Summary of Significant Accounting Policies |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | Note 3. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Diamondhead Casino Corporation and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Land
Land held for development is carried at cost. Costs directly related to site development, such as licensing, permitting, engineering, and other costs, are capitalized.
Land development costs, which have been capitalized, consist of the following at December 31, 2023 and 2022:
Cooperative Energy, a Mississippi Electric Cooperative sought a permanent easement along the northern portion of the Property on which to construct, maintain and operate electric transmission lines together with an access road. On or about November 19, 2020, Cooperative Energy filed a Complaint with the Special Court of Eminent Domain, Hancock County, Mississippi seeking an Order authorizing the Cooperative to enter onto the Property for the purpose of examinations and surveys. The matters sought in the Complaint were quickly resolved by agreement of the parties. The Company’s understanding and MGC’s understanding was that the case would be dismissed, but the case was not dismissed. On or about May 24, 2023, Cooperative Energy filed a Complaint for Eminent Domain in the Special Court of Eminent Domain, Hancock County, Mississippi in which it named MGC and all persons and entities holding liens on the Diamondhead, Mississippi Property as defendants.
On October 17, 2023, the Court entered an Order Approving Settlement in the amount of $1 million and entered an Order Approving Disbursement of Funds to MGC. On October 20, 2023, MGC received $845,378 as part of the settlement amount. Cooperative shall pay the balance amount to MGC, equaling the total settlement payment of $1 million and ownership of the easement across MGC’s condemned property shall be vested in Cooperative. As such, the Company recorded a receivable of $154,622 on the consolidated balance sheet as of December 31, 2023.
Management determined that the easement arrangement was outside the scope of ASC 842. Further, the Company determined that the easement reduced the value of the property by $242,893. The remaining $757,107 of the $1 million easement was recorded as a gain on the condemnation of land in the consolidated statements of operations.
Fair Value Measurements
The Company follows the provisions of ASC Topic 820 “Fair Value Measurements” for financial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. The standard utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Input other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3: Unobservable input that reflects management’s own assumptions.
Financial instruments included in current assets and liabilities are reported at carrying value in the consolidated balance sheets, which approximate fair value due to their short term nature.
Long-Lived Assets
The Company reviews long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of long-lived assets is measured by comparing the carrying amount of the assets to the estimated undiscounted future cash flows projected to be generated by the assets. If such assets are considered impaired, the impairment to be recognized is measured by the amount the carrying value exceeds the fair value of such assets determined by appraisal, discounted cash flow projections, or other means. No impairment existed as of December 31, 2023.
Employee Stock Ownership Plan
The Company has an Employee Stock Ownership Plan (ESOP) covering substantially all employees with one or more years of service, financed by employer loans. The Company also established a trust called the Europa Cruises Corporation Employee Stock Ownership Plan Trust Agreement, to serve as the funding vehicle for the ESOP. The President and Chief Executive Officer is the sole Trustee of the Trust. Compensation expense was measured at the current market price of shares committed for release and such shares constitute outstanding shares for earnings per share computations.
As the loans are repaid, shares are released from the ESOP and allocated to qualified employees based upon the proportion of payments made during the year to the remaining amount of payments due on the loans through maturity. Dividends, if any, are treated as follows:
(1) stock dividends on shares allocated to participant accounts shall be credited to the participant account when paid; and (2) cash dividends on shares allocated to participant accounts shall, at the discretion of the Administrator, be credited to the participants’ Other Investment Account or be used to reduce the indebtedness to the Company, in which case, shares bearing an equal value to the cash dividend would be allocated to participant accounts. The Company has not paid any dividends on its common stock.
For the years 2011 through 2023, the Company elected to temporarily suspend contributions to the Plan, in accordance with the loan pledge agreement between the Company and the ESOP Trust. For each year in which there was no contribution to the Plan, the Plan returned the shares, which would have been allocated to employees annually, to treasury. The Company has not filed the annual Form 550 reports pertaining to the ESOP since the year ended December 31, 2015.
