14 - Annual Review of Visit Newport Beach Audited Financial Statements and Expenditure Report — Newport Beach City Council, October 24, 2023

TO:

FROM:
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NEWPORT BEACH
City Council Staff Report
October 24, 2023
Agenda Item No. 14

HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
Jason AI -Imam, Finance Director/Treasurer - 949-644-3126, [email protected]
PREPARED BY: Michael Gomez, Deputy Finance Director,
[email protected]
PHONE: 949-644-3123
TITLE: Annual Review of Visit Newport Beach Audited Financial Statements and Expenditure Report
ABSTRACT:

In accordance with Sections 6(d) and 6(e) of the City of Newport Beach's (City) agreement with Visit Newport Beach (VNB), originally entered into on September 27, 2011, and amended on August 5, 2015, VNB's audited financial statements, and compliance expenditure report for the fiscal year ending June 30, 2023, are attached for the City Council's review. Due to the significant fees paid to Newport Beach & Company by VNB for services, Newport Beach & Company's audited financial statements are also included for the City Council's review.

RECOMMENDATIONS:
a) Determine this action is exempt from the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because this action will not result in a physical change to the environment, directly or indirectly; and
b) Receive and file.

DISCUSSION:

Section 6(d) of the Agreement with VNB requires audited financial statements to be submitted to the City by September 30 of each year for its most recently ended fiscal year, including any management letter associated with the audited financial statements. VNB submitted audited financial statements to the City for the fiscal year ending June 30, 2023, which was received by City staff on September 28, 2023. The City Council shall review the audited financial statements.

Section 6(e) of the Agreement with VNB requires VNB to submit an expenditure report to the City by September 30 of each year, which shall be certified by VNB and a Certified Public Accountant to the effect that the funds received pursuant to the agreement were expended in accordance with the agreement in the previous fiscal year for purposes authorized by the agreement. This report shall include reasonable detail in support of the certification, including expenditures for or contributions to special events and not -for -profit organizations in Newport Beach.
14-1

Annual Review of Visit Newport Beach
Audited Financial Statements and Expenditure Report
October 24, 2023

Page 2 ends

VNB submitted an expenditure report for the fiscal year ending June 30, 2023, which was received by City staff on September 28, 2023. VNB reports that $2,149,913 was paid to Newport Beach & Company for marketing and promotion services. Therefore, Newport Beach Company's financial statements are also included for City Council review.

The audited financial statements and expenditure report for the fiscal year ending June 30, 2023, were reviewed by the audit firm of KMJ Corbin & Company. The independent auditors' report can be found within the audited financial statements for VNB and Newport Beach & Company for the fiscal year ending June 30, 2023, which reflects an unmodified or "clean" audit opinion, meaning that the financial statements are presented fairly, in all material respects, and in conformity with generally accepted accounting principles. The audit reports reflect no audit findings or internal control recommendations. Therefore, a management letter was not issued in connection with the audit. The firm's review of the required expenditure report indicated that VNB's assertion that VNB complied with the applicable provisions of the agreement with the City is fairly stated, in all material respects.

FISCAL IMPACT:

Under VNB's agreement with the City, VNB receives 18% of all Transient Occupancy Tax revenue collected by the City to fund destination marketing services and activities.

Additionally, VNB receives revenue from the Newport Beach Tourism Business Improvement District (TBID), which is funded by a levy of 3% of most revenues from short-term stays at participating lodging businesses within the City. The TBID funds are dedicated to meeting and event sales promotion and marketing programs. Total revenues from these sources, as outlined in the attached financial statements, amounted to approximately $11.4 million in Fiscal Year 2022-23.

ENVIRONMENTAL REVIEW:

Staff recommends the City Council find this action is not subject to the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly.

NOTICING:

The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item).

ATTACHMENTS:

Attachment A —Visit Newport Beach Audited Financial Statements Attachment B — Newport Beach and Company Audited Financial Statements Attachment C — Visit Newport Beach Expenditure Compliance Report 14-2

Attachment A
Visit Newport Beach Audited Financial Statements for the Year Ended June 30, 2023 14-3

VISIT NEWPORT BEACH INC.
(A Non -Profit Organization)

FINANCIAL STATEMENTS AND SUPPLEMENTAL INFORMATION
For The Years Ended June 30, 2023 and 2022
with

INDEPENDENT AUDITORS' REPORT THEREON
14-4

VISIT NEWPORT BEACH INC.
(A Non -Profit Organization)

TABLE OF CONTENTS
Independent Auditors' Report.................................................................................................1-2 Financial Statements:

Statements of Financial Position........................................................................................ 3 Statementsof Activities..................................................................................................... 4 Statementsof Cash Flows.................................................................................................. 5 Notes to Financial Statements.......................................................................................6-19 Supplemental Information:

Schedule I — Statement of Financial Position by Funding Source ................................... 20 Schedule 11— Statement of Activities by Funding Source ............................................... 21 14-5

KJ� �j J I Corbin g�
lvl Company
Business Advisors Tax and Audit
Independent Auditors' Report
Board of Directors
Visit Newport Beach Inc.

Opinion
We have audited the accompanying financial statements of Visit Newport Beach Inc. (a non-profit organization) (the "Organization"), which comprise the statements of financial position as of June 30, 2023 and 2022, and the related statements of activities and cash flows for the years then ended, and the related notes to the financial statements.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Organization as of June 30, 2023 and 2022, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of America ("GAAS"). Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Organization and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Related -Party Transactions
As discussed in Note 9 to the financial statements, the Organization has significant transactions with a related non-profit organization. Our opinion is not modified with respect to this matter.

Change in Accounting Principle
As discussed in Note 2 to the financial statements, as of July 1, 2022, the Organization adopted new accounting guidance related to leases. Our opinion is not modified with respect to this matter.

Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Organization's ability to continue as a going concern for one year after the date that the financial statements are issued. p 949 431 0997 f 714 734 3431 2855 Michelle Dr Suite 350 Irvine CA 92606 kmjpartnerscpa.com p 818 999 5885 f 818 610 1090 20720 Ventura Blvd Suite 160 Woodland Hills CA 91364 14-6

Auditors' Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Organization's internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Organization's ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control —related matters that we identified during the audit.

Supplemental Information
Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole.

The supplemental information contained in Schedules I and Il on pages 20-21 is presented for purposes of additional analysis and is not a required part of the 2023 financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the 2023 financial statements. The information has been subjected to the auditing procedures applied in the audit of the 2023 financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the 2023 financial statements or the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the 2023 financial statements as a whole.
i ,M j- ckbv- ,,, � lff*n LP
KMJ Corbin & Company LLP
Irvine, California
September 25, 2023
14-7

VISIT NEWPORT BEACH INC.
(A Non -Profit Organization)

STATEMENTS OF FINANCIAL POSITION
June 30,
2023 2022
ASSETS
Current assets:

Cash and cash equivalents $ 2,601,955 $ 4,792,516
Short-term investments 5,313,443 2,952,978
Accounts receivable 48,279 -
Prepaid expenses and other current assets 601,564 425,427 Total current assets 8,565,241 8,170,921
Operating sublease right -of -use assets, net 1,163,799 - Property and equipment, net 143,258 29,520
Website development costs, net 55,665 -
Deposits and other assets 9,619 9,619
$ 9,937,582 $ 8,210.060

LIABILITIES AND NET ASSETS
Current liabilities:

Accounts payable $ 100,883 $ 363,348
Related party payables, net 199,937 2,441
Accrued expenses 26,000 26,451
Accrued payroll and related expenses 94,155 72,529
Group booking incentive reserve 138,683 55,620
Current portion of sublease obligations 151,727 -
Total current liabilities 711,385 520,389
Sublease obligations, net of current portion 1,058,424 - Total liabilities 1,769,809 520,389
Commitments and contingencies
Net assets without donor restrictions 8,167,773 7,689,671 $ 9,937,582 $ 8.210.060
See accompanying notes to financial statements
3 14-8

VISIT NEWPORT BEACH INC.
(A Non -Profit Organization)

STATEMENTS OF ACTIVITIES
For The Years Ended June 30,
2023 2022
Support and revenues:

Service fee revenues $ 11,240,912 S 9,445,421
Advertising and other income 44,000 -
Interest income 125,907 2,272
Total support and revenues
11,410,819
9,447,693
Expenses:

Marketing (including $2,149,913 and $1,806,743
to Newport Beach & Company during 2023 and
2022, respectively — see Note 9)
8,742,659
5,997,635
Salaries and benefits
1,618,690
1,121,805
Other
543,052
363,044
Depreciation and amortization
28,316
12,721
Total expenses
10,932,717
7,495,205
Change in net assets without donor restrictions
478,102
1,952,488
Net assets without donor restrictions, beginning of year 7,689,671
5,737,183
Net assets without donor restrictions, end of year
$ 8,167,773
$ 7.689.671
See accompanying notes to financial statements
4 14-9

VISIT NEWPORT BEACH INC.
(A Non -Profit Organization)

STATEMENTS OF CASH FLOWS
For The Years Ended June 30,
2023
2022
Cash flows from operating activities:

Change in net assets without donor restrictions
$ 478,102
$ 1,952,488
Adjustments to reconcile change in net assets without
donor restrictions to net cash provided by operating
activities:

Depreciation and amortization
28,316
12,721
Amortization of right -of -use operating sublease assets 145,420
-
Loss on disposals of property and equipment
221
1,627
Accrued interest income
(55,989)
(1,498)
Changes in operating assets and liabilities:

Accounts receivable
(48,279)
-
Related -party receivables/payables, net
197,496
(15,170)
Prepaid expenses and other current assets
(176,137)
(242,952)
Accounts payable
(262,465)
262,552
Accrued expenses
2,620
(14,590)
Accrued payroll and related expenses
21,626
(2,198)
Group booking incentive reserve
83,063
49,120
Deferred rent
-
(3,071)
Sublease obligations
(102,139)
-
Net cash provided by operating activities
311,855
1,999,029
Cash flows from investing activities:

Purchases of property and equipment (142,275) (24,327)
Website development costs (55,665) -
Purchases of investments (5,292,476) (6,569,480)
Proceeds from sales/maturities of investments 2,988,000 3,618,000 Net cash used in investing activities (2,502,416) (2,975,807) Cash flows used in financing activities:

Payments on loan payable - (149,280)
Net decrease in cash and cash equivalents (2,190,561) (1,126,058) Cash and cash equivalents at beginning of year 4,792,516 5,918,574 Cash and cash equivalents at end of year $ 2,601,955 $ 4.7 22.516 Supplemental disclosure of cash flow information:

Cash paid during the year for interest $ - $ 3,816
Supplemental disclosure of non -cash transactions:

Right -of -use sublease asset and sublease obligation
recorded upon adoption of ASC 842 $ 30,439 $ -
Right -of -use sublease assets obtained in exchange for sublease obligations $ 1,281,852 $ -
See accompanying notes to financial statements
S
14-10

VISIT NEWPORT BEACH INC.
(A Non -Profit Organization)

NOTES TO FINANCIAL STATEMENTS
For The Years Ended June 30, 2023 and 2022
NOTE 1— ORGANIZATION
Nature of Operations
Visit Newport Beach Inc. (the "Organization") is a non-profit organization formed under the laws of the State of California.

Transient Occupancy Tax("TOT")
The Organization has an agreement ("TOT Agreement") with the City of Newport Beach (the "City") through December 31, 2024 to promote tourism and serve the needs of visitors to the City.

Under the terms of the TOT Agreement, the Organization is responsible to develop, plan, carry out and supervise a program to market and promote the Newport Beach brand and to promote tourism in, and serve the needs of, visitors to the City as well as increase the amount of Transient Occupancy Tax collected through its promotional activities.

The City collects a Transient Occupancy Tax as well as a Visitor's Service Fee applied to the transient rental of lodging rooms (collectively, the "TOT"). The City pays the Organization 18% of the annual TOT in monthly installments. As the Organization is not entitled to its share of the TOT until paid by the City, amounts are recognized as revenue when received.

The City shall have the right, in its sole discretion, to adjust the payment (increase or decrease the percentage of TOT paid to the Organization) as part of its once -annual budget adoption process for any reason after notice to the Organization and an opportunity for the Organization to formally comment on the adjustment. For the years ended June 30, 2023 and 2022, the Organization received approximately 58% and 60%, respectively, of its service fee revenues from the City through the TOT. The City has the right to terminate the TOT Agreement, without cause, by giving the Organization 365 days' written notice of its intention to terminate. Should the City reduce or stop its funding to the Organization due to the Organization's default or termination of the TOT Agreement, the Organization's operations will be impacted.

Tourism Business Improvement District ("TBID")
The Newport Beach Tourism Business Improvement District ("NBTBID") was established April 28, 2009, and expires on January 31, 2024, pursuant to the Management District Plan, as amended (the "Plan"). The NBTBID is funded by assessments levied on participating lodging businesses within a specified district. The assessments are restricted for use for sales promotion and marketing programs to market the City as a tourist, meeting and event destination as outlined in the Plan. Either parry may terminate this agreement by providing the other parry ninety calendar days' written notice prior to the effective date of termination. As the Organization is not entitled to its share of the assessments collected until paid by the City, amounts are recognized as revenue 6 14-11

VISIT NEWPORT BEACH INC.
(A Non -Profit Organization)

NOTES TO FINANCIAL STATEMENTS
For The Years Ended June 30, 2023 and 2022
NOTE 1— ORGANIZATION, continued
when received. For the years ended June 30, 2023 and 2022, the Organization received approximately 42% and 40%, respectively, of its service fee revenues from the City through TBID assessments.

As of June 30, 2023 and 2022, the NBTBID is represented by nine (9) hotels within the City of Newport Beach which collect a 3.0% tax on short-term stays. The City is entitled to 0.25% of the receipts annually for the collection of the assessments and disbursements of the NBTBID.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. Net assets and revenues, expenses, gains, and losses are classified based on the existence or absence of donor -imposed restrictions. Accordingly, net assets and changes therein are classified and reported as follows:

Without donor restrictions — Net assets that are not subject to donor -imposed stipulations.

These assets are available to support the Organization's general activities and operations at the discretion of the Board of Directors.

With donor restrictions —Net assets that are subject to donor -imposed restrictions. Some donor - imposed restrictions are temporary in nature, such as those that will be met by the passage of time or other events specified by the donor. Other donor -imposed restrictions are perpetual in nature, where the donor stipulates that such resources be maintained in perpetuity. Generally, the donors of these assets permit the Organization to use all or part of the income earned on related investments for general or specific purposes.

As of and for the years ended June 30, 2023 and 2022, the Organization had no net assets with donor restrictions.

Revenues are reported as increases in net assets without donor restrictions unless use of the related assets is limited by donor -imposed restrictions. Expenses are reported as decreases in net assets without donor restrictions. Gains and losses on investments and other assets are reported as increases or decreases in net assets without donor restrictions unless their use is restricted by explicit donor stipulations or by law.
7 14-12

VISIT NEWPORT BEACH INC.
(A Non -Profit Organization)

NOTES TO FINANCIAL STATEMENTS
For The Years Ended June 30, 2023 and 2022
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued Use of Estimates
The preparation of financial statements requires the Organization to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates made by the Organization's management include, but are not limited to, fair value of investments, recoverability of long-lived assets, the allocation of expenses to program activities and general and administrative, and lease assumptions, including discount rates and lease terms. Actual results may differ from those estimates.

Cash and Cash Equivalents
The Organization considers all highly liquid investments purchased with an initial maturity of three months or less to be cash equivalents. The Organization maintains its cash and cash equivalent balances at various financial institutions. The total cash balances are insured by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000 per institution. At June 30, 2023, the Organization had approximately $5,746,000 of uninsured cash and cash equivalent balances.

The Organization periodically reviews the quality of the financial institutions it has deposits with to minimize risk of loss. To date, no losses have been incurred.

Investments and Fair Value Measurements
Investments and cash equivalents consist of U.S. Treasury Bills which are carried at amortized cost, which approximates fair value.

Accounting guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal, or in the absence of a principal market, the most advantageous market for the asset or liability, in an orderly transaction between market participants on the measurement date. Accounting guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs in priority that may be used to measure fair value:

Level 1—Quoted prices in active markets for identical assets or liabilities; Level 2—Observable inputs other than quoted prices included within Level 1, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (such as interest rates and yield curves, credit risks, and default rates) or other inputs that are principally derived from or corroborated by observable market data by correlation or by other means; and 8 14-13

VISIT NEWPORT BEACH INC.
(A Non -Profit Organization)

NOTES TO FINANCIAL STATEMENTS
For The Years Ended June 30, 2023 and 2022
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The fair value of the Organization's U.S. Treasury Bills are based partially upon quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the full term of the assets. These instruments have been classified within Level 2 of the valuation hierarchy.

As of June 30, 2023 and 2022, the Organization's investments measured at fair value on a recurring basis were as follows:

June 30. 2023
Quoted Prices in
Significant
Active Markets
Significant Other Unobservable
for Identical
Observable Inputs
Assets (Level 1)
Inputs (Level 2) (Level 3)
Short-term investments:

U.S. Treasury Bills
June 30. 2022
Quoted Prices in
Significant
Active Markets
Significant Other Unobservable
for Identical
Observable Inputs
Assets (Level 1)
Inputs (Level 2) (Level 3)
Short-term investments:

U.S. Treasury Bills
Accounts Receivable
Accounts receivable are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts at year end. Management determines the allowance for doubtful accounts by identifying troubled accounts based on current and historical experience. At June 30, 2023 and 2022, the Organization considers its accounts receivable to be fully collectible and accordingly did not record an allowance for doubtful accounts. As of June 30, 2023, four customers accounted for approximately 55% of the Organization's total accounts receivable balance.
9 14-14

VISIT NEWPORT BEACH INC.
(A Non -Profit Organization)

NOTES TO FINANCIAL STATEMENTS
For The Years Ended June 30, 2023 and 2022
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued Property and Equipment
Property and equipment are stated at cost. Donated assets are recorded at their fair market value when received. The cost of purchased assets or fair market value of donated assets is depreciated using the straight-line method over the estimated useful lives of the related assets which range from three to seven years. Leasehold improvements are amortized over the lesser of their estimated useful lives or the related lease term. Maintenance and repairs are charged to expense as incurred.

