Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Mar. 30, 2018 | Jun. 30, 2017 | |
Document and Entity Information: | |||
Entity Registrant Name | CASTLE GROUP INC | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 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 | FY | ||
Trading Symbol | cagu | ||
Entity Public Float | $ 2,298,681 |
THE CASTLE GROUP, INC. CONSOLID
THE CASTLE GROUP, INC. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2017 & 2016 - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Current Assets | ||
Cash and cash equivalents | $ 4,324,791 | $ 2,775,956 |
Accounts receivable, net of allowance for bad debts | 2,469,922 | 2,405,473 |
Note receivable, current portion | 15,000 | 15,000 |
Prepaid and other current assets | 372,755 | 347,049 |
Total Current Assets | 7,182,468 | 5,543,478 |
Property plant & equipment, net | 6,030,724 | 6,100,677 |
Construction in progress | 940,430 | 0 |
Deposits and other assets | 121,193 | 127,484 |
Notes receivable | 169,900 | 173,878 |
Investment in limited liability company | 644,431 | 616,717 |
Deferred tax asset, net | 413,902 | 536,371 |
Goodwill | 54,726 | 54,726 |
TOTAL ASSETS | 15,557,774 | 13,153,331 |
Current Liabilities | ||
Accounts payable | 3,101,772 | 3,101,074 |
Deposits payable | 2,780,982 | 882,641 |
Current portion of long term debt | 340,896 | 378,694 |
Current portion of long term debt to related parties | 0 | 37,919 |
Accrued salaries and wages | 1,780,506 | 1,716,485 |
Accrued taxes | 54,644 | 29,387 |
Other current liabilities | 430,995 | 0 |
Total Current Liabilities | 8,489,795 | 6,146,200 |
Non-Current Liabilities | ||
Long term debt, net of current portion | 4,361,906 | 4,847,168 |
Other long term liabilities | 224,698 | 0 |
Total Non-Current Liabilities | 4,586,604 | 4,847,168 |
Total Liabilities | 13,076,399 | 10,993,368 |
Commitments and Contingencies (Note 4) | ||
Stockholders' Equity | ||
Preferred stock, $100 par value, 50,000 shares authorized, 11,050 shares issued and outstanding in 2017 and 2016, respectively | 1,105,000 | 1,105,000 |
Common stock, $0.02 par value, 20,000,000 shares authorized, 10,056,392 shares issued and outstanding in 2017 and 2016, respectively | 201,129 | 201,129 |
Additional paid-in capital | 5,556,008 | 5,322,708 |
Accumulated deficit | (4,409,227) | (4,515,200) |
Accumulated other comprehensive income | 28,465 | 46,326 |
Total Stockholders' Equity | 2,481,375 | 2,159,963 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 15,557,774 | $ 13,153,331 |
THE CASTLE GROUP INC. BALANCE S
THE CASTLE GROUP INC. BALANCE SHEET (PARENTHETICAL) - $ / shares | Dec. 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. CONSOLI4
THE CASTLE GROUP, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME YEARS ENDED DECEMBER 31, 2017 & 2016 - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Revenues | ||
Managed property revenue | $ 24,236,723 | $ 23,919,918 |
Food and beverage revenue | 1,977,560 | 2,367,782 |
Other revenue | 36,654 | 3,500 |
Total Revenues | 26,250,937 | 26,291,200 |
Operating Expenses | ||
Managed property expense | 19,308,369 | 19,541,507 |
Food and beverage expense | 1,716,420 | 1,790,797 |
Administrative and general expense | 4,476,839 | 3,839,202 |
Depreciation | 293,479 | 224,158 |
Total Operating Expense | 25,795,107 | 25,395,664 |
Operating Income | 455,830 | 895,536 |
Income from equity method investment | 48,714 | 75,525 |
Interest expense | (276,102) | (319,425) |
Income before taxes | 228,442 | 651,636 |
Income tax provision | (122,469) | (363,077) |
Net Income | 105,973 | 288,559 |
Foreign currency translation adjustment | (17,861) | (3,138) |
Total Comprehensive Income | 88,112 | 285,421 |
Change in unpaid cumulative dividends on convertible preferred stock | (82,875) | (82,875) |
Net Income Attributable to Common Stockholders | $ 23,098 | $ 205,684 |
Earnings Per Common Share Basic | $ 0 | $ 0.02 |
Earnings Per Common Share Diluted | $ 0 | $ 0.02 |
Weighted Average Shares Basic | 10,056,392 | 10,056,392 |
Weighted Average Shares Diluted | 10,056,392 | 10,056,392 |
THE CASTLE GROUP, INC. CONSOLI5
THE CASTLE GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2017 & 2016 - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Cash Flows from Operating Activities | ||
Net Income | $ 105,973 | $ 288,559 |
Depreciation | 293,479 | 224,158 |
Recovery of bad debt | (108,230) | (390,635) |
Decrease in allowance for bad debt, net of recovery | (2,985) | (11,806) |
Deferred compensation | 9,200 | 0 |
Warrants granted as compensation | 47,300 | 29,054 |
Non cash interest expense | 186,000 | 200,040 |
Income from equity method investment | (48,714) | (75,525) |
Distributions from equity method investment | 21,000 | 21,175 |
Deferred taxes | 122,469 | 363,077 |
(Increase) decrease in Accounts receivable | (60,998) | (355,929) |
(Increase) decrease in Other current assets | (5,950) | 38,623 |
(Increase) decrease in Notes receivable | 112,208 | 395,293 |
Increase (decrease) in Deposits and other assets | 26,781 | 4,323 |
Increase (decrease) in Accounts payable and accrued expenses | (11,070) | 583,144 |
Increase (decrease) in Deposits payable | 1,896,656 | 65,882 |
Net Cash Provided by Operating Activities | 2,583,119 | 1,379,433 |
Cash Flows from Investing Activities | ||
Construction in progress | (295,129) | 0 |
Purchase of fixed assets | (80,176) | (227,586) |
Net Cash Used In Investing Activities | (375,305) | (227,586) |
Cash Flows from Financing Activities | ||
Proceeds from notes | 0 | 40,178 |
Payments on notes to related parties | (37,919) | (34,325) |
Payments on notes | (651,116) | (762,432) |
Net Cash Used In Financing Activities | (689,035) | (756,579) |
Effect of foreign currency exchange rate on changes in cash and cash equivalents | 30,056 | 10,131 |
Net Change in Cash and Cash Equivalents | 1,548,835 | 405,399 |
Beginning Balance | 2,775,956 | 2,370,557 |
Ending Balance | 4,324,791 | 2,775,956 |
Supplementary disclosures of cash flow information | ||
Cash paid for interest | 90,102 | 119,385 |
Cash paid for income taxes | 0 | 16,067 |
Non-cash investing and financing activities | ||
Construction in progress included in other current liabilities and other long term liabilities | $ 646,493 | $ 0 |
THE CASTLE GROUP, INC. CONSOLI6
THE CASTLE GROUP, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT) YEARS ENDING DECEMBER 31, 2017 & 2016 - USD ($) | Preferred Stock | Common Stock | Additional Paid-in Capital | Retained Deficit | Accumulated Other Comprehensive Income (Loss) | Total |
Balance preferred shares, beginning balance at Dec. 31, 2015 | 11,050 | 0 | 0 | 0 | 0 | 11,050 |
Balance common shares, beginning balance at Dec. 31, 2015 | 0 | 10,056,392 | 0 | 0 | 0 | 10,056,392 |
Stockholders' Equity, beginning balance at Dec. 31, 2015 | $ 1,105,000 | $ 201,129 | $ 5,093,614 | $ (4,803,759) | $ 49,464 | $ 1,645,448 |
Net Income | 0 | 0 | 0 | 288,559 | 0 | 288,559 |
Warrants granted as compensation | 0 | 0 | 29,054 | 0 | 0 | 29,054 |
Foreign currency translation adjustment | 0 | 0 | 0 | 0 | (3,138) | (3,138) |
Non cash interest expense | $ 0 | $ 0 | $ 200,040 | $ 0 | $ 0 | $ 200,040 |
Balance preferred shares, ending balance at Dec. 31, 2016 | 11,050 | 0 | 0 | 0 | 0 | 11,050 |
Balance common shares, ending balance at Dec. 31, 2016 | 0 | 10,056,392 | 0 | 0 | 0 | 10,056,392 |
Stockholders' Equity, ending balance at Dec. 31, 2016 | $ 1,105,000 | $ 201,129 | $ 5,322,708 | $ (4,515,200) | $ 46,326 | $ 2,159,963 |
Net Income | 0 | 0 | 0 | 105,973 | 0 | 105,973 |
Warrants granted as compensation | 0 | 0 | 47,300 | 0 | 0 | 47,300 |
Foreign currency translation adjustment | 0 | 0 | 0 | 0 | (17,861) | (17,861) |
Non cash interest expense | $ 0 | $ 0 | $ 186,000 | $ 0 | $ 0 | $ 186,000 |
Balance preferred shares, ending balance at Dec. 31, 2017 | 11,050 | 0 | 0 | 0 | 0 | 11,050 |
Balance common shares, ending balance at Dec. 31, 2017 | 0 | 10,056,392 | 0 | 0 | 0 | 10,056,392 |
Stockholders' Equity, ending balance at Dec. 31, 2017 | $ 1,105,000 | $ 201,129 | $ 5,556,008 | $ (4,409,227) | $ 28,465 | $ 2,481,375 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2017 | |
Notes | |
Summary of Significant Accounting Policies | 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) (Mocles), 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. Use of Management Estimates in Financial Statements The preparation of financial statements in conformity with GAAP 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 date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates. These estimates include stock-based compensation expense, valuation of deferred tax assets, useful lives of property, plant, and equipment, and allowance for bad debt. Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Accounts Receivable The Company records accounts receivable for revenue earned but not yet collected. The Company estimates allowances for doubtful accounts based on the aged receivable balances and historical losses. If the Company determines any account to be uncollectible based on significant delinquency or other factors, it is immediately written off. An allowance for bad debts has been provided based on estimated losses amounting to $163,585 and $166,570 as of December 31, 2017 and 2016, respectively. Property, Plant, and Equipment Property, plant, and equipment are recorded at cost. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounting records, and any resulting gain or loss is reflected in the consolidated statements of Comprehensive Income for the period. The cost of maintenance and repairs is expensed as incurred. Renewals and betterments are capitalized and depreciated over their estimated useful lives. At December 31, 2017 and 2016, property, plant, and equipment consisted of the following: 2017 2016 Real estate - Podium $ 7,362,648 $ 7,181,225 Land and improvements 278,984 248,000 Equipment and furnishings 1,740,800 1,671,509 Computer software 162,395 143,568 Less accumulated depreciation (3,514,103) (3,143,625) Net property, furniture and equipment 6,030,724 6,100,677 Depreciation is computed using the straight-line methods over the estimated useful life of the assets (Computer software 3 years, Equipment and furnishings 5 to 7 years, Podium 50 years, and Improvements 30 years). Land is not depreciated. For the years ended December 31, 2017 and 2016, depreciation expense was $293,479 and $224,158, respectively. Goodwill The Company performs impairment tests of goodwill at a reporting unit level, which is one level below the operating segments. The Companys operating segments are primarily based on geographic responsibility, which is consistent with the way management runs its business. The goodwill impairment test consists of a two-step process, if necessary. The first step is to compare the fair value of a reporting unit to its carrying value, including goodwill. The Company typically uses discounted cash flow models to determine the fair value of a reporting unit. The assumptions used in these models are consistent with those the Company believes hypothetical marketplace participants would use. If the fair value of the reporting unit is less than its carrying value, the second step of the impairment test must be performed in order to determine the amount of impairment loss, if any. The second step compares the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit's goodwill exceeds its implied fair value, an impairment charge is recognized in an amount equal to that excess. The loss recognized cannot exceed the carrying amount of goodwill. The Company has the option to perform a qualitative assessment of goodwill prior to completing the two-step process described above to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill and other intangible assets. If the Company concludes that this is the case, it must perform the two-step process. Otherwise, the Company will forego the two-step process and does not need to perform any further testing. During 2017, the Company performed qualitative assessments at the reporting unit level on Goodwill balances, and noted that there were no triggering events requiring further analysis. The Company has completed its annual impairment testing of its goodwill at December 31 of each of the years presented. The Company has not recognized any impairment losses during the periods presented. 