UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One) | ||
[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended December 31, 2016 | ||
OR | ||
[ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to ___________
Commission file number 0-8463
PISMO COAST VILLAGE, INC. | ||
(Exact name of registrant as specified in its charter) | ||
California | 95-2990441 | |
(State or other jurisdiction of | (IRS Employer ID No.) | |
incorporation or organization) | ||
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165 South Dolliver Street, Pismo Beach, CA | 93449 | |
(Address of Principal Executive Offices) | (Zip Code) | |
(805) 773-5649 | ||
Registrant’s telephone number, including area code | ||
(Former name, former address and former fiscal year, if changed since last report) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Subsection 232.405) of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES [X] NO [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
[ ] Large accelerated filer
[ ] Accelerated filer
[ ] Non-accelerated filer
[X] Smaller reporting company
1
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES [ ] NO [X]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13, or 15 (d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. YES [ ] NO [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 1,775
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATMENTS
The following financial statements and related information are included in this Form 10-Q, Quarterly Report.
1.
Accountant’s Review Report
2.
Balance Sheets
3.
Statements of Income and Retained Earnings
4.
Statements of Cash Flows
5.
Notes to Financial Statements (Unaudited)
The financial information included in Part I of this Form 10-Q has been reviewed by Brown Armstrong Accountancy Corporation, the Company's Certified Public Accountants, and all adjustments and disclosures proposed by said firm have been reflected in the data presented. The information furnished reflects all adjustments, which, in the opinion of management, are necessary to a fair statement of the results for the interim periods.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
STATEMENT ON FORWARD-LOOKING INFORMATION
Certain information included herein contains statements that may be considered forward-looking statements, such as statements relating to anticipated expenses, capital spending and financing sources. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ from those expressed in any forward-looking statements made herein. These risks and uncertainties include, but are not limited to, those relating to competitive industry conditions, California tourism and weather conditions, dependence on existing management, leverage and debt service, the regulation of the recreational vehicle industry, domestic or global economic conditions and changes in federal or state tax laws or the administration of such laws.
2
OVERVIEW
The Company continues to promote and depend upon recreational vehicle camping as the primary source of revenue. The rental of campsites to the general public provides income to cover expenses, complete capital improvements, and allow shareholders up to forty-five free nights camping annually. Additional revenues come from RV storage and spotting, RV service and repair, on-site convenience store, and other ancillary activities such as laundromat, arcade, and bike rental.
The Company has been fortunate not to have significant impact due to the recent economy. The RVing public actively seeks accommodations on the Central Coast despite volatile fuel prices and personal financial uncertainties. RVing offers an affordable outdoor recreational experience, and the Company provides quality facilities and services in a highly popular location. Fiscal year-to-date site occupancy is down 0.4%, or 110 nights primarily due to weather. Based on advanced reservation deposits, occupancy projections are up 5% compared to this time last year. However, prime time reservations are equal to last year. Revenues from ancillary operations such as the General Store, RV Service, arcade, laundromat, and bike rental are down 11.2% year-to-date, and management feels this trend will improve as business moves into the primary camping season. Industry projections anticipate positive business trends and reasonable fuel prices as the summer season approaches.
RV storage and towing continue to be a primary source of revenue for the Company. 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. Revenues for RV storage and towing are up 6.0% compared to the previous year due to a storage rate increase and greater site occupancy for storage customers.
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-two parks nationally to receive an industry rated “A” park from over 33,000 surveys for customer satisfaction in 2016.
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 leading national directory, 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, restaurant, 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 December 31, 2016, increased $70,278, or 5.1%, from the same period in 2015. This increase is primarily due to a $43,643, or 4.6%, increase in year-to-date site revenue as a result of a rate increase, and a $24,108, or 6.0%, increase in RV storage and towing activity.
Seasonal fluctuations within this industry are expected, and management projects that income for the fourth quarter will be approximately 40% of its annual revenue. This approximation is based on historical information.
