The Castle Group, Inc. Announces Southeast Asia Goals and Financial Results for 2007
April 15 2008 - 4:00PM
Business Wire
The Castle Group, Inc. (OTCBB:CAGU) holding company for Castle
Resorts & Hotels, today announced its objectives for expansion
into Southeast Asia in 2009 and financial results for year-end,
December 31, 2007. During 2007, Castle entered into six new
contracts with numerous properties in Hawaii, Guam, and Thailand.
These new contracts nearly double the total number of units under
contract as compared to year-end 2006. Reflecting on the Company�s
growth, Chief Operating Officer of The Castle Group Inc., Alan
Mattson said, �2007 and on into the first quarter of 2008 has been
a very exciting time for us. We have substantially increased the
size of our business, furthered our International expansion with
two new management contracts in Thailand, and have reestablished
the Company�s stock into the publicly trading markets, which is now
listed on the Over the Counter Bulletin Board as of December,
2007.� In 2007, the next step in Castle�s global expansion plans
unfolded with the procurement of two new contracts in Thailand; the
Katamanda Villas resort on the southwest coast of Phuket Island,
and the Baan Taling Ngam Resort and Spa on the island of Koh Samui.
The addition of these two properties underscores the company�s
expansion of its high-end luxury vacation offerings. �While our
top-line revenues continue to grow handsomely, our bottom line
reflects our commitment and investment into Thailand, and other
destinations. Our goal is to operate no less than 15 resort
properties in Thailand, Vietnam and Southeast Asia by the end of
2009,� said Rick Wall, Chairman and CEO of The Castle Group, Inc.
By midyear, the Company entered into a new sales and marketing
agreement with the Ocean Resort Hotel Waikiki and took over full
management of the Hotel Santa Fe. On October 1, 2007, Castle began
managing all aspects of the 596-room Maile Sky Court mid-range
hotel in Waikiki and in December 2007, the Company began handling
sales, marketing, and reservations for the 310-room Queen Kapiolani
Hotel in Honolulu. HBII/Quintus Litigation Settled In its filings
with the SEC, the company also discussed its reserve for amounts
owed to it by HBII, In March, 2008, Hanalei Bay International
Investors (�HBII�), settled litigation stemming from a dispute with
the current timeshare developer of the Hanalei Bay Resort over
proceeds from the sale of the Hanalei Bay Resort (�HBR�) on Kauai
in March, 1999 to an unrelated third party. The cash proceeds
received by HBII on the closing of the sale were not sufficient to
satisfy all claims of HBII�s creditors, including Castle. As more
fully set forth in Castle�s recent 10KSB filing, Hanalei Bay
International Investors (�HBII�) owed Castle $4.4 million as of
December 31, 2007. HBII intended to pay that amount from its share
of proceeds owed to it pursuant to an agreement with Quintus (HBR),
LLC (�HBR�). However, HBR disputed the amount that it was indebted
to HBII, and HBII filed a lawsuit to collect the amounts owed by
HBR. In March, 2008, HBII and Quintus Resorts, LLC (�Quintus�), the
current time share developer of the Hanalei Bay Resort, entered
into a settlement agreement to resolve the litigation. In the
settlement agreement, Quintus issued a 19.9% membership interest in
Quintus to HBII or its designee, which included a preferred return
as to the first $6.2 million of future distributions of available
cash flow. For at least the next two or three years, Quintus will
be required to use all of its available cash flow to pay down the
substantial indebtedness it incurred in purchasing its various
timeshare resorts. Based on Quintus�s financial projection, HBII�s
management believes that it is likely to receive in excess of $6.0
million from its ownership interest in Quintus and that it will
utilize these funds to pay its indebtedness to Castle. In light of
such uncertainties, as required by Generally Accepted Accounting
Principles (�GAAP�) the Company has established a reserve for
uncollectible amounts. The Company recorded an expense during 2007
of $954,459 and reduced additional paid in capital for $3.3 million
in providing for the reserve. In the fourth quarter the Company
reversed $150,542 in accrued Interest Income earned on the amount
outstanding during 2007. In an unrelated accounting change, the
Company previously recorded �Management and Service Fees� from its
properties that were operated under a Gross Contract and an
offsetting amount was recorded as an expense under �Property�
operating expenses. For 2007, the Company adopted a change in the
accounting for these fees and expenses. The practice was modified
to eliminate these amounts from both revenue and expense. �Since we
are just getting back out there as a visibly publicly trading
company, it is important that we follow a conservative accounting
approach. We would rather be cautious in our revenue accounting and
allow for any potential uncertainties related to the HBII matter
and then possibly create a pleasant surprise for our shareholders
