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Home My WebLink About14 - Annual Review of Visit Newport Beach Audited Financial Statements and Expenditure ReportQ �EwPpRT CITY OF s NEWPORT BEACH `q44:09 City Council Staff Report October 14, 2025 Agenda Item No. 14 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Jason AI -Imam, Finance Director/Treasurer - 949-644-3126, jalimam@newportbeachca.gov PREPARED BY: Jason AI -Imam, Finance Director/Treasurer TITLE: Annual Review of Visit Newport Beach Audited Financial Statements and Expenditure Report ABSTRACT: In accordance with reporting requirements of the City of Newport Beach's agreement with Visit Newport Beach, Inc. (VNB), entered into on January 1, 2025, VNB's audited financial statements, and compliance expenditure report for the fiscal year ending June 30, 2025, 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: On January 1, 2025, the City entered into a new agreement with VNB to provide destination marketing services, following the expiration of the previous agreement on December 31, 2024. A key component of the new agreement is focused on ensuring transparency when it comes to the use of public funds. To help streamline reporting and increase transparency, VNB agreed to restructure its organization by consolidating Visit Newport Beach, Inc. and Newport Beach & Company into one company. As such, Newport Beach & Company formally dissolved on June 30, 2025 with all business operations ceasing and all assets and liabilities transferred to VNB. VNB will continue the operational activity of the consolidated organization. The audited financial statements attached reflect the activity and transactions related to the dissolution. Similar to the previous agreement, the new agreement requires VNB to submit audited financial statements to the City by September 30 of each year for its most recently ended fiscal year, including any management letter associated with those audited financial statements. 14-1 Annual Review of Visit Newport Beach Audited Financial Statements and Expenditure Report October 14, 2025 Page 2 VNB submitted audited financial statements for the fiscal year ending June 30, 2025 to the City on September 25, 2025. The audited financial statements are attached for the City Council's review. The new agreement still requires VNB to submit an expenditure report to the City by September 30 of each year. The expenditure report must 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 authorized purposes. This report must include reasonable detail in support of the certification, including expenditures or contributions to special events and not -for -profit organizations in Newport Beach. VNB submitted the expenditure report for the fiscal year ending June 30, 2025 to the City on September 25, 2025. According to the report, VNB paid $2,117,563 to Newport Beach & Company for marketing and promotion services prior to its dissolution. 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, 2025 were reviewed by the independent audit firm Crowe LLP. The independent auditor's report can be found within the audited financial statements for VNB and Newport Beach & Company for the fiscal year ending June 30, 2025, 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 indicates that VNB's assertion that it complied with the applicable provisions of the agreement with the City is fairly stated in all material respects. FISCAL IMPACT: Under the previous agreement, VNB received 18% of the City's gross Transient Occupancy Tax (TOT) revenue from both commercial (hotel) and residential (short-term lodging) activity through December 31, 2024. Beginning January 1, 2025, the new agreement increased VNB's share to 23% of hotel TOT while eliminating its share of residential TOT. For the fiscal year ending June 30, 2025, the City collected $40.9 million in TOT revenue from commercial and residential activity. Of this amount, the City paid $7.7 million to VNB in FY 2024/25 to fund destination marketing services and activities. 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. 14-2 Annual Review of Visit Newport Beach Audited Financial Statements and Expenditure Report October 14, 2025 Page 3 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 for the Year Ended June 30, 2025 Attachment B — Newport Beach and Company Audited Financial Statements for the Year Ended June 30, 2025 Attachment C — Visit Newport Beach Expenditure Compliance Report for the Year Ended June 30, 2025 14-3 ATTACHMENT A VISIT NEWPORT BEACH INC. (A Non -Profit Organization) FINANCIAL STATEMENTS June 30, 2025 and 2024 14-4 VISIT NEWPORT BEACH INC. (A Non -Profit Organization) FINANCIAL STATEMENTS June 30, 2025 and 2024 CONTENTS INDEPENDENT AUDITOR'S REPORT.................................................................................................... 1 FINANCIAL STATEMENTS STATEMENTS OF FINANCIAL POSITION....................................................................................... 3 STATEMENTS OF ACTIVITIES......................................................................................................... 4 STATEMENTS OF CASH FLOWS..................................................................................................... 5 NOTES TO FINANCIAL STATEMENTS............................................................................................ 6 14-5 Crowe INDEPENDENT AUDITOR'S REPORT To the Board of Directors of Visit Newport Beach Inc. Newport Beach, California Opinion Crowe LLP Independent Member Crowe Global We have audited the accompanying financial statements of Visit Newport Beach Inc., which comprise the statements of financial position as of June 30, 2025 and 2024, 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 referred to above present fairly, in all material respects, the financial position of Visit Newport Beach Inc. as of June 30, 2025 and 2024, and the results of its operations 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 Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Visit Newport Beach Inc. 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. Emphasis of Matter As discussed in Note 8 to the financial statements, the Organization has significant transactions with related non-profit organizations. 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 Visit Newport Beach Inc.'s ability to continue as a going concern within one year after the date that the financial statements are available to be issued. (Continued) 1. 14-6 Auditor's 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 auditor's 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 Visit Newport Beach Inc.'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 Visit Newport Beach Inc.'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. Gww.t GLP Crowe LLP Costa Mesa, California September 23, 2025 2. 14-7 VISIT NEWPORT BEACH INC. (A Non -Profit Organization) STATEMENTS OF FINANCIAL POSITION June 30, 2025 and 2024 2025 2024 ASSETS Current assets Cash and cash equivalents $ 5,028,643 $ 1,217,431 Short-term investments - 2,222,415 Accounts receivable 2,409 1,185 Related -party receivables, net 54,280 22,645 Prepaid expenses and other current assets 183,712 387,669 Total current assets 5,269,044 3,851,345 Operating sublease of right -of -use assets, net 1,655,822 - Deferred sublease income 73,724 - Property and equipment, net 72,122 2,626 Website development costs, net 58,976 68,254 Deposits and other assets 9,619 9,619 Total assets $ 7,139,307 $ 3,931,844 LIABILITIES AND NET ASSETS Current liabilities Accounts payable $ 257,825 $ 40,793 Related party payables, net - 102,263 Accrued expenses 29,623 94,796 Accrued payroll and related expenses 168,627 - Current portion of sublease obligations 363,900 - Total current liabilities 819,975 237,852 Sublease obligations, net of current portion 1,419,033 - Totalliabilities 2,239,008 237,852 Commitments and contingencies Net assets without donor restrictions 4,900,299 3,693,992 Total liabilities and net assets $ 7,139,307 $ 3,931,844 See accompanying notes to financial statements. 