Significant renewals and betterments are capitalized.

It is the Organization's policy to capitalize property and equipment over $1,500. At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation or amortization are removed from the accounts and any resulting gain or loss is reflected in the statements of activities.

Website Development Costs
The Organization accounts for the costs of developing its mobile apps and websites by capitalizing the costs during the application development stage when it is probable that the project will be completed and the property will be used to perform the function intended. Website development costs are amortized on a straight-line basis over their estimated useful lives when completed, which are typically the earlier of approximately three years or term based on estimated disposal date. The recoverability of website development costs is evaluated periodically, taking into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists.

For the years ended June 30, 2023 and 2022, the Organization capitalized website development costs of $55,665 and $0, respectively.

For the years ended June 30, 2023 and 2022, the Organization recorded amortization expense on website development costs totaling $0 and $0, respectively. 1,eacec
At the inception of a contract, the Organization determines if the arrangement is, or contains, a lease. Operating lease right -of -use ("ROU") assets represent the Organization's right to use an underlying asset for the lease term, and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of the future minimum lease payments over the lease term calculated using the risk -free rate commensurate with the term of the ROU asset. 10 14-15

VISIT NEWPORT BEACH INC.
(A Non -Profit Organization)

NOTES TO FINANCIAL STATEMENTS
For The Years Ended June 30, 2023 and 2022
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued ROU assets also include any lease payments made at or before lease commencement and exclude any lease incentives received. The lease terms may include options to extend the lease when it is reasonably certain that the Organization will exercise that option. Leases with a term of 12 months or less are not recognized in the balance sheet. Rent expense is recognized on a straight-line basis over the lease term.

The Organization accounts for lease and non -lease components as separate lease components for all its leases.

Impairment of Long -Lived Assets
The Organization evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If the estimated future cash flows (undiscounted and without interest charges) from the use of an asset are less than the carrying value, a write -down would be recorded to reduce the related asset to its estimated fair value. At June 30, 2023 and 2022, the Organization's management believes there is no impairment of its long-lived assets. There can be no assurance, however, that market conditions will not change or demand for the Organization's services will continue, which could result in impairment of long-lived assets in the future.

Group Booking Incentive Reserve
The Organization has established an incentive program for businesses by paying for certain costs of conferences and group meetings held in Newport Beach hotels in order to attract businesses and groups to the City. The incentives are recognized upon the reservation of the hotel for future meetings. As of June 30, 2023 and 2022, group booking accruals were $138,683 and $55,620, respectively.

Contributed Materials and Services
Donated materials and other noncash contributions (if any) are reflected in the accompanying financial statements at their estimated fair market values at date of receipt. Contributions of services are recognized if the services received create or enhance nonfinancial assets or require specialized skills, are provided by individuals possessing those skills and would typically need to be purchased if not provided by donation. Other volunteer services that do not meet these criteria are not recognized in the financial statements as there is no objective basis of deriving their value.

VISIT NEWPORT BEACH INC.
(A Non -Profit Organization)

NOTES TO FINANCIAL STATEMENTS
For The Years Ended June 30, 2023 and 2022
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued One of the services provided by the Organization in its efforts to promote the City is to organize site inspections and other promotional events with a variety of potential visiting groups. These groups are introduced by the Organization's staff to the various hotels, restaurants, and other local businesses involved in the tourism industry in Newport Beach. All businesses visited are also sponsors of the Organization. Many of the Organization's sponsors contribute materials, such as meals and rooms, in connection with this program. During the years ended June 30, 2023 and 2022, the Organization determined there were no significant contributed materials and services.

Additionally, a substantial number of unpaid volunteers have made significant contributions of time to the Organization. No amounts have been reflected in the financial statements for these contributions as they do not meet the required criteria.

The Organization annually evaluates tax positions as part of the preparation of its exempt tax return. This process includes an analysis of whether tax positions the Organization takes with regard to a particular item of income or deduction would meet the definition of an uncertain tax position under current accounting guidance. The Organization believes its tax positions are appropriate based on current facts and circumstances. The Organization's policy is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. At June 30, 2023 and 2022, the Organization did not have any unrecognized tax benefits.

The Organization is no longer subject to U.S. federal, state or local income tax examinations by tax authorities for years before 2019.

Allocated Expenses
The costs of providing program activities and supporting services have been summarized on a functional basis in Note 5. The Organization incurs expenses that directly relate to, and can be assigned to, a specific program or supporting activity. The Organization also conducts a number of activities which benefit both its program objectives as well as supporting services. These costs, which are not specifically attributable to a specific program or supporting activity, are allocated by management on a consistent basis among program and supporting services benefited, based on either financial or nonfinancial data, such as headcount, occupancy or estimates of time and effort incurred by personnel.
12 14-17

VISIT NEWPORT BEACH INC.
(A Non -Profit Organization)

NOTES TO FINANCIAL STATEMENTS
For The Years Ended June 30, 2023 and 2022
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued Recent Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842) ("ASC 842"), which requires the lease rights and obligations arising from lease contracts, including existing and new arrangements, to be recognized as assets and liabilities on the statement of financial position. ASU 2016-02, as amended, is effective for reporting periods beginning after December 15, 2021. Most prominent among the changes in the new standard is the recognition of right -of -use assets and lease liabilities by lessees for those leases classified as operating leases. Under the new standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases.

The Organization adopted this standard effective July 1, 2022, using the modified retrospective approach, which allowed the Organization to make any necessary transition adjustments at July 1, 2022. The Organization elected the optional transition method, which allowed the Organization to continue to use disclosures required by the prior standard during fiscal year 2023, the year of adoption.

The adoption of the new standard on July 1, 2022 did not have a material impact on the Organization's statement of financial position, which resulted in the recognition of operating sublease right -of -use asset of $27,367, sublease obligation of $30,438 and a reduction in deferred rent liabilities of $3,071. In addition, the adoption of the new standard did not materially impact the Organization's results of operations and cash flows. Also, the adoption of ASC 842 did not have an impact on the Organization's beginning net assets balance.

ASC 842 provides several optional practical expedients in transition to make the transition more efficient and cost-effective for companies. For leases that commenced prior to July 1, 2022, the Organization elected (i) the "package of practical expedients," which permits it not to reassess under the new standard its prior conclusions about lease identification, lease classification, and initial direct costs, and (ii) the use -of -hindsight in determining the lease term and in assessing impairment of right -of -use assets.

In addition, ASC 842 provides practical expedients for an entity's ongoing accounting that the Organization has elected short-term lease recognition exemption for all leases that qualify.

See Note 7 for additional information regarding the Organization's leases. 13 14-18

VISIT NEWPORT BEACH INC.
(A Non -Profit Organization)

NOTES TO FINANCIAL STATEMENTS
For The Years Ended June 30, 2023 and 2022
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued Subsequent Events
The Organization has evaluated subsequent events through September 25, 2023, the date which the financial statements were available to be issued. Based upon its evaluation, management has determined that no subsequent events have occurred that would require recognition in the accompanying financial statements or disclosure in the notes thereto except as disclosed herein.

NOTE 3 — LIQUIDITY AND AVAILABILITY
At June 30, 2023, the Organization has $7,963,677 of financial assets available within one year of the statement of financial position date to meet cash needs for general expenditures consisting of cash and cash equivalents of $2,601,955, short-term investments of $5,313,443, and accounts receivable of $48,279. None of the financial assets are subject to donor or other contractual restrictions that make them unavailable for general expenditures within one year of the statement of financial position. The Organization has a goal to maintain financial assets, which consist of cash, cash equivalents and short-term investments, on hand to meet 180 days of operating expenses, which are, on average, approximately $900,000 per month. The Organization has a policy to structure its financial assets to be available as its general expenditures, liabilities, and other obligations come due. The Organization invests cash in excess of daily requirements in various short-term treasury instruments.

Funding for the Organization is dependent on the hotel room nights booked in certain Newport Beach hotels each year and the subsequent portion of the TOT that is allocated through the City to the Organization and the portion of the TBID assessments that are sent to the Organization from the TBID participants. Annual revenue fluctuates depending on annual visitors to Newport Beach.

As a result, the Organization closely monitors the monthly projected and received revenue to determine if any change needs to be made to budgeted annual expenditures.

