SMITHS FALLS GOLF AND COUNTRY CLUB LIMITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2015 Independent Auditor's Report Consolidated Statement of Financial Position Consolidated Statement of Operations Consolidated Statement of Changes in Net Assets Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Schedule A - Schedule of Committee Expenses Schedule B - Schedule of General Expenses
INDEPENDENT AUDITOR'S REPORT To the Directors of Smiths Falls Golf and Country Club Limited We have audited the accompanying consolidated financial statements of Smiths Falls Golf and Country Club Limited, which comprise the consolidated statement of financial position as at September 30, 2015, and consolidated statements of operation and change in net assets and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Canadian accounting standards for not-for-profit organizations, and for such internal control as Management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the Auditor's judgement, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the Auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Smiths Falls Golf and Country Club Limited as at September 30, 2015, and its operations and its cash flows for the year then ended in accordance with Canadian accounting standards for not-for-profit organizations. Perth, Ontario Authorized to practise public accounting by January 07, 2016 The Institute of Chartered Professional Accountants of Ontario 3
CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at September 30, 2015 ASSETS CURRENT ASSETS Cash $ 55,528 $ 48,022 Marketable securities - 45,000 Accounts receivable 23,111 20,259 Inventory 19,955 7,957 Prepaid expenses 44,799 41,672 143,393 162,910 CAPITAL ASSETS (note 3) 1,188,089 1,230,256 ORGANIZATION COST 917 917 $ 1,332,399 $ 1,394,083 LIABILITIES CURRENT LIABILITIES Accounts payable and accrued liabilities $ 58,826 $ 59,627 Government payables 38,887 34,969 Deferred revenue 11,204 18,598 Current portion of capital lease obligations 15,098 15,098 Current portion of long-term debt 32,500 32,500 156,515 160,792 CAPITAL LEASE OBLIGATIONS (note 4) 24,481 37,155 DEFERRED CONTRIBUTIONS (note 5) 52,393 65,060 LONG-TERM DEBT (note 6) 70,000 102,500 303,389 365,507 NET ASSETS Unrestricted (17,000) (14,427) Invested in capital assets (note 8a) 1,046,010 1,043,003 1,029,010 1,028,576 APPROVED ON BEHALF OF THE BOARD: $ 1,332,399 $ 1,394,083 The accompanying notes are an integral part of these financial statements. 4
CONSOLIDATED STATEMENT OF OPERATIONS For the year ended September 30, 2015 REVENUE Fees - memberships $ 288,691 $ 251,673 - guests 152,136 145,070 - lockers 340 420 - power carts 114,477 124,016 Bar 198,576 191,790 Kitchen 18,584 18,584 Pro shop 100,476 2,003 Other 17,850 10,647 Contribution revenue 12,667 10,643 Gain on disposal of capital assets - 1,648 903,797 756,494 COST OF SALES Power carts 17,413 21,553 Bar 81,496 78,078 Pro shop 56,107-155,016 99,631 GROSS MARGIN 748,781 656,863 COMMITTEE EXPENSES (schedule A) 561,841 550,919 GENERAL EXPENSES (schedule B) 113,423 112,117 EXCESS OF REVENUE OVER EXPENSES FROM OPERATIONS 73,517 (6,173) Amortization (73,208) (77,296) EXCESS (DEFICIENCY) OF REVENUE OVER EXPENSES $ 309 $ (83,469) The accompanying notes are an integral part of these financial statements. 5
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS For the year ended September 30, 2015 Unrestricted Share Capital (note 7) Deficit Total Invested in Capital Assets (note 8) Balance beginning of year $ 117,075 $ (131,502) $ (14,427) $ 1,043,003 $ 1,028,576 $1,111,170 Excess (deficiency) of revenue over expenses - 73,517 73,517 (73,208) 309 (83,469) Issuance of shares and other capital 125-125 - 125 875 Transfers (note 8b) - (76,215) (76,215) 76,215 - - Balance end of year $ 117,200 $ (134,200) $ (17,000) $ 1,046,010 $ 1,029,010 $1,028,576 The accompanying notes are an integral part of these financial statements. 6
CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended September 30, 2015 CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES Excess (deficiency) of revenue over expenses $ 309 $ (83,469) Items not affecting cash: Amortization 73,208 77,296 Amortization of deferred contributions (12,667) (10,643) Gain on disposal of capital assets - (1,648) Net change in non-cash working capital items: Accounts receivable (2,852) (14,705) Inventory (11,998) (21) Prepaid expenses (3,127) 6,072 Accounts payable and accrued liabilities (801) 20,327 Government payables 3,918 6,856 Deferred revenue (7,394) 14,851 38,596 14,916 INVESTING ACTIVITIES Redemption (purchase) of marketable securities 45,000 (29,014) Purchase of capital assets (31,041) (28,796) Proceeds on disposal of capital assets - 2,750 13,959 (55,060) FINANCING ACTIVITIES Repayment of long-term debt (32,500) (32,500) Increase in deferred contributions - 15,045 (Repayment of) advances on capital lease obligations (12,674) 10,933 Issuance of share capital 125 875 (45,049) (5,647) NET CHANGE IN CASH 7,506 (45,791) CASH - BEGINNING OF YEAR 48,022 93,813 CASH - END OF YEAR $ 55,528 $ 48,022 SUPPLEMENTAL INFORMATION Equipment purchased under capital lease $ - $ 25,191 The accompanying notes are an integral part of these financial statements. 7
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2015 1. NATURE OF OPERATIONS The Club is incorporated under the laws of Ontario and operates a non-profit golf and country club. The Club, being a recreational organization, is exempt from income taxes under Section 149(1)(l) of the Income Tax Act. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation These consolidated financial statements have been prepared in accordance with Canadian accounting standards for not-for-profit organizations. The principal accounting policies of the Club are summarized as follows: Basis of Consolidation These financial statements have been prepared on a consolidated basis and include the assets, liabilities, and operations of SFGCC Holdings Inc. All significant intercompany transactions and balances have been eliminated on consolidation. Revenue Recognition The Club follows the deferral method of accounting for revenues. The Club recognizes revenue when the product has been delivered and collectibility can be reasonably assured. Membership fees are recognized as revenue in the year that membership to the Club is provided. Cash and Cash Equivalents The Club considers cash and cash equivalents to be highly liquid investments with original maturities of three months or less. Marketable Securities Marketable securities consist of guaranteed investment certificates which are recorded at fair value. Inventory The Club values its bar inventory at the lessor of cost and net realizable value. 8
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2015 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Capital Assets Capital assets are stated at cost. Amortization is provided on current purchases at half-rate. When capital assets are disposed of, the related profit or loss is included in current operations. Amortization is calculated using the declining balance method at the following annual rates: Leases Club house - 5% Pro shop - 4% Maintenance building - 5% Dam and bridges - 8% Parking lot - 8% Watering system - 6% Storage shed - 10% Fence - 10% Fixtures and equipment - 30% Rolling stock - 20% Power carts - 15% Computer - 55% Leased equipment - 30% Leases are classified as capital or operating leases. A lease that transfers substantially all of the benefits and risks incidental to the ownership of property is classified as a capital lease. At the inception of a capital lease, an asset and an obligation are recorded at an amount equal to the lesser of the present value of the minimum lease payments and the property s fair value at the beginning of the lease. Assets recorded under capital leases are amortized on a straight-line basis over the term of the lease that is the estimated useful lives of the assets. All other leases are accounted for as operating leases wherein rental payments are expensed as incurred. Accounting Estimates The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates. 9
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2015 3. CAPITAL ASSETS Accumulated Net Book Net Book Cost Amortization Value Value Land and development costs $ 468,816 $ - $ 468,816 $ 468,816 Club house and pro shop 909,830 587,741 322,089 338,710 Maintenance building 296,717 82,965 213,752 225,002 Dam and bridges 11,910 9,956 1,954 2,124 Parking lot 47,826 39,323 8,503 9,243 Watering system 155,502 131,284 24,218 25,341 Storage shed 16,115 15,397 718 798 Fence 4,705 3,289 1,416 1,573 Fixtures and equipment 510,140 436,239 73,901 72,353 Rolling stock 507,651 485,937 21,714 27,142 Power carts 111,442 71,406 40,036 47,101 Computer 3,496 961 2,535 - Leased equipment 120,017 111,580 8,437 12,053 $ 3,164,167 $ 1,976,078 $ 1,188,089 $ 1,230,256 10
