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.

 

[  ] Large accelerated filer		[  ] Accelerated filer
[X] Non-accelerated filer		[X] Smaller reporting company
		[  ] Emerging growth company

 

1

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.           [  ]

 

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.

 

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.  The resort remained closed until May 22, 2020 at which time the County of San Luis Obispo permitted occupancy to fifty percent.  On June 5, 2020 the County of San Luis Obispo allowed lodging businesses to operate at full capacity with restrictions on amenities.  At the current time, we are unable to quantify the potential effects of this pandemic on our future financial statements

 

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 year-to-date site occupancy is down 30.4% compared to this time last year primarily due to COVID-19. Occupancy projections look equal to last year throughout the remainder of the fiscal year unless the resort is required to close or modify operations due to COVID-19 ramifications. Revenues from ancillary operations, such as the store, arcade, laundromat, and bike rental, have been significantly decreased due to the COVID-19 closure and ongoing impact.

 

RV storage continues to be a major source of revenue for the Company, however, the program experienced a 2.8% decrease in revenue due to COVID-19 during the third quarter.  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 2017.

 

The Company’s commitment to quality, value, and enjoyment is underscored by the business’ 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, 2020,decreased $1,034,524, or 49.9%, below the same period in 2019. Resort Income for the nine months ended June 30, 2020, decreased $1,155,419, or 22.4%, below the same period ended June 30, 2019. This decrease in the quarter ending June 30, 2020, is directly due to the impact of the COVID-19 pandemic.   On March 23, 2020 the resort was closed due to concern of COVID-19 infecting resort guests and employees. 

 

3

 

The resort remained closed until May 22, 2020 at which time the County of San Luis Obispo allowed occupancy to fifty percent.  On June 5, 2020 the County of San Luis Obispo allowed lodging businesses to operate at full capacity with restrictions on amenities.  Site Revenue for the quarter ending June 30, 2020 was down $907,382, or 59.4% below the same period in 2019.  This reflects a decrease in site night occupancy of 17,314 or 72.9% compared to the previous year. The resort was closed during Spring Break a traditional time of high occupancy and revenue for the company. The decrease in Resort Operations Income for the nine-month period reflects a decrease of $1,019,444, or 28.1% in site revenue, and a decrease of $84,625, or 6.0% in RV Storage and towing activity.  These decreases reflect the impact of the COVID-19 pandemic.  Management feels revenues 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.

 

Income from Retail Operations, for the three-month period ending June 30, 2020, decreased $150,948, or 47.8%, below the same period in 2019. This decrease reflects a $120,974, or 65.0%, decrease in the General store revenue, and $29,975, or 23.3% decrease in RV Service revenue. These decreases in revenue are directly attributed to the impacts due to COVID-19.  Income from Retail Operations for the nine-month period ending June 30, 2020, decreased by $135,034, or 17.0%, below the same period ended June 30, 2019. This year-to-date income reflects a $129,127, or 30.1%, decrease in the General Store income, and a $5,906, or 1.6%, decrease in RV Service income. Management feels these decreases in revenues are directly attributed to the impacts of COVID-19.

 

Operating expenses for the quarter ended June 30, 2020, decreased $215,908, or 16.8%, from the same period in 2019. This decrease in expense is primarily a result of labor, workers’ compensation, credit card expense, electricity, and vehicle expense.  Operating expenses for the nine-month period ended June 30, 2020, decreased $172,420, or 4.4%, from the same period in 2019. This decrease is primarily due to labor and labor related expenses, electricity, vehicle expense, and advertising.

 

Cost of Goods Sold for 2020 are within projected levels at 39.0% of retail sales for the quarter and 44.2% year-to-date. Cost of Goods Sold for 2019 was 48.8% and 48.4%, respectively.

 

Interest Expense for the three-month and nine-month periods ended June 30, 2020, is $2,224 and $13,163, respectively, compared to $5,331 and $11,276 the previous year. This increase in interest expense reflects the current capital lease obligations, which are primarily for trucks used in the company’s RV storage and towing operation.

 

Income Before Provision for Income Tax for the three-month period ended June 30, 2020, decreased by $981,944, reflecting decreased total income compared to the previous year. For the nine months ended June 30, 2020, Income Before Provisions for Income Tax decreased by $1,127,027, reflecting decreased total income, decreased operating expenses, and a gain on disposal of assets the previous year. Revenues during this period are directly attributed to and are consistent with seasonal occupancy of a tourist-oriented business.

