Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2010
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission file number 0-8463
PISMO COAST VILLAGE, INC.
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(Exact name of registrant as specified in its charter)
California 95-2990441
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
165 South Dolliver Street, Pismo Beach, California 93449
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(Address of principal executive offices) (Zip Code)
(805) 773-5649
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
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Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (Subsection 232.405 of
this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such
files). Yes [ ] No [ ]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company.
[ ] Large accelerated filer [ ] Non-accelerated filer
[ ] Accelerated filer [X] Smaller reporting company
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: 1,790
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following financial statements and related information are
included in this Form 10-Q, Quarterly Report.
1. Accountant's Review Report
2. Balance Sheets
3. Statement of Income and Retained Earnings
4. Statement of Cash Flows
5. Notes to Financial Statements (Unaudited)
The financial information included in Part I of this Form 10-Q
has been reviewed by Brown Armstrong Accountancy Corporation, the
Company's Certified Public Accountants, and all adjustments and
disclosures proposed by said firm have been reflected in the data
presented. The information furnished reflects all adjustments
which, in the opinion of management, are necessary to a fair
statement of the results for the interim periods.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
STATEMENT ON FORWARD-LOOKING INFORMATION
Certain information included herein contains statements that may
be considered forward-looking statements, such as statements
relating to anticipated expenses, capital spending and financing
sources. Such forward-looking information involves important
risks and uncertainties that could significantly affect
anticipated results in the future and, accordingly, such results
may differ from those expressed in any forward-looking statements
made herein. These risks and uncertainties include, but are not
limited to, those relating to competitive industry conditions,
California tourism and weather conditions, dependence on existing
management, leverage and debt service, the regulation of the
recreational vehicle industry, domestic or global economic
conditions and changes in federal or state tax laws or the
administration of such laws.
OVERVIEW
The Company continues to promote and depend upon recreational
vehicle camping as the primary source of revenue. The rental of
campsites to the general public provides income to cover
expenses, complete capital improvements, and allow shareholders
up to forty-five free nights camping annually. Additional
revenues come from RV storage and spotting, RV service and
repair, on-site convenience store, and other ancillary activities
such as laundromat, arcade, and bike rental.
The Company has been fortunate not to have significant impact due
to the current economy. The RVing public actively seeks
accommodations on the Central Coast despite volatile fuel prices
and personal financial uncertainties. RVing offers an affordable
outdoor recreational experience, and the Company provides quality
facilities and services in a highly popular location. Total site
occupancy is down 1.2% compared to this time last year due to
weather. Occupancy projections look strong and equal to last year
throughout the remainder of the fiscal year. Revenues from
ancillary operations such as the store, arcade, laundromat, and
bike rental are flat to slightly down year-to-date, and
management feels this is directly related to the economy, and
this trend will continue throughout the remainder of the fiscal
year.
RV storage continues strong demand with a waiting list in
anticipation of the new RV storage property. RV storage provides
numerous benefits to the customer including: no stress of towing,
no need to own a tow vehicle, use of RV by multiple family
members, and convenience.
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After years with no debt, the Board of Directors approved
expansion of the RV storage program and understood this
investment would require substantial financing. Management has
made it a high priority to effect timely construction and
successful marketing in order to maximize return on this
investment.
Ongoing investment in resort improvements has assured resort
guests and shareholders a top quality up-to-date facility. This
quality and pride of ownership was evident when the National
Association of RV Parks and Campgrounds Park of the Year was
awarded to the resort for 2007-08. In addition, in 2008 the
resort was the only industry rated "A" park in California for
customer satisfaction.
The Company's commitment to quality, value, and enjoyment, is
underscored by the business's success due to word of mouth and
referrals from guests. In addition, investment for online
marketing, ads in the two leading national directories, and trade
magazine advertising formulates most of the business marketing
plan.
RESULTS OF OPERATIONS
The Company develops its income from two sources: (a) Resort
Operations, consisting of revenues generated from RV site
rentals, from RV storage space operations, and from lease
revenues from laundry and arcade operations by third party
lessees; and (b) Retail Operations, consisting of revenues from
General Store operations and from RV parts and service
operations.
