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EX-31.1 - EXHIBIT 31.1 - PISMO COAST VILLAGE INCexhibit31_1.htm
EX-32.3 - EXHIBIT 32.3 - PISMO COAST VILLAGE INCexhibit32_3.htm
EX-32.2 - EXHIBIT 32.2 - PISMO COAST VILLAGE INCexhibit32_2.htm
EX-32.1 - EXHIBIT 32.1 - PISMO COAST VILLAGE INCexhibit32_1.htm
EX-31.3 - EXHIBIT 31.3 - PISMO COAST VILLAGE INCexhibit31_3.htm
EX-31.2 - EXHIBIT 31.2 - PISMO COAST VILLAGE INCexhibit31_2.htm

 

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 June 30, 2016                  

 

 

 

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.

(Exact name of registrant as specified in its charter)

 

                              California 

            95-2990441

(State or other jurisdiction of incorporation or organization) 

             (IRS Employer ID No.)

  

 

165 South Dolliver Street, Pismo Beach, CA

93449

(Address of Principal Executive Offices)

(Zip Code)

 

 (805) 773-5649

Registrant’s telephone number, including area code

 

 

(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 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 [  ]

 

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 [X]            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                                        [  ] Accelerated filer

                  [  ] Non-accelerated filer                                          [X] Smaller reporting company

 

1


 

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 ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13, or 15 (d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.           

YES [  ]            NO [  ]

 

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.            1,775

 

 

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 Income 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.

 

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.

 

2


 

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 up 0.7% compared to this time last year due to good weather conditions. 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 slightly improved 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 major source of revenue for the Company, and has enjoyed growth of 7.3% for the quarter. At this time, RV Storage is considered at maximum capacity with a substantial waiting list. 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.

 

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 a national “My Favorite Campground” contest sponsored by Woodalls, Pismo Coast Village was voted as one of the top ten favorite campgrounds for 2011. Also, Pismo Coast Village was one of thirty-four parks nationally to receive an industry rated “A” park from over 30,000 surveys for customer satisfaction in 2015.

 

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 June 30, 2016, increased $17,000, or 1.0%, above the same period in 2015. Resort Income for the nine months ended June 30, 2016, increased $166,899, or 3.8%, above the same period ended June 30, 2015. This increase in the quarter ending June 30, 2016, is due primarily to a $23,761, or 7.3%, increase in RV Storage. Site rental revenue was down 2.4% below the same period last year due to Spring Break, an annual high occupancy period of two weeks, was during the previous quarter. The increase in Resort Operations Income for the nine-month period reflects increases in site rental of $102,802, or 3.3%, and $54,480, or 5.6%, in storage activity for the reasons mentioned above. Management feels these increases in revenue reflect ongoing loyalty from return customers that appreciate the Resort’s location and commitment to quality guest services.

 

Seasonal fluctuations within this industry are expected, and management projects that income for the fourth quarter will be approximately 40% of its annual revenue. This approximation is based on historical information.

 

3


 

 

Income from Retail Operations, for the three-month period ending June 30, 2016, decreased $13,578, or 3.7%, below the same period in 2015. This decrease reflects a $26,523, or 11.7%, decrease in the General Store primarily due to Spring Break, an annual high occupancy period being scheduled in the previous quarter. The RV Service revenue increased by $12,945, or 9.2%, over the previous year. Income from Retail Operations for the nine-month period ending June 30, 2016, increased by $84,942, or 9.6%, above the same period ended June 30, 2015. This reflects a $25,956, or 5.1%, decrease in the General Store income and an $110,898, or 30.1%, increase in RV Service income. Management feels this increase in revenue from RV Service operations reflects current emphasis providing quality customer service and advertising. The Company anticipates similar activity in both income from resort operations and retail operations through the remainder of fiscal year 2016.

 

Operating expenses for the quarter ended June 30, 2016, increased $111,181, or 9.6%, from the same period in 2015. This increase in expense is primarily a result of labor and labor related expenses, workers’ compensation insurance, electricity, Wi-Fi, and landscaping due to tree removal. Operating expenses for the nine-month period ended June 30, 2016, increased $361,849, or 10.6%, from the same period in 2015. This increase is primarily due to labor and labor related expenses, workers’ compensation insurance, landscaping due to tree removal, credit card processing fees, repairs and maintenance, garbage, Wi-Fi, vehicle expense, and electricity.

 

Cost of Goods Sold for 2016 are within projected levels at 39.2% of retail sales for the quarter and 41.3% year-to-date. Cost of Goods Sold for 2015 was 44.2% and 44.5%, respectively.

