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, 2011
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: 1,789
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. Statements of Operations and Retained Earnings
4. Statements 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 1.4% compared to this time last year due to the
timing of Spring break. Occupancy projections look 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 to be a primary source of revenue for the
Company, however, demand has slowed due to the economy's impact
on disposable income. 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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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, 2011, decreased $4,273, or 0.49%, below the same period
in 2010. This decrease in income reflects a $8,627, or 1.5%,
decrease in site revenue due to Spring break falling in this
period during 2010 and not in 2011, interest revenue posted in
2010 that decreased by $7,273 in 2011, and partially offset by an
increase in storage activity of $8,845, or 3.4%. Resort
Operations Income for the six-months ended March 31, 2011,
increased $10,121, or 0.55%, from the same period ended March 31,
2010. This increase is due primarily to an increase of $25,648,
or 4.96%, in RV storage activity.
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Income from retail operations for the three-month period ended
March 31, 2011, decreased $1,368, or 0.71%, below the same period
in 2010. The General Store revenue was down $4,900, or 5.0%, and
RV Service revenue increased $3,530, or 3.7%, from the previous
year. Management feels this decrease is primarily due to the
timing of Spring break. Income from Retail Operations for the
six-month period ending March 31, 2011, increased by $534, or
0.13%, below the same period ended March 31, 2010. The General
Store was down $10,068, or 4.7%, and RV Service up $10,602, or
5.4%. Management recognizes this economy is impacting the
ancillary revenue areas within the resort. The RV Service
operation is marketed to off-resort customers, and therefore, is
not as impacted by resort occupancy. 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 2011.
Operating expenses for the three-month period ending March 31,
2011, increased $26,264, or 3.0%, above the same period ended
March 31, 2010. This increase in expenses primarily reflects
employee insurance benefits, electricity, and storage lot
maintenance. For the six-month period ending March 31, 2011,
operating expenses increased by $2,076, or 0.11%, above the same
period in 2010. This increase reflects employee insurance
benefits, workers' compensation, electricity, storage lot
maintenance, and advertising. 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, 2011, are 46.8% compared to
50.2% for the same period in 2010. For the six-months ended March
31, 2011, Cost of Goods Sold expenses were 48.1% compared to
49.4% 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, 2011, is
$61,250, compared to $64,633 for the same period in 2010. For the
six-month period ended March 31, 2011, compared to the same
period in 2010, interest expense was $123,539 and $130,223
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, 2011, decreased by $86,972, reflecting
decreased income, increased expenses, and the sale of a fixed
asset for $58,034 the previous year. For the six-months ended
March 31, 2011, income before provisions for income tax decreased
by $56,781, reflecting increased resort income and increased
operating expenses, and the sale of a fixed asset. 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 $526,000
in fiscal year 2011 to further enhance the resort facilities and
services. These projects include: renovation of 26 campsites,
major road paving, a two-door freezer for the General Store, and
continued Wi-Fi upgrade. 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. With the exception of the freezer for the
General Store which was withdrawn, all other 2011 projects were
completed on time and within budget.
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The Company's current cash position as of March 31, 2011, is
$1,600,257, which is 7.6% less than the position in 2010. This
decrease in cash on hand reflects capital projects completed
during the period, and a $250,000 principal buy down of a note
payable made in March 2011. 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.
Accounts payable and accrued liabilities increased $7,684, or
4.3%, 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.
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 (SEC).
The public may read and copy any of the materials filed with the
SEC 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 SEC.
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, 2011, 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, 2010.
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 1934
Act is recorded, processed, summarized, and reported within the
time periods specified in the SEC'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 1934 Act 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 1934 Act) during the six-months
ended March 31, 2011, 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 13, 2011
Signature: /S/ JERALD PETTIBONE
Jerald Pettibone, President and Chairman of the Board
Date: MAY 13, 2011
Signature: /S/ JACK WILLIAMS
Jack Williams, V.P. - Finance/Chief Financial Officer
(principal financial officer and principal
accounting officer)
Date: MAY 13, 2011
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., (Company), as of March 31, 2011 and 2010, and the
related statements of operations and retained earnings and cash
flows for the three month and six month periods ended March 31,
2011 and 2010. 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 13, 2011
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PISMO COAST VILLAGE, INC.