3
Income from retail operations decreased by $34,136 for the three-month period ended December 31, 2016, 11.2% below the same period in 2015. The General Store and RV Service and Repair both decreased revenue by 5.3% and 16.0% respectively. This decrease in revenue is primarily due to weather, however, the RV Service and Repair operation was also operating with one less RV repair technician compared to the previous year.
The Company anticipates slight to moderate increases in both income from resort operations and in retail operations as the fiscal year progresses.
Operating expenses for the three-month period ending December 31, 2016, increased $20,527, or 1.6%, above the same period ended December 31, 2015. This reflects an increase in electricity, water and sewer, and resort repairs and maintenance. Other operating costs remain consistent with the prior year and are considered well managed to create an effective operation.
Cost of goods sold expenses for the three-month period ended December 31, 2016, are 41.6%, compared to 43.5% for the same period in 2015, which is within the guidelines established by management for the individual category sales of RV supplies and General Store merchandise.
Interest expense for the three-month period ended December 31, 2016, was $20,088, compared to $26,001 for the same period ending 2015. The current balance reflects the notes payable as a result of purchasing property in May 2008, as well as property purchased February and April of 2006 to increase RV storage. The Company has also maintained a $500,000 line of credit that currently has no outstanding balance as of December 31, 2016.
Income before provisions for income taxes for the three-month period ended December 31, 2016, increased by $39,528 above the same period in 2015. This increase in income before provision for income taxes is a result of increased total income.
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. 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 December 31, 2016, is $2,643,948, which is 27.4% more than the same position in 2015. The cash balance increased $27,278 from the fiscal year ended September 30, 2016 due to operations revenue and temporary postponement of capital projects. The Company has maintained cash balances in anticipation for large capital expenditures necessary to upgrade the resort. The Company has also maintained a line of credit of $500,000 to insure funds will be available, if required.
Accounts payable and accrued liabilities increased $2,821 above the same period last year and increased $10,018 since the 2016 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 $1,133,194 at the end of the first quarter of fiscal year 2017, compared with $981,514 at the end of fiscal year 2016.
4
CAPITAL RESOURCES AND PLANNED EXPENDITURES
The Company plans capital expenditures of approximately $900,000 in fiscal year 2017 to further enhance the resort facilities and services. These projects include building a new RV Service and Repair facility, purchase new trucks for security, maintenance, and the RV repair shop, RV storage security, and repair the Overlook ramp. Funding for these projects is expected to be from normal operating cash flows and, if necessary, supplemented with outside financing. These capital expenditures are expected to increase the resort’s value to its shareholders and the general public.
After years with no debt, the Board of Directors approved expansion of the RV storage program and understood this investment would require substantial financing. Management has made it a high priority to effect timely construction and successful marketing in order to maximize return on this investment.
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. Second 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 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 electronically with the SEC.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES 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 December 31, 2016, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer/General Manager (our principal executive officer) and our Chief Financial Officer (our principal financial officer). Based upon and as of the date of that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as described in Item 8A(T) included with our Annual Report on Form 10-K for the year ended September 30, 2016.
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.