 

Interest Expense for the three-month and nine-month periods ended June 30, 2016, is $25,704 and $77,641, respectively, compared to $32,215 and $97,230 the previous year. This decrease in interest expense reflects the current interest rate, and the Company’s decision to make accelerated payments towards the note.

 

Net Income for the quarter ending June 30, 2016, decreased by $191,388, or 46%, compared with the same period ending June 30, 2015. This quarterly decrease in Net Income is primarily due to increased operating expenses, specifically tree removal, and an increase in provision for income tax expense. Net Income for the nine-months ending June 30, 2016, decreased by $3,260, or 0.06%, compared with the same period ending June 30, 2015. This decrease in Net Income is a result of an increase in operating expenses, specifically tree removal. The last quarter of 2016 is expected to provide adequate resources for continuing business and provide for planned capital expenditures.

 

Management has introduced various marketing promotions with reduced rates to increase revenues during low occupancy periods. However, 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 as 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.

 

LIQUIDITY

The Company's current cash position, as of June 30, 2016, is $2,387,331, which is 11.5% less than the same position in 2015. This decrease is primarily due to the Company’s redemption of Company stock and timing of capital expenditures. The cash balance increased $151,524 from fiscal year ended September 30, 2015, due to increased rental deposits. The present level of cash is being maintained in anticipation of large capital expenditures in the upcoming fiscal year.

 

4


 

Accounts Payable and accrued liabilities decreased $27,923 to an amount of $181,980 for June 30, 2016, compared to the same period ending 2015. This decrease was primarily due to timing of payment of monthly liabilities. All undisputed payables have been paid in full according to the Company's policy.

 

Accounts Receivable for the period ending June 30, 2016, decreased $9,181 below June 30, 2015, and reflects overall effort by staff on collections.

 

The Company has consistently demonstrated an ability to optimize revenues developed from Resort and Retail Operations during the summer season. During other less revenue producing periods, RV storage space and site rentals are paid for in advance and used for Resort improvements and cash reserves. The Company has a revolving line of credit for $500,000 to augment operating or capital expenditure cash needs during off-season periods. The Company considers its financial position sufficient to meet its anticipated future financial requirements. The foregoing information is forward-looking, based upon certain assumptions of future performance, which may not come to fruition.

 

CAPITAL RESOURCES AND PLANNED EXPENDITURES

The Company plans capital expenditures of approximately $825,000 in fiscal year 2016 to further enhance the resort facilities and services. These projects include building a new RV Service and Repair facility, purchase a new RV storage tow vehicle, purchase a new forklift, road paving, RV storage security, and repair the Overlook ramp. 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.

 

Capital projects are designed to enhance the marketability of the camping sites and enhance support facilities. Recognizing the age of the Resort and increased demands resulting from modern recreational vehicles, the Board has directed management to provide plans to update and improve accommodations of the Resort.

 

The Company redeemed eight shares during the second quarter for $27,000 each. At this time the stock has not been retired.

 

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 Securities and Exchange Commission on official business days during the hours of 10:00 a.m. to 3:00 p.m., 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

 

5


 

 

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 June 30, 2016, 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, 2015.

 

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 nine-months ended June 30, 2016, 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

 

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

 

6


 


ITEM 6.       EXHIBITS

 

Exhibit No.

 

Description of Exhibit

Sequential

Page Number

 

 

 

27

Financial Data Schedule

 

 

 

 

99

Accountant’s Review Report

 

 

 

 

31.1

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Terris Hughes, 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

(Wayne Hardesty, 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

(Terris Hughes, 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

(Wayne Hardesty, Chief Financial Officer, principal financial officer and principal accounting officer)

 

 

7


 

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.

(Registrant)

 

Date:          August 12, 2016

 

 

Signature:   /s/ TERRIS HUGHES

Terris Hughes, President and Chairman of the Board

 

 

Date:          August 12, 2016

 

 

Signature:   /s/ WAYNE HARDESTY

Wayne Hardesty, V.P. - Finance/Chief Financial Officer

(principal financial officer and principal accounting officer)

 

 

Date:          August 12, 2016

 

 

Signature:   /s/ JAY JAMISON

Jay Jamison, General Manager/Chief Executive Officer

(principal executive officer)

 

8


 

REPORT OF INDEPENDENT REGISTERED

 

PUBLIC ACCOUNTING FIRM

 

 

To the Board of Directors

Pismo Coast Village, Inc.

