UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

 

Commission file number 0-8463

 

 

 

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.

 

 

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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, COVID-19 or similar pandemic conditions, domestic or global economic conditions and changes in federal or state tax laws or the administration of such laws.

 

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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 economic volatility. 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.  This quarter ending March 31, 2020 however reflects the initial impact of the COVID-19 pandemic.  On March 4, 2020, the California Governor declared a State of Emergency in response to the increased spread of COVID-19. Additionally, on March 13, 2020, the County of San Luis Obispo declared a countywide emergency.  Initially, the resort received an increase of reservations as schools were closed, however, due to the public health threat and the State’s Shelter at Home Declaration the resort closed on March 23.  The resort remains closed until authorized by San Luis Obispo County officials, and all reservations have been cancelled through May 16, 2020.  This closure may be extended or modified depending upon COVID-19 conditions and direction of local authorities.  Year to date total site occupancy is down 6.0% compared to this time last year primarily due to the impact of COVID-19.  Occupancy projections beyond closure look equal to last year throughout the remainder of the fiscal year.  

 

RV storage and towing continue to be a primary source of revenue for the Company and is even year-to-date compared to last year. 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 Woodall’s, 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 2018.

 

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, 2020, decreased $107,934, or 7.1%, below the same period in 2020. This decrease in income reflects an $86,242, or 8.5%, decrease in site revenue, and a decrease of $18,334, or 3.9%, in RV storage and spotting activity. This decrease in revenue reflects the direct impact of the COVID-19 crisis the last half of March.  Resort Operations Income for the six-months ended March 31, 2020, decreased $120,895, or 3.9%, from the same period ended March 31, 2019. This decrease is due primarily to a decrease of $112,062, or 5.3%, in site rental revenue, which was primarily due to COVID-19 and weather

 

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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.

 

Income from retail operations for the three-month period ended March 31, 2020, decreased $879, or 0.4%, below the same period in 2019. The General Store revenue was down $7,440, or 6.4%, and RV Service revenue increased $6,561, or 5.5%, from the previous year. Due to the COVID-19 the General Store was closed on March 23, 2020 while RV Service remained open during the crisis.  Income from Retail Operations for the six-month period ending March 31, 2020, increased by $15,914, or 3.3%, above the same period ended March 31, 2019. The General Store was down $8,153, or 3.3%, and RV Service was up $24,067, or 10.1%. The decrease in the General Store revenue primarily reflects the decreased resort occupancy and closing due to COVID-19. The increase in the RV Service program revenue reflects effort to target new business and new inventory. Management continues to place importance upon ongoing review of retail product mix, pricing, attention to service, and staff training. The Company anticipates positive performance in income from retail operations as the resort reopens for business following restrictions due to the COVID-19 pandemic.

 

Operating expenses for the three-month period ending March 31, 2020, increased $9,583, or 0.7%, above the same period ended March 31, 2019. This increase in expense primarily reflects labor, electricity, and credit card expense.  For the six-month period ending March 31, 2020, operating expenses increased by $43,485, or 1.6%, above the same period in 2019. This increase reflects labor, benefits, electricity, credit card processing, legal, and printing. Management continues to review and scrutinize expenses in order to maximize efficiency and profitability. Due to the age of the Resort, the Company is undertaking maintenance activity that 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, 2020, are 44.6% compared to 46.5% for the same period in 2019. For the six-months ended March 31, 2020, Cost of Goods Sold expenses were 45.9 % compared to 48.2% 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, 2020, is $4,801, compared to $3,385 for the same period in 2019. For the six-month period ended March 31, 2020, compared to the same period in 2019, interest expense was $10,940 and $5,945, respectively. This expense primarily reflects financing for trucks used in the company’s RV storage and towing operation.

 

Income before provision for income tax for the three-month period ended March 31, 2020, decreased by $111,204, reflecting decreased total income compared to the previous year and increased operating expenses. For the six-months ended March 31, 2020, income before provisions for income tax decreased by $145,081, reflecting decreased total 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.

