The Castle Group, Inc. Announces Southeast Asia Goals and Financial Results for 2007

  
    
  
  
    
      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.