Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2017 | May 15, 2017 | |
Document and Entity Information: | ||
Entity Registrant Name | CASTLE GROUP INC | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2017 | |
Amendment Flag | false | |
Entity Central Index Key | 918,543 | |
Current Fiscal Year End Date | --12-31 | |
Entity Common Stock, Shares Outstanding | 10,056,392 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Entity Well-known Seasoned Issuer | No | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | cagu |
THE CASTLE GROUP, INC. CONDENSE
THE CASTLE GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Current Assets | ||
Cash | $ 2,663,239 | $ 2,775,956 |
Accounts receivable, net of allowance for bad debts | 2,856,528 | 2,405,473 |
Note receivable, current portion | 15,000 | 15,000 |
Prepaid and other current assets | 434,743 | 347,049 |
Total Current Assets | 5,969,510 | 5,543,478 |
Non-Current Assets | ||
Property and equipment, net | 5,971,676 | 6,100,677 |
Construction in progress | 96,866 | 0 |
Deposits and other assets | 123,309 | 127,484 |
Note receivable | 173,280 | 173,878 |
Investment in limited liability company | 629,717 | 616,717 |
Deferred tax asset, net | 454,327 | 536,371 |
Goodwill | 54,726 | 54,726 |
TOTAL ASSETS | 13,473,411 | 13,153,331 |
Current Liabilities | ||
Accounts payable | 3,125,634 | 3,101,074 |
Deposits payable | 1,163,115 | 882,641 |
Current portion of long term debt | 382,374 | 378,694 |
Current portion of long term debt to related parties | 28,791 | 37,919 |
Accrued salaries and wages | 1,754,708 | 1,716,485 |
Accrued taxes | 18,978 | 29,387 |
Total Current Liabilities | 6,473,600 | 6,146,200 |
Non-Current Liabilities | ||
Long term debt, net of current portion | 4,758,563 | 4,847,168 |
Total Non-Current Liabilities | 4,758,563 | 4,847,168 |
Total Liabilities | 11,232,163 | 10,993,368 |
Stockholders' Equity | ||
Preferred stock, $100 par value, 50,000 shares authorized, 11,050 shares issued and outstanding at March 31, 2017 and December 31, 2016 | 1,105,000 | 1,105,000 |
Common stock, $.02 par value, 20,000,000 shares authorized, 10,056,392 shares issued and outstanding at March 31, 2017 and December 31, 2016 | 201,129 | 201,129 |
Additional paid in capital | 5,369,208 | 5,322,708 |
Accumulated deficit | (4,473,107) | (4,515,200) |
Accumulated other comprehensive income | 39,018 | 46,326 |
Total Stockholders' Equity | 2,241,248 | 2,159,963 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 13,473,411 | $ 13,153,331 |
THE CASTLE GROUP INC. BALANCE S
THE CASTLE GROUP INC. BALANCE SHEET (PARENTHETICAL) - $ / shares | Mar. 31, 2017 | Dec. 31, 2016 |
Statement of Financial Position | ||
Preferred stock authorized | 50,000 | 50,000 |
Preferred stock par value | $ 100 | $ 100 |
Preferred stock issued | 11,050 | 11,050 |
Preferred stock outstanding | 11,050 | 11,050 |
Common stock authorized | 20,000,000 | 20,000,000 |
Common stock par value | $ 0.02 | $ 0.02 |
Common stock issued | 10,056,392 | 10,056,392 |
Common stock outstanding | 10,056,392 | 10,056,392 |
THE CASTLE GROUP, INC. CONDENS4
THE CASTLE GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Revenues | ||
Managed property revenue | $ 6,581,215 | $ 6,421,226 |
Other revenue | 300 | 1,100 |
Total Revenues | 6,581,515 | 6,422,326 |
Operating Expenses | ||
Managed property expense | 5,151,609 | 5,204,544 |
Administrative and general | 1,174,937 | 926,994 |
Depreciation | 57,992 | 61,992 |
Total Operating Expense | 6,384,538 | 6,193,530 |
Operating Income | 196,977 | 228,796 |
Income from equity method investment | 13,000 | 14,000 |
Interest expense | (69,774) | (81,949) |
Income before taxes | 140,203 | 160,847 |
Income tax (expense) | (98,110) | (79,949) |
Net Income | 42,093 | 80,898 |
Change in unpaid cumulative dividends on convertible preferred stock | (20,719) | (20,719) |
Net Income (Loss) applicable to Common Stockholders | $ 21,374 | $ 60,179 |
Earnings per common share Basic | $ 0 | $ 0.01 |
Earnings per common share Diluted | $ 0 | $ 0.01 |
Weighted average common shares outstanding Basic | 10,056,392 | 10,056,392 |
Weighted average common shares outstanding Diluted | 10,056,392 | 10,056,392 |
Net Income | $ 42,093 | $ 80,898 |
Other Comprehensive (Loss) Income | ||
Foreign currency translation adjustment | (7,308) | (5,279) |
Total Comprehensive Income | $ 34,785 | $ 75,619 |
THE CASTLE GROUP, INC. CONDENS5
THE CASTLE GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Cash Flows from Operating Activities | ||
Net Income | $ 42,093 | $ 80,898 |
Depreciation | 57,992 | 61,992 |
Recovery of bad debt | (36,947) | (118,617) |
Non cash interest expense | 46,500 | 50,010 |
Income from equity method investment | (13,000) | (14,000) |
Deferred taxes | 98,110 | 79,949 |
(Increase) decrease in Accounts receivable | (450,952) | (241,379) |
(Increase) decrease in Other current assets | 55,831 | 26,795 |
(Increase) decrease in Notes receivable | 37,545 | 119,195 |