 

Net Income for the quarter ending June 30, 2020, decreased by $703,644, or 104.8% compared with the same period ending June 30, 2019. This quarterly decrease in Net Income is primarily due to decreased resort operations and retail revenue as a result of COVID-19 impacts on the business. Net Income for the nine months ending June 30, 2020, decreased by $806,747, or 80.8%, compared with the same period ending June 30, 2019. This decrease in Net Income is a result of a decrease in all resort and retail revenue due to the impact of COVID-19. The last quarter of 2020 is expected to provide adequate resources for continuing business and provide for planned capital expenditures.

 

4

 

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, 2020, is $5,903,061, which is 20.1% more than the same position in 2019. This increase is primarily due to increased revenues in the first and second quarters, and timing of capital expenditures. The cash balance increased $827,037, or 16.3%, from fiscal year ended September 30, 2019, due to increased rental deposits, and timing of capital expenditures. The present level of cash is being maintained in anticipation of large capital expenditures in the current and upcoming fiscal year, which includes the new RV service and repair facility.

 

Accounts Payable and Accrued Liabilities increased $445, or 0.17% to an amount of $267,265 for June 30, 2020, compared to the same period ending 2019. This increase was primarily due to timing of payment of monthly liabilities, which includes construction costs for the new RV service and repair facility. All undisputed payables have been paid in full according to the Company's policy.

 

Accounts Receivable for the period ending June 30, 2020, decreased $114,968 below June 30, 2019, and reflects the 2019 sale of securities in which payment had not been received.

 

Working capital increased to $3,596,862 at the end of the third quarter of fiscal year 2020, compared with $3,075,762 at the end of fiscal year 2019, and $2,740,168 at quarter end June 30, 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 fourth quarter occupancy is expected to be consistent with that of past years, with the possible exception created by COVID-19. 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 $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 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.

 

5

 

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

 

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, 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 nine-months ended June 30, 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

 

6

 

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 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)

 

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 14, 2020

 

Signature:   /s/ TERRIS HUGHES                                                                

Terris Hughes, President and Chairman of the Board

 

 

Date:          August 14, 2020

 

Signature:   /s/ WAYNE HARDESTY                                                           

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

(principal financial officer and principal accounting officer)

 

 

Date:          August 14, 2020

 

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
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 June 30, 2020 and 2019, and the related statements of incomes, and statement of changes in stockholders’ equity for the three-month and nine-month periods ended June 30, 2020 and 2019, and statements of cash flows for the three-month and nine-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 and comprehensive income, and cash flows for the year then; 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 condensed balance sheet as of September 30, 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 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

August 13, 2020

 

9

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PISMO COAST VILLAGE, INC. BALANCE SHEETS JUNE 30, 2020 AND 2019 AND SEPTEMBER 30, 2019
	June 30, 2020 (Unaudited)			September 30, 2019 (Audited)			June 30, 2019 (Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	5,903,061		$	5,076,024		$	4,917,007
Accounts receivable		21,586			50,412			136,554
Inventories		207,733			191,246			195,846
Prepaid income taxes		408,431			4,900			63,100
Prepaid expenses		1,335			26,107			19,743
Total current assets		6,542,146			5,348,689			5,332,250
Property and equipment
Net of accumulated depreciation and amortization		15,567,746			15,314,959			15,180,637
Total Assets	$	22,109,892		$	20,663,648		$	20,512,887
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable and accrued liabilities	$	267,265		$	276,371		$	266,820
Accrued salaries and vacation		113,359			359,910			108,567
Rental deposits		2,507,573			1,592,692			2,167,305
Current portion of capital lease obligations		57,087			43,954			49,390
Total current liabilities		2,945,284			2,272,927			2,592,082
Long-Term Liabilities
Deferred taxes		438,800			444,800			449,000
PPP Loan Payable		553,802			-			-
Capital lease obligations, net of current portion		232,217			198,247			203,502
Total Liabilities		4,170,103			2,915,974			3,244,584
Stockholders’ Equity
Common stock – no par value, 1,800 shares     issued, 1,775 shares outstanding		5,569,268			5,569,268			5,569,268
Retained earnings		12,370,521			12,178,406			11,699,035
Total stockholders’ equity		17,939,789			17,747,674			17,268,303
Total Liabilities and Stockholders’ Equity	$	22,109,892		$	20,663,648		$	20,512,887
The accompanying notes are an integral part of these financial statements.