Income from Resort Operations for the three-month period ended
March 31, 2010, decreased $20,512, or 2.3%, below the same period
in 2009. This decrease in income reflects a $22,051, or 7.7%
decrease in storage/spotting activity and is primarily a
combination of loss of storage customers due to personal finances
and an income reporting adjustment based on advanced deposits.
Resort Operations Income for the six-months ended March 31, 2010,
decreased $38,813, or 2.1%, from the same period ended March 31,
2009. This decrease is due primarily to a decrease of $38,065, or
8.16%, in RV storage activity for the same reasons stated for the
quarter. It should be noted that while paid site occupancy was
down 1.2% compared to the previous year, site rental revenue
increased $20,000, or 1.61%, year-to-date due to rate
adjustments.
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Income from Retail Operations for the three-month period ended
March 31, 2010, decreased $8,488, or 4.2%, below the same period
in 2009. The General Store revenue was down $5,592, or 5.4%, and
RV Service revenue was down $2,895, or 3.0%, from the previous
year. Management feels this decrease is primarily due to the
overall state of the economy. Income from Retail Operations for
the six-month period ending March 31, 2010, decreased by $24,167,
or 5.6%, below the same period ended March 31, 2009. The General
Store was down $15,775, or 6.9%, and RV Service down $8,392, or
4.1%. Management recognizes this overall negative trend in resort
ancillary revenue areas and feels it is a symptom of the current
economy. Management continues to place importance upon ongoing
review of retail product mix, attention to service, and staff
training. The Company anticipates flat to slightly negative
performance in income from retail operations through the
remainder of Fiscal Year 2010.
Operating expenses for the three-month period ending March 31,
2010, increased $21,997, or 2.6%, above the same period ended
March 31, 2009. This increase in expenses primarily reflects
property tax and worker's compensation insurance. For the six-
month period ending March 31, 2010, operating expenses increased
by $111,916, or 6.5%, above the same period in 2009. This
increase reflects payroll and payroll expenses, property taxes,
accounting fees, electricity, and repairs and maintenance.
Management continues to review and scrutinize expenses in order
to maximize efficiency and profitability during this volatile
economy. Due to the age of the Resort, the Company is undertaking
maintenance activity which is considered necessary in order to
continue providing quality facilities and services. Some of these
projects include road repair, utility improvements, landscaping,
and building repair.
Cost of Goods Sold expenses, as a percentage of retail income for
the three-months ended March 31, 2010, are 50.2% compared to
46.0% for the same period in 2009. For the six-months ended March
31, 2010, Cost of Goods Sold expenses were 49.4% compared to
47.2% the previous year. These levels are well within the
guidelines established by management for the individual category
sales of RV supplies and General Store merchandise.
Interest Expense for the three months ended March 31, 2010, is
$64,633, compared to $64,274 for the same period in 2009. For the
six-month period ended March 31, 2010, compared to the same
period in 2009, interest expense was $130,223 and $130,923
respectively. This expense reflects financing for the purchase of
additional RV storage properties which closed escrow January 11,
2006, April 6, 2006, and March 5, 2008.
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Income before provisions for income tax for the three-month
period ended March 31, 2010, decreased by $1,105, reflecting
decreased income and increased expenses. For the six months ended
March 31, 2010, income before provisions for income tax decreased
by $120,335, reflecting decreased resort income and increased
operating expenses. Revenues during this period are directly
attributed to and are consistent with seasonal occupancy of a
tourist-oriented business.
Upon review of operational expenses, occupancy and competition,
the Board of Directors may approve adjustments to the nightly
site rental rates or towing and storage rates. Due to the nature
of business and economic cycles and trends, rates may be adjusted
accordingly, if deemed necessary. Although the supply-demand
balance generally remains favorable, future operating results
could be adversely impacted by weak demand. This condition could
limit the Company's ability to pass through inflationary
increases in operating costs at higher rates. Increases in
transportation and fuel costs or sustained recessionary periods
could also unfavorably impact future results. However, the
Company believes that its financial strength and market presence
will enable it to remain extremely competitive. It is anticipated
the published rates will continue to market site usage at its
highest value and not negatively impact the Company's ability to
capture an optimum market share.