3. 14-8 VISIT NEWPORT BEACH INC. (A Non -Profit Organization) STATEMENTS OF ACTIVITIES Years ended June 30, 2025 and 2024 Support and revenues Service fee revenues Advertising and other income Interest income Total support and revenues Expenses Marketing (including $2,117,563 and $1,828,755 to Newport Beach & Company during 2025 and 2024, respectively - see Note 8) Salaries and benefits Other Depreciation and amortization Total expenses Change in net assets without donor restrictions before expenses related to TBID dissolution Expenses related to TBID dissolution Cash paid to hotels not continuing services under MAP Cash paid to MAP for transferring hotels Total expenses related to TBID dissolution Change in net assets without donor restrictions Net assets without donor restrictions, beginning of year Net assets without donor restrictions, end of year 2025 2024 $ 7,691,119 $ 10, 382, 835 - 28,400 93,909 223,839 7,785,028 10, 635, 074 6,578,721 9,552,691 - 1,173, 885 391,398 - 24,185 6,578,721 11,142,159 1,206,307 (507,085) 667,676 3,299,020 3,966,696 1,206,307 (4,473,781) 3,693,992 8,167,773 $ 4,900,299 $ 3,693,992 See accompanying notes to financial statements. 14-9 VISIT NEWPORT BEACH INC. (A Non -Profit Organization) STATEMENTS OF CASH FLOWS Years ended June 30, 2025 and 2024 Cash flows from operating activities Change in net assets without donor restrictions Adjustments to reconcile change in net assets without donor restrictions to net cash provided by (used in) operating activities: Depreciation and amortization Amortization of right -of -use operating sublease assets Accrued interest income Changes in operating assets and liabilities, net of balances transferred from NB & Co. and to MAP Accounts receivable Related -party receivables/payables, net Prepaid assets and other current assets Accounts payable Accrued expenses Accrued payroll and related expenses Group booking incentive reserve Sublease obligations Net cash provided by (used in) from operating activities Cash flows from investing activities Purchases of property and equipment Website development costs Cash received from MAP for transferred net assets Cash received from NB & Co. upon dissolution Purchases of investments Proceeds from sales/maturities of investments Net cash provided by investing activities Net change in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year Supplemental disclosures of non -cash transactions Net balances transferred to MAP Net balances transferred from NB & Co. 2025 2024 $ 1,206,307 $ (4,473,781) 24,185 94,707 - 14,099 (1,224) 47,094 (63,018) (118,359) 228,957 213,895 217,032 (60, 090) (65,173) 68,796 42,404 (9,869) (138,683) - (104,110) 1,565,285 (4,442,116) (1,058) - (42,568) - 24,289 23,512 - (139,052) (9,264,817) 2,361,467 12, 341, 746 2,245,927 3,057,592 3,811,212 (1,384,524) 1,217,431 2,601,955 $ 5,028,643 $ 1,217,431 $ - $ 24,289 $ 23,512 $ - See accompanying notes to financial statements. 5. 14-10 VISIT NEWPORT BEACH INC. (A Non -Profit Organization) NOTES TO FINANCIAL STATEMENTS Years ended June 30, 2025 and 2024 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, 2029 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 TOT Agreement was renewed January 1, 2025. 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 23% of the annual TOT, excluding TOT revenue on short-term rentals, in monthly installments. 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, 2025 and 2024, the Organization received approximately 100% and 66%, 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 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 expired on January 31, 2024, pursuant to the Management District Plan, as amended (the "Plan"). The NBTBID was funded by assessments levied on participating lodging businesses within a specified district. The assessments were 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. For the year ended June 30, 2024, the Organization received approximately 34% of its service fee revenues from the City through TBID assessments. Through its expiration, the NBTBID was represented by eight (8) hotels within the City which collected a 3.0% tax on short-term stays. The City was entitled to 0.25% of the receipts annually for the collection of the assessments and disbursements of the NBTBID. Upon expiration of NBTBID on January 31, 2024, a related entity, Meetings Assessment Partnership ("MAP") was founded, effective February 1, 2024, in order to operate in the place of NBTBID. MAP works to improve business conditions and the business environment for tourism for member hotels in the City through the provision of marketing, sales, and special events programs, along with various other initiatives. Pursuant to California Streets and Highways Code Section 36671(a), upon the NBTBID's expiration and after all outstanding debts are paid the remaining NBTBID funds shall be refunded to the assessed businesses. As a result, effective February 1, 2024, the Organization refunded the following: (1) to MAP the accumulated net asset amounts attributable to those six (6) hotels transferring services over to MAP totaling $3,299,020 (in accordance with agreements between the Organization and each of the respective hotels); and (2) to the respective hotels the accumulated net asset amounts attributable to those two (2) hotels not transferring services over to MAP totaling $667,676. These payments were reflected in the accompanying statement of activities as other expenses during the year ended June 30, 2024. (Continued) A 14-11 VISIT NEWPORT BEACH INC. (A Non -Profit Organization) NOTES TO FINANCIAL STATEMENTS Years ended June 30, 2025 and 2024 NOTE 1 — ORGANIZATION (Continued) In addition, certain assets and liabilities attributable to TBID were transferred to MAP for net consideration of $24,289. This balance was paid by MAP during the year ended June 30, 2024. The transferred assets and liabilities included the following: Property and equipment, net $ 117,505 Website development costs, net 29,979 Operating sublease of right -of -use assets, net 1,069,092 Sublease obligations (1,106,041) Accrued payroll and related expenses (86,246) $ 24,289 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, 2025 and 2024, 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. 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, and the allocation of expenses to program activities and general and administrative. Actual results may differ from those estimates. (Continued) 7. 