OVATIONS FOOD SERVICES, L.P. D/b/a SPECTRA FOOD SERVICES & HOSPITALITY

from TDC Board Book May 11, 2023

by Tourist Development Council PBC

Event Fact Sheet

Palm Beach County Convention Center Location

WEST PALM BEACH, FLORIDA

NOTES TO THE STATEMENT OF PROFIT AND LOSS Years Ended September 30, 2022 and 2021

NOTE 1 – FOOD A4.ND BEVERAGE AGREEMENT

Ovations Food Services, L.P. d/b/a Spectra Food Services & Hospitality (the “Company”) and Palm Beach County are parties to a Food and Beverage Services Agreement dated July 1, 2010 (the “Agreement”), wherein the County granted the Company the exclusive right to provide food and beverage and catering services (the “Food and Beverage Services”) at the Palm Beach County Convention Center (the “Center”) subject to certain exceptions, as defined within the contract. The Agreement commenced on July 1, 2010, and will continue through September 30, 2015, a period of five (5) years and three (3) months.

There was an amendment to the original agreement with an effective date of October 1, 2015 which extended the term of the original agreement for an additional period of five (5) years commencing on October 1, 2015 and ending on September 30, 2020 (the “Extended Term”). Reference Article 2 Term. There was a second amendment to the original agreement on June 16, 2020 which extended the term of the agreement for an additional twelve (12) months commencing on October 1, 2020 and ending on September 30, 2021 (the “Extended Term”).

A third amendment to the original agreement was executed on June 15, 2021 which extended the term of the agreement for an additional twelve (12) months commencing on October 1, 2021 and ending on September 30, 2022 (the “Extended Term”).

The Company signed a new agreement with Palm Beach County that was executed on August 22, 2022 with a term of five years beginning October 1, 2022 and continuing through September 30, 2027 with the potential for one five year extension at the end of the first term.

Pursuant to the terms of the Agreement, the Company and Palm Beach County have agreed to distribute the net profits, as defined, from the Food and Beverage Services provided at the Center as follows:

 The County will receive 93% of the net profits, as defined;

 The Company will receive 7% of the net profits, as defined;

 The Company will receive a management fee of $50,000 annually with consumer price index (C.P.I.) adjustments each subsequent year.

The Company has remitted total payments to the County of $1,275,268 and $46,062 for the years ended September 30, 2022, and September 30, 2021, respectively. The County paid or credited to Ovations a total of $111,509 and $256,705, pertaining to the same periods. The amounts credited from the County to the Company represent reimbursements for months where the Center incurred a loss.

Also, pursuant to the terms of the Agreement, the Company is required to maintain a $1,000,000 performance bond under which Palm Beach County can draw upon in the event the Company does not faithfully perform, as defined, in accordance with the terms of the Agreement. The performance bond held with Hartford Fire Insurance Company covers a one (1) year period through June 30, 2022 and 2021, with annual renewals.

OVATIONS FOOD SERVICES, L.P.

D/b/a SPECTRA FOOD SERVICES & HOSPITALITY

PALM BEACH COUNTY CONVENTION CENTER LOCATION

WEST PALM BEACH, FLORIDA

NOTES TO THE STATEMENT OF PROFIT AND LOSS

Years Ended September 30, 2022 and 2021

NOTE 1 – FOOD AND BEVERAGE AGREEMENT (Cont’d)

The following is a monthly schedule of gross receipts from the following sources:

YEAR ENDED SEPTEMBER 30, 2022

YEAR ENDED SEPTEMBER 30, 2021

Palm Beach County Convention Center Location

WEST PALM BEACH, FLORIDA

NOTES TO THE STATEMENT OF PROFIT AND LOSS

Years Ended September 30, 2022 and 2021

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

The Company recognizes gross receipts when products are sold or services are provided to its customers.

Expense Recognition

The Company recognizes expenses based upon the accrual method of accounting unless otherwise disclosed.

