,721
Less accumulated depreciation		(50,099,593	)		(49,730,807	)

	$	12,739,819		$	13,106,914

The Company’s property, buildings and equipment are pledged as security for its debt (see Note 7).

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Note 7. Notes Payable and Finance Lease Liabilities

On December 6, 2015 the Company’s financing agreement with a third-party lender was modified to include renewal for the existing principal balance of $4,875,000, along with an advance of an additional $2,000,000. The term note required monthly principal payments of $29,380 plus interest of 3% over the one month LIBOR. In April 2020, the Company’s lender deferred interest and principal payments from April 6, 2020 through June 6, 2020 (the “deferral period”) and monthly payments resumed in July 6, 2020. There was no change to interest rate or maturity date as part of the deferral. In December 2020, this term loan was modified and consolidated with the existing revolving line of credit as described below.

On April 24, 2017, the Company entered into a revolving line of credit agreement with the same third-party lender with maximum borrowings of $1,500,000 to be used as working capital as needed. The agreement was cross collateralized with the existing term note under the same terms and conditions. Amounts borrowed under the revolving line of credit bears interest at 3% over the one month LIBOR index. In April 2020, the Company’s lender deferred interest and principal payments from April 24, 2020 through June 24, 2020 (the “deferral period”) and monthly payments resumed on July 24, 2020. There was no change to interest rate or maturity date as part of the deferral. In December 2020, this revolving line of credit was modified and consolidated with the existing term loan as described below.

On December 6, 2020, the Company entered into a Renewal and Consolidation Promissory Note (the “renewal note”) with the same third-party lender, which consolidated the existing balances on the term note and revolving line of credit. The renewal note requires monthly principal payments of $28,040 plus interest of 3% over the Prime Rate with a minimum interest rate of no lower than 6.25% (6.25% at December 31, 2020). The renewal term note is collateralized by all current and subsequently acquired real and personal property. The renewal term note requires the Company to maintain a Debt Service Ratio, as defined, of 1.25%. The Company was in default of this covenant as of December 31, 2020; however, the Company received a waiver for this default from its lender. Effective on March 6, 2021, the Company entered into a loan modification and forbearance agreement with the lender which extended the maturity date to June 6, 2021, at which any unpaid principal and interest will be due. The loan modification requires monthly principal payments of $28,040 plus interest of 4% over the Prime Rate with a minimum interest rate of no lower than 7.25%.

On May 25, 2021, the third-party lender assigned the renewal note to a separate third-party lender. Effective the same day, the Company and the assignee entered into a loan extension and modification agreement which extended the maturity date to December 6, 2021, at which any unpaid principal and interest will be due. The loan modification requires interest-only payments through maturity at a rate of 4% over the Prime rate with a minimum interest rate of no lower than 7.50%. At March 31, 2021, $6,701,661 was outstanding under the extended and modified note.

In April 2020, the Company entered into a term note agreement with the same third-party lender for approximately $2,949,000 funded under the Paycheck Protection Program (“PPP”) as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”). The note bears interest of 1% per annum, matures in April 2022, and requires a monthly interest and principal payments of $165,529 beginning in November 2020 and through maturity. The currently issued guidelines of the program allow for the loan proceeds to be forgiven if certain requirements are met. The Company applied for forgiveness with the SBA in which on June 10, 2021, the SBA had forgiven the PPP loan in full. As a result, the Company recognized approximately $2,949,000 of gain on debt forgiveness in June 2021.

In March 2021, the Company entered into a term note agreement with the same third-party lender for a second draw Paycheck Protection Program loan (“PPP2”) for $2,000,000. The note bears interest of 1% per annum, matures in March 2026, and requires monthly interest and principal payments after the ten-month deferral period. The currently issued guidelines of the program allow for the loan proceeds to be forgiven if certain requirements are met. At March 31, 2021, $2,000,000 was outstanding under the note.

On September 25, 2020, the Company entered into an Economic Injury Disaster Loan (“EIDL”) for $150,000 funded by the U.S. Small Business Administration. The note bears interest at 3.75% per annum, matures in September 2050, and requires monthly interest and principal payments of $731 beginning in September 2021 and through maturity. At March 31, 2021, $150,000 was outstanding under the note.

On March 1, 2018, the Company entered into a finance lease liability for equipment in the amount of $332,206. The assets associated with this lease cost $461,506, of which $129,300 was reduced through the Company’s trade-in of existing equipment. This finance lease is secured by the equipment purchased, matures in February 2023 and requires monthly payments of $6,500, including interest at 6.5%. At March 31, 2021, the amount due on this finance lease liability was $140,205.

On April 1, 2018, the Company entered into a finance lease liability for equipment in the amount of $156,942. The assets associated with this lease cost $178,942, of which $22,000 was reduced through the Company’s trade-in of existing equipment. This finance lease is secured by the equipment purchased, matures in March 2023 and requires monthly payments of $3,071, including interest at 6.5%. At March 31, 2021, the amount due on this finance lease liability was $68,934.