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6 BALANCE SHEETS
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MARCH 31, 2011 AND 2010, AND SEPTEMBER 30, 2010
-----------------------------------------------
March 31, September 30, March 31,
2011 2010 2010
(Unaudited) (Audited) (Unaudited)
----------- ----------- -----------
ASSETS
------
Current Assets
--------------
Cash and cash equivalents $ 1,600,257 $ 1,727,123 $ 1,731,993
Investment in certificate of deposit - - -
Accounts receivable 24,948 24,584 22,215
Inventory 175,363 127,904 142,986
Current deferred taxes 73,300 73,300 74,300
Prepaid income taxes 226,600 - 206,600
Prepaid expenses 32,931 33,992 36,946
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Total current assets 2,133,399 1,986,903 2,215,040
Pismo Coast Village Recreational
--------------------------------
Vehicle Resort and Related Assets -
-----------------------------------
Net of accumulated depreciation 14,105,421 13,966,429 14,081,556
Other Assets 27,059 31,451 33,648
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Total Assets $16,265,879 $15,984,783 $16,330,244
----------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities
-------------------
Accounts payable and
accrued expenses $ 186,944 $ 161,663 $ 179,260
Accrued salaries and vacation 55,823 170,279 58,660
Rental deposits 1,457,658 771,211 1,465,045
Income taxes payable - 41,800 -
Current portion of
long-term debt 128,007 114,054 102,009
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Total current liabilities 1,828,432 1,259,007 1,804,974
Long-Term Liabilities
---------------------
Long-term deferred taxes 581,500 506,200 492,300
N/P Donahue Trans 39,771 42,821 45,746
N/P Santa Lucia Bank 4,210,010 4,528,128 4,837,102
----------- ----------- -----------
Total liabilities 6,659,713 6,336,156 7,180,122
----------- ----------- -----------
Stockholders' Equity
--------------------
Common stock - no par value,
1,800 shares issued,
1,789 shares outstanding 5,613,194 5,613,194 5,616,332
Retained earnings 3,992,972 4,035,433 3,533,790
----------- ----------- -----------
Total stockholders' equity 9,606,166 9,648,627 9,150,122
----------- ----------- -----------
Total Liabilities and
Stockholders' Equity $16,265,879 $15,984,783 $16,330,244
=========== =========== ===========
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)
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THREE AND SIX MONTHS ENDED MARCH 31, 2011 AND 2010
--------------------------------------------------
Three Months Six Months
Ended March 31, Ended March 31,
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2011 2010 2011 2010
---------- ---------- ---------- ----------
Income
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Resort operations $ 854,438 $ 858,711 $1,838,778 $1,828,657
Retail operations 190,028 191,396 408,954 408,420
---------- ---------- ---------- ----------
Total income 1,044,466 1,050,107 2,247,732 2,237,077
---------- ---------- ---------- ----------
Cost and Expenses
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Operating expenses 888,833 862,569 1,837,998 1,835,922
Cost of goods sold 88,964 96,164 196,596 201,747
Depreciation and
amortization 85,387 78,981 172,154 157,981
---------- ---------- ---------- ----------
Total cost and
expenses 1,063,184 1,037,714 2,206,748 2,195,650
---------- ---------- ---------- ----------
Income (Loss)
from Operations (18,718) 12,393 40,984 41,427
---------- ---------- ---------- ----------
Other Income (Expense)
----------------------
Gain on sale of
fixed assets 2,170 58,034 2,170 58,034
Interest and dividend
income 1,079 4,459 3,224 10,382
Interest expense (61,250) (64,633) (123,539) (130,223)
---------- ---------- ---------- ----------
Total other
income (expense) (58,001) (2,140) (118,145) (61,807)
---------- ---------- ---------- ----------
Income (Loss) Before
Provision for
Income Tax (76,719) 10,253 (77,161) (20,380)
Income Tax (Expense)
Benefit 34,500 (7,232) 34,700 6,768
---------- ---------- ---------- ----------
Net Income (Loss) $ (42,219) $ 3,021 (42,461) (13,612)
========== ==========
Retained Earnings
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Beginning of Period 4,035,433 3,547,402