NOTE 4 — PROPERTY AND EQUIPMENT
Property and equipment consists of the following at June 30:
2023 2022
Computer equipment $ 57,369 $ 21,213
Office furniture and fixtures 197,182 121,159
Leasehold improvements 28,616 -
283,167 142,372
Less accumulated depreciation and amortization (139,902) (112, 552) $ 143,258 $ 29.520
14 14-19

VISIT NEWPORT BEACH INC.
(A Non -Profit Organization)

NOTES TO FINANCIAL STATEMENTS
For The Years Ended June 30, 2023 and 2022
NOTE 5 - STATEMENT OF FUNCTIONAL EXPENSES
The statements of functional expenses for the years ended June 30, 2023 and 2022 are as follows:

Salaries and benefits:

Salaries
Payroll taxes and employee benefits
Total salaries and benefits
Other expense:

Marketing
Office lease
Repairs and maintenance
Insurance
Office supplies
Equipment and equipment rental
Postage and other dues and fees
Meeting and education
Professional fees and services
Interest
Depreciation and amortization
Loss on property and equipment disposals
Travel and related
Total functional expenses
2023
Program General and 2022
Activities Administrative Total Total
(Summarized)
$ 977,330 $
281,053
$ 1,258,383
$ 827,673
294,135
66,172
360,307
294,132
1,271,465
347,225
1,618,690
1,121,805
8,132,286
610,373
8,742,659
5,997,635
145,579
48,526
194,105
119,349
7,023
5,074
12,097
35,301
-
7,129
7,129
6,414
3,137
8,258
11,395
6,245
28,833
75,407
104,240
41,507
92,799
9,067
101,866
65,394
7,915
24,331
32,246
35,691
-
47,909
47,909
30,596
-
-
-
3,816
-
28,316
28,316
12,721
-
221
221
1,627
31,844
-
31,844
17,104
$ %720, 881 $ 1, 111,833 $ 10,932,717 $ 7,495,205
The Organization incurred expenses related to program activities totaling approximately $6,597,000 for the year ended June 30, 2022.

NOTE 6 - LOAN AGREEMENT
On June 3, 2020, the Organization entered into an Economic Injury Disaster Loan (the "Loan") administered by the U.S. Small Business Administration. The loan had an original principal balance of $150,000, bore interest at 2.75% per annum and was set to mature on June 3, 2050. The loan required monthly payments beginning in June 2021. Payments were first applied to interest accrued and then principal. The amount borrowed under the Loan was guaranteed by substantially all of the Organization's assets. The Organization used all the proceeds of this Loan solely as working capital to alleviate economic injury caused by COVID-19. The Loan contained customary events of default, and the occurrence of an event of default may result in a claim for the immediate repayment of all amounts outstanding under the Loan. The Organization paid the loan in full during the year ended June 30, 2022.

IS
14-20

VISIT NEWPORT BEACH INC.
(A Non -Profit Organization)

NOTES TO FINANCIAL STATEMENTS
For The Years Ended June 30, 2023 and 2022
NOTE 7 — COMMITMENTS AND CONTINGENCIES
Lease Agreements
The Organization has operating leases and subleases for office space and office equipment rentals.

The Organization was obligated under a deemed sublease for its office space, which was accounted for as an operating lease. The sublease expired in September 2022. The lessee of the related office lease was Newport Beach & Company ("NB & Co."), a related parry.

In May 2022, the Organization entered into a sublease agreement with NB & Co. for a smaller lease space, which was accounted for as a separate lease. Under the sublease, rent is payable at approximately $17,000 to $20,000 per month and expires in September 2029. In addition, the Organization has a deemed sublease with NB & Co. for office equipment with monthly payments of approximately $250 through January 2026. As the new space was not available to be used until the beginning of 2023 and the office equipment lease commenced in November 2022, these leases resulted in the Organization recording operating sublease right -of -use assets and corresponding sublease obligations of $1,281,852 during the year ended June 30, 2023. During the year ended June 30, 2023, cash paid to NB & Co. under the sublease obligations totaled $149,878.

The operating subleases in place do not contain information to determine the rate implicit in the leases. As such, the Organization utilized the risk -free discount rates based on the assumed remaining lease term for the leases to calculate the present value of the remaining lease payments.

At June 30, 2023, the weighted -average discount rate and the weighted average remaining lease term for the operating subleases held by the Organization was 5% and 6.2 years, respectively.

The components of sublease cost for the year ended June 30, 2023 were as follows:

Operating sublease cost $ 192,470
Variable lease cost, including property taxes, insurance and maintenance 3,452
Total sublease cost
$ 195,922
Total sublease cost was included in other expenses in the accompanying statement of activities. 16 14-21

VISIT NEWPORT BEACH INC.
(A Non -Profit Organization)

NOTES TO FINANCIAL STATEMENTS
For The Years Ended June 30, 2023 and 2022
NOTE 7 — COMMITMENTS AND CONTINGENCIES, continued
Future minimum sublease payments under non -cancelable operating subleases at June 30, 2023 are approximately as follows:

Years Ending
June 30,
2024
2025
2026
2027
2028
Thereafter
Total future minimum lease payments
Less: imputed interest payments
Total operating lease liabilities
Less: current portion
Total
$ 208,000
215,000
222,000
228,000
235,000
305,000
1,413,000
(202,849)
1,210,151
(151,727)
$ 1,058,424
At June 30, 2022, future minimum payments due on the Organization's non -cancelable operating sublease commitments in excess of one year were approximately as follows:

Years Ending
June 30,
2023
$ 148,000
2024
205,000
2025
213,000
2026
220,000
2027
228,000
Thereafter
540,000
$ 1,554,000
17 14-22

VISIT NEWPORT BEACH INC.
(A Non -Profit Organization)

NOTES TO FINANCIAL STATEMENTS
For The Years Ended June 30, 2023 and 2022
NOTE 7 — COMMITMENTS AND CONTINGENCIES, continued
Commitments
The Organization also has several commitments for databases and services regarding marketing, promotion and other contracts ranging from approximately $130 to $17,000 per month over various terms with 30 months or less remaining at June 30, 2023. From these commitments, the Organization incurred approximately $669,000 and $502,000 of expenses for the years ended June 30, 2023 and 2022, respectively, which are recorded in marketing expenses in the accompanying statements of activities.

The Organization has a commitment to contribute $150,000 annually, commencing on June 1, 2014 through December 31, 2024, to the City to be spent on programs or activities that benefit the public, which is recorded in marketing expenses for the years ended June 30, 2023 and 2022. Due to the rights of termination per the agreement, these commitments are considered due each June and December.

Guarantees and Indemnities
The Organization has made certain indemnities and guarantees, under which it may be required to make payments to a guaranteed or indemnified party, in relation to certain actions or transactions.

The Organization indemnifies its directors, officers, employees and agents, as permitted under the laws of the State of California. Pursuant to the TOT Agreement, the Organization also indemnifies the City and all of its related boards, councils, officers, employees, and volunteers from claims related to the conduct of the Organization or any of its officers, employees, or associated individuals. The duration of the guarantees and indemnities varies, and is generally tied to the life of the agreement. These guarantees and indemnities do not provide for any limitation of the maximum potential future payments the Organization could be obligated to make. Historically, the Organization has not been obligated nor incurred any payments for these obligations and, therefore, no liabilities have been recorded for these indemnities and guarantees in the accompanying statements of financial position.

NOTE 8 — RETIREMENT PLAN
The Organization has a 401(k) retirement plan (the "Plan") covering all eligible employees. The Plan provides for voluntary employer contributions. The total Plan expense during the years ended June 30, 2023 and 2022 was approximately $91,000 and $73,000, respectively, and is included in salaries and benefit expenses in the accompanying statements of activities. 18 14-23

VISIT NEWPORT BEACH INC.
(A Non -Profit Organization)

NOTES TO FINANCIAL STATEMENTS
For The Years Ended June 30, 2023 and 2022
NOTE 9 — RELATED -PARTY TRANSACTIONS
During the years ended June 30, 2023 and 2022, the Organization had transactions with a related party that is also a non-profit organization. The related entity, NB & Co., specializes in marketing and promotion services that promote economic development with the City. Pursuant to an Agreement for Services ("Agreement") dated April 1, 2013, the Organization appointed NB & Co. as an exclusive provider of services that the Organization needs to carry out its mission and obligations to the City. In consideration for these services, the Organization agreed to pay NB & Co. annual fees totaling $108,000 for the years ended June 30, 2023 and 2022. The Organization has also agreed to reimburse NB & Co. for all reasonable expenses incurred by it in carrying out its duties to the Organization, including sublease rent and related facility costs, payroll and related benefits, and other direct marketing costs. For the years ended June 30, 2023 and 2022, the Organization incurred $2,041,913 and $1,698,743, respectively, from NB & Co. for these costs, which are recorded in marketing expenses in the accompanying statements of activities. NB & Co.'s costs for the years ended June 30, 2023 and 2022 were broken out as follows: $130,831 and $104,653, respectively, of direct marketing, $1,316,087 and $1,085,958, respectively, of salaries and benefits, and $594,995 and $508,132, respectively, of other (including rent and related facility costs). The Agreement, as amended, expires on June 30, 2024.

In addition, payroll and related expenses from shared employees employed under NB & Co. are allocated to the Organization. During the years ended June 30, 2023 and 2022, payroll and related expenses of $272,160 and $184,288, respectively, were allocated to the Organization.