 

10

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PISMO COAST VILLAGE, INC. STATEMENTS OF INCOME AND RETAINED EARNINGS (UNAUDITED) THREE AND NINE MONTHS ENDED JUNE 30, 2020 AND 2019
	Three Months Ended June 30,						Nine Months Ended June 30,
	2020			2019			2020			2019
Income
Resort operations	$	1,037,340		$	2,071,864		$	4,007,850		$	5,163,269
Retail operations		164,568			315,516			661,081			796,115
Total income		1,201,908			2,387,380			4,668,931			5,959,384
Cost and Expenses
Operating expenses		1,066,535			1,282,443			3,771,971			3,944,391
Cost of goods sold		64,244			153,939			292,268			385,665
Depreciation and amortization		105,117			107,848			309,817			320,472
Total cost and expenses		1,235,896			1,544,230			4,374,056			4,650,528
Income from Operations		(33,988)			843,150			294,875			1,308,856
Other Income (Expense)
Interest and dividend income		498			1,525			1,504			4,577
Interest expense		(2,224)			(5,331)			(13,163)			(11,276)
Gain (loss) on disposal of fixed assets		-			-			-			1,200
Gain (loss) on sale of investments		-			106,886			-			106,886
Total other income (expense)		(1,726)			103,080			(11,659)			101,387
Income Before Provision for Income    Tax		(35,714)			946,230			283,216			1,410,243
Income Tax (Expense)		3,300			(275,000)			(91,100)			(411,380)
Net Income	$	(32,414)		$	671,230		$	192,116		$	998,863
Other Comprehensive Income
Change in unrealized holding gains on available-for-sale securities, net of change in applicable deferred taxes of $3,400		-			(66,861)			-			(78,004)
Total other comprehensive income		-			(66,861)			-			(78,004)
Total Comprehensive Income	$	(32,414)		$	604,369		$	192,116		$	920,859
Net Income Per Share	$	(18.26)		$	378.16		$	108.23		$	562.74
Total Comprehensive Income Per    Share	$	(18.26)		$	340.49		$	108.23		$	518.79
The accompanying notes are an integral part of these financial statements.

 

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PISMO COAST VILLAGE, INC. STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED) THREE AND NINE MONTHS ENDED JUNE 30, 2020 AND 2019
									Accumulated Other Comprehensive Income
	Common Stock					Retained   Earnings
	Shares		Amount									Total
Balance – June 30, 2019	1,775		$	5,569,268		$	11,699,035		$	-		$	17,268,303
Net Income	-			-			479,371			-			479,371
Balance – September 30, 2019	1,775		$	5,569,268		$	12,178,406		$	-		$	17,747,674
Net Income	-			-			121,654			-			121,654
Balance – December 31, 2019	1,775		$	5,569,268		$	12,300,060			-		$	17,869,328
Net Income	-			-			102,875			-			102,875
Balance – March 31, 2020	1,775		$	5,569,268		$	12,402,935		$	-		$	17,972,203
Net Income	-			-			(32,414)			-			(32,414)
Balance – June 30, 2020	1,775		$	5,569,268		$	12,370,521		$	-		$	17,939,789
The accompanying notes are an integral part of these financial statements.

 

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PISMO COAST VILLAGE, INC. STATEMENTS OF CASH FLOWS (UNAUDITED) NINE MONTHS ENDED JUNE 30, 2020 AND 2019
	2020						2019
Cash Flows From Operating Activities
Net Income				$	192,116					$	998,863
Adjustments to reconcile net income to net     cash provided by operating activities:
Depreciation and amortization	$	309,817					$	320,472
(Increase) Decrease in accounts receivable		28,826						(81,145)
(Increase) in inventory		(16,487)						(13,409)
(Increase) in prepaid income taxes		(403,531)						(19,743)
(Increase) Decrease in prepaid expenses		24,772						(47,677)
Increase (Decrease) in accounts payable and     accrued liabilities		(9,107)						14,959
(Decrease) in accrued salaries and vacation		(246,551)						(229,539)
Increase in rental deposits		914,881						668,221
(Decrease) in income taxes payable		-						(8,300)
(Decrease) in long term deferred     income taxes		(6,000)						(38,100)
Total adjustments					596,620						565,739
Net cash provided by operating activities					788,736						1,564,602
Cash Flows From Investing Activities
Proceeds from sale of property and equipment		-						1,200
Purchases of property and equipment		(562,605)						(895,221)
Net cash used in investing activities					(562,605)						(894,021)
Cash Flows from Financing Activities
Proceeds from loans		553,802
Acquisition of capital lease assets		81,669						81,369
Principal payments on capital lease obligations		(34,565)						(37,379)
Net cash provided by financing    Activities					600,906						43,990
Net increase in cash and cash equivalents					827,037						714,571
Cash and Cash Equivalents – Beginning of    Period					5,076,024						4,202,436
Cash and Cash Equivalents – End of Period					5,903,061					$	4,917,007
Schedule of Payments of Interest and Taxes
Payments for interest				$	13,163					$	11,276
Payments for income tax				$	480,631					$	515,000
The accompanying notes are an integral part of these financial statements.