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Note 8. Related Party Receivables

Related party receivables at March 31, 2021 and December 31, 2020 are the result of net intercompany transactions and cash transfers between the Company and its shareholder and affiliated companies. Related party receivables are unsecured and non-interest bearing.

Note 9. 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 the Company’s parent company.

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SADDLEBROOK RENTAL POOL OPERATION

BALANCE SHEETS

DISTRIBUTION FUND


	March 31, 2021 (Unaudited)		December 31, 2020
Assets
Receivable from Saddlebrook Resorts, Inc.	$	766,912	$	221,527

Liabilities and Participants’ Fund Balance
Due to participants for rental pool distribution	$	638,043	$	184,099
Due to maintenance escrow fund		128,869		37,428

	$	766,912	$	221,527

MAINTENANCE ESCROW FUND


	March 31, 2021 (Unaudited)		December 31, 2020
Assets
Cash and cash equivalents	$	928,512	$	964,616
Receivables:
Distribution fund		128,869		37,428
Prepaid expenses and other assets		113,865		60,018
Linen Inventory		14,531		—
Furniture Inventory		39,651		41,433

	$	1,225,428	$	1,103,495

Liabilities and Participants’ Fund Balance
Due to Saddlebrook Resorts, Inc.	$	179,988	$	106,689
Participants’ fund balance		1,045,440		996,806

	$	1,225,428	$	1,103,495

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SADDLEBROOK RENTAL POOL OPERATION

STATEMENTS OF OPERATIONS

(Unaudited)


	Three months ended March 31,
	2021			2020
Rental pool revenues	$	1,861,970		$	1,975,818


Deductions:
Marketing fee		139,648			148,186
Management fee		232,746			246,977
Travel agent commissions		15,938			69,230
Credit card expense		55,765			58,349

		444,097			522,742


Net rental income		1,417,873			1,453,076
Less operator share of net rental income		(638,043	)		(653,884	)
Other revenues (expenses):
Complimentary room revenues		4,680			6,251
Minor repairs and replacements		(17,598	)		(32,686	)


Amount available for distribution	$	766,912		$	772,757

The accompanying notes are an integral part of these financial statements

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SADDLEBROOK RENTAL POOL OPERATION

STATEMENTS OF CHANGES IN PARTICIPANTS’ FUND BALANCES

(Unaudited)

DISTRIBUTION FUND


	Three months ended March 31,
	2021			2020
Balance at beginning of period	$	—		$	—

Additions:
Amount available for distribution		766,912			772,757

Reductions:
Amount withheld for maintenance escrow fund		(128,869	)		(118,873	)
Amount accrued or paid to participants		(638,043	)		(653,884	)

Balance at end of period	$	—		$	—

MAINTENANCE ESCROW FUND


	Three months ended March 31,
	2021			2020
Balance at beginning of period	$	996,806			1,081,140

Additions:
Amount withheld from distribution fund		128,869			118,873
Unit owner payments		25,444			120,777
Interest earned		48			2,617
Reductions:
Escrow account refunds		(28,611	)		(94,419	)
Maintenance charges		(68,796	)		(80,974	)
Unit renovations		—			(8,393	)
Linen replacement		(8,320	)		(30,002	)


Balance at end of period	$	1,045,440		$	1,109,619

The accompanying notes are an integral part of these financial statements

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SADDLEBROOK RENTAL POOL OPERATION

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Note 1. Rental Pool Operations and Rental Pool Agreement

Condominium units are provided as rental (hotel) accommodations by their owners under the Rental Pool and Agency Appointment Agreement (the “Agreement”) with Saddlebrook Resorts, Inc. (collectively, the “Rental Pool”). Saddlebrook Resorts, Inc. (“Saddlebrook”) acts as operator of the Rental Pool which provides for the distribution of a percentage of net rental income, as defined, to the owners.

The Saddlebrook Rental Pool Operation consists of two funds: the Rental Pool Income Distribution Fund (“Distribution Fund”) and the Maintenance and Furniture Replacement Escrow Fund (“Maintenance Escrow Fund”). The operations of the Distribution Fund reflect the earnings of the Rental Pool. The Distribution Fund balance sheets reflect amounts due from Saddlebrook for the rental pool distribution payable to participants and amounts due to the Maintenance Escrow fund. The amounts due from Saddlebrook are required to be distributed no later than forty-five days following the end of each calendar quarter. The Maintenance Escrow Fund reflects the accounting for escrowed assets used to maintain unit interiors and replace furniture as it becomes necessary.