5
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 three-months ended December 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No pending legal proceedings against the Company other than routine litigation incidental to the business.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting for the shareholders of Pismo Coast Village, Inc. was held Saturday, January 21, 2017, at 9:00 a.m. at the South County Regional Center, 800 West Branch Street, Arroyo Grande, California
93420. At that meeting, the following Directors were elected to serve until the annual meeting in January 2018 or until successors are elected and have qualified. Following each elected Director's name is the total
number of votes cast for that Director:
Blank, Sam | 596 |
Buchaklian, Harry | 619 |
Enns, Rodney | 618 |
Fischer, William | 600 |
Hardesty, Wayne | 598 |
Hearne, Dennis | 598 |
Hickman, Glenn | 590 |
Hughes, Terris | 628 |
King, Karen | 637 |
Nelson, Garry | 596 |
Nunlist, Ronald | 644 |
Pappi, Jr., George | 665 |
Pettibone, Jerald | 613 |
Plumley, Dwight | 745 |
Roberts, Jerry | 596 |
Skaggs, Brian | 596 |
Willems, Gary | 596 |
Williams, Jack | 616 |
Further, the following additional matters were voted upon at the meeting, and the number of affirmative votes and negative votes cast with respect to each such matter is set forth below:
Proposal to approve the selection of Brown Armstrong Accountancy Corporation to serve as independent certified public accountants for the Company for Fiscal Year 2016 - 2017:
Affirmative Votes | 759 |
Negative Votes | 4 |
Abstentions | 19 |
6
Proposal to approve a non-binding advisory vote to approve the compensation of the Company’s named executive officer:
Affirmative Votes |
| 676 |
Negative Votes |
| 33 |
Abstains |
| 73 |
ITEM 5. OTHER INFORMATION
The annual meeting of the shareholders of Pismo Coast Village, Inc. was held Saturday, January 21, 2017, at 9:00 a.m. at the South County Regional Center, 800 West Branch Street, Arroyo Grande, California
93420. Following that meeting, the newly elected Board held a reorganizational meeting at which the following officers were elected to serve until the next Annual Shareholders’ Meeting:
President | Terris Hughes |
Executive Vice President | Garry Nelson |
V. P. – Finance/Chief Financial Officer | Wayne Hardesty |
V. P. – Operations | Dwight Plumley |
V. P. – Secretary | George Pappi, Jr. |
Assistant Corporate Secretary | Jay Jamison |
ITEM 6. EXHIBITS
Exhibit No. | Description of Exhibit | Sequential Page Number |
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27 | Financial Data Schedule |
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99 | Accountant’s Review Report |
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31.1 | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Terris Hughes, President and Chairman of the Board) |
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31.2 | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Jay Jamison, Chief Executive Officer and principal executive officer) |
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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) |
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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) |
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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) |
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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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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:
February 14, 2017
Signature:
/s/ TERRIS HUGHES
Terris Hughes, President and Chairman of the Board
Date:
February 14, 2017
Signature:
/s/ WAYNE HARDESTY
Wayne Hardesty, V.P. - Finance/Chief Financial Officer
(principal financial officer and principal accounting officer)
Date:
February 14, 2017
Signature:
/s/ JAY JAMISON
Jay Jamison, General Manager/Chief Executive Officer
(principal executive officer)
8
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Board of Directors
Pismo Coast Village, Inc.
165 South Dolliver Street
Pismo Beach, California 93449
We have reviewed the accompanying balance sheets of Pismo Coast Village, Inc., (Company) as of December 31, 2016 and 2015, and the related statements of income and retained earnings and cash flows for the three-month periods ended December 31, 2016 and 2015. These interim financial statements are the responsibility of the Company's management.
We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the balance sheet of the Company as of September 30, 2016, and the related statements of income and retained earnings, and cash flow for the year then ended, and in our report dated November 18, 2016, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying balance sheet as of September 30, 2016, is fairly stated, in all material respects.