should we collect the monies we are due down the line. It is
important that we address these accounting items now even though
they were not included in our expectations and guidance of our
financial results for 2007. Our efforts in obtaining the new
contracts are having a positive effect on earnings and we expect
that this will be evident when we announce our first quarter
results in the coming days, � said Rick Wall, Chairman and CEO of
the Castle Group, Inc. 2007 Financial Results Total revenues for
the year ending December 2007, increased approximately 8% to $21.0
million, compared to $19.5 million in 2006. Annual Revenues
Attributed from Properties increased 6% year over year, to $18.4
million for 2007, while management and service revenues grew 21%
year over year, to approximately $2.2 million. These increases
reflect the addition of six new property contracts during 2007,
modest increases in rates and occupancy at some of the properties
under Castle�s management and the strengthening of the New Zealand
dollar. Part of the increase in Operating Expenses was reflected in
administrative and general expenses that increased by $1.6 million
for the year ended December 31, 2007. Part of these increases is a
result of costs related to Castle�s ongoing expansion into Thailand
and other Pacific Basin and Asian vacation destinations. In
addition, the Company incurred legal, consulting, accounting and
related costs as a result of bringing the Company�s SEC filings
current which allowed the Company�s common stock to begin actively
trading on the OTCBB in December. Both of these initiatives were
successful during 2007. In addition, the Company recognized an
expense of $954,459 as part of an adjustment in the carrying value
of the receivable from HBII as a result of the settlement of legal
matters between the current timeshare developers of Hanalei Bay
Resort and HBII. The company recorded a net loss of $1.1 million or
$0.12 per share for 2007, as compared to net income of $0.4 million
or $0.04 per share in the year-earlier period. For more information
see the Company�s 10-KSB for the year ending December 31, 2007 as
filed with the Securities and Exchange Commission. Plans for Growth
Over the last several months, Castle has adopted a strategic plan
to further expand in Hawaii, Micronesia, New Zealand, Thailand and
Vietnam, as well as in other regions throughout the Pacific and
Asia. Commenting on the Company�s growth initiatives, Alan Mattson,
COO of the Castle Group, Inc. said, �We believe that there are
significant opportunities to expand Castle�s operations both in the
markets it currently serves, as well as other Pacific Basin and
Asian vacation destinations, including Vietnam. Consequently, over
the last several quarters we have announced new key management
appointments and promotions as part of our strategic plan to
position Castle for significant growth within our current markets
and to capitalize on the emerging growth opportunities particularly
within the Asian markets. In 2007, Castle formed its Thailand
division to support its new business initiatives in Thailand and in
January 2008, the Company announced the appointment of Mr. Robert
Wu to its Board of Directors and to the post of Executive Vice
President of Asian Development for its Castle Resorts & Hotels
subsidiary. Chairman and CEO of The Castle Group, Inc., Rick Wall
commented, � We are very excited about what we see happening with
the growth of our Company. We just recently returned from a
development trip to both Thailand and Vietnam, and we expect to
sign numerous new contracts with properties in both of these areas
over the coming months. About The Castle Group, Inc. Headquartered
in Honolulu, The Castle Group, Inc. provides management and related
hospitality services to hotel and resort condominiums under the
trade name �Castle Resorts & Hotels.� Since 1993, Castle�s
geographic presence has expanded from the Hawaiian Islands to
additional markets throughout the Asia/Pacific region, including
Guam, Saipan, Thailand, and New Zealand. Castle�s services include
pre-opening technical services, customized hotel and resort
operations management, state-of-the-art sales, marketing and
reservations, expert property management and cost-effective
renovations and interior design. Castle offers travelers
accommodations ranging from hotel guest rooms to fully equipped
spacious resort condominiums. This press release contains
forward-looking statements made under the �safe harbor� provisions
of the U.S. Private Securities Litigation Reform Act of 1995.
Forward looking statements are based upon the current plans,
estimates, and projections of The Castle Group's management and are
subject to risks and uncertainties which could cause actual results
to differ from the forward looking statements. These include, but
are not limited to, risks and uncertainties outlined in the
Company's periodic filings with the U.S. Securities and Exchange
Commission. The Castle Group does not assume any obligation to
update the information contained in this press release.
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