Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2015 | Aug. 14, 2015 | |
Document and Entity Information: | ||
Entity Registrant Name | CASTLE GROUP INC | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2015 | |
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 | 2,015 | |
Document Fiscal Period Focus | Q2 | |
Trading Symbol | cagu |
THE CASTLE GROUP INC. CONDENSED
THE CASTLE GROUP INC. CONDENSED CONSOLIDATED BALANCE SHEET - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Current Assets | ||
Cash and cash equivalents | $ 1,883,014 | $ 1,753,780 |
Accounts receivable, net of allowance for bad debts | 1,669,644 | 2,365,071 |
Current deferred tax asset | 474,092 | 474,092 |
Note receivable, current portion | 15,000 | 15,000 |
Prepaids and other current assets | 551,852 | 443,011 |
Total Current Assets | 4,593,602 | 5,050,954 |
Property plant & equipment, net | 6,111,579 | 6,701,806 |
Deposits and other assets | 156,147 | 186,246 |
Note receivable | 181,502 | 185,018 |
Investment in limited liability company | 538,964 | 564,064 |
Deferred tax asset | 645,505 | 651,744 |
Goodwill | 54,726 | 54,726 |
TOTAL ASSETS | 12,282,025 | 13,394,558 |
Current Liabilities | ||
Accounts payable | 2,389,315 | 2,541,770 |
Payable to related parties | 3,666 | 0 |
Deposits payable | 774,977 | 862,527 |
Current portion of long term debt | 399,472 | 374,736 |
Current portion of long term debt to related parties | 32,658 | 45,072 |
Accrued salaries and wages | 1,516,552 | 1,579,974 |
Accrued taxes | 33,075 | 61,482 |
Other current liabilities | 98,564 | 2,714 |
Total Current Liabilities | 5,248,279 | 5,468,275 |
Non-Current Liabilities | ||
Long term debt, net of current portion | 5,767,575 | 6,621,571 |
Long term debt to related parties, net of current portion | 55,509 | 72,244 |
Total Non-Current Liabilities | 5,823,084 | 6,693,815 |
Total Liabilities | 11,071,363 | 12,162,090 |
Stockholders' Equity | ||
Preferred stock, $100 par value, 50,000 shares authorized, 11,050 shares issued and outstanding in 2015 and 2014, respectively | 1,105,000 | 1,105,000 |
Common stock, $.02 par value, 20,000,000 shares authorized, 10,056,392 & 10,046,392 shares issued and outstanding in 2015 and 2014, respectively | 201,129 | 200,929 |
Additional paid in capital | 4,993,594 | 4,877,774 |
Retained deficit | (5,127,232) | (4,978,419) |
Accumulated other comprehensive income | 38,171 | 27,184 |
Total Stockholders' Equity | 1,210,662 | 1,232,468 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 12,282,025 | $ 13,394,558 |
THE CASTLE GROUP INC. BALANCE S
THE CASTLE GROUP INC. BALANCE SHEET (PARENTHETICAL) - $ / shares | Mar. 31, 2015 | Dec. 31, 2014 |
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 | 10,046,392 |
Common stock outstanding | 10,056,392 | 10,046,392 |
THE CASTLE GROUP INC. CONDENSE4
THE CASTLE GROUP INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Revenues | ||||
Revenue attributed from properties | $ 2,680,728 | $ 3,142,747 | $ 6,054,379 | $ 6,533,859 |
Management & Service | 2,698,758 | 2,574,022 | 5,418,578 | 5,283,486 |
Other revenue | 1,400 | 400 | 1,800 | 400 |
Total Revenues | 5,380,886 | 5,717,169 | 11,474,757 | 11,817,745 |
Operating Expenses | ||||
Attributed property expenses | 2,718,815 | 2,991,496 | 5,546,108 | 5,883,394 |
Payroll and office expenses | 2,797,010 | 2,596,805 | 5,554,172 | 5,311,457 |
Administrative and general | 87,917 | 91,460 | 291,914 | 283,612 |
Depreciation | 56,804 | 58,496 | 113,225 | 114,067 |
Total Operating Expense | 5,660,546 | 5,738,257 | 11,505,419 | 11,592,530 |
Operating Income (Loss) | (279,660) | (21,088) | (30,662) | 225,215 |
Investment income | 18,000 | 9,000 | 68,000 | 58,095 |
Interest expense | (88,104) | (51,764) | (179,912) | (142,035) |
Income (Loss) before taxes | (349,764) | (63,852) | (142,574) | 141,275 |
Income tax benefit (expense) | 86,520 | 16,454 | (6,239) | (88,024) |
Net Income (Loss) | (263,244) | (47,398) | (148,813) | 53,251 |
Other Comprehensive Income | ||||
Foreign currency translation adjustment | 15,022 | (3,517) | 10,987 | (21,467) |
Total Comprehensive Income (Loss) | $ (248,222) | $ (50,915) | $ (137,826) | $ 31,784 |
Earnings (Loss) Per Share Basic | $ (0.03) | $ 0 | $ (0.01) | $ 0.01 |
Earnings (Loss) Per Share Diluted | $ (0.03) | $ 0 | $ (0.01) | $ 0.01 |
Weighted Average Shares Basic | 10,053,865 | 10,026,392 | 10,050,149 | 10,026,392 |
Weighted Average Shares Diluted | 10,053,865 | 10,026,392 | 10,050,149 | 10,394,725 |
THE CASTLE GROUP INC. CONDENSE5
THE CASTLE GROUP INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Cash Flows from Operating Activities | ||
Net income (loss) | $ (148,813) | $ 53,251 |
Depreciation | 113,225 | 114,067 |
Stock issued as compensation | 2,000 | 0 |
Non cash interest expense | 114,020 | 100,020 |
Investment income net | (68,000) | (47,595) |
Deferred taxes | 6,239 | 88,024 |
(Increase) decrease in Accounts receivable | 686,715 | 170,406 |
(Increase) decrease in Other current assets | (131,419) | (174,046) |
(Increase) decrease in Notes Receivable | 3,516 | 5,067 |