165 South Dolliver Street

Pismo Beach, California 93449

 

 

We have reviewed the accompanying balance sheets of Pismo Coast Village, Inc. (Company) as of June 30, 2016 and 2015, and the related statements of income and retained earnings and cash flows for the three and nine-month periods ended June 30, 2016 and 2015. 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.

 

We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the balance sheet of the Company as of September 30, 2015, and the related statements of income and retained earnings, and cash flow for the year then ended, and in our report dated November 13, 2015, we expressed an unmodified opinion on those financial statements. In our opinion, the information set forth in the accompanying balance sheet as of September 30, 2015, is fairly stated, in all material respects.

 

 

 

BROWN ARMSTRONG ACCOUNTANCY CORPORATION

 

Bakersfield, California

August 12, 2016

 

 

9


 

 

PISMO COAST VILLAGE, INC.

BALANCE SHEETS

JUNE 30, 2016 AND 2015 AND SEPTEMBER 30, 2015

June 30,

2016

  (Unaudited) 

September 30,

2015

(Audited)   

June 30,

2015

(Unaudited) 

ASSETS

Current Assets

Cash and cash equivalents

$

2,387,331

$

2,235,807

$

2,698,517

Accounts receivable

11,917

43,916

21,098

Inventory

228,888

190,442

194,886

Current deferred income taxes

103,300

103,500

91,500

Prepaid income taxes

223,900

-

-

Prepaid expenses

10,621

29,034

59,745

Deposits

 

32,592

 

-

 

-

Total current assets

2,998,549

2,602,699

3,065,746

Pismo Coast Village Recreational Vehicle Resort and Related Assets –

Net of accumulated depreciation

14,893,971

14,953,463

14,933,726

Other Assets

 

4,271

 

6,018

 

6,600

Total Assets

$

17,896,791

$

17,562,180

$

18,006,072

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities

Accounts payable and accrued expenses

$

181,980

$

224,639

$

209,903

Accrued salaries and vacation

84,495

284,426

71,039

Rental deposits

1,916,798

1,261,191

1,741,228

Income taxes payable

-

50,700

191,900

Current portion of long-term debt

 

160,267

 

127,461

 

98,755

Total current liabilities

2,343,540

1,948,417

2,312,825

Long-Term Liabilities

Long-term deferred income taxes

926,600

928,400

906,900

Note payable Donahue Transportation, net of current portion

87,960

36,207

41,208

Note payable RLC Funding, net of current portion

18,860

28,072

30,942

Note payable Heritage Oaks Bank, net of current portion

 

1,340,126

 

1,781,034

 

2,276,554

Total Liabilities

 

4,717,086

 

4,722,130

 

5,568,429

Stockholders’ Equity

Common stock – no par value, 1,800 shares Issued, 1,775 and 1,783 shares outstanding at
    June 30, 2016 and 2015, respectively

5,569,268

5,594,369

5,594,369

Retained earnings

 

7,610,437

 

7,245,681

 

6,843,274

Total stockholders’ equity

 

13,179,705

 

12,840,050

 

12,437,643

Total Liabilities and Stockholders’ Equity

$

17,896,791

$

17,562,180

$

18,006,072

The accompanying notes are an integral party of these financial statements.

 

10


 

PISMO COAST VILLAGE, INC.

STATEMENTS OF INCOME AND RETAINED EARNINGS

(UNAUDITED)

THREE AND NINE MONTHS ENDED JUNE 30, 2016 AND 2015

Three Months

Ended June 30,

Nine Months

Ended June 30,

2016

2015

2016

2015

Income

Resort operations

$

1,752,900

$

1,735,090

$

4,559,063

$

4,392,164

Retail operations

 

354,332

 

367,910

 

962,519

 

877,577

Total income

 

2,107,232

 

2,103,000

 

5,521,582

 

5,269,741

Cost and Expenses

Operating expenses

1,268,935

1,157,754

3,761,138

3,399,289

Cost of goods sold

138,786

162,832

396,384

390,868

Depreciation and amortization

 

105,392

 

95,556

 

310,849

 

294,559

Total cost and expenses

 

1,513,113

 

1,416,142

 

4,468,371

 

4,084,716

Income from Operations

 

594,119

 

686,858

 

1,053,211

 

1,185,025

Other Income (Expense)

Interest and dividend income

1,017

977

3,536

2,620

Interest expense

(25,704)

(32,215)

(77,641)

(97,230)

Loss on disposal of fixed assets

 

-

 

-

 

(1,551)

 

-

Total other (expense)

 

(24,687)

 

(31,238)

 

(75,656)

 

(94,610)

Net Income Before Provision for Income Tax

569,432

655,620

977,555

1,090,415

Provision for Income Tax Expense

 

343,300

 

238,100

 

421,900

 

531,500

Net Income

$

226,132

$

417,520

555,655

558,915

Retained Earnings – Beginning of Period

 

7,245,681

 

6,284,359

Redemption of Stock

-

-

(190,899)

-

Retained Earnings – End of Period

$

7,610,437

$

6,843,274

Net Income Per Share

$

127.40

$

234.17

$

313.05

$

313.47

The accompanying notes are an integral part of these financial statements.