BROWN ARMSTRONG ACCOUNTANCY CORPORATION
Bakersfield, California
February 14, 2017
9
PISMO COAST VILLAGE, INC. | |||||||||
BALANCE SHEETS | |||||||||
DECEMBER 31, 2016 AND 2015 AND SEPTEMBER 30, 2016 | |||||||||
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| December 31, |
| September 30, |
| December 31, | |||
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| 2016 |
| 2016 |
| 2015 | |||
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| (Unaudited) |
| (Audited) |
| (Unaudited) | |||
ASSETS | |||||||||
Current Assets |
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Cash and cash equivalents |
| $ | 2,643,948 |
| $ | 2,616,670 |
| $ | 2,075,173 |
Accounts receivable |
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| 22,309 |
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| 42,327 |
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| 21,476 |
Inventory |
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| 191,380 |
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| 191,229 |
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| 192,571 |
Prepaid income taxes |
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| 29,900 |
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| 156,200 |
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| - |
Prepaid expenses |
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| 142,010 |
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| 23,745 |
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| 134,010 |
Total current assets |
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| 3,029,547 |
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| 3,030,171 |
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| 2,423,230 |
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Pismo Coast Village Recreational Vehicle Resort and Related Assets – |
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Net of accumulated depreciation |
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| 14,736,352 |
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| 14,827,813 |
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| 14,933,856 |
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Other Assets |
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| 3,106 |
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| 3,688 |
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| 5,435 |
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Total Assets |
| $ | 17,769,005 |
| $ | 17,861,672 |
| $ | 17,362,521 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current Liabilities |
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Accounts payable and accrued liabilities |
| $ | 269,303 |
| $ | 266,482 |
| $ | 259,285 |
Accrued salaries and vacation |
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| 75,633 |
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| 285,679 |
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| 77,882 |
Rental deposits |
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| 1,395,673 |
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| 1,340,592 |
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| 1,230,518 |
Income taxes payable |
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| - |
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| - |
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| 86,800 |
Current portion of note payable |
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| 117,502 |
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| 116,048 |
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| 125,249 |
Current portion of capital lease obligations |
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| 38,242 |
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| 39,856 |
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| - |
Total current liabilities |
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| 1,896,353 |
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| 2,048,657 |
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| 1,779,734 |
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Long-Term Liabilities |
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Long-term deferred taxes |
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| 832,300 |
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| 846,200 |
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| 819,100 |
N/P Donahue Trans |
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| - |
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| - |
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| 31,128 |
N/P RLC Funding |
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| - |
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| - |
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| 25,104 |
N/P Heritage Oaks Bank |
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| 1,285,823 |
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| 1,315,842 |
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| 1,761,417 |
Capital lease obligations, net of current portion |
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| 89,074 |
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| 98,034 |
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| - |
Total Liabilities |
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| 4,103,550 |
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| 4,308,733 |
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| 4,416,483 |
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Stockholders’ Equity |
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Common stock – no par value, 1,800 shares issued 1,775 and 1,783 shares |
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outstanding at December 31, 2016 and 2015, respectively |
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| 5,569,268 |
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| 5,569,268 |