Rental pool participants and Saddlebrook share rental revenues according to the provisions of the Agreement. Net Rental Income shared consists of rentals received less a marketing surcharge of 7.5%, a 12.5% management fee, travel agent commissions, credit card expenses and provision for bad debts, if warranted. Saddlebrook receives 45% of Net Rental Income as operator of the Rental Pool. The remaining 55% of Net Rental Income, after adjustments for complimentary room revenues (ten percent of the normal unit rental price paid by Saddlebrook for promotional use of the unit) and certain minor repair and maintenance charges, is available for distribution to the participants and Maintenance Escrow Fund based upon each participant’s respective participation factor (computed using the value of a furnished unit and the number of days it was available to the pool). Quarterly, 45% of Net Rental Income is distributed to participants and 10%, as adjusted for complimentary room revenues and minor interior maintenance and replacement charges, is deposited in an escrow account until a maximum of 20% of the set value of the individual owner’s furniture package has been accumulated. Excess escrow balances are refunded to participants.

Note 2. Summary of Significant Accounting Policies

Basis of Accounting

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

Income Taxes

No federal or state taxes have been reflected in the accompanying financial statements as the tax effect of fund activities accrues to the rental pool participants and Saddlebrook.

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

General

The Company operates Saddlebrook Resort (the “Resort”) in Wesley Chapel, Florida, 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 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. Other resort property owned by the Company and its affiliates include golf courses, tennis courts, a spa, restaurants and conference center facilities.

Results of Operations

Three months ended March 31, 2021 compared to three months ended March 31, 2020

The Company’s total revenues decreased approximately $2,939,000 or about 41%, for the three months ended March 31, 2021 compared to the same period in the prior year. Total revenues for the Rental Pool decreased about $114,000, or about 6%.

Total costs and expenses decreased approximately $2,449,000 or about 34%, for the Company, and approximately $79,000 or about 15%, for the Rental Pool Operation.

The Company experienced a net loss for the quarter in the amount of approximately $622,000 compared to the net loss of the prior comparable quarter of approximately $83,000. Amounts available for distribution for the Rental Pool Operation decreased approximately $6,000 from the comparable period last year.

Impact of Current Economic Conditions

The Company experienced a significant decrease in revenue for the period ending March 31, 2021 compared to the previous year.

Toward the end of December 2019, an outbreak of a novel strain of coronavirus (“COVID-19”) emerged globally. The COVID-19 outbreak in the United States has resulted in a reduction of hotel occupancy and cancellations of future reservations. It is difficult to estimate the length or severity of the outbreak; however, a significant reduction in occupancy caused by COVID-19 is expected to affect the Company’s results of operations and financial position.

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Liquidity and Capital Resources

Net loss for the 3 months ended March 31, 2021 was $622,000. Excluding non-cash expenses such as Depreciation and Amortization of $369,000 the company’s actual operating cash deficit was $253,000.

Future operating costs and planned expenditures for minor capital additions and improvements are expected to be adequately funded by the Company and its affiliates’ current cash reserves and cash generated by the Resort’s operations.

The current economic conditions, expected effect on the Company’s results of operations and financial position, and uncertainty of the length or severity of the outbreak raise substantial doubt about the Company’s ability to continue as going concern.

The Company’s ultimate shareholder has the financial ability and intent to continue to fund operations through affiliated companies that are 100% owned by the Company’s ultimate shareholder to the extent required to support the Company’s operations. In addition to the shareholders’ financial ability, these affiliated Companies are expected to continue to generate positive cash flows during fiscal year 2021 should additional funding be required to support the Company’s operations.

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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.

Seasonality

The Company’s operations are seasonal with the highest volume of revenue generally occurring in the first quarter of each calendar year.

Due to the seasonal business of the Company, the results of operations for the interim period shown in this report are not necessarily indicative of results to be expected for the full fiscal year.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company’s invested cash is 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.

The Company’s term note bears interest at 4.0% over the Prime Rate with a minimum interest rate of no lower than 7.25% and matures on June 6, 2021.

Item 4. Controls and Procedures

The Company’s management, including the Chief Executive Officer and the Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the disclosure controls and procedures as of March 31, 2021, pursuant to Exchange Act Rule 15d-15. Based upon that evaluation, the Company’s Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2021 in timely alerting them to material information required to be included in the Company’s periodic SEC filings.

The Company’s management, including its Chief Executive Officer and Chief Financial Officer, does not expect that its disclosure controls and procedures over internal controls 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 their costs. 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.

There were no changes in the Company’s internal controls over financial reporting during the three months ended March 31, 2021 that materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

PART II - OTHER INFORMATION

Item 1. 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. Accordingly, the effect, if any, of these claims is considered immaterial to the Company’s financial condition and results of operations.

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Item 6. Exhibits

The following exhibits are included in this Form 10-Q:


31.1 -		Chief Executive Officer Rule 15d-14(a) Certification

31.2 -		Chief Financial Officer Rule 15d-14(a) Certification

32.1 -		Chief Executive Officer Section 1350 Certification

32.2 -		Chief Financial Officer Section 1350 Certification

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


						SADDLEBROOK RESORTS, INC.
						(Registrant)

Date: August 11, 2021						/s/ Donald L. Allen
						Donald L. Allen
						Vice President and Treasurer
						(Principal Financial and Accounting Officer)

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