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2015 4. CAPITAL LEASE OBLIGATIONS Various greens equipment under capital lease at 5.5% with TD Equipment Finance Canada Inc. Due September 30, 2018 with blended monthly payments of $804 (plus taxes). $ 25,907 $ 33,861 Greens equipment under capital lease at 4.59% with TD Equipment Finance Canada Inc. Due May 1, 2018 with blended monthly payments of $454 (plus taxes). 13,672 18,392 39,579 52,253 Less: current portion 15,098 15,098 $ 24,481 $ 37,155 Future minimum lease payments are as follows: 2016 $ 15,098 2017 15,098 2018 12,478 Total minimum lease payments 42,674 Less: imputed interest (3,095) 39,579 Less: current portion 15,098 $ 24,481 5. DEFERRED CONTRIBUTIONS Balance - beginning of year $ 65,060 $ 60,658 Add: contributions received during the year - 14,550 Add: interest - 495 Less: amounts amortized to revenue (12,667) (10,643) $ 52,393 $ 65,060 11
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2015 6. LONG-TERM DEBT Term loan payable to TD Bank, repayable $2,500 monthly plus interest at prime plus.80%, due September 2018. $ 90,000 $ 120,000 Equipment loan, non-interest bearing, annual payment of $2,500 due June 15, 2011 to June 15, 2020. 12,500 15,000 102,500 135,000 Less: current portion 32,500 32,500 $ 70,000 $ 102,500 The term loan and an operating line of credit of $100,000 is secured by a general security agreement, a continuing $600,000 collateral mortgage on the Club's real estate and fire insurance coverage requirements. The Club is committed to the principal repayment on long-term debt over the next four years approximately as follows: 2016 - $ 32,500 2017-32,500 2018-32,500 2019-2,500 7. SHARE CAPITAL Authorized 1,500 common shares, one vote per share Issued and fully paid 1,159 common shares (2014-1,158 common shares) $ 117,200 $ 117,075 During the year, 1 common share was issued for cash consideration of $125 (2014-7 for $875). 12
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2015 8. INVESTED IN CAPITAL ASSETS (a) Net assets invested in capital assets Capital assets $ 1,188,089 $ 1,230,256 Less: Capital lease obligations (39,579) (52,253) Long-term debt (102,500) (135,000) $ 1,046,010 $ 1,043,003 (b) Transfer to invested in capital assets Purchase of capital assets $ 31,041 $ 53,987 Proceeds on disposal of capital assets - (2,750) Advance on capital lease obligations - (19,538) Repayment of capital lease obligations 12,674 8,605 Repayment of long-term debt 32,500 32,500 $ 76,215 $ 72,804 9. FINANCIAL INSTRUMENTS The Club's financial instruments consist of cash, accounts receivable, accounts payable and accrued liabilities, capital lease obligations and long-term debt. It is Management's opinion that the fair value of these instruments is not materially different than their cost and that the Club is not exposed to significant interest rate, currency or credit risk. 13
SCHEDULE A SMITHS FALLS GOLF AND COUNTRY CLUB LIMITED SCHEDULE OF COMMITTEE EXPENSES For the year ended September 30, 2015 GREENS COMMITTEE Gas and oil $ 19,294 $ 23,733 Insurance 2,102 2,076 Contract - greens 65,712 65,729 Repairs and rental - equipment 28,595 40,182 Repairs - course, seed, fertilizer and improvements 66,067 83,007 Hydro and heat 15,796 9,904 Wages 127,402 121,254 324,968 345,885 HOUSE COMMITTEE Cleaning 8,937 13,971 Fuel 12,199 14,375 Hydro 29,629 26,499 Repairs 28,401 20,501 Insurance 9,768 9,572 Wages 8,573 8,081 97,507 92,999 BAR COMMITTEE Supplies and services 4,990 2,672 Wages 44,510 54,740 49,500 57,412 PRO-SHOP COMMITTEE Contract - Pro 1,413 42,858 Hydro 3,591 3,297 Insurance 1,751 1,687 Supplies 4,297 2,985 Wages 72,552-83,604 50,827 KITCHEN COMMITTEE Supplies and services 6,262 3,796 COMMITTEE EXPENSES $ 561,841 $ 550,919 14
SCHEDULE B SMITHS FALLS GOLF AND COUNTRY CLUB LIMITED SCHEDULE OF GENERAL EXPENSES For the year ended September 30, 2015 Advertising and promotion $ 13,401 $ 10,142 Audit and legal fees 8,669 10,125 Bad debt - 175 Bank charges and interest 8,705 13,485 Long-term interest 8,538 10,250 Office expenses 17,911 13,421 Taxes - municipal 17,013 16,738 Telephone 5,382 5,216 Wages - office 33,804 32,565 GENERAL EXPENSES $ 113,423 $ 112,117 15