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| 5,594,369 |
Retained earnings |
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| 8,096,187 |
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| 7,983,671 |
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| 7,351,669 |
Total stockholders’ equity |
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| 13,665,455 |
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| 13,552,939 |
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| 12,946,038 |
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Total Liabilities and Stockholders’ Equity |
| $ | 17,769,005 |
| $ | 17,861,672 |
| $ | 17,362,521 |
The accompanying notes are an integral part of these financial statements. |
10
PISMO COAST VILLAGE, INC. | |||||||
STATEMENTS OF INCOME AND RETAINED EARNINGS | |||||||
(UNAUDITED) | |||||||
THREE MONTHS ENDED DECEMBER 31, 2016 AND 2015 | |||||||
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| Three Months | |||||
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| 2016 |
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| 2015 | ||
Income | |||||||
Resort operations | $ | 1,454,529 | $ | 1,384,251 | |||
Retail operations | 271,736 | 305,872 | |||||
Total income | 1,726,265 | 1,690,123 | |||||
Costs and Expenses | |||||||
Operating expenses | 1,265,348 | 1,244,821 | |||||
Cost of goods sold | 112,948 | 133,090 | |||||
Depreciation | 103,282 | 100,282 | |||||
Total costs and expenses | 1,481,578 | 1,478,193 | |||||
Income from operations | 244,687 | 211,930 | |||||
Other Income (Expense) | |||||||
Interest/dividend income | 1,621 | 1,010 | |||||
Interest expense | (20,088) | (26,001) | |||||
Loss on disposal of fixed assets | (1,304) | (1,551) | |||||
Total other income (expense) | (19,771) | (26,542) | |||||
Income Before Provision for Income Taxes | 224,916 | 185,388 | |||||
Income Tax Expense | 112,400 | 79,400 | |||||
Net Income | 112,516 | 105,988 | |||||
Retained Earnings – Beginning of Period | 7,983,671 | 7,245,681 | |||||
Retained Earnings – End of Period | $ | 8,096,187 | $ | 7,351,669 | |||
Net Income Per Share | $ | 63.39 | $ | 59.44 | |||
The accompanying notes are an integral part of these financial statements. |
11
PISMO COAST VILLAGE, INC. | ||||||||||||
STATEMENTS OF CASH FLOWS (UNAUDITED) | ||||||||||||
THREE MONTHS ENDED DECEMBER 31, 2016 AND 2015 | ||||||||||||
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| 2016 |
| 2015 | ||||||||
Cash Flows From Operating Activities | ||||||||||||
Net Income |
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| $ | 112,516 |
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| $ | 105,988 | ||
Adjustments to reconcile net income to net |
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cash provided by (used in) operating activities: |
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Depreciation |
| $ | 103,282 |
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| $ | 100,282 |
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(Increase) Decrease in accounts receivable |
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| 20,018 |
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| 22,440 |
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(Increase) in inventory |
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| (151) |
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| (2,129) |
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(Decrease) in deferred tax asset |
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| (13,900) |
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|
|
|
| (5,800) |
|
|
|
Decrease in prepaid income taxes |
|
| 126,300 |
|
|
|
|
| - |
|
|
|
(Increase) in prepaid expenses |
|
| (118,263) |
|
|
|
|
| (104,974) |
|
|
|
Increase in accounts payable and accrued liabilities |
|
| 2,821 |
|
|
|
|
| 34,646 |
|
|
|
(Decrease) in accrued salaries and vacation |
|
| (210,046) |
|
|
|
|
| (206,544) |
|
|
|
Increase in rental deposits |
|
| 55,081 |
|
|
|
|
| (30,673) |
|
|
|
(Decrease) in Income taxes payable |
|
| - |
|
|
|
|
| 36,100 |
|
|
|
Total adjustments |
|
|
|
|
| (34,858) |
|
|
|
|
| (156,652) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
|
|
|
| 77,658 |
|
|
|
|
| (50,664) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Disposal of fixed assets |
|
| 1,304 |
|
|
|
|
| 1,551 |
|
|
|
Capital expenditures |
|
| (12,545) |
|
|
|
|
| (81,643) |
|
|
|
Net cash used in investing activities |
|
|
|
|
| (11,241) |
|
|
|
|
| (80,092) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Principal repayments of note payable |
|
| (39,139) |
|
|
|
|
| (29,878) |
|
|
|
Net cash used in financing activities |
|
|
|
|
| (39,139) |
|
|
|
|
| (29,878) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
|
|
| 27,278 |
|
|
|
|
| (160,634) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents – Beginning of Period |
|
|
|
|
| 2,616,670 |
|
|
|
|
| 2,235,807 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents – End of Period |
|
|
|
| $ | 2,643,948 |
|
|
|
| $ | 2,075,173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule of Payments of Interest and Taxes |
|
|
|
|
|
|
|
|
|
|
|
|
Payments for income tax |
|
|
|
| $ | - |
|
|
|
| $ | 49,070 |
Cash paid for interest |
|
|
|
| $ | 20,088 |
|
|
|
| $ | 26,001 |
|
|
|
|
|
|
|
|
|
|
|
| |
The accompanying notes are an integral part of these financial statements. |
12
PISMO COAST VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND 2015 AND SEPTEMBER 30, 2016
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 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 statement of cash flows, the Company considers all highly liquid investments including certificates of deposit with a maturity of three months or less when purchased to be cash equivalents.
Inventory
Inventory has been valued at the lower of cost or market on a first-in, first-out basis. Inventory is comprised primarily of finished goods in the general store and in the RV shop.