Increase (decrease) in Deposits and other assets | 5,200 | 4,857 |
Increase (decrease) in Accounts payable | 6,913 | (33,409) |
Increase (decrease) in Deposits payable | 279,778 | 54,660 |
Net Cash Provided by Operating Activities | 129,063 | 70,951 |
Cash Flows from Investing Activities | ||
Construction in progress-Podium | (96,866) | 0 |
Purchase of fixed assets | (22,502) | (15,163) |
Net Cash Used in Investing Activities | (119,368) | (15,163) |
Cash Flows from Financing Activities | ||
Payments on notes to related parties | (9,128) | (8,263) |
Payments on notes | (132,861) | (202,511) |
Net Cash Used in Financing Activities | (141,989) | (210,774) |
Effect of foreign currency exchange rate on changes in cash | 19,577 | 1,715 |
Net Change in Cash | (112,717) | (153,271) |
Beginning Balance | 2,775,956 | 2,370,557 |
Ending Balance | 2,663,239 | 2,217,286 |
Supplementary Information | ||
Cash Paid for Interest | 23,274 | 31,939 |
Cash Paid for Income Taxes | $ 0 | $ 0 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2017 | |
Notes | |
Summary of Significant Accounting Policies | Note 1 Summary of Significant Accounting Policies Organization The Castle Group, Inc. was incorporated under the laws of the State of Utah on August 21, 1981. The Castle Group, Inc. operates in the hotel and resort management industry in the State of Hawaii, New Zealand, and the Commonwealth of Saipan under the trade name Castle Resorts and Hotels. The accounting and reporting policies of The Castle Group, Inc. conform with accounting principles generally accepted in the United States of America (GAAP) and to practices accepted within the hotel and resort management industry. Principles of Consolidation The consolidated financial statements include the accounts of The Castle Group, Inc. and its wholly-owned subsidiaries: Hawaii Reservations Center Corp., HPR Advertising, Inc., Castle Resorts & Hotels, Inc., Castle Resorts & Hotels Thailand Ltd., NZ Castle Resorts and Hotels Limited (a New Zealand Corporation), NZ Castle Resorts and Hotels wholly-owned subsidiary, Mocles Holdings Limited (a New Zealand Corporation), Castle Resorts & Hotels NZ Ltd., Castle Group LLC (Guam), Castle Resorts & Hotels Guam Inc. and KRI Inc. dba Hawaiian Pacific Resorts (Interactive). Collectively, all of the companies above are referred to as the Company throughout these consolidated financial statements and accompanying notes. All significant inter-company transactions have been eliminated in the consolidated financial statements. Basis of Presentation The accompanying condensed consolidated financial statements have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted. In the opinion of management, the accompanying interim financial statements contain all adjustments, consisting of normal recurring accruals, necessary for a fair presentation. The results of operations for the three month periods ended March 31, 2017, are not necessarily indicative of the results for a full-year period as the tourism industry that the Company relies on is highly seasonal. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in Castles most recent Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC on April 7, 2017. The Companys significant accounting policies are set forth in Note 1 to the consolidated financial statements in its Annual Report on Form 10-K for the year ended December 31, 2016. Revenue Recognition In accordance with ASC 605: Revenue Recognition Specifically, the Company recognizes revenue from the management of resort properties according to terms of its various management contracts, which fall under two basic types of agreements, a Gross Contract and a Net Contract. Under a Gross Contract the Company records revenue which is based on a percentage of the gross rental proceeds received from the rental of hotel or condominium units. The Company pays a portion of the gross rental proceeds to the owner of the rental unit and only records as revenue the difference between the gross rental proceeds and the amount paid to the owner of the rental unit. Under the Gross Contract, the Company is responsible for all of the operating expenses for the hotel or condominium unit and the Company records the expenses of operating the rental program at the property covered by the agreement. These expenses include housekeeping, food and beverage, maintenance, front desk, sales and marketing, advertising and all other operating costs at the property covered by the agreement. Under a Net Contract, the Company receives a management fee that is based on a percentage of the gross rental proceeds received from the rental of hotel or condominium units. Under the Net Contract, the owner of the hotel or condominium unit is responsible for all of the operating expenses of the rental program covering the owners unit and the Company also typically receives an incentive management fee, which is based on the net operating profit of the covered