LIQUIDITY
The Company plans capital expenditures of approximately $767,000
in Fiscal Year 2010 to further enhance the resort facilities and
services. Projects include: development of RV storage property
for 900 units, road paving, resort WiFi upgrade, and new trailer
tow vehicle. Funding for these projects is expected to be from
normal operating cash flows and, if necessary, supplemented with
outside financing. These capital expenditures are expected to
increase the resort's value to its shareholders and the general
public.
The Company's current cash position as of March 31, 2010, is
$1,731,993, which is 5.3% more than the same position in 2009.
This increase in cash on hand reflects less cash expenditure due
to the postponement of a capital paving project. The present
level of cash is being maintained in anticipation of large
capital expenditures. Management is planning and implementing
long term renovations to the Resort property which includes
redesigning sites and utilities to accommodate the needs of
modern recreational vehicles.
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The Company received proceeds of $186,686 from the sale of land
adjacent to a developed RV storage property. The transaction
closed escrow and was recorded on February 5, 2010.
Accounts payable and accrued liabilities decreased $31,456, or
14.9%, from the same period last year. This reflects the
financial activity during this period compared to last year
relative to the Company's capital projects which were ongoing at
that time. All undisputed payables have been paid in full
according to the Company's policy.
The Company has consistently demonstrated an ability to optimize
revenues developed from the resort and retail operations during
the summer season. Historically the Company, because of its
seasonal market, has produced 60% to 65% of its revenue during
the third and fourth quarters of the fiscal year, with more than
40% being produced during the fourth quarter. The third and
fourth quarters' occupancies are expected to be consistent with
that of past years.
The Company has also renewed a $500,000 line of credit in
anticipation of large capital expenditures or emergencies.
DISCLOSURE CONCERNING WEBSITE ACCESS TO COMPANY REPORTS
The Company makes available on its website,
www.pismocoastvillage.com, access to its annual report on Form
10-K, quarterly reports on Form 10-Q, current reports on Form
8-K, and all amendments to those reports as soon as reasonably
practicable after such material is electronically filed with or
furnished to the Securities and Exchange Commission.
The public may read and copy any of the materials filed with the
Securities and Exchange Commission at the SEC's Public Reference
Room located at 100 F Street, N. E., Washington, D.C. 20549.
Information on the operation of the Public Reference Room may be
obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains
an Internet site (http://www.sec.gov) that contains reports,
proxy statements, and other information that the Company files
with the Securities and Exchange Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK.
Not Applicable.
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ITEM 4T. CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES
As required by Rule 13a-15 under the Securities Exchange Act of
1934 (the "1934 Act"), as of March 31, 2010, we carried out an
evaluation of the effectiveness of the design and operation of
our disclosure controls and procedures. This evaluation was
carried out under the supervision and with the participation of
our Chief Executive Officer/General Manager (our principal
executive officer) and our Chief Financial Officer (our principal
financial officer). Based upon and as of the date of that
evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures
were effective as described in Item 8A(T) included with our
Annual Report on Form 10-K for the year ended September 30, 2009.
Disclosure controls and procedures are controls and other
procedures that are designed to ensure that information required
to be disclosed in our reports filed or submitted under the
Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms. Disclosure
controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be
disclosed in our reports filed under the Securities Exchange Act
of 1934 is accumulated and communicated to our management,
including our principal executive officer and our principal
financial officer, as appropriate, to allow timely decisions
regarding required disclosure.
INTERNAL CONTROL OVER FINANCIAL REPORTING
There have not been any changes in our internal control over
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)
promulgated by the SEC under the Exchange Act) during the six
months ended March 31, 2010 that have materially affected, or are
reasonably likely to materially affect, our internal control over
financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No pending legal proceedings against the Company other than
routine litigation incidental to the business.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
Not Applicable
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS
Exhibit Sequential
Number Item Description Page Number
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27 Financial Data Schedule
99 Accountant's Review Report
31.1 Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (Jerald Pettibone,
President and Chairman of the Board).
31.2 Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (Jay Jamison, Chief
Executive Officer and principal executive officer).