Property and Equipment
All property and equipment are recorded at cost. Depreciation of property and equipment is computed using 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 park improvements | 5 to 40 years |
Furniture, fixtures, equipment and leasehold improvements | 3 to 31.5 years |
Transportation equipment | 5 to 10 years |
Earnings (Loss) Per Share
The earnings (loss) 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 response advertising as incurred. Advertising expense was $12,758 and $6,337 for the three months ended December 31, 2016 and 2015, respectively. There was no advertising expense capitalized in prepaid expense.
13
PISMO COAST VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2016 AND 2015 AND SEPTEMBER 30, 2016
PAGE 2
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Concentration of Credit Risk
At December 31, 2016, the Company had cash deposits in excess of the $250,000 federally insured limit with Heritage Oaks Bank of $733,717; however, in the past the Company used an Excess Deposit Insurance Bond which secures deposits up to $1,500,000. It has recently been stated by bank regulators that this insurance bond is not enforceable. Heritage Oaks Bank is a member of CDARS, the Certificate of Deposit Account Registry Service. Large deposits are divided into smaller amounts and placed with other FDIC insured banks, which are also members of the CDARS network. Those member banks then issue CDs in amounts under $250,000, so that the entire investment 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 740. ASC 740 requires, among other things, that if income is expected for the entire year, but there is a net loss to date, a tax benefit is recognized based on the annual effective tax rate.
ASC 740 also requires, among other things, the recognition and measurement of uncertain tax positions based on a “more likely than not” (likelihood greater than 50%) approach. As of December 31, 2016, the Company did not maintain any uncertain tax positions under this approach and, accordingly, all tax positions have been fully recorded in the provision for income taxes. 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. The Company does not expect any material changes in the next year. 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, 2013 and by the California Franchise Tax Board for fiscal years ending on or after September 30, 2012.
Subsequent Events
Subsequent events have been evaluated through February 14, 2017, which is the date the financial statements were available to be issued.
14
PISMO COAST VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2016 AND 2015 AND SEPTEMBER 30, 2016
PAGE 3
NOTE 3 - PISMO COAST VILLAGE RECREATIONAL VEHICLE RESORT AND RELATED ASSETS
At December 31, 2016, September 30, 2016 and December 31, 2015, property and equipment included the following:
December 31, |
| September 30, |
| December 31, | |||||
|
| 2016 |
| 2016 |
| 2015 | |||
Land | $ | 10,394,746 | $ | 10,394,746 | $ | 10,394,746 | |||
Building and resort improvements | 11,295,967 | 11,295,967 | 11,227,437 | ||||||
Furniture, fixtures, equipment and leasehold improvements | 661,380 | 661,583 | 641,554 | ||||||
Transportation equipment | 632,779 | 632,779 | 544,513 | ||||||
Construction in progress | 113,644 | 105,660 | 76,085 | ||||||
23,098,516 | 23,090,735 | 22,884,335 | |||||||
Less: accumulated depreciation | (8,362,164) | (8,262,922) | (7,950,479) | ||||||
Total | $ | 14,736,352 | $ | 14,827,813 | $ | 14,933,856 |
Depreciation expense for December 31, 2016 and 2015 were $103,282 and $100,282, respectively.
NOTE 4 - LINE OF CREDIT
The Company has a revolving line of credit with Heritage Oaks Bank for $500,000, expiring March 21, 2017. There were no outstanding amounts on the line of credit as of December 31, 2016 or 2015.