 

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LIQUIDITY

The Company's current cash position, as of March 31, 2020, is $5,132,971, which is 15.2% more than the same position in 2019. This increase is primarily due to an increase in rental deposits and decrease in capital expenditures. The cash balance increased $56,947 from fiscal year ended September 30, 2019, due to increase in rental deposits and timing of capital expenditures. 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 and replacing restroom buildings. The Company has also maintained a line of credit of $500,000 to ensure funds will be available, if required.

 

Accounts payable and accrued liabilities decreased $50,568 below the same period last year and increased $6,984 since the 2019 fiscal year end, which reflects a timing of capital projects and accrued property taxes. All undisputed payables have been paid in full according to the Company's policy.

 

Working capital increased to $3,118,195 at the end of the second quarter of fiscal year 2020, compared with $3,075,762 at the end of fiscal year 2019, and $2,235,927 at quarter end March 31, 2019.

 

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, with the possible exception created by COVID-19.

 

CAPITAL RESOURCES AND PLANNED EXPENDITURES

The Company plans capital expenditures of approximately $650,000 in fiscal year 2020 to further enhance the resort facilities and services. These projects include completing the construction of a new RV Service and Repair facility, purchase of a new RV storage tow vehicle, and resort surveillance upgrade, purchase a new street sweeper, and a vehicle lift for RV Service. 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 expenditures are consistent with prior years and operations and are expected to provide adequate resources to support the amounts committed to complete the authorized capital projects during the fiscal year. Third and fourth quarter site occupancy and storage fill are expected to be consistent with that of the past year. Capital projects are designed to enhance the marketability of the camping sites and enhance support facilities.

 

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.

 

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Not Applicable

 

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, 2020, 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, 2019.

 

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, 2020 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

 

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ITEM 6. EXHIBITS

 

Exhibit No.	Description of Exhibit
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)

 

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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.

(Registrant)

 

 

Date:          May 15, 2020

 

Signature:   /s/ TERRIS HUGHES                                                                

Terris Hughes, President and Chairman of the Board

 

 

Date:          May 15, 2020

 

Signature:   /s/ WAYNE HARDESTY                                                           

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

(principal financial officer and principal accounting officer)

 

 

Date:          May 15, 2020

 

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

and Stockholders of Pismo Coast Village, Inc.

165 South Dolliver Street

Pismo Beach, California

 

 

Results of Review of Interim Financial Information

 

We have reviewed the balance sheets of Pismo Coast Village, Inc., (the Company) as of March 31, 2020 and 2019, and the related statements of income and comprehensive income for the six-month periods ended March 31, 2020 and 2019, and statements of cash flows for the six-month periods then ended, and the related notes (collectively referred to as the interim financial statements). Based on our reviews, 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 the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the balance sheet of the Company as of September 30, 2019, and the related statements of income, comprehensive income, retained earnings, and cash flows for the year then ended (not presented herein); and in our report dated November 25, 2019, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying balance sheet as of March 31, 2019, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived.

 

Basis for Review Results

 

These interim financial statements are the responsibility of the Company’s management. We conducted our review in accordance with the standards of the PCAOB. 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 standards of the PCAOB, 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. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

                                                            BROWN ARMSTRONG

                                                            ACCOUNTANCY CORPORATION

 

Bakersfield, California

May 15, 2020

 

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 PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2020 AND 2019 AND SEPTEMBER 30, 2019

 

 

NOTE 1:   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.

 

NOTE 2:  SUMMARY OF SIGNIFICANT ACCOUNRTING POLICIES

 

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.

 

Cash and Cash Equivalents

For purposes of the statements of cash flows, the Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.  As of March 31, 2020, September 30, 2019, and March 31, 2019, the Company had $6,094, $6,088 and $6,079 of cash equivalents.

 

Allowance for Doubtful Accounts

It is the policy of management to review the outstanding accounts receivable at year-end, as well as historical bad debt write-offs, and establish an allowance for doubtful accounts for estimated uncollectible accounts.  Management did not believe an allowance for doubtful accounts was necessary as of March 31, 2020, September 30, 2019, and March 31, 2019.

 

Inventories

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.

 

Property and Equipment

All property and equipment is recorded at cost.  Depreciation of property and equipment is computed using the straight line 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:

 

 

 

Investments

Investments in securities have been classified in the balance sheet, according to management’s intent, as securities available-for-sale under the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 320 Investments – Debt and Equity Securities.