 

11



PISMO COAST VILLAGE, INC.

STATEMENTS OF CASH FLOWS (UNAUDITED)

NINE MONTHS ENDED JUNE 30, 2016 AND 2015

2016

2015

Cash Flows From Operating Activities

Net Income

$

555,655

$

558,915

Adjustments to reconcile net income to net cash provided by operating
   activities:

Depreciation and amortization

$

310,849

$

294,559

Changes in operating assets and liabilities

(Increase) Decrease in accounts receivable

31,999

(3,108)

(Increase) in inventory

(38,446)

(17,477)

Decrease in current deferred income taxes

200

1,100

(Decrease) in prepaid income taxes

(223,900)

-

(Decrease) in prepaid expenses

18,413

(6,724)

Deposits

(32,592)

-

Decrease (Increase) in accounts payable and accrued expenses

(42,659)

5,988

Decrease in accrued salaries and vacation

(199,931)

(174,067)

Increase in rental deposits

655,607

608,213

(Decrease) Increase in Income taxes payable

(50,700)

52,800

(Decrease) in long term deferred income taxes

 

(1,800)

 

(11,500)

Total adjustments

 

427,040

 

749,784

Net cash provided by operating activities

982,695

1,308,699

Cash Flows Used in Investing Activities

Capital expenditures

(249,610)

(569,084)

Net cash used in investing activities

(249,610)

(569,084)

Cash Flows from Financing Activities

Redemption of Stock

(216,000)

   

-

Principal payments on notes payable

 

(365,561)

 

(70,192)

Net cash (used in) financing activities

 

(581,561)

 

(70,192)

Net increase (decrease) in cash and cash equivalents

151,524

669,423

Cash and Cash Equivalents – Beginning of Period

 

2,235,807

 

2,029,094

Cash and Cash Equivalents – End of Period

$

2,387,331

$

2,698,517

Schedule of Payments of Interest and Taxes

Cash paid for interest during the period

$

(77,641)

$

97,230

Cash paid for income taxes during the period

$

649,000

$

490,300

The accompanying notes are an integral part of these financial statements.

 

 

12


 


PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2016 AND 2015 (Unaudited) AND SEPTEMBER 30, 2015 (Audited)

 

 

NOTE 1 – NATURE OF BUSINESS

 

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 1,775 and 1,787 shares outstanding as of the balance sheet dates. 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.

 

Concentrations of Credit Risk

 

At June 30, 2016, the Company had cash deposits in excess of the $250,000 federally insured limit with Heritage Oaks Bank of $598,133; however, in the past the Company has used an 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. Heritage Oaks Bank is a member of CDARS, the Certificate of Deposit Account Registry Service. Large deposits are divided into smaller amounts and placed with other FDIC insured banks, which are also members of the CDARS network. Then, those member banks issue CDs in amounts under $250,000, so that the entire investment is eligible for FDIC insurance.

 

13


 


PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF JUNE 30, 2016 AND 2015 (Unaudited) AND SEPTEMBER 30, 2015 (Audited)

PAGE 2

 

 

NOTE 1 – NATURE OF BUSINESS (Continued)

 

Income Taxes

 

The Company uses the asset-liability method of computing deferred taxes in accordance with Accounting Standards Codification (ASC) Income Taxes topic 740. 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.

 

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 June 30, 2016, 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. The Company’s policy is 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 Statements of Income 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, 2012 and by the California Franchise Tax Board for fiscal years ending on or after September 30, 2011

 

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 when paid.

 

Advertising

 

The Company follows the policy of charging the costs of non-direct advertising as incurred. Advertising expense was $28,516 and $26,893 for the nine months ended June 30, 2016 and 2015, respectively. There was no advertising expense capitalized in prepaid expense.

 

Subsequent Events

 

Events subsequent to June 30, 2016 have been evaluated through August 12, 2016, which is the date the financial statements were available to be issued.

