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

 

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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. 

 

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, 2020 and closed the park on March 23, 2020.  The resort remained closed until May 22, 2020 at which time the County of San Luis Obispo permitted occupancy to fifty percent.  On June 12, 2020, the County of San Luis Obispo allowed lodging businesses to operate at full capacity with restrictions on amenities.  The Company enjoyed four consecutive months of record site occupancy until the State mandated a Stay-at-Home order on December 3, 2020.  This order limited non-essential travel, and caused significant cancelations for December 2020 and January 2021.  February and March of 2021 resumed with record occupancy, and projections are expected to meet or exceed 2020 occupancy for the remainder of fiscal year 2021.

 

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

 

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, 2021, increased $340,980, or 24.1%, above the same period in 2020. This increase in income reflects a $335,328, or 36.0%, increase in site revenue, and an increase of $13,080, or 3.1%, in RV storage and spotting activity. This increase in site revenue reflects paid site occupancy due to the COVID-19 crisis.  In March of 2020 there was a negative impact on paid occupancy, while the quarter ending March 31, 2021 reflects a 28% increase in paid occupancy over 2020.  Resort Operations Income for the six-months ended March 31, 2021, increased $548,348, or 18.5%, from the same period ended March 31, 2020. This increase is due primarily to an increase of $571,585, or 28.8%, in site rental revenue, which was primarily due to COVID-19 ramifications where the public sought outdoor recreation as a safe environment.

 

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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, 2021, increased $39,813, or 16.9%, above the same period in 2020. The General Store revenue was up $39,301, or 36.0%, and RV Service revenue increased $511, or 0.4%, from the previous year. Due to the COVID-19 the General Store was closed March 23, 2020 until June 12, 2020, while RV Service remained open during the crisis.  Retail revenue, and specifically General Store revenue increased 36.0%, above the same period ended March 31, 2020 due to increased occupancy.  Income from Retail Operations for the six-month period ending March 31, 2021, increased by $88,936, or 17.9%, over the previous year. The General Store was up $75,485, or 32.1%, and RV Service was up $13,450, or 5.1%. The increase in the General Store revenue primarily reflects the increased resort occupancy 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, 2021, decreased $79,028, or 6.1%, below the same period ended March 31, 2020. This decrease in expense primarily reflects labor, worker’s compensation, repairs and maintenance, and legal fees.  For the six-month period ending March 31, 2021, operating expenses decreased by $120,254, or 4.4%, below the same period in 2020. This decrease reflects payroll taxes, employee insurance benefits, worker’s compensation, employee travel/training, legal fees, WiFi expense, repairs and maintenance, vehicle expense, and recreation expense. 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, 2021, are 46.5% compared to 44.6% for the same period in 2020. For the six-months ended March 31, 2021, Cost of Goods Sold expenses were 46.9 % compared to 45.9% 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, 2021, is $3,985, compared to $4,801 for the same period in 2020. For the six-month period ended March 31, 2021, compared to the same period in 2020, interest expense was $8,076 and $10,940, 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, 2021, increased by $440,631, reflecting increased total income compared to the previous year and decreased operating expenses. For the six-months ended March 31, 2021, income before provisions for income tax increased by $719,929, reflecting increased total income and decreased 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.

 

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However, the Company believes that its financial strength and market presence will enable it to remain extremely competitive. It is anticipated the published rates will continue to market site usage at its highest value and not negatively impact the Company's ability to capture an optimum market share.

 

LIQUIDITY

The Company's current cash position, as of March 31, 2021, is $8,156,893, which is 58.9% more than the same position in 2020. This increase is primarily due to an increase in income, rental deposits, and decrease in capital expenditures. The cash balance increased $1,704,783 from fiscal year ended September 30, 2020, due to increase in income, rental deposits, reduction of expenses, 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 $2,885 below the same period last year and decreased $314 since the 2020 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 $5,041,669 at the end of the second quarter of fiscal year 2021, compared with $4,288,675 at the end of fiscal year 2020, and $3,118,195 at quarter end March 31, 2020.

 

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 up to $200,000 in fiscal year 2021 to further enhance the Resort facilities and services. This would include the purchase of equipment with sweeper attachments, surveillance cameras for the resort, garbage compactor container, service truck for RV service, and a lift for the RV service facility.  Funding for these projects is expected to come 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, 2021, 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, 2020.

 

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, 2021 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 (Garry Nelson, 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 (Jerry Roberts, 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 (Garry Nelson, 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 (Jerry Roberts, 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 14, 2021

 

Signature:   /s/ GARRY NELSON

Garry Nelson, President and Chairman of the Board

 

 

Date:          May 14, 2021

 

Signature:   /s/ JERRY ROBERTS

Jerry Roberts, V.P. - Finance/Chief Financial Officer

(principal financial officer and principal accounting officer)

 

 

Date:          May 14, 2021

 

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, 2021 and 2020, and the related statements of operations, and statement of changes in stockholders’ equity for the six-month periods ended March 31, 2021 and 2020, 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, 2020, and the related statements of operations, and statement of changes in stockholders’ equity, and cash flows for the year then ended; and in our report dated November 18, 2020, 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, 2020, 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 interim 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

May 14, 2021

 

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 PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2021 AND 2020 AND SEPTEMBER 30, 2020

 

 

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 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.  As of March 31, 2021, September 30, 2020, and March 31, 2020, the Company had $77,401, $71,145, and $30,266 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.