As of June 30, 2023 and 2022, the Organization has net related -party payables to NB & Co. of $199,937 and $2,441, respectively, in the accompanying statements of financial position. These amounts do not bear interest, are not collateralized, and have no stated repayment terms. 19 14-24

VISIT NEWPORT BEACH INC.
(A Non -Profit Organization)

SCHEDULE I - STATEMENT OF FINANCIAL POSITION BY FUNDING SOURCE June 30, 2023
Current assets:

Cash and cash equivalents
Short-term investments
Accounts receivable
Prepaid expenses and other
current assets
Total current assets
Operating sublease right -of -use
assets, net
Property and equipment, net
Website development costs, net
Deposits and other assets
Current liabilities:

TOT* TBID
$ 1,163,138 $ 1,438,817
2,864,232
2,449,211
44,860
3,419
272,493
329,071
4,344,723
4,220,518
Eliminations Total
$ - $ 2,601,955
- 5,313,443
- 48,279
- 601.564
8,565,241
- 1,163,799 - 1,163,799
5,586 137,672 - 143,258
41,749 13,916 - 55,665

9.619 - - 9.619
$ 4.401.677 $ 5.535.905 $ - $ 9.937.582
Accounts payable
$ 51,793
$ 49,090
Related -party payables, net
99,776
100,161
Accrued expenses
8,000
18,000
Accrued payroll and related
expenses
-
94,155
Group booking incentive reserve
-
138,683
Current portion of sublease
obligations
-
151,727
Total current liabilities
159,569
551,816
Sublease obligations, net
of current portion
-
1,058,424
Total liabilities
159,569
1,610,240
Net assets without donor restrictions

4.242.108

3.925.665
$ 4.401.677 $ 5.535.905
* Includes balances for other marketing and administrative costs. $ - $ 100,883
- 199,937
- 26,000
- 94,155
- 138,683
151.727
711,385
1,058,424
- 1,769,809
- 8,167,773
20 14-25

VISIT NEWPORT BEACH INC.
(A Non -Profit Organization)

SCHEDULE II - STATEMENT OF ACTIVITIES BY FUNDING SOURCE For The Year Ended June 30, 2023
Support and revenues:

Service fee revenues
Advertising and other income
Interest income
Total support and revenues
Expenses:

Marketing
Salaries and benefits
Other
Depreciation and amortization
Total expenses
Change in net assets without donor
restrictions
Net assets, beginning of year
Net assets, end of year
TOT* TBID
$ 6,491,957 $ 4,748,955
42,000 2,000
69,903 56,004
6,603,860 4,806,959
6,714,907 2,027,752
- 1,618,690
84,377 458,675

5.503 22.813
6,804,787 4,127,930
(200,927) 679,029
4,443,035 3,246,636
$ 4.242.108 $ 3.925.665
* Includes balances for other marketing and administrative costs.

Eliminations Total
$ - $ 11,240,912
- 44,000
- 125,907
11,410,819
8,742,659
1,618,690
543,052

28.316
10,932,717
478,102
7,689,671
$
21 14-26

Attachment B
Newport Beach and Co. Audited Financial Statements for the Year Ended June 30, 2023 14-27

NEWPORT BEACH & COMPANY
(A Non -Profit Organization)

FINANCIAL STATEMENTS
For The Years Ended June 30, 2023 and 2022
with

INDEPENDENT AUDITORS' REPORT THEREON
14-28

NEWPORT BEACH & COMPANY
(A Non -Profit Organization)

TABLE OF CONTENTS
Independent Auditors' Report.................................................................................................1-2 Financial Statements:

KJ� �j J I Corbin &lvl Company
Business Advisors Tax and Audit
Independent Auditors' Report
Board of Directors
Newport Beach & Company
Opinion
We have audited the accompanying financial statements of Newport Beach & Company (a non- profit organization) (the "Organization"), which comprise the statements of financial position as of June 30, 2023 and 2022, and the related statements of activities and cash flows for the years then ended, and the related notes to the financial statements.

In performing an audit in accordance with GARS, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Organization's internal control. Accordingly, no such opinion is expressed.
• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Organization's ability to continue as a going concern for a reasonable period of time.

KMJ Corbin & Company LLP
Irvine, California
September 25, 2023
14-31

NEWPORT BEACH & COMPANY
(A Non -Profit Organization)

STATEMENTS OF FINANCIAL POSITION
June 30,
2023
2022
ASSETS
Current assets:

Cash
$ 47,669 $
140,707
Accounts receivable
11,259
16,381
Related -party receivables, net
199,937
2,441
Prepaid expenses and other current assets
80,238
107,575
Total current assets
339,103
267,104
Operating lease right -of -use assets, net
2,327,598
-
Deferred sublease income
46,352
-
Property and equipment, net
131,873
9,185
Other
50,000
75,000
$ 2,894,926 $
351.289

LIABILITIES AND NET ASSETS
Current liabilities:

Accounts payable
$ 13,535
$ 12,472
Accrued expenses
180,692
58,664
Accrued payroll and related expenses
129,576
139,009
Current portion of operating lease liabilities
303,454
-
Current portion of deferred compensation
25,000
25,000
Total current liabilities
652,257
235,145
Operating lease liabilities, net of current portion
2,116,848
-
Deferred compensation, net of current portion
50,000
75,000
Total liabilities
2,819,105
310,145
Commitments and contingencies
Net assets without donor restrictions 75,821 41,144
$ 2,894,926 $ 351.289
See accompanying notes to financial statements
3 14-32

NEWPORT BEACH & COMPANY
(A Non -Profit Organization)

STATEMENTS OF ACTIVITIES
For The Years Ended June 30,
2023 2022
Support and revenues:

Service fees from related party $ 2,149,913 $ 1,806,743 Community marketing income 164,067 153,765
Paycheck protection program grant - 109,450
Total support and revenues 2,313,980 2,069,958
Expenses:

Marketing 141,021 168,354
Salaries and benefits 1,585,763 1,172,769
Other 531,670 647,001
Depreciation 20,849 20,271
Total expenses 2,279,303 2,008,395
Increase in net assets without donor restrictions 34,677 61,563 Net assets without donor restrictions, beginning of year 41,144 (20,419) Net assets without donor restrictions, end of year $ 75,821 $ 41.144 See accompanying notes to financial statements
4 14-33

Cash flows from operating activities:

Increase in net assets without donor restrictions
Adjustments to reconcile increase in net assets without donor restrictions to net cash provided by (used in)
operating activities:

Depreciation
Amortization of operating lease right -of -use assets
Forgiveness on PPP loan
Loss on disposals of property and equipment
Changes in operating assets and liabilities:

Accounts receivable
Related -party receivables/payables, net
Prepaid expenses and other
Deferred sublease income
Accounts payable
Accrued expenses
Accrued payroll and related expenses
Deferred compensation
Deferred rent
Operating lease liabilities
Net cash provided by (used in) operating activities
Cash flows used in investing activities:

Purchases of property and equipment
Net change in cash
Cash at beginning of year
Cash at end of year
Supplemental disclosure of non -cash transactions:

Operating lease right -of -use assets and operating lease liabilities recorded upon adoption of ASC 842
Operating lease right -of -use assets obtained in
exchange for operating lease liabilities

NEWPORT BEACH & COMPANY
(A Non -Profit Organization)

STATEMENTS OF CASH FLOWS
For The Years Ended June 30,
2023
$ 34,677 $
20,849
358,879
417
5,122
(197,496)
52,337
(46,352)
1,063
139,328
(9,433)
(25,000)
(283,475)
50,916
(143,954)
(93,038)
140,707
$ 47,669
$ 140,073
$ 2,563,704
2022
61,563
20,271
(109,450)
14,038
(3,490)
16,185
(105,926)
6,423
(74,022)
15,242
100,000
(14,229)
(73,395)
(5,352)
(78,747)
219,454
$ 140.707
See accompanying notes to financial statements
S
14-34

NEWPORT BEACH & COMPANY
(A Non -Profit Organization)

NOTES TO FINANCIAL STATEMENTS
For The Years Ended June 30, 2023 and 2022
NOTE 1— ORGANIZATION
Nature of Operations
Newport Beach & Company (the "Organization") is a non-profit organization formed under the laws of the State of California in 2013. The Organization specializes in marketing and promotion services related to enhancing the economic development for the City of Newport Beach (the "City"). The Organization currently has an agreement with the City to manage its public access television channel. Such services include production, administrative, and sponsorship services.

This agreement, as amended, expires on December 31, 2023. By embracing a variety of neighborhoods, businesses and individual unique voices into a complementary story, the Organization seeks to strengthen all of its partners, drive new revenue to the City and enhance the City's overall economic vibrancy.

Without donor restrictions — Net assets that are not subject to donor -imposed stipulations. These assets are available to support the Organization's general activities and operations at the discretion of the Board of Directors.