14-12 VISIT NEWPORT BEACH INC. (A Non -Profit Organization) NOTES TO FINANCIAL STATEMENTS Years ended June 30, 2025 and 2024 NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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, 2025, the Organization had approximately $4,533,000 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 Measurement: Investments and cash equivalents consist of certificates of deposit which are carried at cost plus accrued interest (which approximates fair value) and U.S. Treasury Bills which are carried at market 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 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 and certificates of deposit 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. (Continued) CI 14-13 VISIT NEWPORT BEACH INC. (A Non -Profit Organization) NOTES TO FINANCIAL STATEMENTS Years ended June 30, 2025 and 2024 NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) As of June 30, 2025, the Organization held no investments. As of June 30, 2024, the Organization's investments measured at fair value on a recurring basis were as follows: Short-term investments: U.S. Treasury Bills Certificates of deposit Quoted prices in Active Markets Significant Other Significant Other for Identical Observable Unobservable Assets (Level 1) Inputs (Level 2) Inputs (Level 3) $ 1,813,911 $ - 408,504 Accounts Receivable: Accounts receivable are carried at original invoice amount less an estimate for credit losses based on a review of all outstanding amounts at year end. Management determines the allowance for credit losses by identifying troubled accounts based on current and historical experience and reasonable and supportable forecasts. At June 30, 2025 and 2024, the Organization considers its accounts receivable to be fully collectible and accordingly did not record an allowance for credit losses. 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 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. Capitalized costs are primarily related to third -party contractor fees incurred during the application development stage. For the years ended June 30, 2025 and 2024, the Organization capitalized website development costs of $0 and $42,568, respectively. (Continued) a 14-14 VISIT NEWPORT BEACH INC. (A Non -Profit Organization) NOTES TO FINANCIAL STATEMENTS Years ended June 30, 2025 and 2024 NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) At June 30, 2025, website development costs were transferred to the Organization as a result of the transfer from Newport Beach & Company ("NB & Co."), a related party (see Note 8). Accordingly, the Organization will record amortization expense on website development costs over an estimated useful life of three years beginning in fiscal 2026, and no impairment indicators were identified as of June 30, 2025. Estimated amortization costs will be $27,168 for the fiscal year ended 2026, $27,168 for the fiscal year ended 2027, and $4,640 for the fiscal year ended 2028. 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 statement of financial position. 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. At June 30, 2025, the Organization recorded an operating ROU asset and related liability as a result of the transfer from NB & Co. (see Note 8). 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, 2025 and 2024, 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. Support and Revenue: The Organization's service fee revenues are recognized as revenue when received as the Organization is not entitled to its share of the TOT or assessments collected under TBID until paid by the City. Advertising and other income are recognized when the advertisement service is completed and billed to the customers. Interest income is recognized as income in the period it is earned. All revenue is subject to Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers. The Organization applies the following steps to recognize revenue under ASC 606: 1. Identify the contract with a customer 2. Identify the performance obligations in the contract 3. Determine the transaction price 4. Allocate the transaction price to the performance obligations 5. Determine the satisfaction of performance obligations (Continued) 10. 14-15 VISIT NEWPORT BEACH INC. (A Non -Profit Organization) NOTES TO FINANCIAL STATEMENTS Years ended June 30, 2025 and 2024 NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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. 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, 2025 and 2024, the Organization determined there were no 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, 2025 and 2024, 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, 2025 and 2024, 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 2021. 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 Subsequent Events: The Organization has evaluated subsequent events through September 23, 2025, 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. (Continued) 11. 14-16 VISIT NEWPORT BEACH INC. (A Non -Profit Organization) NOTES TO FINANCIAL STATEMENTS Years ended June 30, 2025 and 2024 NOTE 3 — LIQUIDITY AND AVAILABILITY At June 30, 2025, the Organization has $5,031,052 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 $5,028,643 and accounts receivable of $2,409. At June 30, 2024, the Organization had $3,441,031 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 $1,217,431, short-term investments of $2,222,415, and accounts receivable of $1,185. 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) to meet 180 days of operating expenses, which calculates to a minimum goal of approximately $3,300,000 and $3,600,000 as of June 30, 2025 and 2024, respectively. 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 and certificates of deposit. Funding for the Organization is dependent on the hotel room nights booked in certain City hotels each year and the subsequent portion of the TOT that is allocated through the City to the Organization. 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 consist of the following at June 30: Computer equipment Office furniture and fixtures Leasehold improvements Less: accumulated depreciation and amortization 2025 2024 $ 8,691 $ 13,405 41,419 22,109 22,012 - 72,122 35,514 - (32,888) $ 72,122 $ 2,626 Depreciation expense totaled $0 and $24,185 for the years ended June 30, 2025 and 2024, respectively. The Organization did not record depreciation expense during the year ended June 30, 2025, because property and equipment was transferred from NB & Co. on June 30, 2025 (see Note 8). (Continued) 12. 14-17 VISIT NEWPORT BEACH INC. (A Non -Profit Organization) NOTES TO FINANCIAL STATEMENTS Years ended June 30, 2025 and 2024 NOTE 5 - SCHEDULES OF FUNCTIONAL EXPENSES The schedules of functional expenses for the years ended June 30, 2025 and 2024 are as follows: Salaries and benefits: Salaries Payroll taxes and employee benefits Total salaries and benefits Other expense Marketing 2025 Program General and Activities Administrative Total 5,848,305 730,416 6,578,721 $ 5,848,305 $ 730,416 $ 6,578,721 2024 Program General and Activities Administrative Total Salaries and benefits: Salaries $ 709,244 $ 199,086 $ 908,330 Payroll taxes and employee benefits 197,545 68,010 265,555 Total salaries and benefits 906,789 267,096 1,173,885 Other expense Marketing 8,942,056 610,635 9,552,691 Office lease 96,071 32,024 128,095 Repairs and maintenance 944 1,251 2,195 Insurance - 2,518 2,518 Office supplies 3,512 3,121 6,633 Equipment and equipment rental 30,312 23,482 53,794 Postage and other dues and fees 82,804 2,204 85,008 Meeting and education 4,742 7,414 12,156 Professional fees and services - 82,477 82,477 Depreciation and amortization - 24,185 24,185 Travel and related 18,522 - 18,522 $ 10, 085, 752 $ 1,056,407 $ 11,142,159 (Continued) 13. 14-18 VISIT NEWPORT BEACH INC. (A Non -Profit Organization) NOTES TO FINANCIAL STATEMENTS Years ended June 30, 2025 and 2024 NOTE 6 — COMMITMENTS AND CONTINGENCIES Lease Agreements: The Organization has operating leases for office space and office equipment rentals In May 2022, NB & Co. entered into a lease for its facility. Upon the dissolution of NB&Co. on June 30, 2025, the lease was formally transferred to the Organization. Under the 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 a result of the transfer of the lease at June 30, 2025, the Organization recorded operating right -of -use assets of $1,655,822 and corresponding operating lease liabilities of $1,782,933 (see Note 8). 