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. The Company has two basic types of agreements. 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. Under a Gross Contract the Company pays a portion of the gross rental proceeds to the owner of the rental unit. The Company 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. 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, under a Net Contract, in most cases 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 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 Gross Contract, 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 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. The Company also recognizes revenue from the operation of restaurants and bars at its New Zealand property. Revenue as presented in our consolidated statements of comprehensive income, represents food and beverage product sold and is presented net of discounts, coupons, employee meals and complimentary meals. Revenue from restaurant sales is recognized when food and beverage products are sold. Taxes collected from customers and remitted to governmental authorities are presented on a net basis within sales in our consolidated statements of comprehensive income. Advertising, Sales and Marketing Expenses The Company incurs sales and marketing expenses (mostly consisting of employee wages) in conjunction with the production of promotional materials, trade shows, and related travel costs. The Company expenses advertising and marketing costs as incurred or as the advertising takes place. For the years ended December 31, 2017 and 2016, total advertising expense was $1,174,047 and $1,178,320 respectively, and are included in administrative and general expense. Stock-Based Compensation The Company has accounted for stock-based compensation by recording an expense associated with the fair value of stock-based compensation over the requisite service period, which typically represents the vesting period. For employees, the measurement date is the grant date. For non-employees the measurement date is the earlier of the date of performance completion or the date of performance commitment if a sufficient disincentive to perform exists. The Company currently uses the Black-Scholes option valuation model to calculate the valuation of stock options and warrants at the measurement date. Option pricing models require the input of highly subjective assumptions, including the expected price volatility. Changes in these assumptions can materially affect the fair value estimate. In December 2016, the Company granted a total of fully vested 200,000 warrants to purchase the Companys common stock at a price of $1.00 per share, exercisable on or before December 12, 2021 by issuing 50,000 warrants to each of four employees. Using the Black-Scholes model, the warrants were valued at $0.14527 for each warrant and the Company recorded an expense of $29,054 and an increase of the same amount to Additional Paid in Capital. No warrants were exercised as of December 31, 2017. In November 2017, the Company, as part of an amendment to the employment contracts with its Chief Executive Officer and Chief Operating Officer, granted a total of 1,750,000 fully vested warrants. The warrants expire at various expiration dates and at various stock prices. Using the Black-Scholes model, the warrants were valued as shown in the table below. The total fair value of the warrants of $47,300 was recorded as an expense and an increase of the same amount to Additional Paid in Capital. No warrants were exercised as of December 31, 2017. Warrants Issued Exercise Price Expiration Per share using Black Scholes Total 750,000 5.00 10/31/2022 0.0151 11,340 500,000 7.00 10/31/2024 0.0261 13,060 500,000 10.00 10/31/2027 0.0458 22,900 Deferred Compensation The company has accounted for deferred compensation by recording an expense associated with the present value of the deferred stock compensation over the requisite vesting period. The total present value of the deferred compensation using a discount rate of 5.75% is amortized from the date of issuance to the retirement of the liability. A long term liability has been recorded to accumulate the deferred compensation that will be paid in future years. In November 2017, the Company, as part of an amendment to the employment contracts with its Chief Executive Officer and Chief Operating Officer, granted a total of 1,750,000 fully vested warrants (see note 8). The contracts also called for deferred compensation of $1,000,000 payable to the Chief Executive Officer in ten annual installments of $100,000 beginning November 1, 2027, and $500,000 payable to the Chief Operating Officer in ten annual installments of $50,000 beginning November 1, 2017. The deferred compensation was valued using a sinking fund approach and the Company expensed $9,200 as an expense and as long term liability as of December 31, 2017. Income Taxes Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company has recorded deferred tax assets for the Companys US based operations as these benefits will more likely than not be realized in the future. The Company does not recognize any deferred tax assets from its net operating losses from the Companys foreign operations, as it is not likely that these tax benefits will be realized in the future. The recent tax reform reduced the corporate income tax rates, which therefore reduced the value of our future deferred tax benefits. We recorded $130,341 of deferred income tax expense for the year ended December 31, 2017 which represents the amount of reduction in the value of our deferred tax benefits due to the decrease in the corporate income tax rate beginning in calendar 2018. Tax benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon ultimate settlement. Unrecognized tax benefits are tax benefits claimed in the Companys tax returns that do not meet these recognition and measurement standards. The Companys policy is to recognize potential interest and penalties accrued related to unrecognized tax benefits within income tax expense. For the years ended December 31, 2017 and 2016, the Company did not recognize any interest or penalties in its statements of comprehensive income, nor did it have any interest or penalties accrued in its Balance Sheet at December 31, 2017 and 2016, relating to unrecognized tax benefits. Basic and Diluted 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 2,350,000 shares and 600,000 shares for the years ended December 31, 2017 and 2016, respectively 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. Reconciliation of the Numerator and Denominator of the Basic and Diluted Earnings Per Share Computations: Basic EPS December 31, 2017 December 31, 2016 Income Shares Per Share Income Shares Per Share Numerator Denominator Amount Numerator Denominator Amount Income Available to Common Stockholders $ 23,098 10,056,392 $ 0.00 $ 205,684 10,056,392 $ 0.02 Effect of Dilutive Securities 0 0 Diluted EPS Income Available to Common Stockholders plus Assumed Conversions $ 23,098 10,056,392 $ 0.00 $ 205,684 10,056,392 $ 0.02 Concentration of Credit Risks The Company maintains its cash with several financial institutions in Hawaii and New Zealand. Balances maintained with the US institutions are occasionally in excess of US FDIC insurance limits. As of December 31, 2017 and 2016, the Company had balances of $3,557,316 and $1,189,316, respectively, in excess of US federally insured limits of $250,000 per financial institution. The Company also maintained cash in a New Zealand bank with balances of $267,049 and $1,144,304 at December 31, 2017 and 2016, respectively. The New Zealand government does not provide any insurance for financial institution account losses. The Company has never experienced any losses related to these balances. Concentration in Market Area The Company manages hotel properties in Hawaii and New Zealand, and is dependent on the visitor industries in these geographic areas. Fair Value of Financial Instruments Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. A fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, may be used to measure fair value. As of December 31, 2017 and 2016, there are no assets or liabilities measured at fair value on a recurring basis. The carrying values of cash and cash equivalents, accounts receivable, and accounts payable and accrued expenses approximate fair value due to the relatively short-term maturities of these financial instruments. The carrying values of notes receivable and notes payable approximate fair value as these notes have interest rates or imputed interest rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Long-Lived Assets The Company regularly evaluates whether events or circumstances have occurred that indicate the carrying value of long-lived assets may not be recoverable. When factors indicate the asset may not be recoverable, the Company compares the related undiscounted future net cash flows to the carrying value of the asset to determine if impairment exists. If the expected undiscounted future net cash flows are less than the carrying value, an impairment charge is recognized based on the fair value of the asset. No impairments were indicated or recorded during the years ended December 31, 2017 and 2016. Investment in Limited Liability Company On July 23, 2010, the Company acquired a 7.0% common series interest in a limited liability corporation that owns a hotel located in Hawaii. The investment is accounted for as an equity method investment since the Company has significant influence over the investee. During the years ended December 31, 2017 and 2016, the Company recognized $48,714 and $75,525, respectively, in income resulting from the portion of net income attributable to its common series ownership interest. For the year ended December 31, 2017, the investee had sales of $812,915, gross profit of $735,053 and net income of $737,605. For the year ended December 31, 2016, the investee had sales of $856,896, gross profit of $768,111 and net income of $775,914. The Company does not anticipate that the amount of income from this investment will exceed 20% of its pretax income in future years. Foreign Currency Translation and Transaction Gains/Losses The US dollar is the functional currency of the Companys consolidated entities operating in the United States. The functional currency for the Companys consolidated entities operating outside of the United States is generally the currency of the country in which the entity primarily generates and expends cash. For consolidated entities whose functional currency is not the U.S. dollar, the Company translates its financial statements into U.S. dollars. Assets and liabilities are translated at the exchange rate in effect as of the financial statement date, and the line items of the results of operations are translated using the weighted average exchange rate for the year. Translation adjustments resulting from these translations are included as a separate component of stockholders equity in accumulated other comprehensive income (loss). Gains and losses resulting from foreign currency transactions are included in the consolidated statements of comprehensive income (loss). Reclassifications The Company has reclassified certain prior-period amounts to conform to the current-period presentation. The Company reclassified food and beverage operating revenues and expenses into separate lines on the consolidated statements of comprehensive income in order to more accurately depict the results of operations. Adoption of New Accounting Pronouncements Deferred taxes In November 2015, FASB issued ASU no. 2015-17, Balance Sheet Classification of Deferred Taxes. The ASU simplifies the presentation of deferred taxes on a classified statement of financial position by classifying all deferred taxes and liabilities as noncurrent. The effective date of this change for public companies is for fiscal years beginning after December 15, 2016 with early application available to all entities as of the beginning of an interim or annual period. This update may be applied either prospectively or retrospectively to all periods presented. The Company chose to early adopt this change in accounting principle as of June 30, 2016. 