31.3 Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (Jack Williams,
Chief Financial Officer, principal financial officer
and principal accounting officer).
32.1 Certification Pursuant to 18 U. S. C. Subsection
1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (Jerald Pettibone,
President and Chairman of the Board).
32.2 Certification Pursuant to 18 U. S. C. Subsection
1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (Jay Jamison, Chief
Executive Officer and principal executive officer).
32.3 Certification Pursuant to 18 U. S. C. Subsection
1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (Jack Williams, Chief
Financial Officer, principal financial officer and
principal accounting officer).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
PISMO COAST VILLAGE, INC.
Date: May 14, 2010
Signature: /s/ JERALD PETTIBONE
Jerald Pettibone, President and Chairman of the Board
Date: MAY 14, 2010
Signature: /S/ JACK WILLIAMS
Jack Williams, V.P. - Finance/Chief Financial Officer
(principal financial officer and principal
accounting officer)
Date: MAY 14, 2010
Signature: /S/ JAY JAMISON
Jay Jamison, General Manager/Chief Executive Officer
(principal executive officer)
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REPORT OF INDEPENDENT REGISTERED
--------------------------------
PUBLIC ACCOUNTING FIRM
----------------------
To the Board of Directors
Pismo Coast Village, Inc.
Pismo Beach, California
We have reviewed the accompanying balance sheets of Pismo Coast
Village, Inc. as of March 31, 2010 and 2009, and the related
statements of income and retained earnings and cash flows for the
three month and six month periods ended March 31, 2010 and 2009.
These interim financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with the standards of the
Public Company Accounting Oversight Board (United States). A
review of interim financial information consists principally of
applying analytical procedures and making inquiries of persons
responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance
with the standards of the Public Company Accounting Oversight
Board, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying interim
financial statements for them to be in conformity with accounting
principles generally accepted in the United States of America.
BROWN ARMSTRONG ACCOUNTANCY CORPORATION
Bakersfield, California
May 14, 2010
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PISMO COAST VILLAGE, INC.
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BALANCE SHEETS
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MARCH 31, 2010 AND 2009 AND SEPTEMBER 30, 2009
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March 31, September 30, March 31,
--------- ------------- ---------
2010 2009 2009
---- ---- ----
(Unaudited) (Audited) (Unaudited)
----------- ----------- -----------
ASSETS
------
Current Assets
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Cash and cash equivalents $ 1,731,993 $ 1,672,045 $ 1,644,549
Investment in certificate of deposit - - -
Accounts receivable 22,215 21,908 34,252
Inventory 142,986 132,154 149,471
Current deferred taxes 74,300 74,100 62,600
Prepaid income taxes 206,600 - 112,600
Prepaid expenses 36,946 61,491 42,210
----------- ----------- -----------
Total current assets 2,215,040 1,961,698 2,045,682
Pismo Coast Village Recreational
--------------------------------
Vehicle Resort and Related Assets -
-----------------------------------
Net of accumulated depreciation 14,081,556 13,816,035 13,629,979
Other Assets 33,648 35,844 38,041
------------ ----------- ----------- -----------
Total Assets $16,330,244 $15,813,577 $15,713,702
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities
-------------------
Accounts payable and
accrued expenses $ 179,260 $ 180,921 $ 210,716
Accrued salaries & vacation 58,660 185,246 51,799
Rental deposits 1,465,045 767,488 1,461,591
Income Taxes payable - 51,000 -
Current portion of
long-term debt 102,009 112,042 99,577
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Total current liabilities 1,804,974 1,296,697 1,823,683
Long-Term Liabilities
---------------------
Long-term deferred taxes 492,300 491,100 331,800
N/P Donahue Trans 45,746 - -
N/P Santa Lucia Bank 4,837,102 4,862,046 4,898,861
----------- ----------- -----------
Total liabilities 7,180,122 6,649,843 7,054,344
----------- ----------- -----------
Stockholders' Equity
--------------------
Common stock - no par value,
1,800 shares issued,
1,790 shares outstanding 5,616,332 5,616,332 5,616,332
Retained earnings 3,533,790 3,547,402 3,043,026
----------- ----------- -----------
Total stockholders' equity 9,150,122 9,163,734 8,659,358
----------- ----------- -----------
Total Liabilities and
Stockholders' Equity $16,330,244 $15,813,577 $15,713,702
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
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PISMO COAST VILLAGE, INC.