Income Taxes
Under the asset and liability method of ASC Topic 740, “Accounting for Income Taxes,” deferred tax liabilities and assets are recognized for future tax consequences attributable to differences between the financial statement carrying amounts and the tax basis of assets and liabilities. A valuation allowance is recorded to reflect the uncertainty of realization of deferred tax assets.
The Company follows the provisions of Financial Accounting Standard Board (“FASB”) No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes.” The standard addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the consolidated financial statements. Under this standard, an entity may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. The standard also provides guidance on derecognition, classification, interest and penalties on income taxes, and accounting in interim periods and requires increased disclosures. The Company does not have a liability for unrecognized tax benefits.
The Company’s policy is to record interest and penalties on uncertain tax provisions as income tax expense. As of December 31, 2023 and 2022, the Company has no accrued interest or penalties related to uncertain tax positions.
Basic loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Basic weight average shares includes and of shares not yet issued as of December 31, 2023 and 2022. Diluted earnings per share is calculated by using the weighted average number of common shares outstanding, plus other potentially dilutive securities. Potentially dilutive securities are excluded from the computation of diluted loss per shares since their effect would be antidilutive. Common shares outstanding consist of issued shares, including allocated and committed shares held by the ESOP trust, less shares held in treasury. The dilutive securities below do not include potentially convertible Debentures, since the requirements for possible conversion had not yet been met and may never be met.
The Company follows the provisions of ASC Topic 718 “Compensation — Stock Compensation” which requires the measurement and recognition of compensation expense for all share-based payment awards either modified or granted to employees and directors based upon estimated fair values.
On November 9, 2020, the Board of Directors voted to award options to purchase common stock to its six current directors, including three officers of the Company, at a strike price of $ per share with an expiration date of , as follows: Martin Blount: ; Daniel Burstyn: ; Robert Crow: ; Benjamin Harrell: ; Gregory Harrison: and Deborah Vitale: . All options are vested.
On December 12, 2023, the Board of Directors voted to extend these outstanding options from December 31, 2023 to December 31, 2025.
On February 4, 2022, the Board of Directors entered into an agreement with the Chairman to issue shares of common stock of the Company to the Chairman to repurchase the indemnification. This repurchase eliminates any risk to the Company arising from the indemnification which could have been material. During the years ended December 31, 2023 and 2022, the Company record stock-based compensation of $ for the fair value for these shares, which have not yet been issued as of the issuance date of the consolidated financial statements.
Option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. The Company uses projected volatility rates, which are based upon historical volatility rates, trended into future years. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of the Company’s options.
Reclassification
Certain reclassifications have been made to the Company’s consolidated financial statements for the year ended December 31, 2023 to conform to the current period’s consolidated financial statement presentation. A reclassification of $ from administrative and general expenses to stock-based compensation expense was recorded. The reclassification did not have any effects on the Company’s consolidated financial statements.
Recently Adopted Accounting Pronouncements
In November 2019, the FASB issued ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivative and Hedging (Topic 815, and Leases (Topic 841). This new guidance is effective for annual reporting periods beginning after December 15, 2019, including interim periods within those annual reporting periods. This pronouncement was amended under ASU 2019-10 to allow an extension on the adoption date to entities that qualify as a small reporting company. The Company has elected this extension and the effective date for the Company to adopt this standard will be for fiscal years beginning after December 15, 2022. Accordingly, the Company has adopted this standard as of January 1, 2023 and it did not have an effect on its consolidated financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
On March 27, 2023, the FASB issued ASU 2023-01, which amends certain provisions of ASC 842 that apply to arrangements between related parties under common control. Specifically, the ASU:
The ASU is effective for fiscal years beginning after December 15, 2023. The Company has not completed its assessment of the standard, but does not expect the adoption to have a material impact on the Company’s unaudited condensed consolidated financial position, results of operations, or cash flows.
No other recent accounting pronouncements were issued by FASB that are believed by management to have a material impact on the Company’s present or future financial statements.
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