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 and forfeiture rate calculations. This ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. We adopted ASU 2016-09 effective January 1, 2017, and plan to track forfeitures as they occur. The adoption of ASU 2016-09 did not have a material impact on our financial condition or results of operations. In August 2016, the FASB issued ASU 2016-15, 2 which amends ASC 230 to add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. For public business entities, the guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. An entity is required to make an accounting policy election to classify distributions received from equity method investees under either of the following methods: Cumulative-earnings approach Under this approach, distributions are presumed to be returns on investment and classified as operating cash inflows. However, if the cumulative distributions received, less distributions received in prior periods that were determined to be returns of investment, exceed the entitys cumulative equity in earnings, such excess is a return of capital and should be classified as cash inflows from investing activities. Nature of the distribution approach Under this approach, each distribution is evaluated on the basis of the source of the payment and classified as either operating cash inflows or investing cash inflows. We adopted ASU 2016-15 effective January 1, 2017 using the cumulative earnings approach and elected to classify distributions received from equity method investees under the Cumulative-earnings approach. Accounting Pronouncements Not Yet Adopted 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 ASU 2014 09, Revenue from Contracts with Customers (Topic 606) (ASU 2014 09). The FASB and the International Accounting Standards Board (IASB) initiated a joint project to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and IFRS that would: (i) remove inconsistencies and weaknesses in revenue requirements; (ii) provide a more robust framework for addressing revenue issues; (iii) improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets; (iv) provide more useful information to users of financial statements through improved disclosure requirements; and (v) simplify the preparation of financial statements by reducing the number of requirements to which an entity must refer. To meet those objectives, the FASB amended the FASB Accounting Standards Codification (Codification) and created a new Topic 606, Revenue from Contracts with Customers. The core principle of the guidance in ASU 2014 09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance in this ASU supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry specific guidance throughout the Industry Topics of the Codification. The ASU is effective for fiscal years beginning after December 15, 2017 (and interim periods within that period). In periods subsequent to the initial issuance of this ASU, the FASB has issued additional ASUs clarifying items within Topic 606, as follows: - In August 2015, the FASB issued ASU 2015-14, "Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date," which defers by one year the effective date of ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)" to annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. - In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (ASU 2016-08). The amendments in ASU 2016-08 serve to clarify the implementation guidance on principal vs. agent considerations. - In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing (ASU 2016-10). The purpose of ASU 2016-10 is to clarify two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance (while retaining the related principles for those areas). - In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606) (ASU 2016-12). The purpose of ASU 2016-12 is to address certain issues identified to improve Topic 606 by enhancing guidance on assessing collectability, presentation of sales taxes and other similar taxes collected from customers, noncash consideration and completed contracts and contract modifications at transition. - In December 2016, the FASB issued ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, which amends certain aspects of the Boards new revenue standard, ASU 2014-09. This ASU addresses thirteen specific issues pertaining to Topic 606, Revenue from Contracts with Customers. Our qualitative evaluation of ASU 2014-09 included identifying the potential differences in the timing and/or method of revenue recognition for our contracts and, ultimately, the expected impact on our business processes, systems and controls. As part of this evaluation, we have reviewed our customer contracts and applied the five-step model of the new standard to each contact type identified thats associated to our material revenue streams and have compared the results to our current accounting practices. Areas of impact will include the timing of revenue recognition during the calendar year of certain incentive fees which we receive from one of our managed properties. The timing of our revenue recognition for this contract will have no effect on our annual financial statements, however it may impact our quarterly interim financial statement as we will accelerate the recognition of our incentive fee on a pro-rated basis over the fiscal year if it is determined that this incentive fee shall be earned during the fiscal year. We have adopted this standard on January 1, 2018, as well as other clarifications and technical guidance issued by the FASB related to this new revenue standard using the retrospective adoption method. Based on our assessment, the impact that ASU 2014-09 will have on our financial statements is expected to remain substantially unchanged. 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 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 $634,780 of operating lease obligations as of December 31, 2017 (see Note 4) and upon adoption of this standard it will record a ROU asset and lease liability for the 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 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. |
Related Party Transactions Disc
Related Party Transactions Disclosure | 12 Months Ended |
Dec. 31, 2017 | |
Notes | |
Related Party Transactions Disclosure | 2. Related Party Transactions Hanalei Bay International Investors (HBII) As disclosed in Note 3, the Company has a receivable of $490,459 from Hanalei Bay International Investors (HBII) and this note is fully reserved. The Chairman and CEO of the Company is the sole shareholder of HBII Management, Inc., the managing General Partner of HBII. During the years ended December 31, 2017 and December 31, 2016, the Company collected $108,230 and $390,635, respectively. Investment in LLC In July 2010, the Company acquired a 7.0% interest in a limited liability company that purchased one of the properties managed by the Company. After the purchase, the chief financial officer of Castle Resorts & Hotels, Inc. was appointed treasurer of a subsidiary of the limited liability company that owns the property (see Note 1). Related Party Loans In 2002, the Companys Chairman and CEO advanced $$117,316 to the Company for general working capital. During 2017, the Company made payments against the note of $37,919 and also made payments of $2,085 in interest accrued on the note. The note was paid in full in December 2017. In 2004, as part of the Companys purchase of real estate in New Zealand, the seller of the real estate provided an interest free loan on a portion of the total purchase price (see Note 6). The sellers of the real estate collectively own 0.7% of the outstanding common stock of the Company as of December 31.2017. The loan does not carry interest and the Company has imputed interest expense of $186,000 and $200,040 for the years ended December 31, 2017 and 2016. The New Zealand real estate loan matures on March 31, 2019. An additional extension to March 31, 2024 is available if the Company remains current with its obligations in connection with the purchase of the New Zealand real estate. Rental of Unit In September of 2013, an entity which is 57% owned by the Companys Chairman and CEO purchased the front office unit at one of the managed properties, and the Company entered into a rental agreement for the front office unit. The unit was previously owned by the Association of Apartment Owners of the property and was purchased in order to secure the Companys rental of the space which is necessary for the Companys operations at the property. The rental agreement is on the same terms as the previous owner and there were no increases in rent or other charges. The agreement expires on September 30, 2021 and the Company has the option to extend the agreement for two periods of five years each after September 30, 2021. The agreement calls for monthly rental payments of $6,000 plus Hawaii general excise tax. For each of the years ended December 31, 2017 and 2016, the Company made rental payments of $75,000 for the unit. |
Notes Receivable
Notes Receivable | 12 Months Ended |
Dec. 31, 2017 | |
Notes | |
Notes Receivable | 3. Notes Receivable Notes receivable at December 31 consisted of the following: 2017 2016 Note receivable from HBII, secured by a direct assignment of HBII right to receive future proceeds from HBIIs ownership interest in unrelated real estate development company (Assigned to third parties- see Note 2 and 4) $ 490,459 $ 598,689 Less Reserve for Uncollectible Notes (490,459) (598,689) Notes Receivable from Oceanfront Realty, interest rate of 2%. Note is payment for the sale of one of the Company's management contracts. Payments are payable based on 30% of the net profits originating from the contract. 184,900 188,878 Notes Receivable, Total 188,900 188,878 Less Current Portion (15,000) (15,000) Notes Receivable, Non-current $ 169,900 $ 173,878 |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2017 | |
Notes | |
Commitments and Contingencies | 4. Commitments and Contingencies Leases The Company leases two office spaces that expire on October 31, 2019 and February 28, 2020. The Company also leases office space at one of its managed properties from a related party that expires September 30, 2021. For the years ended December 31, 2017 and 2016, the Company paid $401,326 and $402,291, respectively, in lease expense for these leases. As of December 31, 2017, the future minimum rental commitment under these leases was $916,030. Year Amount 2018 399,770 2019 366,205 2020 93,805 2021 56,250 Total $916,030 Management Contracts The Company manages several hotels and resorts under management agreements expiring at various dates. Several of these management agreements contain automatic extensions for periods of 1 to 10 years. In addition, the Company has sales, marketing and reservations agreements with other hotels and resorts expiring at various dates through December 2022. Several of these agreements contain automatic extensions for periods of one month to five years. Fees received are based on revenues, net available cash flows or commissions as defined in the respective agreements. Contractor Settlement 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 imposed a special assessment on all the owners of units in the building. The Company has paid NZ $323,347 (US $229,641) which represented the amount due under the initial special assessment. At a meeting of the Body Corporate held in November of 2017, the Body Corporate determined that the amounts collected were not sufficient to remedy the defect and as a result, the Body Corporate imposed an additional special assessment in the amount of NZ $1,041,113 (US$739,398), payable in 20 monthly installments of NZ $52,056 (US $36,969), representing the Companys share of the total special assessment. Payment of this special assessment began November 2017. These payments were capitalized by the Company since the repairs are expected to improve and extend the life of the property. At December 31, 2017, the Company has paid a total of NZ $413,879 (US $293,937) for the initial and additional special assessment classifying this as construction in progress on the accompanying balance sheet. The Company also recorded present value of the balance of the assessment for the additional $646,493 that is to be paid in 2018 and 2019 in construction in progress with an offsetting $430,995 recorded as other current liabilities and $215,498 as other long term liabilities. Construction will commence in the first quarter of 2018. Litigation From time to time, there are claims and lawsuits pending against the Company involving complaints, which are normal and reasonably foreseeable in light of the nature of the Companys business. The ultimate liability of the Company, if any, cannot be determined at this time. Based upon consultation with counsel, management does not expect that the aggregate liability, if any, resulting from these proceedings would have a material effect on the Companys consolidated financial position, results of operations or liquidity. |