(Increase) decrease in Deposits and other assets | 10,860 | 12,402 |
Increase (decrease) in Accounts payable and accrued expenses | (57,868) | (210,504) |
Increase (decrease) in Customer advance deposits | (78,870) | 180,702 |
Net Cash from Operating Activities | 451,605 | 291,794 |
Cash Flows from Investing Activities | ||
Distributions from investments | 93,100 | 0 |
Purchase of assets | (352,586) | (28,799) |
Net Cash from Investing Activities | (259,486) | (28,799) |
Cash Flows from Financing Activities | ||
Proceeds from notes | 200,000 | 0 |
Payments on notes to related parties | (29,149) | 0 |
Payments on notes | (173,745) | (220,310) |
Net Cash from Financing Activities | (2,894) | (220,310) |
Effect of foreign currency exchange rate on changes in cash and cash equivalents | (59,991) | 49,375 |
Net Change in Cash and Cash Equivalents | 129,234 | 92,060 |
Beginning Balance | 1,753,780 | 1,137,215 |
Ending Balance | 1,883,014 | 1,229,275 |
Supplementary Information | ||
Cash Paid for Interest | (79,892) | (90,649) |
Cash Paid for Income Taxes | $ 0 | $ 0 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2015 | |
Notes | |
Summary of Significant Accounting Policies | 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 and in New Zealand under the trade name Castle Resorts and Hotels. The Company also has inactive operations in Saipan, Guam and Thailand. The accounting and reporting policies of The Castle Group, Inc. (the Company or Castle) conform with U.S. generally accepted accounting principles and practices within the hotel and resort management industry. Principles of Consolidation The condensed consolidated financial statements of the Company 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), and NZ Castle Resorts and Hotels wholly-owned subsidiary, Mocles Holdings Limited (a New Zealand Corporation). All significant inter-company transactions have been eliminated in the condensed consolidated financial statements. Note 1 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 and six month periods ended June 30, 2015, 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 financial statements be read in conjunction with the financial statements and notes thereto included in Castles most recent Annual Report on Form 10-K. Revenue Recognition In accordance with ASC 605: Revenue Recognition, the Company recognizes revenue when persuasive evidence of an arrangement exists, services have been rendered, the sales price charged is fixed or determinable, and collectability is reasonably assured. The Company recognizes revenue from the management of resort properties according to terms of its various management contracts. The Company has 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 the remaining gross rental proceeds to the owner of the rental unit. The Company only records the difference between the gross rental proceeds and the amount paid to the owner of the rental unit as Revenue Attributed from Properties. Under this arrangement, the Company is responsible for all of the operating expenses for the hotel or condominium unit. The Company records the expenses of operating the rental program at the property covered by the agreement. These expenses typically include housekeeping, food & beverage, maintenance, front desk, sales & marketing, advertising and all other operating costs at the property covered by the agreement and are recorded as Attributed Property Expenses. 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 this arrangement, 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 in addition to the percentage of gross rental proceeds the Company typically receives an incentive management fee 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 our management agreements and for such services the Company recognizes revenue in an amount equal to the expenses incurred. Revenues received under the net contract are recorded as Management and Service Revenue. 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 above. 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 of any profits or the covering of any operating loss belong to and is the responsibility of the owner of the property. 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. Note 2 New Accounting Pronouncements From time to time, new accounting pronouncements are issued by 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 consolidated financial statements upon adoption. In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). The Company is currently evaluating the impact of its pending adoption of ASU 2014-09 on the Companys consolidated financial statements and has not yet determined the method by which we will adopt the standard in 2017. The FASB announced on July 9, 2015 a one-year deferral for the effective date. In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements Going Concern. |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2015 | |
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 | 6 Months Ended |
Jun. 30, 2015 | |