 

13

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PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2020 AND 2019 (Unaudited) AND SEPTEMBER 30, 2019 (Audited)

 

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 ACCOUNTING POLICIES

 

Revenue from Contracts with Customers

 

The Financial Accounting Standards Board (FASB) issued new guidance that created Topic 606, Revenue from Contracts with Customers, in the Accounting Standards Codification (ASC).  Topic 606 supersedes the revenue recognition requirements in FASB ASC 605, Revenue Recognition, and requires the recognition of revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services.  The new guidance also added Subtopic 340-40, Other Assets and Deferred Costs-Contracts with Customers, to the ASC to require the deferral of incremental costs of obtaining a contract with a customer.  The cumulative impact of adopting FASB ASC 606 was immaterial and did not require an adjustment to retained earnings. 

 

Revenue primarily consists of recreational camping space rentals, revenue from recreational vehicle storage space and RV service and repairs, food and beverage sales and other ancillary goods and services.  Revenue is recognized when spaces are occupied or goods and services have been delivered or rendered, respectively.   

 

Sales taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue.   Finally, the Company collects Transient Occupancy Taxes (TOT) and Tourism Business Improvement District (TBID) assessments from guests which are remitted to the City of Pismo Beach and County of San Luis Obispo and are excluded from revenues.  At June 30, 2020, September 30, 2019, and June 30, 2019, the Company had $73,903, $63,922, and $36,455 in TOT and TBID assessments due to the City of Pismo Beach and the County of San Luis Obispo included in accrued expenses on the combined balance sheet, respectively.

 

Performance Obligations

For performance obligations related to the Company accommodations and other ancillary goods and services, control transfers to the customer at a point in time.  The Company’s principal terms of sale occur simultaneously when control of the goods and services are transferred to the customer and payment is accepted.  The Company does not have any significant financing components.

 

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PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF JUNE 30, 2020 AND 2019 (Unaudited) AND SEPTEMBER 30, 2019 (Audited)

PAGE 2

 

NOTE 2:   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

The Company does not disclose the value of unsatisfied performance obligations for contracts with an expected length of one year or less.  Due to the nature of the business, the Company’s revenue is not significantly impacted by refunds.  Cash payments received in advance of guests staying at the resort are refunded to guests if the guest cancels within the specified time period, before any services are rendered.  Refunds related to services are generally recognized as an adjustment to the transaction price at the time the resort stay occurs or services are rendered.

 

Disaggregation of Revenue

Revenue from performance obligations satisfied at a point in time consists of sales related to the Company accommodations and other ancillary goods and services at the location in Pismo Beach, California.  The geographic nature of the revenue could affect the nature, timing, amount and uncertainty of revenue and cash flows.  Revenue from site rentals, storage rental, spotting, and store and accessory sales accounts for approximately 56%, 22%, 5%, and 14% of the Company total revenue for the period ended June 30, 2020, respectively.  Revenue from other ancillary goods and services accounts for the remaining 3% of revenue for the period ended June 30, 2020.

 

Customer Deposits

The Company does not recognize revenue when a customer prepays for resort accommodations.  Rather, the Company records a deferred revenue liability equal to the amount received.  Revenue is then recognized when the customer stays at the resort.  As of June 30, 2020, September 30, 2019, and June 30, 2019, the Company had Customer deposits related to prepaid village accommodations was $2,507,573, $1,592,692, and $2,167,305 on the balance sheet as rental deposits, respectively.

 

Cash and Cash Equivalents

 

For purposes of the statement of cash flows, the Company considers all highly liquid investments including certificates of deposit with an original maturity of three months or less when purchased to be cash equivalents.  As of June 30, 2020, September 30, 2019, and June 30, 2019, the Company had $6,096, $6,088, and $6,084 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 June 30, 2020, September 30, 2019, or June 30, 2019.

 

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PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF JUNE 30, 2020 AND 2019 (Unaudited) AND SEPTEMBER 30, 2019 (Audited)

PAGE 3

 

NOTE 2:   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Inventories

 

Inventories have been valued at the lower of cost or market on a first-in, first-out basis.  Inventories are comprised primarily of finished goods in the general store and in the RV repair shop.