Employee Benefits
Employee Benefits | 12 Months Ended |
Dec. 31, 2017 | |
Notes | |
Employee Benefits | 5. Employee Benefits The Company has a 401(k) Profit Sharing Plan (the Plan) available for its USA employees. Any employee with one-year of continuous service and 1,000 credited hours of service, who is at least twenty-one years old, is eligible to participate. For the years ended December 31, 2017 and 2016, the Company made no contributions. The Company has a mandated retirement plan in New Zealand. All employees are automatically enrolled in this program when hired but have two to four weeks to opt out at their discretion. Employees elect to contribute between thee to eight percent of their gross earnings and the Company is required to also contribute a minimum of three percent for each enrolled employee. For the years ended December 31, 2017 and 2016, the Company made contributions of $34,036 and $36,211, respectively. In November 2017, the Company, as part of an amendment to the employment contracts with its Chief Executive Officer and Chief Operating Officer, granted a total of 1,750,000 fully vested warrants (see note 8). The contracts also called for deferred compensation of $1,000,000 payable to the Chief Executive Officer in ten annual installments of $100,000 beginning November 1, 2027, and $500,000 payable to the Chief Operating Officer in ten annual installments of $50,000 beginning November 1, 2017. The deferred compensation was valued using a sinking fund approach and the Company expensed $9,200 as an expense and as long term liability as of December 31, 2017. The deferred compensation vests to the employee over the term of their employment contracts (ten years for the Chief Executive Officer and five years for the Chief Operating Officer). The Company is amortizing the net present value of the deferred compensation over the length of the employment contracts. |
Notes Payable
Notes Payable | 12 Months Ended |
Dec. 31, 2017 | |
Notes | |
Notes Payable | 6. Long Term Debt Long term debt at December 31 consisted of the following: 2017 2016 Note dated 12/31/02 from the Company's CEO , with interest at 10% due on or before 12/31/17, with monthly payments of $3,334 commencing January 2015, unsecured 0 $ 37,919 Less current portion 0 37,919 Long term debt to related parties, net of current portion 0 0 Related party note dated 12/31/04, 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 Company's New Zealand subsidiary, with the Company as guarantor. The note calls for payments of NZ $20,000 (US $13,854 at 12/31/16) 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 $200,040 for the years ended December 31, 2016 and 2015 so that the combined interest rate paid on the note payable at December 31, 2016 and 2015 is approximately 5.4%, and 4.9%, respectively. 3,321,463 3,531,705 Note dated 12/31/04, payable to a New Zealand bank, Westpac, for a loan in favor of Mocles at the banks prime rate plus 2% which as of December 31, 2016 was 5.4%. The note calls for monthly interest payments and payments against principal of NZ $20,000 (US $13,854). The maturity date is March 31, 2019 with an extension to March 31, 2024 available if the Company is not in default. 1,381,339 1,513,550 Revolving line of credit with a bank for up to $600,000 and $300,000 as of December 31, 2016 and 2015, respectively. The line is secured by a general security interest in the Companys assets. Draws against the line will bear interest at the banks base lending rate plus 1.5%, which as of December 31, 2016 was 5.875%. The line has a termination date of October 31, 2017.. 0 0 Term loan with a local bank dated June 19, 2015 with an original Face value of $200,000 secured by a general security interest in the Companys assets. The note calls for sixty monthly payments of $3,855 to be applied to principal and interest at a fixed rate of 5.875%. The maturity date is June 19, 2020. 0 145,892 Equipment loan with a local bank dated March 31, 2016. The loan is secured by vehicles purchased by the Company for one of its properties. The note calls for sixty monthly payments of $749 to be applied to Principal and interest at a fixed rate of 4.43%. The maturity date is March 31, 2021. 0 34,715 Revolving line of credit with a bank for up to NZ $150,000 (US$103,905). The line is secured by a general security interest in the Companys assets in New Zealand. Draws against the line will bear interest at the banks base lending rate plus 2%. The line is cancellable at any time by the bank. 0 0 Subtotal $ 4,702,802 $ 5,225,862 Less Current Portion 340,896 378,694 Notes Payable, Non-current $ 4,361,906 $ 4,847,168 The five year payout schedule for long term debt, is as follows (assuming extensions of the maturity date of the related party note and Westpac note to March 31, 2024): Year Amount 2018 $340,896 2019 340,896 2020 340,896 2021 340,896 2022 340,896 Thereafter 2,998,332 Total $4,702,802 |
Stockholders Equity
Stockholders Equity | 12 Months Ended |
Dec. 31, 2017 | |
Notes | |
Stockholders Equity | 7. Preferred Stock In 1999 and 2000, the Company issued a total of 11,050 shares of $100 par value preferred stock to certain officers and directors. Dividends are cumulative from the date of original issue and are payable semi-annually, when, and if declared by the board of directors beginning July 15, 1999, at a rate of $7.50 per annum per share. At December 31, 2017, undeclared and unpaid dividends on these shares were $1,513,551 or $136.97 per preferred share. At December 31, 2016, undeclared and unpaid dividends on these shares were $1,430,358 or $129.44 per preferred share. These dividends are not accrued as a liability, as no declaration has occurred. However dividends are considered for basic and diluted earnings per share computation (see Note 1). The shares are nonvoting, and each share of preferred stock is convertible into 33.33 shares of the Companys common stock at an exercise price of $3.00 per share. As of January 15, 2001, the preferred stock is redeemable at the option of the Company at a redemption price of $100 per share plus accrued and unpaid dividends. 8. Common Stock Common Stock Options and Warrant The Company does not have Stock Based Incentive, Stock Purchase or Stock Option or Warrant Plans; however there were warrants granted to employees of the Company in November 2017, as discussed below. In November 2017, the Company, as part of an amendment to the employment contracts with its Chief Executive Officer and Chief Operating Officer, granted a total of 1,750,000 fully vested warrants. The employment contracts were filed on the Companys Form 8-K, filed on November 13, 2017. The warrants expire at various expiration dates and at various stock prices. Using the Black-Scholes model, the warrants were valued as shown in the table below. The total expense of $47,300 was recorded as an expense and an increase of the same amount to Additional Paid in Capital. No warrants were exercised as of December 31, 2017. Black-Scholes inputs included: Volatility 68.63%, expected term 5-10 years, Risk free rate 0.85%, Dividend yield 0%. Warrants Issued Exercise Price Expiration Per share using Black Scholes Total 750,000 5.00 10/31/2022 0.0151 11,340 500,000 7.00 10/31/2024 0.0261 13,060 500,000 10.00 10/31/2027 0.0458 22,900 In December 2016, the Company granted a total of 200,000 warrants to purchase the Companys common stock at a price of $1.00 per share, exercisable on or before December 12, 2021 by issuing 50,000 warrants to each of four employees. Using the Black-Scholes model, the warrants were valued as shown in the table below. The total fair value of the warrants of $29,054 was recorded as an expense and an increase of the same amount to Additional Paid-in Capital. Black-Scholes inputs included: Volatility 75.32%, Expected Term 5 years, Risk Free Rate 1.9%, Dividend Yield 0%. Warrants Issued Exercise Price Expiration Per share using Black Scholes Total 200,000 $1.00 12/12/2021 $0.14527 $29,054 Changes in warrants were as follows: Number of Shares Weighted Average Exercise Price Remaining Contractual Term (in Years) Intrinsic Value Outstanding and exercisable at January 1, 2016 400,000 $1.00 2.42 $0 Granted 200,000 1.00 3.95 0 Outstanding and exercisable at December 31, 2016 600,000 $1.00 3.26 $0 Granted 1,750,000 7.00 6.83 0 Outstanding and exercisable at December 31, 2017 2,350,000 $5.47 5.31 0 The following table summarizes information about compensatory warrants outstanding at December 31, 2017: Exercise Price Number Outstanding Expiration Date Weighted Average Remaining Contractual Life (in years) Weighted Average Exercise Price Number Exercisable Weighted Average Exercise Price $1.00 200,000 December 12, 2021 3.95 $1.00 200,000 $1.00 $1.00 400,000 May 28, 2019 1.42 $ 1.00 400,000 $ 1.00 $5.00 750,000 10/31/2022 4.83 $ 5.00 750,000 $ 5.00 $7.00 500,000 10/31/2024 6.83 $ 7.00 500,000 $ 7.00 $10.00 500,000 10/31/2027 9.83 $ 10.00 500,000 $ 10.00 |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2017 | |
Notes | |
Income Taxes | 9. Income Taxes The Companys income before taxes for 2017 and 2016 are as follows: 2017 2016 United States $ 232,244 $ 353,077 New Zealand (3,802) 298,559 Income before taxes $ 228,442 $ 651,636 The provision for income taxes consists of the following: 2017 2016 Current 0 0 Deferred Federal 120,713 322,954 State 1,756 40,123 Total Provision (Benefit) $ 122,469 $ 363,077 The components of the Companys deferred tax assets and liabilities are as follows: 2017 2016 Deferred Tax Assets (liabilities) Accounts Receivable $ 43,442 $ 62,058 Accrued Vacation 126,482 170,593 Net Operating Loss 73,212 148,756 Note Receivable 248,407 351,599 Fixed Assets (11,979) (78,652) Net Operating Loss Carryforwards 14,724 Less: Valuation Allowance (80,386) (117,983) Total Deferred Tax Asset, Net $ 413,902 $ 536,371 As of December 31, 2017, the Company had net operating loss carry forwards amounting to $741,028 for domestic jurisdiction which expire on various dates through 2034 and $184,321184,321 for foreign jurisdictions that do not expire. The Company has reported a full valuation allowance on deferred tax assets in foreign jurisdictions, which changed from $117,983 to $80,386 during the year ended December 31, 2017 resulting in a decrease of $37,597. The Companys US based net operating losses available for future use are as follows: Year Available Net Operating Loss Expires 2014 465 2034 2008 2028 2007 71,416 2027 Total Available 741,028 Income tax expense differs from amounts computed by applying the statutory Federal rate to pretax income as follows: 2017 2015 Expected US income tax on Consolidated Income before Tax effects of: $ 47,973 $ 221,556 State income tax on consolidated income before tax net federal benefit 9,640 40,123 Change in valuation allowance (37,597) (95,822) Non-deductible expenses 53,690 82,106 Earnings in foreign jurisdictions taxes at rates different from the statutory U.S. federal rate 37,597 95,822 Income from foreign subsidiary 0 (114,121) Prior period adjustment 0 38,146 Currency valuation adjustment (116,340) 65,210 Reduction in rate due to US tax reform 130,341 0 Other, net (2,835) 30,057 Effective Tax Provision $122,469 $363,077 Due to the complexities of the Tax Act, on December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (SAB 118) that allows the company to record a provisional amount for any income tax effects of the Tax Act in accordance with ASC 740, to the extent that a reasonable estimate can be made. SAB 118 allows for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts. We are currently evaluating the impact of the one-time transition tax related to foreign earnings and profits, and have not yet determined if any provision for this tax will be recorded. The ultimate impacts of the Tax Act may be material, and there could be additional guidance from the U.S. Department of Treasury, updates or changes in the Companys assumptions, revision of accounting standards for income taxes or related interpretations and future information that may become available. We currently anticipate finalizing and recording any resulting adjustments by the quarter ended June 30, 2018. If the information necessary to finalize and record the related tax impacts are available prior to the quarter ended June 30, 2018, we will book these impacts accordingly. The Company has evaluated its uncertain tax positions and determined that any required adjustments would not have a material impact on the Company's balance sheets, statements of operations, or statements of cash flows. The tax years 2007, 2008 and 2013 through 2017 remain open to examination for federal income tax purposes and by other major taxing jurisdictions to which the Company is subject. |