 

Available-for-sale securities consist of investment securities not classified as trading securities nor as held-to-maturity securities.  Unrealized holding gains and losses, net of deferred taxes, on available-for-sale securities are reported as a net amount in a separate component of stockholders’ equity until realized.  Gains and losses on the sale of available-for-sale securities are determined using the specific identification method. 

 

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PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2020 AND 2019 AND SEPTEMBER 30, 2019

PAGE 2

 

NOTE 2:  SUMMARY OF SIGNFICANT ACCOUNTING POLICIES  (continued)

 

Fair Value Measurements

The Company records its financial assets and liabilities at fair value in accordance with the Fair Value Measurements and Disclosures Topic of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) (the Topic).  This Topic provides a framework for measuring fair value, clarifies the definition of fair value and expands disclosures regarding fair value measurements.  Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date.  The Topic also establishes a three-tier hierarchy, as follows, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

 

Level 1:    Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.

 

Level 2:    Inputs to the valuation methodology include:

 

*   Quoted prices for similar assets and liabilities in active markets;

 

*   Quoted prices for identical or similar assets or liabilities in inactive markets;

 

*   Inputs other than quoted prices that are observable for the asset or liability;

 

*   Inputs that are derived principally from or corroborated by observable market data by correlation or

    other means.

 

If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.

 

Level 3:    Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

 

The following is a description of the valuation methodologies used for assets measured at fair value:

 

Investments:  Investments in common stock are recorded at fair value based upon quoted market prices using Level 1 inputs.

 

This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. 

 

At March 31, 2020, the following sets forth by level, within the fair value hierarchy, the Company’s assets at fair value:

 

 

At September 30, 2019, the following sets forth by level, within the fair value hierarchy, the Company’s assets at fair value:

 

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PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2020 AND 2019 AND SEPTEMBER 30, 2019

PAGE 3

 

NOTE 2:  SUMMARY OF SIGNFICANT ACCOUNTING POLICIES  (continued)

 

Fair Value Measurements (continued)

 

 

At March 31, 2019, the following sets forth by level, within the fair value hierarchy, the Company’s assets at fair value:

 

 

 

Earnings Per Share

The earnings per share are based on the 1,775 shares issued and outstanding.  The financial statements report only basic earnings per share, as there are no potentially dilutive shares outstanding.

 

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.

 

Advertising

The Company follows the policy of charging the costs of non-direct advertising as incurred.  Advertising expense was $7,225 and $30,755 for the six months ended March 31, 2020 and 2019, respectively, and $2,841 and $6,421 for the three months ended March 31, 2020 and 2019, respectively.  Advertising expense was included in operating expenses on the statement of operations. 

 

Concentration of Credit Risk

At March 31, 2020, September 30, 2019, and March 31, 2019 the Company had cash deposits of $3,257,123, $3,239,598 and $2,166,495, respectively, in excess of the $250,000 federally insured limit with Pacific Premier Bank.  However, because Pacific Premier Bank is a member of the Certificate of Deposit Account Registry Service (CDARS), 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 deposit balance is eligible for FDIC insurance.

 

Income Taxes

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

 

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PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2020 AND 2019 AND SEPTEMBER 30, 2019

PAGE 4

 

NOTE 2:  SUMMARY OF SIGNFICANT ACCOUNTING POLICIES  (continued)

 

Income Taxes (continued)

FASB 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, 2020, management has considered its tax positions and believes that 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, and accordingly no interest or penalties associated with income taxes have been included in this calculation, or separately in the Statement of Operations and Retained Earnings.  The Company does not expect any material changes through March 31, 2021.  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, 2017 and by the California Franchise Tax Board for fiscal years ending on or after September 30, 2016.

 

NOTE 3: PROPERTY AND EQUIPMENT

 

At March 31, 2020, September 30, 2019, and March 31, 2019, property and equipment included the following:

 

 

 

 

Total depreciation and amortization expense was $204,700 and $212,624 for the six months ended March 31, 2020 and 2019, respectively, and $101,602 and $107,615 for the three months ended March 31, 2020 and 2019, respectively.