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STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
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(UNAUDITED)
-----------
THREE AND SIX MONTHS ENDED MARCH 31, 2010 AND 2009
--------------------------------------------------
Three Months Six Months
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Ended March 31, Ended March 31,
---------------------- ----------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
Income
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Resort operations $ 858,711 $ 879,223 $1,828,657 $1,867,470
Retail operations 191,396 199,884 408,420 432,587
---------- ---------- ---------- ----------
Total income 1,050,107 1,079,107 2,237,077 2,300,057
---------- ---------- ---------- ----------
Cost and Expenses
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Operating expenses 862,569 840,572 1,835,922 1,724,006
Cost of goods sold 96,164 92,062 201,747 204,358
Depreciation 78,981 72,773 157,981 145,539
---------- ---------- ---------- ----------
Total cost and
expenses 1,037,714 1,005,407 2,195,650 2,073,903
---------- ---------- ---------- ----------
Income from
operations 12,393 73,700 41,427 226,154
---------- ---------- ---------- ----------
Other Income (Expense)
----------------------
Gain on sale of
fixed assets 58,034 - 58,034 -
Interest and
dividend income 4,459 1,932 10,382 4,724
Interest expense (64,633) (64,274) (130,223) (130,923)
---------- ---------- ---------- ----------
Total other
income (expense) (2,140) (62,342) (61,807) (126,199)
---------- ---------- ---------- ----------
Loss Before Provision
for Income Tax 10,253 11,358 (20,380) 99,955
Income Tax Expense
(Benefit) 7,232 2,246 (6,768) 11,846
---------- ---------- ---------- ----------
Net Income (Loss) $ 3,021 $ 9,112 (13,612) 88,109
========== ==========
Retained Earnings
-----------------
Beginning of period 3,547,402 2,954,917
---------- ----------
Redemption of stock -
End of period $3,533,790 $3,043,026
========== ==========
Net Income/(Loss)
Per Share $ 1.69 $ 5.09 $ (7.60) $ 49.22
========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
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PISMO COAST VILLAGE, INC.
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STATEMENTS OF CASH FLOWS (UNAUDITED)
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SIX MONTHS ENDED MARCH 31, 2010 AND 2009
----------------------------------------
2010 2009
---------------------- ---------------------
Cash Flows From Operating Activities
------------------------------------
Net income (loss) $ ( 13,612) $ 88,109
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Depreciation $ 157,980 $ 145,538
(Gain) on disposal of
fixed assets (58,034) -
Decrease (Increase) in
accounts receivable (307) 9,046
(Increase) in inventory (10,832) (32,504)
Decrease (Increase) in
current deferred taxes (200) 800
Decrease (Increase) in
prepaid income taxes (206,600) 77,200
Decrease (Increase) in
prepaid expenses 24,545 (22,769)
Decrease in other assets 2,196 2,195
(Decrease) Increase in
accounts payable and
accrued expenses (1,660) 32,447
(Decrease) in accrued
salaries and vacation (126,586) (103,242)
Increase in rental deposits 697,557 667,439
(Decrease) in income
taxes payable (51,000) -
Increase(Decrease)in
deferred taxes 1,200 (4,400)
---------- ---------
Total adjustments 428,259 781,750
---------- ----------
Net cash provided by
operating activities 414,647 869,859
Cash Flows From Investing Activities
------------------------------------
Capital expenditures (552,154) (548,351)
Decrease in investment in
certificate of deposit 93,819
---------- ---------
Proceeds from sale of land 186,686
----------
Net cash used in
investing activities (365,468) (454,532)
Cash Flows From Financing Activities
------------------------------------
Borrowings on long-term debt 45,746 -
Principal payments on note
payable (34,977) (24,318)
---------- ---------
Net cash used in
investing activities 10,769 (24,318)
---------- -----------
Net increase (decrease) in cash &
cash equivalents 59,948 391,009
Cash and Cash Equivalents -
---------------------------
Beginning of Period 1,672,045 1,253,540
------------------- ---------- ----------
Cash and Cash Equivalents -
---------------------------
End of Period $1,731,993 $1,644,549
------------- ========== ==========
Schedule of Payments of Interest & Taxes
----------------------------------------
Payments for interest $ 130,223 $ 130,923
Payments for income tax $ 189,832 $ (61,754)
The accompanying notes are an integral part of these financial statements.