Business Segments
Business Segments | 12 Months Ended |
Dec. 31, 2017 | |
Notes | |
Business Segments | 10. Foreign Operations and Business Segments The Company has one business segment consisting of resort and hotel management services. The consolidated financial statements include the following related to USA and international operations (which are solely in New Zealand as our Asian operations are inactive). December 31, 2017 December 31, 2016 USA New Zealand Total USA New Zealand Total Revenues $23,657,149 $2,593,788 $26,250,937 $23,293,830 $2,997,370 $26,291,200 Long lived assets 402,528 5,628,196 6,030,724 435,537 5,665,140 6,100,677 |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2017 | |
Notes | |
Subsequent Events | 11. Subsequent events In January 2018, the Company secured a $1,200,000 revolving line of credit with a local bank. The interest rate is the banks base rate less 0.25%, which at the date of execution was 4.25%. The line expires on January 3, 2019 and is secured by a first position security interest over the general business assets of the Company. No draws against this line were made as of April 2, 2018. In February 2018, the Company made an investment of $200,000 into an entity. The entity is anticipated to result in the Company receiving less than 10% ownership of this entity. The entity will become a 50% owner in a hotel property located in New Zealand. |
Summary of Significant Accoun17
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 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) (Mocles), 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. |
Use of Management Estimates in Financial Statements | Use of Management Estimates in Financial Statements The preparation of financial statements in conformity with GAAP 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 date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates. These estimates include stock-based compensation expense, valuation of deferred tax assets, useful lives of property, plant, and equipment, and allowance for bad debt. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. |
Accounts Receivable | Accounts Receivable The Company records accounts receivable for revenue earned but not yet collected. The Company estimates allowances for doubtful accounts based on the aged receivable balances and historical losses. If the Company determines any account to be uncollectible based on significant delinquency or other factors, it is immediately written off. An allowance for bad debts has been provided based on estimated losses amounting to $163,585 and $166,570 as of December 31, 2017 and 2016, respectively. |
Property, Plant, and Equipment | Property, Plant, and Equipment Property, plant, and equipment are recorded at cost. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounting records, and any resulting gain or loss is reflected in the consolidated statements of Comprehensive Income for the period. The cost of maintenance and repairs is expensed as incurred. Renewals and betterments are capitalized and depreciated over their estimated useful lives. At December 31, 2017 and 2016, property, plant, and equipment consisted of the following: 2017 2016 Real estate - Podium $ 7,362,648 $ 7,181,225 Land and improvements 278,984 248,000 Equipment and furnishings 1,740,800 1,671,509 Computer software 162,395 143,568 Less accumulated depreciation (3,514,103) (3,143,625) Net property, furniture and equipment 6,030,724 6,100,677 Depreciation is computed using the straight-line methods over the estimated useful life of the assets (Computer software 3 years, Equipment and furnishings 5 to 7 years, Podium 50 years, and Improvements 30 years). Land is not depreciated. For the years ended December 31, 2017 and 2016, depreciation expense was $293,479 and $224,158, respectively. |
Goodwill and Intangibles | Goodwill The Company performs impairment tests of goodwill at a reporting unit level, which is one level below the operating segments. The Companys operating segments are primarily based on geographic responsibility, which is consistent with the way management runs its business. The goodwill impairment test consists of a two-step process, if necessary. The first step is to compare the fair value of a reporting unit to its carrying value, including goodwill. The Company typically uses discounted cash flow models to determine the fair value of a reporting unit. The assumptions used in these models are consistent with those the Company believes hypothetical marketplace participants would use. If the fair value of the reporting unit is less than its carrying value, the second step of the impairment test must be performed in order to determine the amount of impairment loss, if any. The second step compares the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit's goodwill exceeds its implied fair value, an impairment charge is recognized in an amount equal to that excess. The loss recognized cannot exceed the carrying amount of goodwill. The Company has the option to perform a qualitative assessment of goodwill prior to completing the two-step process described above to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill and other intangible assets. If the Company concludes that this is the case, it must perform the two-step process. Otherwise, the Company will forego the two-step process and does not need to perform any further testing. During 2017, the Company performed qualitative assessments at the reporting unit level on Goodwill balances, and noted that there were no triggering events requiring further analysis. The Company has completed its annual impairment testing of its goodwill at December 31 of each of the years presented. The Company has not recognized any impairment losses during the periods presented. |
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. The Company has two basic types of agreements. 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. Under a Gross Contract the Company pays a portion of the gross rental proceeds to the owner of the rental unit. The Company 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. 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, under a Net Contract, in most cases 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 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 Gross Contract, 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 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. The Company also recognizes revenue from the operation of restaurants and bars at its New Zealand property. Revenue as presented in our consolidated statements of comprehensive income, represents food and beverage product sold and is presented net of discounts, coupons, employee meals and complimentary meals. Revenue from restaurant sales is recognized when food and beverage products are sold. Taxes collected from customers and remitted to governmental authorities are presented on a net basis within sales in our consolidated statements of comprehensive income. |
Advertising, Sales and Marketing Expenses | Advertising, Sales and Marketing Expenses The Company incurs sales and marketing expenses (mostly consisting of employee wages) in conjunction with the production of promotional materials, trade shows, and related travel costs. The Company expenses advertising and marketing costs as incurred or as the advertising takes place. For the years ended December 31, 2017 and 2016, total advertising expense was $1,174,047 and $1,178,320 respectively, and are included in administrative and general expense. |
Stock-based Compensation | Stock-Based Compensation The Company has accounted for stock-based compensation by recording an expense associated with the fair value of stock-based compensation over the requisite service period, which typically represents the vesting period. For employees, the measurement date is the grant date. For non-employees the measurement date is the earlier of the date of performance completion or the date of performance commitment if a sufficient disincentive to perform exists. The Company currently uses the Black-Scholes option valuation model to calculate the valuation of stock options and warrants at the measurement date. Option pricing models require the input of highly subjective assumptions, including the expected price volatility. Changes in these assumptions can materially affect the fair value estimate. In December 2016, the Company granted a total of fully vested 200,000 warrants to purchase the Companys common stock at a price of $1.00 per share, exercisable on or before December 12, 2021 by issuing 50,000 warrants to each of four employees. Using the Black-Scholes model, the warrants were valued at $0.14527 for each warrant and the Company recorded an expense of $29,054 and an increase of the same amount to Additional Paid in Capital. No warrants were exercised as of December 31, 2017. In November 2017, the Company, as part of an amendment to the employment contracts with its Chief Executive Officer and Chief Operating Officer, granted a total of 1,750,000 fully vested warrants. The warrants expire at various expiration dates and at various stock prices. Using the Black-Scholes model, the warrants were valued as shown in the table below. The total fair value of the warrants of $47,300 was recorded as an expense and an increase of the same amount to Additional Paid in Capital. No warrants were exercised as of December 31, 2017. Warrants Issued Exercise Price Expiration Per share using Black Scholes Total 750,000 5.00 10/31/2022 0.0151 11,340 500,000 7.00 10/31/2024 0.0261 13,060 500,000 10.00 10/31/2027 0.0458 22,900 Deferred Compensation The company has accounted for deferred compensation by recording an expense associated with the present value of the deferred stock compensation over the requisite vesting period. The total present value of the deferred compensation using a discount rate of 5.75% is amortized from the date of issuance to the retirement of the liability. A long term liability has been recorded to accumulate the deferred compensation that will be paid in future years. In November 2017, the Company, as part of an amendment to the employment contracts with its Chief Executive Officer and Chief Operating Officer, granted a total of 1,750,000 fully vested warrants (see note 8). The contracts also called for deferred compensation of $1,000,000 payable to the Chief Executive Officer in ten annual installments of $100,000 beginning November 1, 2027, and $500,000 payable to the Chief Operating Officer in ten annual installments of $50,000 beginning November 1, 2017. The deferred compensation was valued using a sinking fund approach and the Company expensed $9,200 as an expense and as long term liability as of December 31, 2017. |