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, 2025, the weighted - average discount rate and the weighted average remaining lease term for the operating leases held by the Organization was 5% and 4.2 years, respectively. There were no lease -related expenses recognized by the Organization in fiscal year 2025, as its obligations were transferred only at year-end and no rent payments were made by the Organization during the period. Future minimum lease payments under non -cancelable operating leases at June 30, 2025 are approximately as follows: Years Ending June 30, 2026 $ 443,000 2027 455,000 2028 471,000 2029 487,000 2030 123,000 Total future minimum sublease payments 1,979,000 Less: imputed interest payments (196,067) Total operating lease liabilities 1,782,933 Less: current portion (363,900) $ 1,419,033 (Continued) 14. 14-19 VISIT NEWPORT BEACH INC. (A Non -Profit Organization) NOTES TO FINANCIAL STATEMENTS Years ended June 30, 2025 and 2024 NOTE 6 — COMMITMENTS AND CONTINGENCIES (Continued) Sublessor Agreements: As a result of NB &Co.'s dissolution at June 30, 2025, the lease was transferred to the Organization, with MAP maintaining the sublease for 58% of the leased space. The Organization recorded deferred sublease income of $73,724 at June 30, 2025, which is included in the accompanying statement of financial position. As the lease was transferred to the Organization at June 30, 2025, no sublease income was recorded and no cash was received by the Organization during 2025 since the Organization did not hold the rights and obligations of said lease until June 30, 2025. Future minimum sublease payments to be collected under non -cancelable operating subleases at June 30, 2025 are approximately as follows: Years Ending June 30, 2026 $ 255,000 2027 264,000 2028 273,000 2029 283,000 2030 71,000 Total future minimum sublease payments $ 1,146,000 Sublease income will be recognized on a straight-line basis over the remaining term of the sublease Sublessee Agreements: In May 2022, the Organization entered into an operating sublease agreement with NB & Co. for half of its leased space. In February 2024, NB & Co. entered into a new sublease agreement with Meetings Assessment Partnership ("MAP"), a related party, to assign the sublease previously agreed to with the Organization. NB & Co. also had a deemed sublease with the Organization for office equipment which was also assigned to MAP. During the year ended June 30, 2024, cash paid to NB & Co. under the sublease obligation totaled $120,625. For the year ended June 30, 2024, operating sublease costs totaled $129,747 which was recorded in other expenses in the accompanying statement of activities. Commitments: The Organization also has several commitments for databases and services regarding marketing, promotion and other contracts ranging from approximately $1,300 to $17,000 per month over various terms with 12 or 24 months or less remaining at June 30, 2025. From these commitments, the Organization incurred approximately $349,000 and $544,000 of expenses for the years ended June 30, 2025 and 2024, respectively, which are recorded in marketing expenses in the accompanying statements of activities. Under the TOT Agreement, the Organization had a commitment to contribute $150,000 annually to the City to be spent on programs or activities that benefit the public. The Organization recorded marketing expense of $75,000 and $150,000, respectively, forthe years ended June 30, 2025 and 2024 under this commitment. Due to the rights of termination per the TOT Agreement, these commitments were considered due each June and December. This public benefit funding requirement was not carried forward into the new TOT agreement effective January 1, 2025, and no equivalent obligation exists under the updated terms. (Continued) 15. 14-20 VISIT NEWPORT BEACH INC. (A Non -Profit Organization) NOTES TO FINANCIAL STATEMENTS Years ended June 30, 2025 and 2024 NOTE 6 — COMMITMENTS AND CONTINGENCIES (Continued) Indemnities: The Organization has made certain indemnities, under which it may be required to make payments to an 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 both the TOT agreement in effect through December 31, 2024, and the new TOT agreement effective January 1, 2025, 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 indemnities varies and is generally tied to the life of the agreement. These 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 in the accompanying statements of financial position. NOTE 7 — 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, 2025 and 2024 was approximately $0 and $70,000, respectively, and is included in salaries and benefit expenses in the accompanying statements of activities. NOTE 8 — RELATED PARTY TRANSACTIONS During the years ended June 30, 2025 and 2024, the Organization had transactions with related parties that are also non-profit organizations as summarized below. NB & Co. was related through the sharing of management and administrative employees between entities, common board members, and the service agreement discussed below. MAP is related through the TBID business that was transferred from the Organization. NB & Co. specialized in marketing and promotion services that promoted 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 needed 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 $0 and $63,000, respectively, for the years ended June 30, 2025 and 2024. The Organization 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, 2025 and 2024, the Organization incurred $ 2,117,563 and $1,765,755, 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, 2025 and 2024 were broken out as follows: $0 and $50,427, respectively, of direct marketing, $1,614,833 and $1,319,260, respectively, of salaries and benefits, and $502,730 and $396,068 respectively, of other (including rent and related facility costs). The Agreement expired on June 30, 2025. In addition, payroll and related expenses from shared employees employed under NB & Co. are allocated to the Organization. During the year ended June 30, 2025, there were no shared employees. During the year ended June 30, 2024, payroll and related expenses of $ 279,885 were allocated to the Organization. (Continued) 16. 14-21 VISIT NEWPORT BEACH INC. (A Non -Profit Organization) NOTES TO FINANCIAL STATEMENTS Years ended June 30, 2025 and 2024 NOTE 8 — RELATED PARTY TRANSACTIONS (Continued) As of June 30, 2025 and 2024, the Organization has net related -party payables to NB & Co. of $0 and $102,263, respectively, in the accompanying statements of financial position. As of June 30, 2025 and 2024, the Organization has net related -party receivables from MAP of $54,280 and $22,645, respectively, in the accompanying statements of financial position. These amounts do not bear interest, are not collateralized, and have no stated repayment terms. During fiscal year 2025, the Organization engaged a vendor, in which an Organization Board member holds an ownership interest, to provide event planning and coordination services. The total cost of these services was $52,900, of which $26,450 was allocated to the Organization in connection with the event and recorded in marketing expenses in the accompanying statement of activities. These transactions were conducted in the ordinary course of business and were reviewed in accordance with the Organization's related -party policies. Upon the expiration of the Agreement at June 30, 2025, all assets and liabilities of NB & Co. were transferred to the Organization at their historical cost basis as the entities were related parties, as follows: Cash and cash equivalents $ 23,512 Deposits and other assets 25,000 Property and equipment, net 72,122 Website development costs, net 58,976 Operating lease of right -of -use assets, net 1,655,822 Deferred sublease income 73,724 Operating lease obligations (1,782,933) Accrued payroll and related expenses (126,223) 17. 