Notes | |
Long Term Debt | Note 4 Long term debt 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. |
Equity-based Compensation
Equity-based Compensation | 6 Months Ended |
Jun. 30, 2015 | |
Notes | |
Equity-based Compensation | Note 5 Equity-Based Compensation The Company issued 10,000 shares of restricted common stock as a hiring incentive to one of its employees. The shares were issued on April 24, 2015 and were assigned a value of $0.20 per share or a total of $2,000 as compensation to the employee. |
Summary of Significant Accoun10
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2015 | |
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 and in New Zealand under the trade name Castle Resorts and Hotels. The Company also has inactive operations in Saipan, Guam and Thailand. The accounting and reporting policies of The Castle Group, Inc. (the Company or Castle) conform with U.S. generally accepted accounting principles and practices within the hotel and resort management industry. |
Principles of Consolidation | Principles of Consolidation The condensed consolidated financial statements of the Company 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), and NZ Castle Resorts and Hotels wholly-owned subsidiary, Mocles Holdings Limited (a New Zealand Corporation). All significant inter-company transactions have been eliminated in the condensed consolidated financial statements. |
Basis of Presentation | Note 1 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 and six month periods ended June 30, 2015, 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 financial statements be read in conjunction with the financial statements and notes thereto included in Castles most recent Annual Report on Form 10-K. |
Revenue Recognition | Revenue Recognition In accordance with ASC 605: Revenue Recognition, the Company recognizes revenue when persuasive evidence of an arrangement exists, services have been rendered, the sales price charged is fixed or determinable, and collectability is reasonably assured. The Company recognizes revenue from the management of resort properties according to terms of its various management contracts. The Company has 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 the remaining gross rental proceeds to the owner of the rental unit. The Company only records the difference between the gross rental proceeds and the amount paid to the owner of the rental unit as Revenue Attributed from Properties. Under this arrangement, the Company is responsible for all of the operating expenses for the hotel or condominium unit. The Company records the expenses of operating the rental program at the property covered by the agreement. These expenses typically include housekeeping, food & beverage, maintenance, front desk, sales & marketing, advertising and all other operating costs at the property covered by the agreement and are recorded as Attributed Property Expenses. 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 this arrangement, 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 in addition to the percentage of gross rental proceeds the Company typically receives an incentive management fee 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 our management agreements and for such services the Company recognizes revenue in an amount equal to the expenses incurred. Revenues received under the net contract are recorded as Management and Service Revenue. 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 above. 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 of any profits or the covering of any operating loss belong to and is the responsibility of the owner of the property. 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. |
New Accounting Pronouncements | Note 2 New Accounting Pronouncements From time to time, new accounting pronouncements are issued by 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 consolidated financial statements upon adoption. In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). The Company is currently evaluating the impact of its pending adoption of ASU 2014-09 on the Companys consolidated financial statements and has not yet determined the method by which we will adopt the standard in 2017. The FASB announced on July 9, 2015 a one-year deferral for the effective date. In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements Going Concern. |
Long Term Debt (Details)
Long Term Debt (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2015 | Jun. 30, 2014 | |
Details | |||
Proceeds from notes | $ 200,000 | $ 200,000 | $ 0 |
Accounts Payable, Interest-bearing, Interest Rate | 5.88% | 5.88% | |
Loan Payable Monthly Payment | $ 3,855 |
Equity-based Compensation (Deta
Equity-based Compensation (Details) - USD ($) | 1 Months Ended | 6 Months Ended | |
Apr. 30, 2015 | Jun. 30, 2015 | Jun. 30, 2014 | |
Details | |||
Stock Issued During Period, Shares, Issued for Services | 10,000 | ||
Shares Issued, Price Per Share | $ 0.20 | ||
Stock issued as compensation | $ 2,000 | $ 0 |