property. Additionally the Company employs on-site personnel to provide services such as housekeeping, maintenance and administration to property owners under the Companys management agreements and for such services the Company recognizes revenue in an amount equal to the employee expenses incurred. Under both types of agreements, revenues are recognized after services have been rendered. A liability is recognized for any deposits received for which services have not yet been rendered for properties managed under a Gross Contract. Under a Net Contract, the Company does not record the operating expenses of the property covered by the agreement, other than the personnel costs mentioned in the previous paragraph. The difference between the Gross and Net Contracts is that under a Gross Contract, all expenses, and therefore the ownership of any profits or the covering of any operating loss, belong to and is the responsibility of the Company; under a Net Contract, all expenses, and therefore the ownership or any profits or the covering of any operating loss belong to and is the responsibility of the owner of the property. Reclassifications The Company has reclassified certain prior-period amounts to conform to the current-period presentation. For presentation of 2016 results, the company combined previously reported Revenue attributed from properties and Management and service revenue into a new revenue line Managed property revenue to better reflect the revenues that the Company receives from its properties under management, and to also match those revenues with the direct costs associated with Managed property revenue. For the presentation of 2016 results, the Company combined previously reported Attributed property expenses and Payroll and office expenses into a new expense line Managed property expense to better reflect the direct operating costs associated with the Managed property revenue. Management feels that combining the two costs into one expense line item better reflects the direct operating costs associated with the Managed property revenue. For presentation of 2016 results, the Company increased Administrative and general expenses by $830,053 and correspondingly reduced Managed property expense to reclassify the payroll and other operating costs of our centralized corporate offices as these costs are more of an overhead nature than a variable cost associated with fluctuations in Managed property revenue. For presentation of 2016 results, the Company reduced Administrative and general expenses by $118,617 and increased Attributed property and management departmental expenses by $118,617. This is a result of a reclassification of the recovery of amounts previously written off as bad debts. For presentation of the 2016 Statement of Cash Flows, the Company increased the Notes receivable collection by $118,617 and added a line Recovery of bad debt to show an offsetting decrease in Cash flows from operating activities to account for the reversal of $118,617 previously written off and the subsequent collection of the same amount. Note 2 New Accounting Pronouncements From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) that are adopted by the Company as of the specified effective date. If not discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Companys financial statements upon adoption. In May 2014, the FASB issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers, which is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. ASU 2014-09 may be applied using either a full retrospective or a modified retrospective approach and is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is not permitted. We are in the early stages of evaluating the effect of the standard on our financial statements, upon adoption our financial statements will include expanded disclosures related to contracts with customers, we are continuing our assessment of other impacts on our financial statements at this time. We are still assessing our method of adoption. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company has $954,692 of operating lease obligations as of December 31, 2016 and upon adoption of this standard it will record a ROU asset and lease liability for present value of these leases which will have a material impact on the balance sheet. However, the statement of income recognition of lease expenses is not expected to change from the current methodology. In March 2016, the FASB issued ASU 2016-09, Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The objective of this update is to simplify several aspects of the accounting for employee share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230). The objective of this update is to add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those annual periods and is to be applied utilizing a retrospective approach. Early adoption is permitted. The Company is currently evaluating the new guidance to determine the impact it may have on its consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other ASU 2017-04 simplifies the accounting for goodwill impairment by eliminating Step 2 of the current goodwill impairment test, which required a hypothetical purchase price allocation. Goodwill impairment will now be the amount by which the reporting units carrying value exceeds its fair value, limited to the carrying value of the goodwill. ASU 2017-04 is effective for financial statements issued for fiscal years, and interim periods beginning after December 15, 2019. Upon adoption, we will follow the guidance in this standard for the goodwill impairment testing. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2017 | |