With donor restrictions - Net assets that are subject to donor -imposed restrictions. Some donor - imposed restrictions are temporary in nature, such as those that will be met by the passage of time or other events specified by the donor. Other donor -imposed restrictions are perpetual in nature, where the donor stipulates that such resources be maintained in perpetuity. Generally, the donors of these assets permit the Organization to use all or part of the income earned on related investments for general or specific purposes.
6 14-35

NEWPORT BEACH & COMPANY
(A Non -Profit Organization)

NOTES TO FINANCIAL STATEMENTS
For The Years Ended June 30, 2023 and 2022
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued Revenues are reported as increases in net assets without donor restrictions unless use of the related assets is limited by donor -imposed restrictions. Expenses are reported as decreases in net assets without donor restrictions. Gains and losses on investments and other assets are reported as increases or decreases in net assets without donor restrictions unless their use is restricted by explicit donor stipulations or by law.

As of and for the years ended June 30, 2023 and 2022, the Organization had no net assets with donor restrictions.

Use of Estimates
The preparation of financial statements requires the Organization to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates made by the Organization's management include, but are not limited to, the collectability of receivables, recoverability of long- lived assets, the allocation of expenses to program activities and general and administrative, and lease assumptions, including discount rates and lease terms. Actual results may differ from those estimates.

Cash and Cash Equivalents
The Organization considers all highly liquid investments purchased with an initial maturity of three months or less to be cash equivalents. The Organization maintains its cash balances at various financial institutions. The total cash balances are insured by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000 per institution. At June 30, 2023, the Organization had no uninsured balances. The Organization periodically reviews the quality of the financial institutions it has deposits with to minimize risk of loss. To date, no losses have been incurred.

Accounts Receivable
Accounts receivable are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts at year end. Management determines the allowance for doubtful accounts by identifying troubled accounts based on current and historical experience. At June 30, 2023 and 2022, the Organization considers its accounts receivable to be fully collectible and accordingly did not record an allowance for doubtful accounts. As of June 30, 2023 and 2022, one customer accounted for approximately 86% and two customers accounted for 98%, respectively, of the Organization's total accounts receivable balance.
7 14-36

NEWPORT BEACH & COMPANY
(A Non -Profit Organization)

Significant renewals and betterments are capitalized.

Deferred Compensation
Deferred compensation represents a commitment to make annual $25,000 annuity payments through 2026 to a member of the Organization's management. As of June 30, 2023, $75,000 was due. Payments due within one year have been classified under prepaid expenses and other current assets and current liabilities; all other amounts have been classified as non -current assets and non- current liabilities.

Leases
At the inception of a contract, the Organization determines if the arrangement is, or contains, a lease. Operating lease right -of -use ("ROU") assets represent the Organization's right to use an underlying asset for the lease term, and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of the future minimum lease payments over the lease term calculated using the risk -free rate commensurate with the term of the ROU asset.

ROU assets also include any lease payments made at or before lease commencement and exclude any lease incentives received. The lease terms may include options to extend the lease when it is reasonably certain that the Organization will exercise that option. Leases with a term of 12 months or less are not recognized in the balance sheet. Rent expense is recognized on a straight-line basis over the lease term.

The Organization accounts for lease and non -lease components as separate lease components for all its leases.
8 14-37

NEWPORT BEACH & COMPANY
(A Non -Profit Organization)

NOTES TO FINANCIAL STATEMENTS
For The Years Ended June 30, 2023 and 2022
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued Impairment of Long -Lived Assets
The Organization evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If the estimated future cash flows (undiscounted and without interest charges) from the use of an asset are less than the carrying value, a write -down would be recorded to reduce the related asset to its estimated fair value. At June 30, 2023 and 2022, the Organization's management believes there is no impairment of its long-lived assets. There can be no assurance, however, that market conditions will not change or demand for the Organization's services will continue, which could result in impairment of long-lived assets in the future.

During the years ended June 30, 2023 and 2022, the Organization did not have significant contributed materials and services.

Income Tax Status
The Organization qualifies as a tax-exempt organization for Federal income taxes under Section 501(c)(6) of the United States Internal Revenue Code and for California state income taxes under Section 23701(d) of the California Revenue and Taxation Code; therefore, the Organization has no provision for federal or state income taxes. During the years ended June 30, 2023 and 2022, the Organization had no unrelated business income. The Organization annually evaluates tax positions as part of the preparation of its exempt tax return. This process includes an analysis of whether tax positions the Organization takes with regard to a particular item of income or deduction would meet the definition of an uncertain tax position under current accounting guidance. The Organization believes its tax positions are appropriate based on current facts and circumstances. The Organization's policy is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. At June 30, 2023 and 2022, the Organization did not have any unrecognized tax benefits.

The Organization is no longer subject to income tax examinations by tax authorities for years before 2019.
9 14-38

NEWPORT BEACH & COMPANY
(A Non -Profit Organization)

NOTES TO FINANCIAL STATEMENTS
For The Years Ended June 30, 2023 and 2022
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued Allocated Expenses
The costs of providing program activities and supporting services have been summarized on a functional basis in Note 5. The Organization incurs expenses that directly relate to, and can be assigned to, a specific program or supporting activity. The Organization also conducts a number of activities which benefit both its program objectives as well as supporting services. These costs, which are not specifically attributable to a specific program or supporting activity, are allocated by management on a consistent basis among program and supporting services benefited, based on either financial or nonfinancial data, such as headcount, occupancy or estimates of time and effort incurred by personnel.

Recent Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842) ("ASC 842"), which requires the lease rights and obligations arising from lease contracts, including existing and new arrangements, to be recognized as assets and liabilities on the statement of financial position. Most prominent among the changes in the new standard is the recognition of right -of -use assets and lease liabilities by lessees for those leases classified as operating leases. Under the new standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases.

The adoption of the new standard on July 1, 2022 had a material impact on the Organization's statement of financial position, which resulted in the recognition of right -of -use assets of $122,773, operating lease liabilities of $140,073 and a reduction in deferred rent liabilities of $17,300.

However, the adoption of the new standard did not materially impact the Organization's results of operations and cash flows. Also, the adoption of ASC 842 did not have an impact on the Organization's beginning net assets balance.
10 14-39

NEWPORT BEACH & COMPANY
(A Non -Profit Organization)

NOTES TO FINANCIAL STATEMENTS
For The Years Ended June 30, 2023 and 2022
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued ASC 842 provides several optional practical expedients in transition to make the transition more efficient and cost-effective for companies. For leases that commenced prior to July 1, 2022, the Organization elected (i) the "package of practical expedients," which permits it not to reassess under the new standard its prior conclusions about lease identification, lease classification, and initial direct costs, and (ii) the use -of -hindsight in determining the lease term and in assessing impairment of right -of -use assets.

In addition, ASC 842 provides practical expedients for an entity's ongoing accounting that the Organization has elected short-term lease recognition exemption for all leases that qualify.

See Note 7 for additional information regarding the Organization's leases.

Subsequent Events
The Organization has evaluated subsequent events through September 25, 2023, the date which the financial statements were available to be issued. Based upon its evaluation, management has determined that no subsequent events have occurred that would require recognition in the accompanying financial statements or disclosure in the notes thereto except as disclosed herein.

NOTE 3 — LIQUIDITY AND AVAILABILITY
At June 30, 2023, the Organization has $58,928 of financial assets available within one year of the statement of financial position date to meet cash needs for general expenditures consisting of cash of $47,669 and accounts receivable of $11,259. None of the financial assets are subject to donor or other contractual restrictions that make them unavailable for general expenditures within one year of the statement of financial position. The Organization has a policy to structure its financial assets to be available as its general expenditures, liabilities, and other obligations come due.

Funding for the Organization is dependent on funding received from a related parry (see Note 9) and revenue generated through marketing efforts. As a result, the Organization closely monitors the monthly projected and collected revenue to determine if any changes need to be made to budgeted annual expenditures.
11 14-40

NEWPORT BEACH & COMPANY
(A Non -Profit Organization)

NOTES TO FINANCIAL STATEMENTS
For The Years Ended June 30, 2023 and 2022
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following at June 30:

Leasehold improvements
Computer equipment
Office furniture and fixtures
2023 2022
$ 36,230 $ 7,614
120,780 84,979
103,346 26,351
260,356 118,944
Less accumulated depreciation and amortization (128,483) (109,759) $ 131,873 $ 9.185
NOTE 5 - STATEMENT OF FUNCTIONAL EXPENSES
The statements of functional expenses for the years ended June 30, 2023 and 2022 are as follows:
2023
Program General and 2022
Activities Administrative Total Total
Salaries and benefits:

Salaries $ 930,757 $ 325,452 $ 1,256,209 $ 907,856
Payroll taxes and employee benefits 225,530 104,024 329,554 264,913 Total salaries and benefits 1,156,287 429,476 1,585,763 1,172,769 Other expenses:

Marketing
140,565
456
141,021
168,354
Office lease
202,651
67,550
270,201
416,501
Repairs and maintenance
7,023
43,481
50,504
40,887
Insurance
-
3,564
3,564
3,207
Office supplies
4,853
12,025
16,878
10,122
Equipment and equipment rental
28,349
38,801
67,150
44,636
Postage and fees
18,958
1,862
20,820
20,662
Meeting and education
13,608
28,046
41,654
35,282
Professional fees and services
-
39,901
39,901
35,967
Depreciation
-
20,849
20,849
20,271
Loss on disposals of property and equipment
-
417
417
14,038
Travel and related
19,794
787
20,581
25,699
Total functional expenses $

1.592.088 $
687.213
$ 2.279.301
$ 2.008.395
12 14-41

NEWPORT BEACH & COMPANY
(A Non -Profit Organization)

NOTES TO FINANCIAL STATEMENTS
For The Years Ended June 30, 2023 and 2022
NOTE 5 — STATEMENT OF FUNCTIONAL EXPENSES, continued
The Organization incurred expenses related to program activities totaling approximately $1,421,000 for the year ended June 30, 2022.