---------- ----------
End of Period $3,992,972 $3,533,790
---------- ----------
Net Income/(Loss)
Per Share $ (23.60) $ 1.69 $ (23.73) $ (7.60)
========== ========== ========== ==========
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)
------------------------------------
SIX MONTHS ENDED MARCH 31, 2011 AND 2010
----------------------------------------
2011 2010
------------------------ ----------------------
Cash Flows From Operating
-------------------------
Activities
----------
Net Loss $ (42,461) $ (13,612)
Adjustments to reconcile net
loss to net cash provided
by operating activities:
Depreciation and
amortization $ 172,153 $ 157,980
Loss (gain) on disposal
of fixed assets (2,170) (58,034)
Accounts receivable (364) (307)
Inventory (47,459) (10,832)
Current deferred taxes - (200)
Prepaid income taxes (226,600) (206,600)
Prepaid expenses 1,061 24,545
Other assets 4,392 2,196
Accounts payable and
accrued expenses 25,282 (1,660)
Accrued salaries
and vacation (114,456) (126,586)
Rental deposits 686,447 697,557
Income taxes payable (41,800) (51,000)
Deferred taxes 75,300 1,200
--------- ---------
Total adjustments 531,786 428,259
---------- ----------
Net cash provided by
operating activities 489,325 414,647
Cash Flows Used In
------------------
Investing Activities
--------------------
Capital expenditures (311,229) (552,154)
Proceeds from sale
of assets 2,250 186,686
--------- ---------
Net cash used in
investing activities (308,979) (365,468)
Cash Flows From
---------------
Financing Activities
--------------------
Borrowings on
long-term debt - 45,746
Principal payments on
note payable (307,212) (34,977)
--------- ---------
Net cash provided by
(used in) investing
activities (307,212) 10,769
---------- ----------
Net increase(decrease)
in cash and cash
equivalents (126,866) 59,948
Cash and Cash Equivalents -
---------------------------
Beginning of Period 1,727,123 1,672,045
------------------- ---------- ----------
Cash and Cash Equivalents -
---------------------------
End of Period $1,600,257 $1,731,993
------------- ========== ==========
Schedule of Payments of
-----------------------
Interest and Taxes
------------------
Payments for interest $ 123,539 $ 130,223
Payments for income tax $ 158,401 $ 189,832
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
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MARCH 31, 2011 AND 2010 (Unaudited) AND SEPTEMBER 30, 2010 (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 park improvements 5 to 40 years
Furniture, fixtures, equipment, and
leasehold improvements 5 to 31.5 years
Transportation equipment 5 to 10 years
Earnings (Loss) Per Share
-------------------------
The earnings (loss) per share reported on the financial statements are based
on the 1,789 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, 2011, the Company had cash deposits in excess of the $250,000
federally insured limit with Santa Lucia Bank of $1,388,291; 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 December 31, 2013. 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
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MARCH 31, 2011 AND 2010 (Unaudited) AND SEPTEMBER 30, 2010 (Audited)
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PAGE 2
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Note 1 - Summary of Significant Accounting Policies (Continued)
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Income Taxes
------------
The Company uses the asset-liability method of computing deferred taxes in
accordance with Accounting Standards Codification (ASC) Income Taxes topic.
ASC Topic 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.
ASC Topic 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, 2011, 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, 2007, and by the California Franchise Tax Board for fiscal
years ending on or after September 30, 2006.
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 $31,500 and $22,500 for the six months
ended March 31, 2011 and 2010, respectively. There was no advertising expense
capitalized in prepaid expense.
16
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PISMO COAST VILLAGE, INC.