Notes | |
Income Taxes | Note 3 Income Taxes Income tax expense reflects the expense or benefit only on the Companys domestic taxable income. Income tax expense and benefit from the Companys foreign operations are not recognized as they have been fully reserved. |
Long Term Debt
Long Term Debt | 3 Months Ended |
Mar. 31, 2017 | |
Notes | |
Long Term Debt | Note 4 Long Term Debt The Company has a note dated December 31, 2004, payable in New Zealand dollars, with an original face value of NZ $8.6 million and secured by real estate in New Zealand and a general security agreement over the assets of the Companys New Zealand subsidiary, with the Company as guarantor. The holder of the note owns 0.7% of the issued and outstanding common stock of the Company. The note calls for payments of NZ $20,000 (US $13,980 at 03/31/17) per month. The maturity date is March 31, 2019 with an extension to March 31, 2024 available is the Company is not in default. The agreement does not provide for interest to be paid on this note payable so the Company has imputed interest of $46,500 and $50,010 for the quarters ended March 31, 2017 and 2016, respectively. The balance of this note was NZ $4,987,543 (US $3,486,293) and NZ$ 5,098,463 (US $3,531,705) as of March 31, 2017 and December 31, 2016, respectively. The Company has a note payable dated December 31, 2004, payable to a New Zealand bank, Westpac, for a loan in favor of Mocles at the banks prime rate plus 2%. The note calls for monthly interest payments and payments against principal of NZ $20,000 (US $13,980). The maturity date is March 31, 2019 with an extension to March 31, 2024 available if the Company is not in default. The balance of this note was NZ $2,125,000 (US $1,485,375) and NZ $2,185,000 (US $1,513,550) as of March 31, 2017 and December 31, 2016, respectively. In June 2015, the Company received a term loan of $200,000 from a local bank which was used to fund upgrades to the property management and central reservation systems. These outflows will be recouped by the Company through reimbursements from managed properties. The loan is for a fixed interest rate of 5.875% with monthly payments of $3,855 and matures in June 2020. The outstanding balance of this loan was $136,423 and $145,892 as of March 31, 2017 and December 31, 2016, respectively. In March 2016, the Company received a loan of $40,178 to finance the purchase carts for one of its managed properties. The loan is secured by the equipment purchased. The loan is for a fixed interest rate of 4.43% with monthly payments of $749 and matures in March, 2021. The outstanding balance of this loan was $32,846 and $37,919 as of March 31, 2017 and December 31, 2016, respectively. |
Equity-based Compensation
Equity-based Compensation | 3 Months Ended |
Mar. 31, 2017 | |
Notes | |
Equity-based Compensation | Note 5 Equity-Based Compensation None issued for the three months ended March 31, 2017 and 2016. |
Basic and Diluted Earnings Per
Basic and Diluted Earnings Per Share | 3 Months Ended |
Mar. 31, 2017 | |
Notes | |
Basic and Diluted Earnings Per Share | Note 6 Basic and Dilutive Earnings Per Share Basic earnings per share of common stock were computed by dividing income available to common stockholders by the weighted average number of common shares outstanding. Diluted earnings per share were computed using the treasury stock method for vested warrants and the two-class method for redeemable preferred stock. The calculation of diluted earnings per share for 2017 and 2016 excludes 368,333 shares which would be issued upon conversion of the outstanding $100 par value redeemable preferred stock of the Company as they are considered to be anti-dilutive. The warrants for 600,000 shares outstanding at March 31, 2017 and December 31, 2016 are not included as they are considered to be anti-dilutive since the exercise price exceeded the average market price of the stock during the respective periods. As the preferred shares and the warrants are considered to be anti-dilutive, the Company employed the two-class method and basic and diluted earnings per share were the same. March 31, 2017 March 31, 2016 Income Shares Per Share Income Shares Per Share Numerator Denominator Amount Numerator Denominator Amount Basic EPS Income Available to Common Stockholders $ 21,374 10,056,392 $ 0.00 $ 60,179 10,056,392 $ 0.01 Effect of Dilutive Securities 0 0 Diluted EPS Income Available to Common Stockholders plus Assumed Conversions $ 21,374 10,056,392 $ 0.00 $ 60,179 10,056,392 $ 0.01 |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2017 | |