NOTE 5 - NOTES PAYABLE
At December 31, 2016, the note payable consisted of the following:
Note payable with Heritage Oaks Bank | |||
with monthly payments of $15,416, | |||
including a variable interest rate | |||
currently at 5%; note matures May 2018 | |||
and is secured by property. | $ | 1,403,325 | |
Less current portion | (117,502) | ||
Total | $ | 1,285,823 |
At December 31, 2016, future minimum payments on the note payable were as follows:
For the Year Ending September 30, | |||
2017 | $ | 117,502 | |
2018 | 1,285,823 | ||
$ | 1,403,325 |
15
PISMO COAST VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2016 AND 2015 AND SEPTEMBER 30, 2016
PAGE 4
NOTE 6 – Capital Lease Obligations
At December 31, 2016, capital lease obligations consisted of the following:
A 2008 tow truck leased from Donahue Transportation Services Corp, | |||
payable in monthly installments of $799, including interest at | |||
8.39% per annum, through February 2017. | $ | 3,446 | |
A 2013 Hino truck leased from Donahue Transportation Services Corp. | |||
payable in monthly installments of $1,046, including interest at | |||
4.751% per annum, through April 2019. | 27,681 | ||
A security system for Lot-K leased from RLC Funding, | |||
payable in monthly installments of $1,295, including interest at | |||
13.537% per annum, through October 2018. | 25,104 | ||
A 2016 Hino truck leased from Donahue Transportation Services Corp, | |||
payable in monthly installments of $1,116, including interest at | |||
4.532% per annum, through January 2023. | 71,085 | ||
Total capital lease obligations | $ | 127,316 |
At December 31, 2016, future minimum payments on capital lease obligations were as follows:
For the Year Ending September 30, | |||
2017 | $ | 44,974 | |
2018 | 38,897 | ||
2019 | 17,577 | ||
2020 | 13,392 | ||
2021 | 13,392 | ||
Thereafter | 14,508 | ||
Present value of future minimum payments | 142,740 | ||
Less amount representing interest | (15,424) | ||
127,316 | |||
Less current portion of capital lease obligations | (38,242) | ||
Total capital lease obligations, net of current portion | $ | 89,074 |
NOTE 7 - COMMON STOCK
Each share of stock is intended to provide the shareholder with a maximum free use of the resort for 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.
16
PISMO COAST VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2016 AND 2015 AND SEPTEMBER 30, 2016
PAGE 5
NOTE 8 - INCOME TAXES
The provision for income taxes is as follows:
December 31, | December 31, | |||||
2016 | 2015 | |||||
Income tax provision | $ | 112,400 | $ | 79,400 | ||
The Company uses the asset-liability method of computing deferred taxes in accordance with FASB Accounting Standards Codification (ASC) topic 740. The difference between the effective tax rate and the statutory tax rates is due primarily to the effects of the graduated tax rates, state taxes net of federal tax benefit, and non-deductible variable cost of shareholder usage.
We have early adopted Accounting Standards Update (ASU) 2015-17, Balance Sheet Classification of Deferred Taxes, to simplify and improve the usefulness of the financial statements. The amendments in the ASU require that deferred tax liabilities and assets be classified as noncurrent in the classified statement of financial position.
This ASU is effective for financial statements issued for annual periods beginning after December 15, 2018. Earlier application is permitted as of the beginning of an interim or annual reporting period. We have made this classification update as of October 1, 2016, and have applied this change retrospectively to all periods presented. Below is a table summarizing the changes in presentation for the periods ending September 30, 2016 and December 31, 2015:
September 30, |
| December 31, | ||||
|
| 2016 |
| 2015 | ||
Total Assets – original presentation | $ | 17,969,672 | $ | 17,465,221 | ||
Total liabilities – original presentation | 4,416,733 | 4,519,183 | ||||
Total assets – change in presentation | (108,000) | (102,700) | ||||
Total liabilities – change in presentation | (108,000) | (102,700) | ||||
Total assets – updated presentation | 17,861,672 | 17,362,521 | ||||
Total liabilities – updated presentation | 4,308,733 | 4,416,483 |
NOTE 9 - OPERATING LEASES
The Company leases a lot in Oceano, California, to use as storage lot, at $2,933 per month. The lease has converted to a month-to-month lease; however, the lessor is considering a long-term renewal at this time.
Rent expense under these agreements was $9,285 and $9,139 for the three-month period ended December 31, 2016 and 2015, 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 $18,778 and $19,196 for the three months ended December 31, 2016 and 2015, respectively.
17