 

Property and Equipment

 

All property and equipment are 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:

 

 

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 $9,967 and $35,983 for the nine months ended June 30, 2020 and 2019, respectively, and $2,742 and $5,228 for the three months ended June 30, 2020 and 2019, respectively.  Advertising expense was included in operating expenses on the statement of operations.

 

16

 

PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF JUNE 30, 2020 AND 2019 (Unaudited) AND SEPTEMBER 30, 2019 (Audited)

PAGE 4

 

NOTE 2:   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Concentration of Credit Risk

 

At June 30, 2020, September 30, 2019, and June 30, 2019, the Company had cash deposits of $4,016,180, $3,239,598, and $3,026,421 in excess of the $250,000 federally insured limit with Pacific Premier Bank, respectively.  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.

 

Risks and Uncertainties

 

Due to uncertainty surrounding the recent COVID-19 pandemic, the length and severity of the outbreak, and the volatility in the world investment markets, there is increasing uncertainty as to how these events will affect results of operations and financial position of the Company going forward.  As required by executive order by the Governor of California in March 2020, all non-essential businesses were required to close services offered in person to the public.  As such, the recreational vehicle camping resort operated by the Company was required to close and thereby effecting the occupancy rate.  However, the Company did see an increase in occupancy rates from July through the report date.

 

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. 

 

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 June 30, 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 June 30, 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.

 

17

 

PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF JUNE 30, 2020 AND 2019 (Unaudited) AND SEPTEMBER 30, 2019 (Audited)

PAGE 5

 

NOTE 3:   PROPERTY AND EQUIPMENT

 

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

 

 

Depreciation and amortization expense were $309,817 and $320,472 for the nine months ended June 30, 2020 and 2019, respectively, and $105,117 and $107,848 for the three months ended June 30, 2020 and 2019, respectively.

 

At June 30, 2020, September 30, 2019, and June 30, 2019, the cost of assets under capital lease was $480,439, $398,770, and $398,770, respectively, and related accumulated amortization was $252,680, $201,335, and $185,128, respectively.  Amortization expense on assets under capital lease was $51,345, and $44,554 for the nine months ended June 30, 2020 and 2019, respectively, and $18,930 and $16,207 for the three months ended June 30, 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 credit.  The Company expects the RV service facility project to be completed and bond satisfied by September 30, 2020.

 

18

PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF JUNE 30, 2020 AND 2018 (Unaudited) AND SEPTEMBER 30, 2018 (Audited)

PAGE 6

 

NOTE 5:   CAPITAL LEASE OBLIGATIONS

 

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

 

 

 

19

 

PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF JUNE 30, 2020 AND 2019 (Unaudited) AND SEPTEMBER 30, 2019 (Audited)

PAGE 7

 

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 months and nine months ending June 30, 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 June 30, 2020, September 30, 2019, and June 30, 2019, the Company’s deferred tax liability was $438,800, $444,800, and $449,000, 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. 

 

NOTE 8:   PAYROLL PROTECTION PLAN LOAN

 

On April 28 2020, the Company (the “Borrower”) was granted a loan in the aggregate amount of $553,802, pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act, which was enacted March 27, 2020.

 

The loan, which was in the form of a note dated April 28, 2020 issued by the borrower, matures on April 28, 2022 and bears interest at a rate of 0.98% per annum, payable monthly commencing on November 28, 2020.  The note may be prepaid by the borrower at any time prior to maturity with no prepayment penalties.  Funds from the loan may only be used for payroll costs, costs used to continue group health

 

20

 

PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF JUNE 30, 2020 AND 2019 (Unaudited) AND SEPTEMBER 30, 2019 (Audited)

PAGE 8

 

NOTE 8:   PAYROLL PROTECTION PLAN LOAN (CONTINUED)

 

care benefits, mortgage payments, rent, utilities, and interest on other debt obligations incurred before February 15, 2020.  The Company intends to use the entire Loan amount for qualifying expenses.  Under the terms of the PPP, certain amounts of the Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act.

 

NOTE 9:   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; however, the lessor is considering a long-term renewal at this time.  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 lease agreements was $6,867 and $33,466 for the nine months ended June 30, 2020 and 2019, respectively, and $4,384 and $11,148 for the three months ended June 30, 2020 and 2019, respectively.

 

NOTE 10:   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 $49,638, and $56,692 for the nine months ended June 30, 2020 and 2019, respectively, and $11,098 and $56,692 for the three months ended June 30, 2020 and 2019, respectively. 

 

NOTE 11:   SUBSEQUENT EVENTS

 

Events subsequent to June 30, 2020 have been evaluated through August 13, 2020, which is the date the financial statements were available to be issued.  Management did not identify any subsequent events that require disclosure.

 

21