Notes | |
Commitments and Contingencies | Note 7 Commitments and Contingencies The Company owns the Podium unit in New Zealand, and there was a claim made against the contractor by the Body Corporate (that represents all the unit owners, similar to an association of apartment owners in the United States) for defective work on the outer waterproofing skin of the building. A settlement was reached and the amounts recovered from the contractor were not sufficient to cure the waterproofing defect. As a result the Body Corporate will be imposing a special assessment on all the owners of units in the building. The Company has paid NZ $138,578 (US $96,866) as of March 31, 2017, and expects to make additional payments through July 2017 of NZ $184,770 (US $129,154). The project is scheduled to commence in the first quarter of 2018. These payments will be capitalized by the Company since the repairs are expected to improve the property. Another claim has been filed by the Body Corporate against the law firm previously representing the Body Corporate to recover funds previously expended by the Company and other owners in the building and the amounts assessed against the Companys Podium unit may or may not be recovered. There could also be additional remedial work required once construction starts, which could increase the amount assessed against the Companys Podium unit. The amounts paid through March 31, 2017 have been recorded as Construction in progress. Once the project has completed, the Company will capitalize the costs of the asset as improvements and shall commence depreciation upon completion of the project. |
Related Party Transactions Disc
Related Party Transactions Disclosure | 3 Months Ended |
Mar. 31, 2017 | |
Notes | |
Related Party Transactions Disclosure | Note 8 Related Party Transactions The Company has a receivable of $561,742 and $598,689 from Hanalei Bay International Investors (HBII) as of March 31, 2017 and December 31, 2016. The receivable has been fully provided for. The Chairman and CEO of the Company is the sole shareholder of HBII Management, Inc., the managing General Partner of HBII. During the quarters ended March 31, 2017 and 2016, the Company collected $36,947 and $118,617, respectively, of the note. |
Summary of Significant Accoun13
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
Policies | |
Organization | Organization The Castle Group, Inc. was incorporated under the laws of the State of Utah on August 21, 1981. The Castle Group, Inc. operates in the hotel and resort management industry in the State of Hawaii, New Zealand, and the Commonwealth of Saipan under the trade name Castle Resorts and Hotels. The accounting and reporting policies of The Castle Group, Inc. conform with accounting principles generally accepted in the United States of America (GAAP) and to practices accepted within the hotel and resort management industry. |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of The Castle Group, Inc. and its wholly-owned subsidiaries: Hawaii Reservations Center Corp., HPR Advertising, Inc., Castle Resorts & Hotels, Inc., Castle Resorts & Hotels Thailand Ltd., NZ Castle Resorts and Hotels Limited (a New Zealand Corporation), NZ Castle Resorts and Hotels wholly-owned subsidiary, Mocles Holdings Limited (a New Zealand Corporation), Castle Resorts & Hotels NZ Ltd., Castle Group LLC (Guam), Castle Resorts & Hotels Guam Inc. and KRI Inc. dba Hawaiian Pacific Resorts (Interactive). Collectively, all of the companies above are referred to as the Company throughout these consolidated financial statements and accompanying notes. All significant inter-company transactions have been eliminated in the consolidated financial statements. |
Basis of Presentation | Basis of Presentation The accompanying condensed consolidated financial statements have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted. In the opinion of management, the accompanying interim financial statements contain all adjustments, consisting of normal recurring accruals, necessary for a fair presentation. The results of operations for the three month periods ended March 31, 2017, are not necessarily indicative of the results for a full-year period as the tourism industry that the Company relies on is highly seasonal. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in Castles most recent Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC on April 7, 2017. The Companys significant accounting policies are set forth in Note 1 to the consolidated financial statements in its Annual Report on Form 10-K for the year ended December 31, 2016. |