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PISMO COAST VILLAGE, INC.
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NOTES TO FINANCIAL STATEMENTS
-----------------------------
MARCH 31, 2010 AND 2009 (UNAUDITED) AND SEPTEMBER 30, 2009 (AUDITED)
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Note 1 - Summary of Significant Accounting Policies
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Nature of Business
------------------
Pismo Coast Village, Inc. (Company) is a recreational vehicle camping resort.
Its business is seasonal in nature with the fourth quarter, the summer, being
its busiest and most profitable.
Inventory
---------
Inventory has been valued at the lower of cost or market on a first-in,
first-out basis. Inventory is comprised primarily of finished goods in the
general store and in the RV repair shop.
Depreciation and Amortization
-----------------------------
Depreciation of property and equipment is computed using an accelerated method
based on the cost of the assets, less allowance for salvage value, where
appropriate. Depreciation rates are based upon the following estimated useful
lives:
Building and resort improvements 5 to 40 years
Furniture, fixtures, equipment and
leasehold improvements 5 to 31.5 years
Transportation equipment 5 to 10 years
Earnings Per Share
------------------
The earnings per share reported on the financial statements are based on the
1,790 shares outstanding. The financial statements report only basic earnings
per share, as there are no potentially dilutive shares outstanding.
Cash and Cash Equivalents
-------------------------
For purposes of the statement of cash flows, the Company considers all highly
liquid investments including certificates of deposit with maturities of three
months or less when purchased, to be cash equivalents.
Concentration of Credit Risk
----------------------------
At March 31, 2010, the Company had cash deposits in excess of the $250,000
federally insured limit with Santa Lucia Bank of $1,454,572, however, in the
past the Company has used Excess Deposit Insurance Bond which secures deposits
up to $1,500,000. It has recently been stated by bank regulators that this
insurance bond is not enforceable. The FDIC's Temporary Transaction Account
Guarantee Program provides unlimited coverage for non-interest bearing
accounts until June 30, 2010. Santa Lucia Bank is participating in the
Temporary Liquidity Guarantee Program which is a requirement to obtain the
non-interest bearing coverage.
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PISMO COAST VILLAGE, INC.
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NOTES TO FINANCIAL STATEMENTS
-----------------------------
MARCH 31, 2010 AND 2009 (UNAUDITED) AND SEPTEMBER 30, 2009 (AUDITED)
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PAGE 2
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Note 1 - Summary of Significant Accounting Policies (Continued)
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Use of Estimates
----------------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires the
Company to make estimates and assumptions that affect certain reported amounts
and disclosures. Accordingly, actual results could differ from those
estimates.
Revenue and Cost Recognition
----------------------------
The Company's revenue is recognized on the accrual basis as earned based on
the date of stay. Expenditures are recorded on the accrual basis whereby
expenses are recorded when incurred, rather than when paid.
Advertising
-----------
The Company follows the policy of charging the costs of non-direct advertising
as incurred. Advertising expense was $22,500 and $20,473 for the six-months
ended March 31, 2010 and 2009, respectively. There was no advertising expense
capitalized in prepaid expense.
New Accounting Pronouncements
-----------------------------
STANDARDS ADOPTED:
In May 2009, the FASB issued authoritative guidance, which establishes general
standards of accounting for and disclosure of events that occur after the
balance sheet date but before financial statements are issued or are available
to be issued. We implemented this guidance during the first quarter of fiscal
2010 and we expanded our disclosures accordingly. See Note 8 to the unaudited
financial statements.