-------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
MARCH 31, 2011 AND 2010 (Unaudited) AND SEPTEMBER 30, 2010 (Audited)
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PAGE 3
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Note 1 - Summary of Significant Accounting Policies (Continued)
---------------------------------------------------
Subsequent Events
--------------
Subsequent events have been evaluated through May 13, 2011,which is the date
the financial statements were available to be issued.
New Accounting Pronouncements
-----------------------------
Standards Adopted:
In January 2010, the Financial Accounting Standards Board (FASB) issued
Accounting Standards Update (ASU) No. 2010-06 "Improving Disclosures about
Fair Value Measurements." The ASU amends previously issued authoritative
guidance, requires new disclosures, 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 the Company's
financial position or results of operations.
Note 2 - Pismo Coast Village Recreational Vehicle Resort and Related Assets
---------------------------------------------------------------------------
At March 31, 2011, September 30, 2010, and March 31, 2010, property and
equipment included the following:
March 31, September 30, March 31,
2011 2010 2010
----------- ------------- -----------
Land $ 9,957,263 $ 9,957,263 $ 9,957,263
Building and resort
improvements 10,332,175 10,242,392 9,344,007
Furniture, fixtures,
equipment, and
leasehold improvements 526,033 517,485 805,381
Transportation equipment 472,478 477,278 489,899
Construction in progress 276,780 68,277 625,046
----------- ----------- -----------
21,564,729 21,262,695 21,221,596
Less: accumulated
depreciation and
amortization (7,459,308) (7,296,266) (7,140,040)
----------- ----------- -----------
$14,105,421 $13,966,429 $14,081,556
=========== =========== ===========
Note 3 - Line of Credit
-----------------------
The Company's revolving line of credit for $500,000 expired on March 24, 2011.
There was no outstanding amount for the line of credit at March 31, 2011 and
2010, and September 30, 2010.
17
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PISMO COAST VILLAGE, INC.
-------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
MARCH 31, 2011 AND 2010 (Unaudited) AND SEPTEMBER 30, 2010 (Audited)
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PAGE 4
------
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 $1,468,945 and was financed
over a period of ten years at a variable interest rate currently at 5.00%. The
lot in Oceano was formerly 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 $2,863,099 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 and principal. 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 $45,746 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,
-----------------------
2012 $ 128,007
2013 136,676
2014 144,146
2015 152,033
2016 159,822
Thereafter 3,657,104
-----------
$ 4,377,788
===========
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.
18
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PISMO COAST VILLAGE, INC.
-------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
MARCH 31, 2011 AND 2010 (Unaudited) AND SEPTEMBER 30, 2010 (Audited)
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PAGE 5
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Note 6 - Income Taxes
---------------------
The provision for income taxes is as follows:
March 31, March 31,
2011 2010
--------- ---------
Income tax expense (benefit) $(34,699) $ (6,768)
========= =========
The Company uses the asset-liability method of computing deferred taxes in
accordance with FASB ASC Topic 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, and
nondeductible variable costs of shareholder usage.
ASC Topic 740 requires, among other things, the recognition and measurement of
tax positions based on a "more likely than not" (likelihood greater than 50%)
approach. As of March 31, 2011, the Company did not maintain any tax positions
that did not meet the "more likely than not" threshold 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 generally remain subject to
examination by the Internal Revenue Service for fiscal years ending on or
after September 30, 2007, and by the California Franchise Tax Board for fiscal
years ending on or after September 30, 2006.
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 per
month 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.
19
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PISMO COAST VILLAGE, INC.
-------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
MARCH 31, 2011 AND 2010 (Unaudited) AND SEPTEMBER 30, 2010 (Audited)
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PAGE 6
------
Note 7 - Operating Leases (Continued)
-------------------------
Future minimum lease payments under the second lease and an obligation to
lease equipment are as follows:
For the Year Ended March 31,
----------------------------
2012 $ 62,808
2013 58,920
2014 52,822
---------
$ 174,550
=========
Rent expense under these agreements was $46,409 and $46,409 for the six months
ended March 31, 2011 and 2010, 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 $25,289 for the six months ended
March 31, 2011. The contribution to the pension plan for the six months ended
March 31, 2010, was $29,660.
20
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