Revenue Recognition | Revenue Recognition In accordance with ASC 605: Revenue Recognition Specifically, the Company recognizes revenue from the management of resort properties according to terms of its various management contracts, which fall under two basic types of agreements, a Gross Contract and a Net Contract. Under a Gross Contract the Company records revenue which is based on a percentage of the gross rental proceeds received from the rental of hotel or condominium units. The Company pays a portion of the gross rental proceeds to the owner of the rental unit and only records as revenue the difference between the gross rental proceeds and the amount paid to the owner of the rental unit. Under the Gross Contract, the Company is responsible for all of the operating expenses for the hotel or condominium unit and the Company records the expenses of operating the rental program at the property covered by the agreement. These expenses include housekeeping, food and beverage, maintenance, front desk, sales and marketing, advertising and all other operating costs at the property covered by the agreement. Under a Net Contract, the Company receives a management fee that is based on a percentage of the gross rental proceeds received from the rental of hotel or condominium units. Under the Net Contract, the owner of the hotel or condominium unit is responsible for all of the operating expenses of the rental program covering the owners unit and the Company also typically receives an incentive management fee, which is based on the net operating profit of the covered property. Additionally the Company employs on-site personnel to provide services such as housekeeping, maintenance and administration to property owners under the Companys management agreements and for such services the Company recognizes revenue in an amount equal to the employee expenses incurred. Under both types of agreements, revenues are recognized after services have been rendered. A liability is recognized for any deposits received for which services have not yet been rendered for properties managed under a Gross Contract. Under a Net Contract, the Company does not record the operating expenses of the property covered by the agreement, other than the personnel costs mentioned in the previous paragraph. The difference between the Gross and Net Contracts is that under a Gross Contract, all expenses, and therefore the ownership of any profits or the covering of any operating loss, belong to and is the responsibility of the Company; under a Net Contract, all expenses, and therefore the ownership or any profits or the covering of any operating loss belong to and is the responsibility of the owner of the property. |
Reclassification | Reclassifications The Company has reclassified certain prior-period amounts to conform to the current-period presentation. For presentation of 2016 results, the company combined previously reported Revenue attributed from properties and Management and service revenue into a new revenue line Managed property revenue to better reflect the revenues that the Company receives from its properties under management, and to also match those revenues with the direct costs associated with Managed property revenue. For the presentation of 2016 results, the Company combined previously reported Attributed property expenses and Payroll and office expenses into a new expense line Managed property expense to better reflect the direct operating costs associated with the Managed property revenue. Management feels that combining the two costs into one expense line item better reflects the direct operating costs associated with the Managed property revenue. For presentation of 2016 results, the Company increased Administrative and general expenses by $830,053 and correspondingly reduced Managed property expense to reclassify the payroll and other operating costs of our centralized corporate offices as these costs are more of an overhead nature than a variable cost associated with fluctuations in Managed property revenue. For presentation of 2016 results, the Company reduced Administrative and general expenses by $118,617 and increased Attributed property and management departmental expenses by $118,617. This is a result of a reclassification of the recovery of amounts previously written off as bad debts. For presentation of the 2016 Statement of Cash Flows, the Company increased the Notes receivable collection by $118,617 and added a line Recovery of bad debt to show an offsetting decrease in Cash flows from operating activities to account for the reversal of $118,617 previously written off and the subsequent collection of the same amount. |