In June 2009, the FASB approved the FASB Accounting Standards Codification
(ASC), which after its effective date of July 1, 2009 is the single source of
authoritative, nongovernmental U.S. Generally Accepted Accounting Principles
(GAAP). The Codification reorganizes all previous U.S. GAAP pronouncements
into roughly 90 accounting topics and displays all topics using a consistent
structure. All existing standards that were used to create the Codification
are now superseded, replacing the previous references to specific Statements
of Financial Accounting Standards (SFAS) with numbers used in the
Codification's structural organization. The adoption of this authoritative
guidance did not have a material impact on our financial statements. We have
updated our disclosures accordingly.
In January 2010, the FASB issued Accounting Standards Update (ASU) No. 2010-06
"Improving Disclosures about Fair Value Measurements." The ASU amends
previously issued authoritative guidance and requires new disclosures and
clarifies existing disclosures and is effective for interim and annual
reporting periods beginning after December 15, 2009, except for the
disclosures about purchases, sales, issuances, and settlements in the
rollforward activity in Level 3 fair value measurements. Those disclosures are
effective for fiscal years beginning after December 15, 2010 and for interim
periods within those fiscal years. As this requires only additional
disclosures, the guidance will have no impact on our financial position or
results of operations.
16
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PISMO COAST VILLAGE, INC.
-------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
MARCH 31, 2010 AND 2009 (UNAUDITED) AND SEPTEMBER 30, 2009 (AUDITED)
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PAGE 3
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Note 2 - Pismo Coast Village Recreational Vehicle Resort and Related Assets
---------------------------------------------------------------------------
At March 31, 2010, September 30, 2009 and March 31, 2009, property and
equipment included the following:
March 31, September 30, March 31,
2010 2009 2009
----------- ------------- -----------
Land $ 9,957,263 $10,085,915 $ 9,994,935
Building and resort
improvements 9,344,007 9,344,007 8,634,856
Furniture, fixtures,
equipment and
leasehold improvements 805,381 803,373 814,483
Transportation equipment 489,899 422,938 422,938
Construction in progress 625,046 144,057 621,330
----------- ----------- -----------
21,221,596 20,800,290 20,488,542
Less: accumulated
depreciation (7,140,040) (6,984,255) (6,858,563)
----------- ----------- -----------
$14,081,556 $13,816,035 $13,629,979
=========== =========== ===========
Depreciation expense was $157,981, and $145,539, for the six months ended
March 31, 2010 and 2009, respectively.
Note 3 - Line of Credit
-----------------------
The Company renewed its revolving line of credit for $500,000, expiring March
2011. The interest rate is variable at one percent over West Coast Prime, with
an initial rate of 6.00 percent at March 31, 2010. The purpose of the loan is
to augment operating cash needs in off-season months. There was no outstanding
amount for the line of credit at March 31, 2010 and 2009 and September 30,
2009.
Note 4 - Note Payable
---------------------
The Company secured permanent financing on the purchase of storage lot land in
Arroyo Grande with Santa Lucia Bank. The loan was refinanced on April 6, 2006
and consolidated with a note for the purchase of another storage lot in
Oceano. The total loan currently outstanding is $2,031,487.57 and was financed
over a period of ten years at a variable interest rate currently at 5.00%. The
lot in Oceano was formally leased for $4,800 per month and was purchased for
$925,000. The payments are currently $12,760 per month interest and principal.
The Company also secured permanent financing on the purchase of another
storage lot in Arroyo Grande with Santa Lucia Bank. The loan originated on May
8, 2008. The total loan currently outstanding is $2,903,187 and financed over
a period of ten years at a variable interest rate currently at 5.5%. The
payments are currently $16,566 per month interest only. The Company secured a
vehicle lease with Donahue Transportation Services Corp on a 2008 Tow Truck.
The loan originated on December 9, 2009. The total loan currently outstanding
is $50,182 and financed over a period of seven years at an interest rate of
8.39%. The payments are currently $799 per month interest and principal.
Period Ending March 31,
-----------------------
2011 $ 102,009
2012 103,100
2013 109,506
2014 115,583
2015 122,006
Thereafter 4,432,653
----------
$4,984,857
==========
17
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PISMO COAST VILLAGE, INC.