NOTE 6 — PAYCHECK PROTECTION PROGRAM GRANT/LOAN
In January 2021, the Organization entered into an unsecured promissory note for a loan (the "Loan") in the principal amount of $336,997 and received cash proceeds of the same amount, pursuant to the Paycheck Protection Program (the "PPP"), which is administered by the U.S. Small Business Administration (the "SBA"). Under the terms of the Loan, interest accrued on the outstanding principal at the rate of 1.0% per annum. The term of the Loan was five years, unless sooner required in connection with an event of default under the Loan. To the extent the Loan amount was not fully forgiven by the SBA, the Organization was obligated to make equal monthly payments of principal and interest beginning on the earlier of: (1) the date the SBA sends the loan forgiveness amount to the lender or (2) ten months after the covered 24-week period, until the maturity date.

The PPP provided a mechanism for forgiveness of up to the full amount borrowed. During the year ended June 30, 2021, the Organization had used $227,527 of the proceeds for purposes consistent with the PPP and believed that its use of this portion of the loan proceeds met the conditions for forgiveness. Since the Organization used $227,527 of the proceeds from the PPP Loan for such qualifying expenses before June 30, 2021, the Organization recorded this amount of the PPP Loan proceeds as a conditional cost -reimbursed government grant in the accompanying statement of activities for the year ended June 30, 2021 pursuant to relevant technical accounting guidance.

During the year ended June 30, 2022, the Organization received forgiveness from the SBA for the full loan amount. Upon such forgiveness, the Organization recorded the remaining PPP loan balance of $109,450 as a conditional cost -reimbursed government grant in the accompanying statement of activities for the year ended June 30, 2022 pursuant to relevant technical accounting guidance.

NOTE 7 — COMMITMENTS AND CONTINGENCIES
Lease Agreements
The Organization has operating leases for office space and office equipment rentals.

The Organization was obligated under a lease for its office space, which was accounted for as an operating lease. The lease expired in September 2022.
13 14-42

NEWPORT BEACH & COMPANY
(A Non -Profit Organization)

NOTES TO FINANCIAL STATEMENTS
For The Years Ended June 30, 2023 and 2022
NOTE 7 — COMMITMENTS AND CONTINGENCIES, continued
In May 2022, the Organization entered into a lease amendment for a smaller lease space, which was accounted for as a separate lease. Under the amended lease, rent is payable at approximately $33,000 to $41,000 per month and expires in September 2029. The lease contains a five-year extension option at the end of the lease term. In addition, the Organization has a lease for office equipment with monthly payments of approximately $500 through January 2026. As the new space was not available to be used until the beginning of 2023 and the office equipment lease commenced in November 2022, these leases resulted in the Organization recording operating lease right -of -use assets and corresponding operating lease liabilities of $2,563,704 during the year ended June 30, 2023.

The operating leases in place do not contain information to determine the rate implicit in the leases.

As such, the Organization utilized the risk -free discount rate based on the assumed remaining lease term for the leases to calculate the present value of the remaining lease payments. At June 30, 2023, the weighted -average discount rate and the weighted average remaining lease term for the operating leases held by the Organization was 5% and 6.2 years, respectively.

During the year ended June 30, 2023, cash paid for amounts included for the operating lease liabilities totaled $231,253, which is net of payments of $149,878 received from the related -party sublessee (see below).

The components of lease cost for the year ended June 30, 2023 were as follows:

Operating lease cost $ 456,534
Variable lease cost, including property taxes, insurance and maintenance 11,406
Sublease income (see below) (195,922)
Total lease cost, net $ 272,018
Total lease cost was included in other expenses in the accompanying statement of activities. 14 14-43

NEWPORT BEACH & COMPANY
(A Non -Profit Organization)

NOTES TO FINANCIAL STATEMENTS
For The Years Ended June 30, 2023 and 2022
NOTE 7 — COMMITMENTS AND CONTINGENCIES, continued
Future minimum lease payments under non -cancelable operating leases at June 30, 2023 are approximately as follows:

Years Ending
June 30,
Total
2024
$ 416,000
2025
431,000
2026
443,000
2027
455,000
2028
470,000
Thereafter
611,000
Total future minimum lease payments
2,826,000
Less: imputed interest payments
(405,698)
Total operating lease liabilities
2,420,302
Less: current portion
(303,454)
$ 21,168,48
At June 30, 2022, future minimum payments due on the Organization's non -cancelable facility lease commitment in excess of one year are as follows:

Years Ending
June 30,
2023
$ 378,000
2024
410,000
2025
426,000
2026
440,000
2027
456,000
Thereafter
1,080,000
$ 3.190.000
IS
14-44

NEWPORT BEACH & COMPANY
(A Non -Profit Organization)

NOTES TO FINANCIAL STATEMENTS
For The Years Ended June 30, 2023 and 2022
NOTE 7 — COMMITMENTS AND CONTINGENCIES, continued
Sublease Agreements
In May 2022, the Organization entered into an operating sublease agreement with Visit Newport Beach Inc. ("VNB"), a related party, for half of the smaller leased space. The Organization also has a deemed sublease with VNB for office equipment and has recorded deferred sublease income of $46,352 as of June 30, 2023, included in the accompanying statement of financial position.

Future minimum sublease payments to be collected under non -cancelable operating subleases at June 30, 2023 are approximately as follows:

Years Ending
June 30,
2024
2025
2026
2027
2028
Thereafter
Total future minimum sublease payments
Guarantees and Indemnities
Total
208,000
215,000
222,000
228,000
235,000
305,000
$ 1.413.000
The Organization has made certain indemnities and guarantees, under which it may be required to make payments to a guaranteed or indemnified party, in relation to certain actions or transactions.

The Organization indemnifies its directors, officers, employees and agents, as permitted under the laws of the State of California. In connection with its facility lease, the Organization has indemnified its lessor for certain claims arising from the use of the facilities. The duration of the guarantees and indemnities varies, and is generally tied to the life of the agreement. These guarantees and indemnities do not provide for any limitation of the maximum potential future payments the Organization could be obligated to make. Historically, the Organization has not been obligated nor incurred any payments for these obligations and, therefore, no liabilities have been recorded for these indemnities and guarantees in the accompanying statements of financial position.
16 14-45

NEWPORT BEACH & COMPANY
(A Non -Profit Organization)

NOTES TO FINANCIAL STATEMENTS
For The Years Ended June 30, 2023 and 2022
NOTE 8 — RETIREMENT PLAN
The Organization has a 401(k) retirement plan (the "Plan") covering all eligible employees. The Plan provides for voluntary employer contributions. The total Plan expense during the years ended June 30, 2023 and 2022 was approximately $70,000 and $63,000, respectively, which is recorded in salaries and benefits expenses in the accompanying statements of activities.

NOTE 9 — RELATED -PARTY TRANSACTIONS
During the years ended June 30, 2023 and 2022, the Organization had transactions with a related party that is also a non-profit organization. The related entity, VNB, initiates, sponsors, promotes and carries out plans, policies and activities to attract conferences and visitors to the City. VNB was the driving force behind the formation of the Organization. Pursuant to an Agreement for Services ("Agreement") dated April 1, 2013, the Organization was appointed by VNB as an exclusive provider of services that VNB requires to carry out its mission and obligations to the City. In consideration for these services, VNB agreed to pay monthly fees totaling $108,000 for the years ended June 30, 2023 and 2022. VNB has also agreed to reimburse the Organization for all reasonable expenses incurred by it in carrying out its duties to VNB, including rent and related facility costs, payroll and related benefits, and other direct marketing costs. For the years ended June 30, 2023 and 2022, the Organization billed $2,041,913 and $1,698,743, respectively, to VNB for these fees and costs, which are recorded as service fees from related party in the accompanying statements of activities. The Agreement, as amended, expires on June 30, 2024.

In addition, payroll and related expenses from shared employees employed under the Organization are allocated to VNB. During the years ended June 30, 2023 and 2022, payroll and related expenses of $272,160 and $184,288, respectively, were allocated to VNB.