14-22 ATTACHMENT B NEWPORT BEACH & COMPANY (A NON-PROFIT ORGANIZATION) FINANCIAL STATEMENTS June 30, 2025 and 2024 14-23 NEWPORT BEACH & COMPANY (A NON-PROFIT ORGANIZATION) FINANCIAL STATEMENTS June 30, 2025 and 2024 CONTENTS INDEPENDENT AUDITOR'S REPORT...................................................................... FINANCIAL STATEMENTS STATEMENTS OF FINANCIAL POSITION STATEMENTS OF ACTIVITIES ................. STATEMENTS OF CASH FLOWS ............. NOTES TO FINANCIAL STATEMENTS .... 3 4 5 6 14-24 Crowe INDEPENDENT AUDITOR'S REPORT To the Board of Directors Newport Beach & Company Newport Beach, California Opinion Crowe LLP Independent Member Crowe Global We have audited the accompanying financial statements of Newport Beach & Company, which comprise the statements of activities as of June 30, 2025 and 2024, 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 referred to above present fairly, in all material respects, the financial position of Newport Beach & Company as of June 30, 2025 and 2024, and the changes in its net assets and its cash flows for the year 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 (GARS). 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 Newport Beach & Company 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. Emphasis of Matter As discussed in Note 1 to the financial statements, Newport Beach & Company ceased operations as of June 30, 2025, and transferred all of its net assets and operations to a related party. Our opinion is not modified with respect to this matter. Other Matter As discussed in Note 8 to the financial statements, Newport Beach & Company has significant transactions with related non-profit organizations. 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. (Continued) 1. 14-25 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 Newport Beach & Company's ability to continue as a going concern for one year after the date that the financial statements are available to be issued. Auditor's 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 auditor's 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 Newport Beach & Company'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 ourjudgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Newport Beach & Company'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. 0&0" ule Crowe LLP Costa Mesa, California September 23, 2025 2. 14-26 NEWPORT BEACH & COMPANY (A NON-PROFIT ORGANIZATION) STATEMENTS OF FINANCIAL POSITION June 30, 2025 and 2024 2025 2024 ASSETS Current assets: Cash $ - $ 238,034 Accounts receivable - 11,796 Related -party receivables, net - 152,919 Prepaid expenses and other current assets - 99,785 Total current assets - 502,534 Operating lease right -of -use assets, net - 1,999,694 Deferred sublease income - 58,578 Property and equipment, net - 97,753 Other 25,000 $ - $ 2,683,559 LIABILITIES AND NET ASSETS Current liabilities: Accounts payable $ - $ 14,188 Accrued expenses - 258,176 Accrued payroll and related expenses - 157,671 Current portion of operating lease liabilities - 340,867 Current portion of deferred compensation - 25,000 Total current liabilities - 795,902 Operating lease liabilities, net of current portion - 1,775,982 Deferred compensation, net of current portion - 25,000 Total liabilities - 2,596,884 Net assets without donor restrictions - 86,675 $ - $ 2,683,559 See accompanying notes to financial statements. 3. 14-27 NEWPORT BEACH & COMPANY (A NON-PROFIT ORGANIZATION) STATEMENTS OF ACTIVITIES Years ended June 30, 2025 and 2024 Support and revenues: Service fees from related parties Sublease income Community marketing income Total support and revenues Expenses: Marketing Salaries and benefits Other Depreciation and amortization Total expenses (Decrease) increase in net assets without donor restrictions Net assets without donor restrictions, beginning of year Net assets without donor restrictions, end of year 2025 $ 2,225,563 185,003 36,030 2,446,596 2024 $ 1,873,755 220,242 114,222 2,208,219 117,237 1,727,461 1,326,496 760,817 718,451 44,993 35,181 2,533,271 2,197,365 (86,675) 10,854 86,675 75,821 $ - $ 86,675 See accompanying notes to financial statements. 4. 14-28 NEWPORT BEACH & COMPANY (A NON-PROFIT ORGANIZATION) STATEMENTS OF CASH FLOWS Years ended June 30, 2025 and 2024 Cash flows from operating activities: Change in net assets without donor restrictions Adjustments to reconcile change in net assets without donor restrictions to net cash (used in) provided by operating activities: Depreciation and amortization Noncash lease expense Changes in operating assets and liabilities, net of assets transferred to VNB: 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 Operating lease liabilities Net cash (used in) provided by operating activities Cash flows from investing activities: Purchases of property and equipment Cash paid to VNB upon dissolution Net cash used in investing activities Net change in cash Cash at beginning of year Cash at end of year 2025 2024 $ (86,675) $ 10,854 44,993 35,181 343,872 327,904 11,796 74,581 99,785 (15,146) (14,188) (258,176) (31,448) (50,000) (333,916) (214, 522) (537) 47,018 5,453 (12,226) 653 77,484 28,095 (25, 000) (303,453) 1 Q1 d7R - (1,061) (23, 512) - (23,512) (1,061) (238,034) 190,365 238,034 47,669 $ - $ 238,034 See Note 1 for the effect of the transfer of net assets at June 30, 2025 to VNB. See accompanying notes to financial statements. 5. 14-29 NEWPORT BEACH & COMPANY (A NON-PROFIT ORGANIZATION) NOTES TO FINANCIAL STATEMENTS June 30, 2025 and 2024 NOTE 1 — ORGANIZATION Nature of Operations: Newport Beach & Company (the "Organization") was a non-profit organization formed under the laws of the State of California in 2013. The Organization specialized in marketing and promotion services related to enhancing the economic development for the City of Newport Beach (the "City"). Pursuant to an Agreement for services ("Agreement") dated April 1, 2013, Visit Newport Beach Inc. ("VNB"), a related party entity, appointed the Organization as an exclusive provider of services that VNB needed to carry out its mission and obligations to the City. The Agreement expired on June 30, 2025. On June 30, 2025, the Company formally dissolved in accordance with the applicable state laws. As a result, all business operations ceased on that date. Upon dissolution, all assets and liabilities were transferred to VNB. VNB will continue the operational activity of the Organization, including assuming the lease and hiring all of the employees, among other items. The transferred assets and liabilities included the following: Cash and cash equivalents $ 23,512 Deposits and other assets 25,000 Property and equipment, net 72,122 Website development costs, net 58,976 Operating lease of right -of -use assets, net 1,655,822 Deferred sublease income 73,724 Operating lease obligations (1,782,933) Accrued payroll and related expenses (126,223) 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. 