New Accounting Pronouncements | Note 2 New Accounting Pronouncements From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) that are adopted by the Company as of the specified effective date. If not discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Companys financial statements upon adoption. In May 2014, the FASB issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers, which is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. ASU 2014-09 may be applied using either a full retrospective or a modified retrospective approach and is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is not permitted. We are in the early stages of evaluating the effect of the standard on our financial statements, upon adoption our financial statements will include expanded disclosures related to contracts with customers, we are continuing our assessment of other impacts on our financial statements at this time. We are still assessing our method of adoption. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company has $954,692 of operating lease obligations as of December 31, 2016 and upon adoption of this standard it will record a ROU asset and lease liability for present value of these leases which will have a material impact on the balance sheet. However, the statement of income recognition of lease expenses is not expected to change from the current methodology. In March 2016, the FASB issued ASU 2016-09, Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The objective of this update is to simplify several aspects of the accounting for employee share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230). The objective of this update is to add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those annual periods and is to be applied utilizing a retrospective approach. Early adoption is permitted. The Company is currently evaluating the new guidance to determine the impact it may have on its consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other ASU 2017-04 simplifies the accounting for goodwill impairment by eliminating Step 2 of the current goodwill impairment test, which required a hypothetical purchase price allocation. Goodwill impairment will now be the amount by which the reporting units carrying value exceeds its fair value, limited to the carrying value of the goodwill. ASU 2017-04 is effective for financial statements issued for fiscal years, and interim periods beginning after December 15, 2019. Upon adoption, we will follow the guidance in this standard for the goodwill impairment testing. |
Basic and Diluted Earnings Pe14
Basic and Diluted Earnings Per Share (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Tables/Schedules | |
Reconciliation of Numerator and Denominator of The Basic and Diluted Earnings Per Share Computations: | March 31, 2017 March 31, 2016 Income Shares Per Share Income Shares Per Share Numerator Denominator Amount Numerator Denominator Amount Basic EPS Income Available to Common Stockholders $ 21,374 10,056,392 $ 0.00 $ 60,179 10,056,392 $ 0.01 Effect of Dilutive Securities 0 0 Diluted EPS Income Available to Common Stockholders plus Assumed Conversions $ 21,374 10,056,392 $ 0.00 $ 60,179 10,056,392 $ 0.01 |
Long Term Debt (Details)
Long Term Debt (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | Jun. 30, 2015 | Dec. 31, 2016 | |
Details | |||||
HBII Note Monthly Payment | $ 13,980 | ||||
Non cash interest expense | 46,500 | $ 50,010 | |||
HBII Note Balance | 3,486,293 | $ 3,531,705 | |||
New Zealand Bank Monthly Payment | 13,980 | ||||
Term Loan With New Zealand Bank | $ 1,485,375 | 1,513,550 | |||
Proceeds from notes | $ 40,178 | $ 200,000 | |||
Accounts Payable, Interest-bearing, Interest Rate | 5.88% | ||||
Loan Payable Monthly Payment | $ 3,855 | ||||
Balance Due On Term Loan | $ 136,423 | 145,892 | |||
April Loan 2016 Interest Rate | 4.43% | ||||
March Loan 2016 Payable Monthly Payment | $ 749 | ||||
March 2016 Loan Balance | $ 32,846 | $ 37,919 |
Basic and Diluted Earnings Pe16
Basic and Diluted Earnings Per Share (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Details | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 368,333 | |
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Outstanding, Number | 600,000 | |
Net Income (Loss) applicable to Common Stockholders | $ 21,374 | $ 60,179 |
Weighted average common shares outstanding Basic | 10,056,392 | 10,056,392 |
Income (Loss) from Continuing Operations, Per Basic Share | $ 0 | $ 0.01 |
Net Income (Loss) Available to Common Stockholders, Diluted | $ 21,374 | $ 60,179 |
Weighted average common shares outstanding Diluted | 10,056,392 | 10,056,392 |
Income (Loss) from Continuing Operations, Per Diluted Share | $ 0 | $ 0.01 |
Commitments and Contingencies (
Commitments and Contingencies (Details) - USD ($) | Jul. 31, 2017 | Mar. 31, 2017 | Dec. 31, 2016 |
Details | |||
Construction in progress | $ 96,866 | $ 0 | |
New Zealand Podium Payments | $ 129,154 |
Related Party Transactions Di18
Related Party Transactions Disclosure (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Details | |||
Accounts Receivable From Hanalei-Bay International Investors | $ 561,742 | $ 598,689 | |
Recovery of bad debt | $ 36,947 | $ 118,617 |