 

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.

 

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PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2021 AND 2020 AND SEPTEMBER 30, 2020

PAGE 2

 

NOTE 2:  SUMMARY OF SIGNFICANT ACCOUNTING POLICIES  (continued)

 

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 62%, 17%, 5%, and 14% of the Company total revenue for the period ended March 31, 2021, respectively.  Revenue from other ancillary goods and services accounts for the remaining 2% of revenue for the period ended March 31, 2021.

 

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 March 31, 2021, September 30, 2020, and March 31, 2020, the Company had customer deposits related to prepaid village accommodations of $3,027,365, $2,058,135, and $2,120,707 on the balance sheet as rental deposits, respectively.

 

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, 2021, September 30, 2020, and March 31, 2020, the Company had $6,098, $6,096 and $6,094 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, 2021, September 30, 2020, and March 31, 2020.

 

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:

 

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 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.

 

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PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2021 AND 2020 AND SEPTEMBER 30, 2020

PAGE 3

 

NOTE 2:  SUMMARY OF SIGNFICANT ACCOUNTING POLICIES  (continued)

 

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 $6,336 and $7,225 for the six months ended March 31, 2021 and 2020, respectively, and $5,089 and $2,841 for the three months ended March 31, 2021 and 2020, respectively.  Advertising expense was included in operating expenses on the statement of operations. 

 

Concentration of Credit Risk

At March 31, 2021, September 30, 2020, and March 31, 2020 the Company had cash deposits of $6,299,526, $4,591,597 and $3,257,123, 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 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 March 31, 2021, 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, 2022.  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, 2018 and by the California Franchise Tax Board for fiscal years ending on or after September 30, 2017.

 

NOTE 3: PROPERTY AND EQUIPMENT

At March 31, 2021, September 30, 2020, and March 31, 2020, property and equipment included the following:

 

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PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2021 AND 2020 AND SEPTEMBER 30, 2020

PAGE 4

 

NOTE 3:  PROPERTY AND EQUIPMENT  (continued)

 

 

Total depreciation and amortization expense was $198,568 and $204,700 for the six months ended March 31, 2021 and 2020, respectively, and $98,687 and $101,602 for the three months ended March 31, 2021 and 2020, respectively.

 

At March 31, 2021, September 30, 2020, and March 31, 2020, the cost of assets under capital lease was $405,819, $405,819, and $398,770 and related accumulated amortization was $234,882, $196,991 and $233,750, respectively.  Amortization expense on assets under capital lease was $37,891 and $32,415 for the six months ended March 31, 2021 and 2020, respectively, and $19,035 and $16,206 for the three months ended March 31, 2021 and 2020, 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, 2021. 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 June 30, 2021.

 

NOTE 5:  CAPITAL LEASE OBLIGATIONS

At March 31, 2021, September 30, 2020, and March 31, 2020, capital lease obligations consisted of the following:

 

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PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2021 AND 2020 AND SEPTEMBER 30, 2020

PAGE 5

 

NOTE 5:  CAPITAL LEASE OBLIGATIONS  (continued)

 

 

At March 31, 2021, future minimum payments on the capital lease obligations were as follows:

 

 

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PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2021 AND 2020 AND SEPTEMBER 30, 2020

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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, 2021 and 2020 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, 2021, September 30, 2020, and March 31, 2020, the Company’s deferred tax liability was $375,400 $423,100 and $435,600, 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:  OPERATING LEASES

The Company leases property for RV storage which is located in Oceano and is leased at $3,575 per month. The Company entered into a lease with the County of San Luis Obispo on 06/02/2020 which expires 06/02/2022 at which time there will be an option to renew.

 

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 $23,953 and $2,483 for the six months ended March 31, 2021 and 2020, respectively, and $11,987 and $1,241 for the three months ended March 31, 2021 and 2020, respectively.

 

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PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2021 AND 2020 AND SEPTEMBER 30, 2020

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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 $32,147 and $38,540 for the six months ended March 31, 2021 and 2020, respectively, and $13,916 and $15,400 for the three months ended March 31, 2021 and 2020, respectively.

 

NOTE 10:  COVID-19 Pandemic

Due to the uncertainty surrounding the recent COVID-19 pandemic, the length and severity of the outbreak, and the volatility in the world investment markets, there is uncertainty as to how these events will affect results of the Company’s operations going forward.  However, the Company experienced minimal impact from the COVID-19 pandemic during the period ended March 31, 2021.

 

NOTE 11:  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 care benefits, mortgage payments, rent, utilities, and interest on other debt obligations incurred before February 15, 2020.  The Company expects the note payable to be forgiven. Therefore, interest noted on the balance sheet will not be applied.

 

NOTE 12:  SUBSEQUENT EVENTS

Events subsequent to March 31, 2021 have been evaluated through May 7, 2021, which is the date the financial statements were available to be issued.  Management did not identify any subsequent events that required disclosure.

 

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