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. (Continued) A 14-30 NEWPORT BEACH & COMPANY (A NON-PROFIT ORGANIZATION) NOTES TO FINANCIAL STATEMENTS June 30, 2025 and 2024 NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) As of and for the years ended June 30, 2025 and 2024, 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 included, but were 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 considered all highly liquid investments purchased with an initial maturity of three months or less to be cash equivalents. The Organization maintained its cash balances at various financial institutions. The total cash balances were insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per institution. The Organization periodically reviewed the quality of the financial institutions it had deposits with to minimize risk of loss. To date, no losses were incurred. Accounts Receivable: Accounts receivable were carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts at year end. Management determined the allowance for doubtful accounts by identifying troubled accounts based on current and historical experience and reasonable and supportable forecasts. At June 30, 2024, the Organization considered its accounts receivable to be fully collectible and accordingly did not record an allowance for doubtful accounts and no customer accounted for more than 10% of the Organization's total accounts receivable balance. Property and Equipment: Property and equipment were stated at cost. Donated assets were recorded at their fair market value when received. The cost of purchased assets or fair market value of donated assets were depreciated using the straight-line method over the estimated useful lives of the related assets which range from three to seven years. Leasehold improvements were amortized over the lesser of their estimated useful lives or the related lease term. Maintenance and repairs were charged to expense as incurred. Significant renewals and betterments were capitalized. It was 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 were removed from the accounts and any resulting gain or loss was reflected in the statements of activities. Deferred Compensation: Deferred compensation represented a commitment to make annual $25,000 annuity payments through 2026 to a member of the Organization's management. As of June 30, 2025, the balance was $0 since it was transferred to VNB upon dissolution of the Organization. As of June 30, 2024, $50,000 was due. Payments due within one year were classified under prepaid expenses and other current assets and current liabilities; all other amounts were classified as non -current assets and non -current liabilities. (Continued) 7. 14-31 NEWPORT BEACH & COMPANY (A NON-PROFIT ORGANIZATION) NOTES TO FINANCIAL STATEMENTS June 30, 2025 and 2024 NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Leases: At the inception of a contract, the Organization determined if the arrangement was, or contained, a lease. Operating lease right -of -use (ROU) assets represented the Organization's right to use an underlying asset for the lease term, and lease liabilities represented its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities were 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 were not recognized in the balance sheet. Rent expense was recognized on a straight-line basis over the lease term. The Organization accounted for lease and non -lease components as separate lease components for all its leases. Impairment of Long -Lived Assets: The Organization evaluated long-lived assets for impairment whenever events or changes in circumstances indicated 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 were less than the carrying value, a write -down would be recorded to reduce the related asset to its estimated fair value. At June 30, 2024, the Organization's management believes there was no impairment of its long-lived assets. Support and Revenues: The Organization's service fee revenues, sublease income, and community marketing income were considered revenue under ASC 606, Revenue from Contracts with Customers. Service fee revenues were recognized upon performance of services for related parties. Sublease income was recognized on a straight-line basis over the lease term. Revenue from community marketing was recognized when the related marketing service was completed. The Organization applied the following steps to recognize revenue related to ASC 606: 1. Identify the contract with a customer 2. Identify the performance obligations in the contract 3. Determine the transaction price 4. Allocate the transaction price to the performance obligations 5. Determine the satisfaction of performance obligations Contributed Materials and Services: Donated materials and other noncash contributions (if any) were reflected in the accompanying financial statements at their estimated fair market values at date of receipt. Contributions of services were recognized if the services received created or enhanced nonfinancial assets or required specialized skills, were provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation. Other volunteer services that did not meet these criteria were not recognized in the financial statements as there was no objective basis of deriving their value. During the years ended June 30, 2025 and 2024, the Organization did not have significant contributed materials and services. (Continued) 3 14-32 NEWPORT BEACH & COMPANY (A NON-PROFIT ORGANIZATION) NOTES TO FINANCIAL STATEMENTS June 30, 2025 and 2024 NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Income Tax Status: The Organization qualified 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 had no provision for federal or state income taxes. During the years ended June 30, 2025 and 2024, the Organization had no unrelated business income. The Organization annually evaluated tax positions as part of the preparation of its exempt tax return. This process included 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 were appropriate based on current facts and circumstances. The Organization's policy was to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. At June 30, 2025 and 2024, 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 2021. Allocated Expenses: The costs of providing program activities and supporting services have been summarized on a functional basis in Note 5. The Organization incurred expenses that directly related to, and could be assigned to, a specific program or supporting activity. The Organization also conducted a number of activities which benefited both its program objectives as well as supporting services. These costs, which were not specifically attributable to a specific program or supporting activity, were 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. Subsequent Events: The Organization has evaluated subsequent events through September 23, 2025, 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, 2025, the Organization has $0 of financial assets available within one year of the statement of financial position date to meet cash needs for general expenditures. At June 30, 2024, the Organization had $249,830 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 $238,034 and accounts receivable of $11,796. None of the financial assets were 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 had a policy to structure its financial assets to be available as its general expenditures, liabilities, and other obligations came due. Funding for the Organization was dependent on funding received from related parties (see Note 8) and revenue generated through marketing efforts. As a result, the Organization closely monitored the monthly projected and collected revenue to determine if any changes needed to be made to budgeted annual expenditures. (Continued) 91 14-33 NEWPORT BEACH & COMPANY (A NON-PROFIT ORGANIZATION) NOTES TO FINANCIAL STATEMENTS June 30, 