NOTE 3 – RESERVE FUND

Pursuant to the terms of the Agreement, the Company provides for the purchase of small wares expended against a cumulative monthly marketing reserve fund (the “Fund”) calculated at 2% of gross receipts, which is included in other expenses in the accompanying statement. The Company can use the amounts in the Fund to pay the cost of marketing activities and for the purchase of small wares, as defined. The Fund is not required to be deposited into a separate bank account. Upon the expiration or termination of the Agreement, the Company shall remit to Palm Beach County the then-outstanding balance of the Fund. As of September 30, 2022 and 2021, the cumulative balance in the reserve fund was $174,830 and $105,023, respectively.

NOTE 4 – INSURANCE COSTS

The Company’s operations at the Center are covered under workers’ compensation and comprehensive general liability (umbrella) insurance coverage obtained by Ovations Food Services, LP and its affiliates on a consolidated basis. The total cost of this coverage has been allocated to the operating location of Ovations Food Services, LP and its affiliates, including the Center. In the accompanying statement, charges for workers’ compensation and liability coverage totaling $110,627 and $89,351 in 2022 and 2021, respectively, are included in “other payroll cost and benefits” and other expenses.

NOTE 5 – SUBCONTRACTOR INCOME

The Company has entered into various subcontractor agreements to provide certain concession and catering services at the Center. There was $476,128 of subcontract revenue recognized in 2022 and $152,287 in 2021. These amounts have been properly included in the accompanying statements as part of “subcontract and other income.”

NOTE 6 – SUPPLEMENTAL CATERING FEE

The Company adds to its catering contracts a service charge which covers all the incidental expenses incurred by Ovations to carry out the terms of the catering contract or agreement. These charges totaled $681,215 in 2022 and $246,220 in 2021.

Palm Beach County Convention Center Location

WEST PALM BEACH, FLORIDA

Notes To The Statement Of Profit And Loss

Years Ended September 30, 2022 and 2021

NOTE 7 – CONSIGNMENT INCOME

Included in “subcontract and other income” are flow-through revenues of $67,057 and $76,435 for the year ended September 30, 2022 and 2021, respectively, pertaining to consignment income from services provided by the Palm Beach County Convention Center. These revenues are remitted to the building and the consignment income is included as an offsetting expense in “Administration and Other Expenses.”

NOTE 8 – INCENTIVE FEES

According to the Agreement with Palm Beach County, Ovations is entitled to receive an “incentive fee” based upon meeting certain performance measures each year. The incentive fee is calculated at 1% applied to gross sales up to $2,500,000, and up to 2% in addition based upon sales in excess of $2,500,000 up to $4,000,000. The qualitative performance measures are generally assessed subsequent to the close of the fiscal year. For the years ended September 30, 2022 and 2021, no incentive fees were earned.

NOTE 9 – RISKS AND UNCERTAINTIES

Global pandemic - On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a global pandemic, which continues to spread throughout the United States. The impact of this pandemic has been and will likely continue to be extensive in many aspects of society, which has resulted in and will likely continue to result in significant disruptions to the global economy, as well as business and capital markets around the world. In an effort to halt the outbreak of COVID-19, the United States has placed significant restrictions on travel and many businesses have announced extended closures which could adversely impact the Company's operations. As of this date, we cannot reasonably estimate the remaining length or severity of this pandemic, or the extent to which the disruption may materially impact our financial operations in fiscal year 2023. Management will continue to identify, adjust and mitigate financial, operational and liquidity related risks.

NOTE 10 – SUBSEQUENT EVENTS

The Company evaluated subsequent events through April 13, 2023, which is the date the financial statements were available to be issued, for both conditions existing and not existing as of April 13, 2023 and concluded there were no subsequent events to disclose.

OVATIONS FOOD SERVICES, L.P.

D/b/a SPECTRA FOOD SERVICES & HOSPITALITY

PALM BEACH COUNTY CONVENTION CENTER LOCATION

WEST PALM BEACH, FLORIDA

NOTES TO STATEMENT OF PROFIT AND LOSS

Year Ended September 30, 2022

NOTE 11 - SCHEDULE OF MONTHLY REMITTANCES TO PALM BEACH COUNTY