Income Taxes | Income Taxes Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company has recorded deferred tax assets for the Companys US based operations as these benefits will more likely than not be realized in the future. The Company does not recognize any deferred tax assets from its net operating losses from the Companys foreign operations, as it is not likely that these tax benefits will be realized in the future. The recent tax reform reduced the corporate income tax rates, which therefore reduced the value of our future deferred tax benefits. We recorded $130,341 of deferred income tax expense for the year ended December 31, 2017 which represents the amount of reduction in the value of our deferred tax benefits due to the decrease in the corporate income tax rate beginning in calendar 2018. Tax benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon ultimate settlement. Unrecognized tax benefits are tax benefits claimed in the Companys tax returns that do not meet these recognition and measurement standards. The Companys policy is to recognize potential interest and penalties accrued related to unrecognized tax benefits within income tax expense. For the years ended December 31, 2017 and 2016, the Company did not recognize any interest or penalties in its statements of comprehensive income, nor did it have any interest or penalties accrued in its Balance Sheet at December 31, 2017 and 2016, relating to unrecognized tax benefits. |
Basic and Diluted Earnings Per Share | Basic and Diluted 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 2,350,000 shares and 600,000 shares for the years ended December 31, 2017 and 2016, respectively 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. Reconciliation of the Numerator and Denominator of the Basic and Diluted Earnings Per Share Computations: Basic EPS December 31, 2017 December 31, 2016 Income Shares Per Share Income Shares Per Share Numerator Denominator Amount Numerator Denominator Amount Income Available to Common Stockholders $ 23,098 10,056,392 $ 0.00 $ 205,684 10,056,392 $ 0.02 Effect of Dilutive Securities 0 0 Diluted EPS Income Available to Common Stockholders plus Assumed Conversions $ 23,098 10,056,392 $ 0.00 $ 205,684 10,056,392 $ 0.02 |
Concentration of Credit Risks | Concentration of Credit Risks The Company maintains its cash with several financial institutions in Hawaii and New Zealand. Balances maintained with the US institutions are occasionally in excess of US FDIC insurance limits. As of December 31, 2017 and 2016, the Company had balances of $3,557,316 and $1,189,316, respectively, in excess of US federally insured limits of $250,000 per financial institution. The Company also maintained cash in a New Zealand bank with balances of $267,049 and $1,144,304 at December 31, 2017 and 2016, respectively. The New Zealand government does not provide any insurance for financial institution account losses. The Company has never experienced any losses related to these balances. Concentration in Market Area The Company manages hotel properties in Hawaii and New Zealand, and is dependent on the visitor industries in these geographic areas. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. A fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, may be used to measure fair value. As of December 31, 2017 and 2016, there are no assets or liabilities measured at fair value on a recurring basis. The carrying values of cash and cash equivalents, accounts receivable, and accounts payable and accrued expenses approximate fair value due to the relatively short-term maturities of these financial instruments. The carrying values of notes receivable and notes payable approximate fair value as these notes have interest rates or imputed interest rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. |
Long-lived Assets | Long-Lived Assets The Company regularly evaluates whether events or circumstances have occurred that indicate the carrying value of long-lived assets may not be recoverable. When factors indicate the asset may not be recoverable, the Company compares the related undiscounted future net cash flows to the carrying value of the asset to determine if impairment exists. If the expected undiscounted future net cash flows are less than the carrying value, an impairment charge is recognized based on the fair value of the asset. No impairments were indicated or recorded during the years ended December 31, 2017 and 2016. |
Investment in Limited Liability Company | Investment in Limited Liability Company On July 23, 2010, the Company acquired a 7.0% common series interest in a limited liability corporation that owns a hotel located in Hawaii. The investment is accounted for as an equity method investment since the Company has significant influence over the investee. During the years ended December 31, 2017 and 2016, the Company recognized $48,714 and $75,525, respectively, in income resulting from the portion of net income attributable to its common series ownership interest. For the year ended December 31, 2017, the investee had sales of $812,915, gross profit of $735,053 and net income of $737,605. For the year ended December 31, 2016, the investee had sales of $856,896, gross profit of $768,111 and net income of $775,914. The Company does not anticipate that the amount of income from this investment will exceed 20% of its pretax income in future years. |
Foreign Currency Transactions and Translations Policy | Foreign Currency Translation and Transaction Gains/Losses The US dollar is the functional currency of the Companys consolidated entities operating in the United States. The functional currency for the Companys consolidated entities operating outside of the United States is generally the currency of the country in which the entity primarily generates and expends cash. For consolidated entities whose functional currency is not the U.S. dollar, the Company translates its financial statements into U.S. dollars. Assets and liabilities are translated at the exchange rate in effect as of the financial statement date, and the line items of the results of operations are translated using the weighted average exchange rate for the year. Translation adjustments resulting from these translations are included as a separate component of stockholders equity in accumulated other comprehensive income (loss). Gains and losses resulting from foreign currency transactions are included in the consolidated statements of comprehensive income (loss). |
Reclassification | Reclassifications The Company has reclassified certain prior-period amounts to conform to the current-period presentation. The Company reclassified food and beverage operating revenues and expenses into separate lines on the consolidated statements of comprehensive income in order to more accurately depict the results of operations. |
Adoption of New Accounting Pronouncements | Adoption of New Accounting Pronouncements Deferred taxes In November 2015, FASB issued ASU no. 2015-17, Balance Sheet Classification of Deferred Taxes. The ASU simplifies the presentation of deferred taxes on a classified statement of financial position by classifying all deferred taxes and liabilities as noncurrent. The effective date of this change for public companies is for fiscal years beginning after December 15, 2016 with early application available to all entities as of the beginning of an interim or annual period. This update may be applied either prospectively or retrospectively to all periods presented. The Company chose to early adopt this change in accounting principle as of June 30, 2016. 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 and forfeiture rate calculations. This ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. We adopted ASU 2016-09 effective January 1, 2017, and plan to track forfeitures as they occur. The adoption of ASU 2016-09 did not have a material impact on our financial condition or results of operations. In August 2016, the FASB issued ASU 2016-15, 2 which amends ASC 230 to add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. For public business entities, the guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. An entity is required to make an accounting policy election to classify distributions received from equity method investees under either of the following methods: Cumulative-earnings approach Under this approach, distributions are presumed to be returns on investment and classified as operating cash inflows. However, if the cumulative distributions received, less distributions received in prior periods that were determined to be returns of investment, exceed the entitys cumulative equity in earnings, such excess is a return of capital and should be classified as cash inflows from investing activities. Nature of the distribution approach Under this approach, each distribution is evaluated on the basis of the source of the payment and classified as either operating cash inflows or investing cash inflows. We adopted ASU 2016-15 effective January 1, 2017 using the cumulative earnings approach and elected to classify distributions received from equity method investees under the Cumulative-earnings approach. |
Accounting Pronouncements Not Yet Adopted | Accounting Pronouncements Not Yet Adopted 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 ASU 2014 09, Revenue from Contracts with Customers (Topic 606) (ASU 2014 09). The FASB and the International Accounting Standards Board (IASB) initiated a joint project to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and IFRS that would: (i) remove inconsistencies and weaknesses in revenue requirements; (ii) provide a more robust framework for addressing revenue issues; (iii) improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets; (iv) provide more useful information to users of financial statements through improved disclosure requirements; and (v) simplify the preparation of financial statements by reducing the number of requirements to which an entity must refer. To meet those objectives, the FASB amended the FASB Accounting Standards Codification (Codification) and created a new Topic 606, Revenue from Contracts with Customers. The core principle of the guidance in ASU 2014 09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance in this ASU supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry specific guidance throughout the Industry Topics of the Codification. The ASU is effective for fiscal years beginning after December 15, 2017 (and interim periods within that period). In periods subsequent to the initial issuance of this ASU, the FASB has issued additional ASUs clarifying items within Topic 606, as follows: - In August 2015, the FASB issued ASU 2015-14, "Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date," which defers by one year the effective date of ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)" to annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. - In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (ASU 2016-08). The amendments in ASU 2016-08 serve to clarify the implementation guidance on principal vs. agent considerations. - In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing (ASU 2016-10). The purpose of ASU 2016-10 is to clarify two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance (while retaining the related principles for those areas). - In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606) (ASU 2016-12). The purpose of ASU 2016-12 is to address certain issues identified to improve Topic 606 by enhancing guidance on assessing collectability, presentation of sales taxes and other similar taxes collected from customers, noncash consideration and completed contracts and contract modifications at transition. - In December 2016, the FASB issued ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, which amends certain aspects of the Boards new revenue standard, ASU 2014-09. This ASU addresses thirteen specific issues pertaining to Topic 606, Revenue from Contracts with Customers. Our qualitative evaluation of ASU 2014-09 included identifying the potential differences in the timing and/or method of revenue recognition for our contracts and, ultimately, the expected impact on our business processes, systems and controls. As part of this evaluation, we have reviewed our customer contracts and applied the five-step model of the new standard to each contact type identified thats associated to our material revenue streams and have compared the results to our current accounting practices. Areas of impact will include the timing of revenue recognition during the calendar year of certain incentive fees which we receive from one of our managed properties. The timing of our revenue recognition for this contract will have no effect on our annual financial statements, however it may impact our quarterly interim financial statement as we will accelerate the recognition of our incentive fee on a pro-rated basis over the fiscal year if it is determined that this incentive fee shall be earned during the fiscal year. We have adopted this standard on January 1, 2018, as well as other clarifications and technical guidance issued by the FASB related to this new revenue standard using the retrospective adoption method. Based on our assessment, the impact that ASU 2014-09 will have on our financial statements is expected to remain substantially unchanged. 