2025 and 2024 NOTE 4 - PROPERTY AND EQUIPMENT All the Organization's property and equipment were transferred to VNB as of June 30, 2025 (see Note 1). Property and equipment consist of the following at June 30, 2024: Leasehold improvements $ 37,289 Computer equipment 114,933 Office furniture and fixtures 103,346 255,568 Less accumulated depreciation and amortization (157,815) $ 97,753 NOTE 5 - SCHEDULE OF FUNCTIONAL EXPENSES The schedules of functional expenses for the years ended June 30, 2025 and 2024 are as follows: 2025 Program General and Activities Administrative Total Salaries and benefits: Salaries $ 1,006,423 $ 339,845 $ 1,346,268 Payroll taxes and employee benefits 264,147 117,044 381,191 Total salaries and benefits 1,270,570 456,889 1,727,459 Other expenses: Office lease 289,431 96,477 385,908 Repairs and maintenance 3,806 27,422 31,228 Insurance - 14,806 14,806 Office supplies 2,906 10,722 13,628 Equipment and equipment rental 24,833 46,165 70,998 Postage and fees 81,282 19,967 101,249 Meeting and education 3,460 21,025 24,485 Professional fees and services - 99,423 99,423 Depreciation and amortization - 44,993 44,993 Travel and related expenses 18,110 984 19,094 Total functional expenses $ 1,694,398 $ 838,873 $ 2,533,271 (Continued) 10. 14-34 NEWPORT BEACH & COMPANY (A NON-PROFIT ORGANIZATION) NOTES TO FINANCIAL STATEMENTS June 30, 2025 and 2024 NOTE 5 - SCHEDULE OF FUNCTIONAL EXPENSES (Continued) 2024 Program General and Activities Administrative Total Salaries and benefits: Salaries $ 786,783 $ 231,766 $ 1,018,549 Payroll taxes and employee benefits 205,719 102,228 307,947 Total salaries and benefits 992,502 333,994 1,326,496 Other expenses: Marketing 117,095 142 117,237 Office lease 329,854 109,952 439,805 Repairs and maintenance 4,576 27,445 32,021 Insurance - 3,982 3,982 Office supplies 2,816 10,417 13,233 Equipment and equipment rental 19,824 39,839 59,663 Postage and fees 25,678 11,170 36,848 Meeting and education 8,030 55,070 63,100 Professional fees and services - 40,204 40,204 Depreciation and amortization - 35,181 35,181 Travel and related expenses 28,914 681 29,595 Total functional expenses $ 1,529,289 $ 668,077 $ 2,197,365 NOTE 6 - COMMITMENTS AND CONTINGENCIES In connection with the Organization's dissolution as of June 30, 2025, all rights and obligations related to office and equipment leases, as well as sublease agreements, were transferred to VNB. As a result, the Organization had no remaining lease or sublease commitments as of the liquidation date. Lease Agreements: In May 2022, the Organization entered into a lease for its facility. Under the lease, rent was payable at approximately $33,000 to $41,000 per month and expires in September 2029. The lease contained a five-year extension option at the end of the lease term. In addition, the Organization had a lease for office equipment with monthly payments of approximately $500 through January 2026. The operating leases in place did 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, 2024, the weighted - average discount rate and the weighted average remaining lease term for the operating leases held by the Organization were 5% and 5.2 years, respectively. During the years ended June 30, 2025 and 2024, cash paid for amounts included for the operating lease liabilities totaled $430,527 and $416,034, respectively. (Continued) 11. 14-35 NEWPORT BEACH & COMPANY (A NON-PROFIT ORGANIZATION) NOTES TO FINANCIAL STATEMENTS June 30, 2025 and 2024 NOTE 6 — COMMITMENTS AND CONTINGENCIES (Continued) The components of lease cost for the years ended June 30, 2025 and 2024 were as follows: 2025 2024 Operating lease cost $ 440,484 $ 440,484 Variable lease cost, including property taxes, insurance and maintenance 2,131 2,109 Total lease cost $ 442,615 $ 442,593 Total lease cost was included in other expenses in the accompanying statements of activities. Sublease Agreements: In May 2022, the Organization entered into an operating sublease agreement with VNB, for half of its leased space. In February 2024, the Organization entered into a new sublease agreement with Meetings Assessment Partnership (MAP), a related party, to assign the sublease previously agreed to with VNB. The Organization also had a deemed sublease with VNB for office equipment which was also assigned to MAP. The Organization has recorded deferred sublease income of $0 and $58,578 as of June 30, 2025 and 2024, respectively, which is included in the accompanying statement of financial position. During the years ended June 30, 2025 and 2024, cash received from the related -party sublessee totaled $249,706 and $208,017, respectively, and the Organization recorded sublease income of $185,003 and $220,242, respectively, in the accompanying statements of financial position. Indemnities: The Organization had entered into various indemnification agreements in the normal course of operations, including indemnities provided to its directors, officers, employees, agents, and landlords. These indemnities, permitted under California law, survive the dissolution of the Organization. Although these indemnities do not provide for a limitation on the maximum potential future payments, management is not aware of any existing claims or circumstances that would require the Organization to make such payments. Accordingly, no liabilities related to these indemnities have been recorded in the accompanying statements of financial position. NOTE 7 — RETIREMENT PLAN Prior to dissolution, the Organization sponsored a defined contribution 401(k) retirement plan covering eligible employees. The plan allowed for discretionary employer contributions, which totaled approximately $86,000 and $63,000 for the years ended June 30, 2025 and 2024, respectively, which is recorded in salaries and benefits expenses in the accompanying statements of activities. NOTE 8 — RELATED -PARTY TRANSACTIONS During the years ended June 30, 2025 and 2024, the Organization had transactions with related parties that are also non-profit organizations. VNB and MAP are related through the sharing of management and administrative employees between entities and the service agreements discussed below. VNB is also related through common board members. (Continued) 12. 14-36 NEWPORT BEACH & COMPANY (A NON-PROFIT ORGANIZATION) NOTES TO FINANCIAL STATEMENTS June 30, 2025 and 2024 NOTE 8 — RELATED -PARTY TRANSACTIONS (Continued) VNB initiates, sponsors, promotes and carries out plans, policies and activities to attract conferences and visitors to the City. Pursuant to the Agreement, VNB agreed to pay fees to the Organization totaling $0 and $63,000, respectively, for the years ended June 30, 2025 and 2024. VNB 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, 2025 and 2024, the Organization billed $2,117,563 and $1,765,755, respectively, to VNB for these fees and costs, which are recorded as service fees from related parties in the accompanying statements of activities. MAP works to improve business conditions and the business environment for tourism for member hotels in the City through the provision of marketing, sales, and special events programs, along with various other initiatives directly to promoting tourism and its associated activities. Pursuant to an Agreement for Services ("MAP Agreement") dated June 17, 2024, the Organization was appointed by MAP, effective February 1, 2024, as a consultant MAP requires to carry out its mission and obligations to the City. The MAP Agreement, as amended, expired on June 30, 2025. In consideration for these services, MAP agreed to pay quarterly fees of $27,000 during the term of the Agreement. MAP paid fees totaling $108,000 and $45,000 for the years ended June 30, 2025 and 2024, respectively, which are recorded as service fees from related parties in the accompanying statement of activities. In addition, payroll and related expenses from shared employees employed by the Organization were allocated to VNB and MAP. During the years ended June 30, 2025 and 2024, payroll and related expenses of $0 and $279,885, respectively, were allocated to VNB. During the years ended June 30, 2025 and 2024, payroll and related expenses of $539,367 and $226,695, respectively, were allocated to MAP. As of June 30, 2025 and 2024, the Organization had related -party receivables from VNB of $0 and $102,263, respectively, in the accompanying statements of financial position. As of June 30, 2025 and 2024, the Organization had related -party receivables from MAP of $0 and $50,656, respectively, in the accompanying statements of financial position. These amounts do not bear interest, are not collateralized and have no stated repayment terms. 