As of June 30, 2023 and 2022, the Organization has net related -party receivables from VNB of $199,937 and $2,441, respectively, in the accompanying statements of financial position. These amounts do not bear interest, are not collateralized and have no stated repayment terms. 17 14-46

Attachment C
Visit Newport Beach Expenditure Compliance Report for the Year Ended June 30, 2023 14-4 7

VISIT NEWPORT BEACH INC.
(a Non -Profit Organization)

EXPENDITURES REPORT
For The Year Ended June 30, 2023
with

INDEPENDENT AUDITORS' REPORT THEREON
14-48

K j� ^ T I Corbin &
1v1J Company
Business Advisors Tax and Audit
Independent Auditors' Report
Board of Directors of
Visit Newport Beach Inc.

We have examined management's assertion, included in the accompanying Management Statement Regarding Compliance With Certain Provisions of the Agreement Between the City of Newport Beach and Visit Newport Beach Inc. for Tourism Promotion, Branding, and Marketing Services, that Visit Newport Beach Inc. (the "Organization") complied with the provisions in Section 4 of the Agreement Between the City of Newport Beach and Visit Newport Beach Inc. for Tourism Promotion, Branding, and Marketing Services (the "Agreement") regarding the attached 2023 Expenditures Report, summarizing the expenditures of funds received pursuant to the Agreement during the period July 1, 2022 to June 30, 2023. The Organization's management is responsible for its assertion. Our responsibility is to express an opinion on management's assertion about the Organization's compliance with the specified requirements based on our examination.

Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. Those standards require that we plan and perform the examination to obtain reasonable assurance about whether management's assertion about compliance with the specified requirements is fairly stated, in all material respects. An examination involves performing procedures to obtain evidence about management's assertion. The nature, timing, and extent of the procedures selected depend on our judgment, including an assessment of the risks of material misstatement of management's assertion, whether due to fraud or error. We believe that the evidence we obtained is sufficient and appropriate to provide a reasonable basis for our opinion.

We are required to be independent and to meet our other ethical responsibilities in accordance with relevant ethical requirements relating to the engagement.

Our examination does not provide a legal determination on the Organization's compliance with the specified requirements.

In our opinion, management's assertion that Visit Newport Beach Inc. complied with the provisions of Section 4 of the Agreement regarding the attached 2023 Expenditures Report for the year ended June 30, 2023 is fairly stated, in all material respects.

This report is intended solely for the information and use of Visit Newport Beach, Inc. and the City of Newport Beach and is not intended to be and should not be used by anyone other than these specified parties.
"T Wv-w t lovif'" La
KMJ Corbin & Company LLP
Irvine, California
September 25, 2023
p 949 431 0997 f 714 734 3431 2855 Michelle Dr Suite 350 Irvine CA 92606 kmjpartnerscpa.com p 818 999 5885 f 818 610 1090 20720 Ventura Blvd Suite 160 Woodland Hills CA 91364 14-49

VISIT

E I' P RT
BEACH

CALIFORNIA
Management Statement Regarding Compiiance With Certain provisions of the AgmeMent Between the City of Newport Beach and Visit Newport Beach Inc. for Tourism Promotion, Branding, and Marketing Services
e, as members of management of Visit Newport. Beach Inc. {the "Organization"), are responsible for complying with the provisions of Section 4 of the Agreement Between the City of Newport Beach and Visit Newport Reach Inc, (collectively, the "Parties' for Tourism Promotion, Branding, and Marketing Services (tyre "Agreement") in that funds received by the Organization pursuant to this Agreement were expended in accordance with this Agreement. We are responsible for establisbing and maintaining effective internal controls over compI iance with the provisions of Section 4 of the Agreement. We have performed an evaluation of the Organization's compliance with the provisions of Section 4 of the Agreement regarding funds expended during the year ended June 30, 2023, as summarized in the attached 2023 Expenditures Report. Based on this evaluation, we assert that the Organization was in compliance with the provisions of Section 4 of the Agreement as described below:

Section 4 of the Agreement requires the Organization to "develop, plan, carry out, and supervise a program to market and promote the Newport Beach brand and to promote tourism in, and serve the needs of, visitors to Newport Beach as well as increase the amount of TOT collected through their promotional. activities `Services°). Subject to the foregoing sentence, the Services shad, at a minimum, include the following: (a) the maintenance of suitable office space and the employment of competent personnel to cagy out the promotional, branding and marketing duties; (b) the preparation of brochures, publications, guides, on-line promotions, social network efforts, and other marketing materials and information that inform prospective tourists and visitors of the recreational activities, cultural assets, shopping and dining opportunities, night-time stay opportunities, and natural beauty of Newport Beach; (c) the dissemination of information described in dais section by way of the mcdia, direct mail, handouts, social networking, websites, smart phone applications, or other means of distribution; and d) the development and implementation of specific marketing programs designed to increase awareness of the Newport Beach brand and to increaw business and visitor trade in Newport Beach; and {e} any additional Services when proposed by the City which are consistent with the promotion of tourism and the Newport Beach brand which are mutually agreeable and acceptable to the Parties,"
l3�
133
14-50

V
VISIT NEWPORT BEACH INC.
2023 Expenditures Report
July 1, 2022 -
June 30, 2023
2023 Expenses
General and Administrative Expenses
Operating Expenses
64100 - Office Supplies
$ 341
64125 - Computer Software (non-deprec)
9,040
64130 - Voice and Data - Office
75 64145 - Shipping Charges
546
64150 - Bank Fees
1,143
64160 - Membership Dues
48,730
64170 - Team Meetings
3,570
Total Operating Expenses
63,445
Insurance
63100 - General Liability Insurance
1,795
63300 - Board of Directors Insurance
1,769
Total Insurance
3,564
Professional Fees
64203 - Recruiting Fees
35 64207 - Online Content
37,175
64201 -Audit Fees
6,000
64202 - Tax Preparation Fees
2,000
64204 - Legal Fees
5,500
Total Professional Fees
50,710
Travel Expenses
65100 - Airfare
2,015
65200 - Accommodations
1,124
65300 - Meals
307
65400 - Transportation Costs
317
65405 - Mileage ($0.655/mile 2023)
2 65500 - Other Travel Costs
67 Total Travel Expenses
3,832
Total General and Administrative
121,551
Advertising Expenses
66101 - Advertising - Purchased
2,045,203
66102 - Advertising - Local Events
5,000
66121- Promotional Gift Cards
6,158
66123 - Promotional Client Gifts
2,125
66202 - Ad/Creative Production
90,034
66203 - Creative Design/Development
95,042
66205 - Photography/Video Shoots/Production
195,675
66212 - Community Sponsorships
150,000
67101- Research
124,133
67102 - Christmas Boat Parade
162,557
Total Advertising Expenses
2,875,927
Marketing Expenses
Community Relations
67103 - Community Partner Events
125,269
67105 - Awards
19,450
67107 - Promotional Items
1,136
Total Community Relations
145,855
Marketing Collateral
67301 - Inspiration Guide
169,000
67309 - Business Plan
4,940
67312 - Collateral Distribution
5,451
Total Marketing Collateral
179,391
Digital Marketing
67501 - Social Media
92,300
67502 - Website Maintenance
161,608
67503 - SEO/SEM
101,972
67504- Content Creators/Influencers
49,462
67511 - Digital Lifestyle Channel Production
28,268
66211 - CRM Maintenance & Platform Subscriptions
16,263
Total Digital Marketing
449,873
Communications/Public Relations
67601 - PR Agency/Tracking/Copywriting
13,119
67602 - Media FAM Tours
70,240
67605 - Media Opportunities
231,614
67607 - Media Relations
9,265
67608 - Media Missions
5,025
14-51

VISIT NEWPORT BEACH INC.
2023 Expenditures Report
July 1, 2022 -
June 30, 2023
Total Communications/Public Relations
329,264
Total Marketing Expenses
1,104,382
International Marketing Initiatives
67401 - International Brand Activations
125,240
67403 - International Promotions
416
67405 - International Airfare
56,573
67406 - International Accommodations
12,578
67407 - International Meals
418
67408 - International Transportation Costs
3,300
67409 - International Other Travel Costs
2,911
67410 - International Business Meals/Entertainment
3,701
67411 - International Promotional Items
3,425
67412 - International Brand Events
442,618
67413 - International Sales Missions
4,332
Total International Marketing Initiatives
655,512
NB&Company Fees
68001 - NB&Co Fees
2,041,913
B Total NB&Company Fees
2,041,913
Total Expenses
6,799,285
Other Expenditures:

Fixed asset additions capitalized
5,561
Website development costs capitalized
41,749
Change in other prepaid expenses and current
32,033
liabilities, net
79,343
$ 6,878,628
NOTES:

A Included in this account are expenditures for or contributions to special events and not -for -profit organizations in Newport Beach as follows:

Vendor Event Amount
City of Newport Beach Program Sponsorships 150,000
$ 150,000
B Consist of reimbursements for costs incurred by Newport Beach & Company as follows:

Class of Expense Amount
Salaries/Benefits $ 1,316,087
Marketing 130,831
General and Administrative and Overheai 594.995
$ 6,U41,915
14-52

Newport Beach City CouncilOctober 24, 2023

Newport Beach City Council
October 24, 2023