OPERATIONS AT THE PALM BEACH COUNTY CONVENTION CENTER MANAGED BY GLOBAL SPECTRUM, L.P.

NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENTS FOR THE YEARS ENDED SEPTEMBER 30, 2022 AND 2021

1. Nature of Organization and Significant Accounting Policies, continued

The following methods and assumptions were used by the Organization in estimating fair value of financial instruments that are not disclosed under ASC 820-10.

Cash: The carrying amount reported approximates fair value.

Accounts receivables: The carrying amount reported approximates fair value due to the shortterm of the receivables.

Accounts payable and accrued expenses: The carrying amount reported approximates fair value due to the short-term duration of the instruments.

Due to (from) others: The carrying amount reported approximates fair value due to the shortterm duration of the instruments.

Accounting Estimates

The preparation of the special-purpose financial statements in conformity with provisions of the Management Agreement require 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 special-purpose financial statement and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Cash

Cash consists of cash on hand, and cash in checking and saving accounts. Cash in the amounts of approximately $1,933,100 and $1,353,600 is designated for advanced deposits for events that will occur subsequent to September 30, 2022 and 2021, respectively. As of September 30, 2022, the amount of advance deposits for events in the escrow cash account exceeded the liability by approximately $179,600. This difference was due to the September monthly transfer amount for completed events was not made to the County until October 2022.

Receivables

Accounts receivable and amounts due from/to Palm Beach County, other related parties, and customers are carried at their original charged amounts, which approximate fair value, based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts, if any, by identifying troubled accounts and by using historical experience applied to an aging of accounts. Receivables are written-off when deemed uncollectible. Recoveries of accounts receivable previously written-off are recorded when received. The allowance for uncollectable accounts receivable as of September 30, 2022 and 2021 was approximately $1,600 and $0, respectively.

Deferred Revenue

As of September 30, 2022 and 2021, deferred revenue includes designated advance deposits and other amounts for events scheduled for a subsequent fiscal year. These deposits are included in the accompanying special-purpose financial statements in deferred revenue.

OPERATIONS AT THE PALM BEACH COUNTY CONVENTION CENTER MANAGED BY GLOBAL SPECTRUM, L.P.

NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENTS FOR THE YEARS ENDED SEPTEMBER 30, 2022 AND 2021

1. Nature of Organization and Significant Accounting Policies, continued Advertising

Advertising costs are expensed when incurred. Advertising costs totaled approximately $1,900 and $11,000 for the years ended September 30, 2022 and 2021, respectively.

Income Tax Status

The Facility is not subject to federal or state income tax because its operations fall under the tax-exempt status of the County.

2. Management Agreement

In July 2012, the County amended and restated its operating agreement with the Organization to operate and manage the Facility, except for food, beverage, and catering services. The Management Agreement provides that Discover Palm Beach County, Inc. (a Palm Beach County not-for-profit agency) is responsible for the Organization’s long-term sales (i.e., booking events that will not occur for 18 months or more in the future). This agreement covers the period from October 1, 2012, through September 30, 2017, with an option to renew for an additional five years thereafter. In July 2017, the County and the Organization extended its operating agreement for another five years through September 30, 2022. A second amendment was entered into in May 2022, extending the operating agreement to September 30, 2023.

The Management Agreement requires that net proceeds from the operation of the Facility are paid to the County and that operating deficits, if any, are funded by the County. The County provided net funding to the Organization during fiscal year 2021, and the Organization provided net payments to the County during fiscal year 2022. These amounts are presented net on the special-purpose statements of revenues, expenses and transfer as contractual funding transfers. Should the funding reimbursements from the County not be provided, the ongoing operations would be impaired. The County's approved budget for fiscal year ended September 30, 2022 and 2021 amounted to $5,350,000 and $5,524,500, respectively.

The County directly paid for machinery and equipment, insurance, legal, inspector general fee, and indirect operating expenses, which totaled $781,800 and $614,200 for the fiscal years ended September 30, 2022 and 2021, respectively. These expenses are not included in the accompanying special-purpose financial statements. Total management fees, including incentives for the years ended September 30, 2022 and 2021, were $254,092 and $226,092, respectively, of which $52,000 and $78,332 remained unpaid as of September 30, 2022 and 2021, respectively. The unpaid balances of management fees are included as accrued expenses in the statement of assets and liabilities. All of the Facility staff are employed by the Organization. The Facility does not have any employees. The County reimbursed the Organization for employee salaries and related benefits in fiscal years 2022 and 2021. These amounts are included in contracted services in the special-purpose statements of activities.

OPERATIONS AT THE PALM BEACH COUNTY CONVENTION CENTER MANAGED BY GLOBAL SPECTRUM, L.P.

NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENTS FOR THE YEARS ENDED SEPTEMBER 30, 2022 AND 2021

3. Food, Beverage and Catering Services

The County engaged Ovations Food Services, L.P. (a related party to the Organization) to provide food, beverage, and catering services at the Facility. Global Spectrum, L.P. is not a party to this agreement and has no responsibility for food, beverage, and catering services. The activities of food, beverage and catering services are not included in the special-purpose statements of revenues, expenses and transfers for the years ended September 30, 2022 and 2021; however the activity for the year ended September 30, 2022 is included as unaudited combining information in the supplemental combining schedule of revenues, expenses and transfers.

4. Prepaid Expenses

The Organization incurred expenses, including prepaid expenses for software, operating expenses, and insurance deposits, for services to be provided after fiscal years ending September 30, 2022 and 2021, and these amounts have been properly included in prepaid expenses in the special-purpose statements of assets and liabilities.

5. Contingencies

While the Organization and other parties may be involved in various legal actions arising in the normal course of business, management does not believe such matters will have a material negative effect upon the Convention Center Operations or these special-purpose financial statements.

6. Leases

The Organization leases various equipment under non-cancellable operating leases that range from 36 to 60 months. Rent expense for these leases for the years ended September 30, 2022 and 2021 was approximately $0 and $4,200, respectively.

7. Related Party Transactions

The Organization earns a management fee as compensation for operating the Facility. Management fees include both fixed and variable portions. The total amount earned for the years ended September 30, 2022 and 2021 by the Organization was $254,092 and $226,092, respectively. Management fees include $40,000 and $12,000 as an incentive fee for the years ended September 30, 2022 and 2021, respectively. Accrued balance of incentive fee as of September 30, 2022 and 2021, amounted to $52,000 and $78,332, respectively, pending approval from the County. Accounts payable for fixed management fee as of September 30, 2022 and 2021, amounted to $17,841, and $0, respectively.

In addition, the Facility purchases certain operating services including employee benefits and related expenses, insurance coverage, and meeting and convention expenses from the Organization. Total expense for these services for the years ended September 30, 2022 and 2021 purchased from the Organization was $833,778 and $830,807, respectively. Accounts payable for operating services as of September 30, 2022 and 2021, amounted to $147,204 and $54,781, respectively.

OPERATIONS AT THE PALM BEACH COUNTY CONVENTION CENTER MANAGED BY GLOBAL SPECTRUM, L.P.

NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENTS FOR THE YEARS ENDED SEPTEMBER 30, 2022 AND 2021

8. Credit and Business Concentrations

Business Concentration

The Facility received approximately 26% and 32% of total revenues from five customers during the years ended September 30, 2022 and 2021, respectively. One of the five customers represents approximately 6% and 8% of total revenues for the years ended September 30, 2022 and 2021, respectively.

Credit Concentration

The Organization maintains its cash in bank deposit accounts, which at times, may exceed federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. As of September 30, 2022 and 2021, there was approximately $2,705,800 and $1,546,400, respectively, in excess of the FDIC limit. The Organization has not experienced any losses on such accounts and management believes the Organization is not exposed to any significant credit risk arising from such balances.

9. Subsequent Events

Management has evaluated subsequent events through April 17, 2023, the date on which the specialpurpose financial statements were available to be issued, and determined there were no further events to disclose in these special-purpose financial statements.

OPERATIONS AT THE PALM BEACH COUNTY CONVENTION CENTER MANAGED BY GLOBAL SPECTRUM, L.P.

COMBINING SCHEDULE OF REVENUES, EXPENSES AND TRANSFERS (UNAUDITED) FOR THE YEAR ENDED SEPTEMBER 30, 2022

See independent auditor's report and accompanying notes to combining schedule of activities (unaudited). -13-

OPERATIONS AT THE PALM BEACH COUNTY CONVENTION CENTER MANAGED BY GLOBAL SPECTRUM, L.P.

NOTES TO SUPPLEMENTARY INFORMATION (UNAUDITED) FOR THE YEAR ENDED SEPTEMBER 30, 2022

1. General

The accompanying supplemental combining schedule of revenues, expenses and transfers (unaudited) presents the activities of the Operations at the Palm Beach County Convention Center, managed by Global Spectrum, L.P., and the food, beverage and catering services managed by a third-party vendor, Ovations Food Services, L.P., for the year ended September 30, 2022.

2. Basis of Accounting

The accompanying supplementary information is presented using the accrual basis of accounting.

See independent auditor’s report.

-14-

To Management of Palm Beach County Convention Center West Palm Beach, Florida

In planning and performing our audit of the financial statements of the Operations of the Palm Beach County Convention Center ("Convention Center") as of and for the years ended September 30, 2022 and 2021, in accordance with auditing standards generally accepted in the United States of America, we considered the Convention Center’s internal control over financial reporting (internal control) as a basis for designing auditing procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Convention Center’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Convention Center’s internal control.

Definitions Related to Internal Control Deficiencies

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency or combination of deficiencies in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis.

Our Responsibilities

Our consideration of internal control was for the limited purpose described in the first paragraph and was not designed to identify all deficiencies in internal control that might material weaknesses. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. * * *

This communication is intended solely for the information and use of management, and others within the Convention Center, and is not intended to be and should not be, used by anyone other than these specified parties.