 

At March 31, 2020, September 30, 2019, and March 31, 2019, the cost of assets under capital lease was $398,770, $398,770, and $398,770 and related accumulated amortization was $233,750, $201,335 and $168,921, respectively.  Amortization expense on assets under capital lease was $32,415 and $28,347 for the six months ended March 31, 2020 and 2019, respectively, and $16,206 and $16,207 for the three months ended March 31, 2020 and 2019, respectively.

 

NOTE 4: LINE OF CREDIT

 

The Company has a revolving line of credit with Pacific Premier Bank (formerly Heritage Oaks Bank) for $500,000, expiring April 1, 2020.  There currently is a Letter of Credit written in favor of the County of San Luis Obispo (the County), California for $416,062 to cover a bond requirement relating to public improvements as part of the Company’s construction of a new RV service facility.  If the Company fails to complete the required public improvements, monies will be drawn from the credit line to satisfy the County.  A balance of $83,938 is available if the Company requires additional funding from the line of

 

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PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2020 AND 2019 AND SEPTEMBER 30, 2019

PAGE 5

 

NOTE 4:  LINE OF CREDIT (continued)

 

credit.  The Company expects the RV service facility project to be completed and bond satisfied by June 30, 2020.

 

 

NOTE 5:  CAPITAL LEASE OBLIGATIONS

 

At March 31, 2020, September 30, 2019, and March 31, 2019, capital lease obligations consisted of the following:

 

 

 

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PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2020 AND 2019 AND SEPTEMBER 30, 2019

PAGE 6

 

NOTE 5:  CAPITAL LEASE OBLIGATIONS (continued)

 

At March 31, 2020, future minimum payments on the capital lease obligations were as follows:

 

 

 

NOTE 6:  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 7:  INCOME TAXES

 

The provision for income taxes for the three and six months ended March 31, 2020 and 2019 is as follows:

 

 

 

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 state taxes net of the federal tax benefit and nondeductible variable costs of shareholder usage.

 

As of March 31, 2020, September 30, 2019, and March 31, 2019, the Company’s deferred tax liability was $435,600, $444,800 and $505,100, respectively.  Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future.  The majority of the balance is due to timing differences of depreciation expense, caused by the use of accelerated depreciation methods for tax calculations. 

 

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PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2020 AND 2019 AND SEPTEMBER 30, 2019

PAGE 7

 

 

NOTE 8:  OPERATING LEASES

 

The Company leases a lot, located in Oceano, for $3,421 per month.  The lease has converted to a month-to-month lease. As of the period ending December 31, 2019, the County is working on the lot.  As a result, this lease payment is not being made at this time and will be resumed once the County completes their work.

 

The Company has a five-year lease obligation for a copier.  Rental expense under this operating lease is $384 per month.  Future minimum lease payments under this obligation are as follows:

 

 

 

 

Rent expense under these agreements was $2,483 and $22,318 for the six months ended March 31, 2020 and 2019, respectively, and $1,241 and $11,169 for the three months ended March 31, 2020 and 2019, respectively.

 

NOTE 9:  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 $38,540 and $40,147 for the six months ended March 31, 2020 and 2019, respectively, and $15,400 and $16,060 for the three months ended March 31, 2020 and 2019, respectively.

 

NOTE 10:  CONTINGENCIES AND UNCERTAINTIES-CORONAVIRUS PANDEMIC

 

On March 11, 2020, the World Health Organization declared the outbreak of a coronavirus (COVID-19) a pandemic. In response, the County of San Luis Obispo, followed by the Governor of California issued a Shelter at Home order effective March 19, 2020, requiring certain non-essential businesses to temporarily close to the public. The Company began canceling reservations on March 19 and closed the park on March 23. As of the report date, three sites were occupied, and re-opening the park is dependent upon County and State re-opening plans.  At the current time, management is unable to quantify the potential effects of this pandemic on it’s future financial statements.

 

NOTE 11:  SUBSEQUENT EVENTS

 

Events subsequent to March 31, 2020 have been evaluated through May 6, 2020, which is the date the financial statements were available to be issued.  The Company applied for a Payment Protection Loan under the CARES Act and on April 28, 2020 the Loan was funded in the amount of $543,802. 

 

 

 

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