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 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 $634,780 of operating lease obligations as of December 31, 2017 (see Note 4) and upon adoption of this standard it will record a ROU asset and lease liability for the 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 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. |
Summary of Significant Accoun18
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Tables/Schedules | |
Property, Plant and Equipment | 2017 2016 Real estate - Podium $ 7,362,648 $ 7,181,225 Land and improvements 278,984 248,000 Equipment and furnishings 1,740,800 1,671,509 Computer software 162,395 143,568 Less accumulated depreciation (3,514,103) (3,143,625) Net property, furniture and equipment 6,030,724 6,100,677 |
Schedule of Share-based Compensation Officer Activity | Warrants Issued Exercise Price Expiration Per share using Black Scholes Total 750,000 5.00 10/31/2022 0.0151 11,340 500,000 7.00 10/31/2024 0.0261 13,060 500,000 10.00 10/31/2027 0.0458 22,900 |
Reconciliation of Numerator and Denominator of The Basic and Diluted Earnings Per Share Computations: | Basic EPS December 31, 2017 December 31, 2016 Income Shares Per Share Income Shares Per Share Numerator Denominator Amount Numerator Denominator Amount Income Available to Common Stockholders $ 23,098 10,056,392 $ 0.00 $ 205,684 10,056,392 $ 0.02 Effect of Dilutive Securities 0 0 Diluted EPS Income Available to Common Stockholders plus Assumed Conversions $ 23,098 10,056,392 $ 0.00 $ 205,684 10,056,392 $ 0.02 |
Notes Receivable (Tables)
Notes Receivable (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Tables/Schedules | |
Schedule of Notes Receivable | Notes receivable at December 31 consisted of the following: 2017 2016 Note receivable from HBII, secured by a direct assignment of HBII right to receive future proceeds from HBIIs ownership interest in unrelated real estate development company (Assigned to third parties- see Note 2 and 4) $ 490,459 $ 598,689 Less Reserve for Uncollectible Notes (490,459) (598,689) Notes Receivable from Oceanfront Realty, interest rate of 2%. Note is payment for the sale of one of the Company's management contracts. Payments are payable based on 30% of the net profits originating from the contract. 184,900 188,878 Notes Receivable, Total 188,900 188,878 Less Current Portion (15,000) (15,000) Notes Receivable, Non-current $ 169,900 $ 173,878 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Tables/Schedules | |
Operating Leases of Lessee Disclosure | Year Amount 2018 399,770 2019 366,205 2020 93,805 2021 56,250 Total $916,030 |
Notes Payable (Tables)
Notes Payable (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Tables/Schedules | |
Schedule of Accrued Liabilities | Long term debt at December 31 consisted of the following: 2017 2016 Note dated 12/31/02 from the Company's CEO , with interest at 10% due on or before 12/31/17, with monthly payments of $3,334 commencing January 2015, unsecured 0 $ 37,919 Less current portion 0 37,919 Long term debt to related parties, net of current portion 0 0 Related party note dated 12/31/04, 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 Company's New Zealand subsidiary, with the Company as guarantor. The note calls for payments of NZ $20,000 (US $13,854 at 12/31/16) 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 $200,040 for the years ended December 31, 2016 and 2015 so that the combined interest rate paid on the note payable at December 31, 2016 and 2015 is approximately 5.4%, and 4.9%, respectively. 3,321,463 3,531,705 Note dated 12/31/04, payable to a New Zealand bank, Westpac, for a loan in favor of Mocles at the banks prime rate plus 2% which as of December 31, 2016 was 5.4%. The note calls for monthly interest payments and payments against principal of NZ $20,000 (US $13,854). The maturity date is March 31, 2019 with an extension to March 31, 2024 available if the Company is not in default. 1,381,339 1,513,550 Revolving line of credit with a bank for up to $600,000 and $300,000 as of December 31, 2016 and 2015, respectively. The line is secured by a general security interest in the Companys assets. Draws against the line will bear interest at the banks base lending rate plus 1.5%, which as of December 31, 2016 was 5.875%. The line has a termination date of October 31, 2017.. 0 0 Term loan with a local bank dated June 19, 2015 with an original Face value of $200,000 secured by a general security interest in the Companys assets. The note calls for sixty monthly payments of $3,855 to be applied to principal and interest at a fixed rate of 5.875%. The maturity date is June 19, 2020. 0 145,892 Equipment loan with a local bank dated March 31, 2016. The loan is secured by vehicles purchased by the Company for one of its properties. The note calls for sixty monthly payments of $749 to be applied to Principal and interest at a fixed rate of 4.43%. The maturity date is March 31, 2021. 0 34,715 Revolving line of credit with a bank for up to NZ $150,000 (US$103,905). The line is secured by a general security interest in the Companys assets in New Zealand. Draws against the line will bear interest at the banks base lending rate plus 2%. The line is cancellable at any time by the bank. 0 0 Subtotal $ 4,702,802 $ 5,225,862 Less Current Portion 340,896 378,694 Notes Payable, Non-current $ 4,361,906 $ 4,847,168 |
Schedule of Accounts Payable and Accrued Liabilities | Year Amount 2018 $340,896 2019 340,896 2020 340,896 2021 340,896 2022 340,896 Thereafter 2,998,332 Total $4,702,802 |
Stockholders Equity (Tables)
Stockholders Equity (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Tables/Schedules | |
Schedule of Share-based Compensation, Activity | Warrants Issued Exercise Price Expiration Per share using Black Scholes Total 750,000 5.00 10/31/2022 0.0151 11,340 500,000 7.00 10/31/2024 0.0261 13,060 500,000 10.00 10/31/2027 0.0458 22,900 |
Schedule of Common Stock Options and Warrants | Number of Shares Weighted Average Exercise Price Remaining Contractual Term (in Years) Intrinsic Value Outstanding and exercisable at January 1, 2016 400,000 $1.00 2.42 $0 Granted 200,000 1.00 3.95 0 Outstanding and exercisable at December 31, 2016 600,000 $1.00 3.26 $0 Granted 1,750,000 7.00 6.83 0 Outstanding and exercisable at December 31, 2017 2,350,000 $5.47 5.31 0 |
Schedule of Compensatory Warrants | Exercise Price Number Outstanding Expiration Date Weighted Average Remaining Contractual Life (in years) Weighted Average Exercise Price Number Exercisable Weighted Average Exercise Price $1.00 200,000 December 12, 2021 3.95 $1.00 200,000 $1.00 $1.00 400,000 May 28, 2019 1.42 $ 1.00 400,000 $ 1.00 $5.00 750,000 10/31/2022 4.83 $ 5.00 750,000 $ 5.00 $7.00 500,000 10/31/2024 6.83 $ 7.00 500,000 $ 7.00 $10.00 500,000 10/31/2027 9.83 $ 10.00 500,000 $ 10.00 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Tables/Schedules | |
Schedule of Income before Income Tax, Domestic and Foreign | 2017 2016 United States $ 232,244 $ 353,077 New Zealand (3,802) 298,559 Income before taxes $ 228,442 $ 651,636 |
Schedule of Components of Income Tax Expense (Benefit) | 2017 2016 Current 0 0 Deferred Federal 120,713 322,954 State 1,756 40,123 Total Provision (Benefit) $ 122,469 $ 363,077 |
Schedule of Deferred Tax Assets and Liabilities | 2017 2016 Deferred Tax Assets (liabilities) Accounts Receivable $ 43,442 $ 62,058 Accrued Vacation 126,482 170,593 Net Operating Loss 73,212 148,756 Note Receivable 248,407 351,599 Fixed Assets (11,979) (78,652) Net Operating Loss Carryforwards 14,724 Less: Valuation Allowance (80,386) (117,983) Total Deferred Tax Asset, Net $ 413,902 $ 536,371 |
Summary of Operating Loss Carryforwards | Year Available Net Operating Loss Expires 2014 465 2034 2008 2028 2007 71,416 2027 Total Available 741,028 |
Schedule of Effective Income Tax Rate Reconciliation | 2017 2015 Expected US income tax on Consolidated Income before Tax effects of: $ 47,973 $ 221,556 State income tax on consolidated income before tax net federal benefit 9,640 40,123 Change in valuation allowance (37,597) (95,822) Non-deductible expenses 53,690 82,106 Earnings in foreign jurisdictions taxes at rates different from the statutory U.S. federal rate 37,597 95,822 Income from foreign subsidiary 0 (114,121) Prior period adjustment 0 38,146 Currency valuation adjustment (116,340) 65,210 Reduction in rate due to US tax reform 130,341 0 Other, net (2,835) 30,057 Effective Tax Provision $122,469 $363,077 |
Business Segments (Tables)
Business Segments (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Tables/Schedules | |
Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas | December 31, 2017 December 31, 2016 USA New Zealand Total USA New Zealand Total Revenues $23,657,149 $2,593,788 $26,250,937 $23,293,830 $2,997,370 $26,291,200 Long lived assets 402,528 5,628,196 6,030,724 435,537 5,665,140 6,100,677 |
Summary of Significant Accoun25
Summary of Significant Accounting Policies (Details) | 12 Months Ended | ||||
Dec. 31, 2017USD ($)$ / sharesshares | Dec. 31, 2016USD ($)$ / sharesshares | Feb. 01, 2018 | Dec. 31, 2015USD ($)shares | Dec. 31, 2010 | |
Details | |||||
Allowance for Doubtful Accounts Receivable, Current | $ 163,585 | $ 166,570 | |||
Real Estate Investment Property, at Cost | 7,362,648 | 7,181,225 | |||
Land and Land Improvements | 278,984 | 248,000 | |||
Fixtures and Equipment, Gross | 1,740,800 | 1,671,509 | |||
Capitalized Computer Software, Gross | 162,395 | 143,568 | |||
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment | (3,514,103) | (3,143,625) | |||
Property plant & equipment, net | $ 6,030,724 | 6,100,677 | |||
Property Plant and Equipment Useful Life Minimum | 5 | ||||
Property Plant and Equipment Useful Life Maximum | 7 | ||||
Real Estate Useful Life | 50 | ||||
Depreciation | $ 293,479 | 224,158 | |||
Marketing and Advertising Expense | $ 1,174,047 | $ 1,178,320 | |||
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Granted | shares | 1,750,000 | 200,000 | |||
Investment Warrants, Exercise Price | $ / shares | $ 1 | $ 1 | |||
Warrants Issued To Each Of Four Employees | shares | 50,000 | ||||
Warrants Value Per Warrant Issued To Each Of Four Employees | $ / shares | $ 0.14527 | ||||
Warrants granted as compensation | $ 47,300 | $ 29,054 | |||
Warrants Issued at $5.00 exercise price | shares | 750,000 | ||||
Warrants $5.00 exercise price | $ / shares | $ 5 | ||||
Warrants $5.00 exercise price Black Scholes per share | $ / shares | $ 0.0151 | ||||
Warrants $5.00 exercise price total | $ 11,340 | ||||
Warrants Issued at $7.00 exercise price | shares | 500,000 | ||||
Warrants $7.00 exercise price | $ / shares | $ 7 | ||||