-------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
MARCH 31, 2010 AND 2009 (UNAUDITED) AND SEPTEMBER 30, 2009 (AUDITED)
--------------------------------------------------------------------
PAGE 4
------
Note 5 - Common Stock
---------------------
Each share of stock is intended to provide the shareholder with free use of
the resort for a maximum of 45 days per year. If the Company is unable to
generate sufficient funds from the public, the Company may be required to
charge shareholders for services.
A shareholder is entitled to a pro rata share of any dividends as well as a
pro rata share of the assets of the Company in the event of its liquidation or
sale. The shares are personal property and do not constitute an interest in
real property. The ownership of a share does not entitle the owner to any
interest in any particular site or camping period.
Note 6 - Income Taxes
---------------------
The provision for income taxes is as follows:
March 31, March 31,
2010 2009
--------- ---------
Income tax expense (benefit) $ (6,768) $ 11,846
========= =========
The Company uses the asset-liability method of computing deferred taxes in
accordance with FASB Accounting Standard Codification (ASC) 740 (formerly SFAS
109). ASC 740 requires, among other things, that if income is expected for the
entire year, but there is a net loss to date, a tax benefit is recognized
based on the annual effective tax rate. The Company has not recorded a
valuation allowance for deferred tax assets since the benefit is expected to
be realized in the following year. In accordance with FASB Accounting
Standards Codification (ASC) effective for years ending After September 15,
2009, SFAS 109 is now FASB ASC 740.
The difference between the effective tax rate and the statutory tax rates is
due primarily to the effects of the graduated tax rates, state taxes net of
the federal tax benefit, nondeductible variable costs of shareholder usage and
other adjustments.
ASC 740 also requires, among other things, the recognition and measurement of
uncertain tax positions based on a "more likely than not" (likelihood greater
than 50%) approach. As of March 31, 2010, the Company did not maintain any
uncertain tax positions under this approach and, accordingly, all tax
positions have been fully recorded in the provision for income taxes. It is
the policy of the Company to consistently classify interest and penalties
associated with income tax expense separately from the provision for income
taxes. No interest or penalties associated with income taxes have been
included in this calculation, or separately in the Statement of Operations and
Retained Earnings, and no significant increases or decreases are expected
within the following twelve-month period. Although the Company does not
maintain any uncertain tax positions, tax returns remain subject to
examination by the Internal Revenue Service for fiscal years ending on or
after September 30, 2006 and by the California Franchise Tax Board for fiscal
years ending on or after September 30, 2005.
18
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PISMO COAST VILLAGE, INC.
-------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
MARCH 31, 2010 AND 2009 (UNAUDITED) AND SEPTEMBER 30, 2009 (AUDITED)
--------------------------------------------------------------------
PAGE 5
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Note 7 - Operating Leases
-------------------------
The Company leases two pieces of property to use as storage lots. One is
leased under a seven-year agreement beginning March 1, 2007 for $4,802 based
on the Consumer Price Index.
The second lot is located in Oceano and is leased at $2,933 per month. The
lease has converted to a month to month lease; however the lessor is
considering a long-term renewal at this time.
The Company has a five-year lease obligation for a copier. Rental expense
under this operating lease is $432 per month.
Future minimum lease payments under the second lease and an obligation to
lease equipment are as follows:
Period Ending March 31,
-----------------------
2011 $ 62,808
2012 62,808
2013 58,920
2014 52,822
2015 -
Thereafter -
----------
$ 237,358
==========
Rent expense under these agreements was $46,409 and $46,411 for the six months
ended March 31, 2010 and 2009, respectively.
Note 8 - Employee Retirement Plans
----------------------------------
The Company is the sponsor of a 401(k) profit-sharing pension plan, which
covers substantially all full-time employees. Employer contributions are
discretionary and are determined on an annual basis. The Company's matching
portion of the 401(k) safe harbor plan was $29,660 for the six months ended
March 31, 2010. The contribution to the pension plan for the six months ended
March 31, 2009 was $22,429.
Note 9 - Subsequent Events
--------------------------
The Company evaluates subsequent events through the date the financial
statements are issued, which for the quarterly period ended March 31, 2010 is
May 14, 2010. No material subsequent events were identified during this
period.
19
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