13. 14-37 ATTACHMENT C Crowe INDEPENDENT ACCOUNTANT'S REPORT To the Board of Directors Visit Newport Beach Inc. Crowe LLP Independent Member Crowe Global We have examined management of Visit Newport Beach Inc.'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 Exhibit A 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 2025 Expenditures Report, summarizing the expenditures of funds received pursuant to the Agreement during the period July 1, 2024 to June 30, 2025. The Organization's management is responsible for its assertion. Our responsibility is to express an opinion on management's assertion about Visit Newport Beach Inc.'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 whether management's assertion is fairly stated, in all material respects. 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 Visit Newport Beach Inc.'s compliance with the specified requirements. In our opinion, management's assertion that Visit Newport Beach Inc. complied with the provisions of Exhibit A of the Agreement regarding the attached 2025 Expenditures Report for the year ended June 30, 2025, 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 the specified parties. oto" LLP Crowe LLP Costa Mesa, California September 23, 2025 14-38 Docusign Envelope ID: 968C7CCD-CCO2-4886-9E3E-4DC3CD95AC24 VISIT NEWPOR"I' 13L-'ACH CALIFORNIA 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 We, as members of management of Visit Newport Beach Inc. (the "Organization"), are responsible for complying with the provisions of Exhibit A of the Agreement Between the City of Newport Beach and Visit Newport Beach Inc. (collectively, the "Parties") for Tourism Promotion, Branding, and Marketing Services (the "Agreement") in that funds received by the Organization pursuant to this Agreement were expended in accordance with this Agreement. We are responsible for establishing and maintaining effective internal controls over compliance with the provisions of Exhibit A of the Agreement. We have performed an evaluation of the Organization's compliance with the provisions of Exhibit A of the Agreement regarding funds expended during the year ended June 30, 2025, as summarized in the attached 2025 Expenditures Report. Based on this evaluation, we assert that the Organization was in compliance with the provisions of Exhibit A of the Agreement as described below: Exhibit A 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 and thereby drive up the amount of TOT collected and improve the overall tourism business and commerce throughout the City (`Services'). Services shall, at a minimum, include the following: • The maintenance of suitable office space and the employment of competent personnel to properly carry out promotional, branding, and marketing duties; • The creation of marketing materials and information to promote tourism and inform prospective visitors of the recreational activities, cultural assets, shopping and dining opportunities, night-time stay opportunities, and natural beauty of Newport Beach. These materials may include, but are not limited to, website and digital content, brochures, publications, guides, online promotions, social media campaigns and various forms of print and digital advertising; • The dissemination of information described in this section by way of print and digital media, including direct mail, publications, social media, websites, mobile applications, direct digital advertising , events or other means of distribution; • The development and implementation of specific marketing programs designed to increase awareness of the Newport Beach brand and to increase business and visitor trade in Newport Beach; and • Any additional services as may be proposed by the City from time to time, subject to mutual agreement of the Parties, which are consistent with the promotion of tourism and the Newport Beach brand." Visit Newport Beach Inc. Signed by: Gary erwm President/CEO r��DocuSignedb ��(y:I ,, By Lily narson CFO 14-39 VISIT NEWPORT BEACH CALWORNIA VISIT NEWPORT BEACH, INC. 2025 Expenditures Report July 1, 2024 - June 30, 2025 2025 Expenses Advertising Expenses 66101 -Advertising $ 1,286,016 66121 - Promotional Gift Cards 1,875 66202 - Creative Production 373,887 67101 - Research 271,970 Total Advertising Expenses 1,933,748 Marketing Expenses Community Relations A 66212 - Community Sponsorships 90,325 67104 - Annual Marketing Outlook Event - 67105 - Awards 4,320 67107 - Promotional Items 42,426 67108 - Company -Sponsored Events - 67111 - Community Partnerships 137,461 Total Community Relations 274,532 Event Marketing 67102 - Christmas Boat Parade 176,244 67103 - Community Partner Events 512,109 Total Event Marketing 688,353 Marketing Collateral 67309 - Business Plan 2,405 67311 - Collateral Production Expenses 3,642 Total Marketing Collateral 6,047 Digital Marketing 67501 - Social Media 106,965 67502 - Website Maintenance 23,976 67503 - SEO/SEM 120,570 67508 - Website Redesign Expenses - 66211 - CRM Maintenance & Platform Subscrip 25,917 Total Digital Marketing 277,428 Communications/Public Relations 67601 - PR Agency/Tracking/Copywriting 233,807 67602 - Media FAM Tours 56,278 67605 - Media Opportunities 35,637 67607 - Media Relations 2,105 Total Communications/Public Relations 327,827 Total Marketing Expenses 1,574,187 International Marketing Initiatives 67401 - International Brand Activations 26,909 67402 - International FAM Tours 8,059 67404 - International Trade Shows 20,633 67405 - International Airfare 47,420 67406 - International Accommodations 48,654 67407 - International Meals 2,273 67408 - International Transportation Costs 4,351 67409 - International Other Travel Costs 308 67410 - International Business Meals/Entertain 201 67411 - International Promotional Items 1,509 67412 - International Brand Events 663,113 Total International Marketing Initiatives 823,430 NB&Company Fees B 68001 - NB&Co Fees 2,117,563 Total NB&Company Fees 2,117,563 Direct Sales Initiatives Sponsorships 66232 - Hosted Industry Events 129,793 Total Sponsorships 129,793 14-40 VISIT NEWPORT BEACH CALWORNIA VISIT NEWPORT BEACH, INC. 2025 Expenditures Report July 1, 2024 - June 30, 2025 Total Direct Sales Initiatives 129,793 Total Expenses 6,578,721 Other Expenditures: Fixed asset additions capitalized Website development costs capitalized Change in other prepaid expenses and current (253,557) liabilities, net tL S3,Db/) $ 6,325,164 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 $ 75,000 S 75,000 B Consist of reimbursements for costs incurred by Newport Beach & Company as follows: Class of Expense Amount Salaries/Benefits $ 1,614,833 G & A Overhead 502,730 $ 2,117,563 14-41