Warrants $7.00 exercise price Black Scholes per share | $ / shares | $ 0.0261 | ||||
Warrants $7.00 exercise price total | $ 13,060 | ||||
Warrants Issued at $10.00 exercise price | shares | 500,000 | ||||
Warrants $10.00 exercise price | $ / shares | $ 10 | ||||
Warrants $10.00 exercise price Black Scholes per share | $ / shares | $ 0.0458 | ||||
Warrants $10.00 exercise price total | $ 22,900 | ||||
CEO deferred compensation | 1,000,000 | ||||
CEO deferred compensation installments | 100,000 | ||||
CFO deferred compensation | 500,000 | ||||
CFO deferred compensation installments | 50,000 | ||||
Deferred compensation | 9,200 | $ 0 | |||
Decrease in Unrecognized Tax Benefits is Reasonably Possible | $ 130,341 | $ 0 | |||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | shares | 368,333 | ||||
Preferred stock par value | $ / shares | $ 100 | $ 100 | |||
Warrants Outstanding | shares | 2,350,000 | 600,000 | 400,000 | ||
Net Income Attributable to Common Stockholders | $ 23,098 | $ 205,684 | |||
Weighted Average Shares Basic | shares | 10,056,392 | 10,056,392 | |||
Income (Loss) from Continuing Operations, Per Basic Share | $ / shares | $ 0 | $ 0.02 | |||
Net Income (Loss) Available to Common Stockholders, Diluted | $ 23,098 | $ 205,684 | |||
Weighted Average Shares Diluted | shares | 10,056,392 | 10,056,392 | |||
Income (Loss) from Continuing Operations, Per Diluted Share | $ / shares | $ 0 | $ 0.02 | |||
Amount Above Federally Insured Limit | $ 3,557,316 | $ 1,189,316 | |||
Cash, FDIC Insured Amount | 250,000 | ||||
Foreign Financial Institutions, Actual Deposits | 267,049 | 1,144,304 | |||
Equity Method Investment, Ownership Percentage | 10.00% | 7.00% | |||
Investment Income, Interest | 48,714 | 75,525 | |||
Limited Liability Company Sales | 812,915 | 856,896 | |||
Limited Liability Company Gross Profit | 735,053 | 768,111 | |||
Limited Liability Company Net Income | $ 737,605 | $ 775,914 | |||
Not To Exceed Percent Of Pretax Income | 20.00% | ||||
Capital Lease Obligations | $ 634,780 |
Related Party Transactions Di26
Related Party Transactions Disclosure (Details) - USD ($) | 12 Months Ended | ||||
Dec. 31, 2017 | Dec. 31, 2016 | Feb. 01, 2018 | Dec. 31, 2010 | Dec. 31, 2002 | |
Details | |||||
Accounts Receivable From Hanalei-Bay International Investors | $ 490,459 | $ 598,689 | |||
Recovery of bad debt | 108,230 | 390,635 | |||
Equity Method Investment, Ownership Percentage | 10.00% | 7.00% | |||
Due to Officers or Stockholders, Current | 0 | 37,919 | $ 117,316 | ||
Payments on notes to related parties | 37,919 | 34,325 | |||
Interest Income, Related Party | 2,085 | ||||
Non cash interest expense | $ 186,000 | $ 200,040 |
Notes Receivable (Details)
Notes Receivable (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Details | ||
Accounts Receivable From Hanalei-Bay International Investors | $ 490,459 | $ 598,689 |
Less Reserve For Uncollectible Notes For Hanalei-Bay International | (490,459) | (598,689) |
Notes Receivable Oceanfront Realty | 184,900 | 188,878 |
Financing Receivable, Gross | 188,900 | 188,878 |
Accounts, Notes, Loans and Financing Receivable, Net, Current | (15,000) | (15,000) |
Notes receivable | $ 169,900 | $ 173,878 |
Commitments and Contingencies28
Commitments and Contingencies (Details) - USD ($) | 12 Months Ended | |||
Dec. 31, 2017 | Dec. 31, 2016 | Nov. 30, 2017 | Jul. 31, 2017 | |
Details | ||||
Operating Leases, Rent Expense | $ 401,326 | $ 402,291 | ||
Operating Leases, Future Minimum Payments Due | 916,030 | |||
Operating Leases, Future Minimum Payments Due, Next Twelve Months | 399,770 | |||
Operating Leases, Future Minimum Payments, Due in Two Years | 366,205 | |||
Operating Leases, Future Minimum Payments, Due in Three Years | 93,805 | |||
Operating Leases, Future Minimum Payments, Due in Four Years | 56,250 | |||
New Zealand Podium Initial Assessment | 229,641 | |||
New Zealand Podium Special Assessment | $ 739,398 | |||
New Zealand Podium Payments | $ 36,969 | |||
New Zealand Podium Special Assessment payments | 293,937 | |||
Construction in progress included in other current liabilities and other long term liabilities | 646,493 | |||
Construction in progress included in other current liabilities | 430,995 | |||
Construction in progress included in other long term liabilities | $ 215,498 |
Employee Benefits (Details)
Employee Benefits (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Details | ||
Accrued Employee Benefits | $ 34,036 | $ 36,211 |
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Granted | 1,750,000 | 200,000 |
CEO deferred compensation | $ 1,000,000 | |
CEO deferred compensation installments | 100,000 | |
CFO deferred compensation | 500,000 | |
CFO deferred compensation installments | 50,000 | |
Deferred compensation | $ 9,200 | $ 0 |
Notes Payable (Details)
Notes Payable (Details) - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2002 |
Details | ||||||||||
Due to Officers or Stockholders, Current | $ 0 | $ 37,919 | $ 117,316 | |||||||
Current portion of long term debt to related parties | 0 | 37,919 | $ 37,919 | |||||||
Long term debt to related parties, net of current portion | 0 | 0 | ||||||||
HBII Note Balance | 3,321,463 | 3,531,705 | ||||||||
Term Loan With New Zealand Bank | 1,381,339 | 1,513,550 | ||||||||
Bank Revolving Line Of Credit | 0 | 0 | ||||||||
Term Loan With Local Bank | 0 | 145,892 | ||||||||
Equipment Loan With Local Bank | 0 | 34,715 | ||||||||
Line of Credit | 0 | 0 | ||||||||
Notes Payable | 4,702,802 | 5,225,862 | ||||||||
Notes Payable, Current | 340,896 | 378,694 | ||||||||
Long term debt, net of current portion | 4,361,906 | $ 4,847,168 | $ 4,847,168 | |||||||
Notes Payable payout | $ 2,998,332 | $ 340,896 | $ 340,896 | $ 340,896 | $ 340,896 | $ 340,896 | ||||
Total Notes Payable Balance | $ 4,702,802 |
Stockholders Equity (Details)
Stockholders Equity (Details) | 12 Months Ended | ||
Dec. 31, 2017USD ($)$ / sharesshares | Dec. 31, 2016USD ($)$ / sharesshares | Dec. 31, 2015shares | |
Details | |||
Preferred stock outstanding | shares | 11,050 | 11,050 | |
Preferred stock par value | $ 100 | $ 100 | |
Preferred Stock, Dividend Payment Terms | Dividends are cumulative from the date of original issue and are payable semi-annually, when, and if declared by the board of directors beginning July 15, 1999, at a rate of $7.50 per annum per share. | ||
Dividends, Common Stock | $ | $ 1,513,551 | $ 1,430,358 | |
Dividends Payable, Amount Per Share | $ 136.97 | $ 129.44 | |
Convertible Preferred Stock, Shares Issued upon Conversion | shares | 33.33 | ||
Redeemable Preferred Stock Exerise Price | $ 3 | ||
Redeemable Preferred Stock Redemption Price Per Share | $ 100 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Granted | shares | 1,750,000 | 200,000 | |
Warrants granted as compensation | $ | $ 47,300 | $ 29,054 | |
Fair Value Assumptions, Expected Volatility Rate | 68.63% | 75.32% | |
Fair Value Assumptions, Risk Free Interest Rate | 0.85% | 1.90% | |
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate | 0.00% | 0.00% | |
Warrants Issued at $5.00 exercise price | shares | 750,000 | ||
Warrants $5.00 exercise price | $ 5 | ||
Warrants $5.00 exercise price Black Scholes per share | $ 0.0151 | ||
Warrants $5.00 exercise price total | $ | $ 11,340 | ||
Warrants Issued at $7.00 exercise price | shares | 500,000 | ||
Warrants $7.00 exercise price | $ 7 | ||
Warrants $7.00 exercise price Black Scholes per share | $ 0.0261 | ||
Warrants $7.00 exercise price total | $ | $ 13,060 | ||
Warrants Issued at $10.00 exercise price | shares | 500,000 | ||
Warrants $10.00 exercise price | $ 10 | ||
Warrants $10.00 exercise price Black Scholes per share | $ 0.0458 | ||
Warrants $10.00 exercise price total | $ | $ 22,900 | ||
Investment Warrants, Exercise Price | $ 1 | $ 1 | |
Warrants Issued To Each Of Four Employees | shares | 50,000 | ||
Warrants Value Per Warrant Issued To Each Of Four Employees | $ 0.14527 | ||
Warrants Outstanding | shares | 2,350,000 | 600,000 | 400,000 |
Warrants Outstanding Weighted Average Exercise Price | 5.47 | 1 | |
Weighted Average Contractural Term | 5.31 | 3.26 | |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Intrinsic Value, Amount Per Share | $ 0 | ||
Warrants Granted Weighted Average Exercise Price | $ 7 | $ 1 | |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Outstanding, Weighted Average Remaining Contractual Terms | 6 years 9 months 29 days | 3 years 11 months 12 days | 1 year 5 months 1 day |
Warrants $5.00 exercise price weighted average remaining contractual life | 4 years 9 months 29 days | ||
Warrants $7.00 exercise price weighted average remaining contractual life | 6 years 9 months 29 days | ||
Warrants $10.00 exercise price weighted average remaining contractual life | 9 years 9 months 29 days |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | 12 Months Ended | |||||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2034 | Dec. 31, 2028 | Dec. 31, 2027 | |
Details | ||||||
Income (Loss) from Continuing Operations before Income Taxes, Domestic | $ 232,244 | $ 353,077 | ||||
Income (Loss) from Continuing Operations before Income Taxes, Foreign | (3,802) | 298,559 | ||||
Income before taxes | 228,442 | 651,636 | ||||
Current Income Tax Expense (Benefit) | 0 | 0 | ||||
Deferred Federal Income Tax Expense (Benefit) | 120,713 | 322,954 | ||||
Deferred State and Local Income Tax Expense (Benefit) | 1,756 | 40,123 | ||||
Income tax provision | 122,469 | 363,077 | ||||
Deferred Income Taxes and Other Assets, Current | 43,442 | 62,058 | ||||
Deferred Tax Assets, Tax Deferred Expense, Compensation and Benefits, Compensated Absences | 126,482 | 170,593 | ||||
Deferred Tax Asset Net Operating Loss Current | 73,212 | 148,756 | ||||
Deferred Income Taxes and Other Assets, Noncurrent | 248,407 | 351,599 | ||||
Deferred Tax Assets, Property, Plant and Equipment | (11,979) | (78,652) | ||||
Operating Loss Carryforwards | 14,724 | |||||
Deferred Tax Assets, Valuation Allowance | (80,386) | (117,983) | ||||
Deferred tax asset, net | 413,902 | 536,371 | ||||
Deferred Tax Assets, Operating Loss Carryforwards | 741,028 | |||||
foreign jurisdictions net operating loss carry forwards | 184,321 | |||||
foreign jurisdictions valation allowance | 80,386 | $ 117,983 | ||||
Valuation Allowances and Reserves, Period Increase (Decrease) | 37,597 | $ 95,822 | ||||
Deferred Tax Assets, Operating Loss Carryforwards, Subject to Expiration | $ 465 | $ 669,147 | $ 71,416 | |||
Effective Income Tax Rate Reconciliation at Federal Statutory Income Tax Rate, Amount | 47,973 | 221,556 | ||||
Effective Income Tax Rate Reconciliation, State and Local Income Taxes, Amount | 9,640 | 40,123 | ||||
Valuation Allowances and Reserves, Period Increase (Decrease) | (37,597) | (95,822) | ||||
Non-Deductible Expenses | 53,690 | 82,106 | ||||
Effective Income Tax Rate Reconciliation, Foreign Income Tax Rate Differential, Amount | 37,597 | 95,822 | ||||
Income From Foreign Subsidiary | 0 | (114,121) | ||||
Prior Period Reclassification Adjustment | 0 | 38,146 | ||||
Effective Income Tax Rate Reconciliation, Other Adjustments, Amount | (116,340) | 65,210 | ||||
Decrease in Unrecognized Tax Benefits is Reasonably Possible | 130,341 | 0 | ||||
Other, net | (2,835) | 30,057 | ||||
Deferred Income Tax Expense (Benefit) | $ 122,469 | $ 363,077 |
Business Segments (Details)
Business Segments (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Revenues | $ 26,250,937 | $ 26,291,200 |
Long lived assets | 6,030,724 | 6,100,677 |
North America | ||
Revenues | 23,657,149 | 23,293,830 |
Long lived assets | 402,528 | 435,537 |
Non-US | ||
Revenues | 2,593,788 | 2,997,370 |
Long lived assets | $ 5,628,196 | $ 5,665,140 |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Feb. 01, 2018 | Dec. 31, 2010 | |
Details | |||
Long-term Line of Credit | $ 1,200,000 | ||
Line of Credit Facility, Covenant Terms | . The interest rate is the bank’s base rate less 0.25%, which at the date of execution was 4.25%. The line expires on January 3, 2019 and is secured by a first position security interest over the general business assets of the Company. | ||
Investment Owned, at Cost | $ 200,000 | ||
Equity Method Investment, Ownership Percentage | 10.00% | 7.00% |