 

14


 


PISMO COAST VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS

AS OF JUNE 30, 2016 AND 2015 (Unaudited) AND SEPTEMBER 30, 2015 (Audited)

PAGE 3

 

 

NOTE 2 – PISMO COAST VILLAGE RECREATIONAL VEHICLE RESORT AND RELATED ASSETS

 

At June 30, 2016, September 30, 2015 and June 30, 2015, property and equipment included the following:

 

June 30,

2016

September 30,

2015

June 30,

2015

Land

$

10,394,746

$

10,394,746

$

10,383,171

Building and resort improvements

11,227,437

11,227,437

11,169,548

Furniture, fixtures, equipment and leasehold improvements

710,084

599,355

613,234

Transportation equipment

628,999

479,592

484,607

Construction in progress

 

92,587

 

107,225

 

71,000

23,053,853

22,808,355

22,721,560

Less: accumulated depreciation

 

(8,159,882)

 

(7,854,892)

 

(7,787,834)

$

14,893,971

$

14,953,463

$

14,933,726

 

 

NOTE 3 – LINE OF CREDIT

 

The Company has a revolving line of credit with Heritage Oaks Bank for $500,000, expiring March 21, 2017. There was no outstanding amount for the line of credit at June 30, 2016, September 30, 2015, and June 30, 2015.

 

NOTE 4 – NOTES PAYABLE

 

The Company secured permanent financing on the purchase of storage lot land in Arroyo Grande, California, with Heritage Oaks Bank. The loan was originated on May 8, 2008. The total loan currently outstanding is $1,458,954 and was financed over a period of ten years at a variable interest rate currently at 5.5%. The payments are currently $15,416 per month. interest and principal. The Company secured a note payable with Donahue Transportation Services Corp on a 2008 Tow Truck. The loan originated on December 9, 2009. The total loan currently outstanding is $7,983 and was financed over a period of seven years at an interest rate of 8.39%. The payments are currently $799 per month interest and principal. The Company secured a lease, which has been classified as a capital lease and included with notes payable.

 

The capital lease is with Donahue Transportation Services Corp on a 2013 Hino Truck. The lease originated on May 10, 2012. The total balance currently outstanding is $33,224 and is financed over a period of seven years at an interest rate of 4.751%. The payments are currently $1,046 per month interest and principal. The Company secured a lease, which has been classified as a capital lease and included with notes payable. The capital lease is with RLC Funding on a security system for Lot-K. The lease originated on November 8, 2013. The total balance currently outstanding is $30,942 and is financed over a period of five years at an interest rate of 13.537%. The payments are currently $1,295 per month interest and principal. The Company secured a vehicle lease with Donahue Transportation Services Corp on a 2015 Hino Truck. The loan originated on January 8, 2016. The total loan currently outstanding is $76,105 and financed over a period of seven years at an interest rate of 4.532%. the payments are currently $1,116 per month interest and principal.

 

15


 

 

PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF JUNE 30, 2016 AND 2015(Unaudited) AND SEPTEMBER 30, 2015(Audited)

PAGE 4

 

 

NOTE 4 – NOTES PAYABLE (Continued)

 

At June 30, 2016, minimum payments are as follows:

 

For The Year Ending June 30,

                                

2016

$

160,267

2017

1,376,335

2018

26,390

2019

11,628

2020

12,166

Thereafter

     

20,427

Total

$    

1,607,213

 

 

 
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.

 

During the second quarter, the Company repurchased 8 (eight) shares of its common stock for $27,000 per share for a total of $216,000 in cash. The repurchase was recorded as a decrease in common stock of $25,101 equal to the original sale price of the shares, and a reduction of the remaining $190,899 was recorded as a reduction in retained earnings.

 

NOTE 6 – INCOME TAXES

 

The provision for income taxes is as follows:

 

June 30,

2016

June 30,

 2015

Income tax expense

$

421,900

$

531,500

 

 

The Company uses the asset-liability method of computing deferred taxes in accordance with FASB Accounting Standards Codification (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 federal tax benefit and nondeductible variable costs of shareholder usage.

 

16


 


PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF JUNE 30, 2016 AND 2015(Unaudited) AND SEPTEMBER 30, 2015(Audited)

PAGE 5

 

 

NOTE 7 – OPERATING LEASES

 

The Company leases a lot in Oceano, California, to use as storage lot, 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 $414 per month.

 

Rent expense under these agreements were $33,781 and $33,596 for the nine-month period ended June 30, 2016 and 2015, 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 $43,591 and $43,077 for the nine months ended June 30, 2016 and 2015, respectively.

 

17