UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-K

 

 

For the transition period from __________ to ___________

 

Commission file number 0-8463

 

                                                                PISMO COAST VILLAGE, INC.                                                     

(Exact name of registrant as specified in its charter)

 

                                       California                                                                                    95-2990441          

(State or other jurisdiction of incorporation or organization)                                    (IRS Employer ID No.)

 

 165 South Dolliver Street, Pismo Beach, CA                                                                                 93449         

(Address of Principal Executive Offices)                                                                                (Zip Code)

 

                                                                           (805) 773-5649                                                                     

Registrant’s telephone number, including area code

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

Securities registered pursuant to Section 12(g) of the Act:

 

Common Stock

(Title of Class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.       YES [  ]        NO [X]

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.                 YES [  ]        NO [X]

 

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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 Exchange 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 Website, 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Subsection 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.                      [  ]

 

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

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     YES [  ]            NO [X]

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter.  $66,462,000

 

APPLICABLE ONLY TO REGISTRANTS 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 REGISTRANTS)

 

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.            1,775

 

DOCUMENTS INCORPORATED BY REFERENCE

 

Portions of the registrant's Notice of 2017 Definitive Proxy Statement for the Annual Meeting of Shareholders to be held January 20, 2018, are incorporated by reference into Part III.

 

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FORM 10-K

 

PART I

 

ITEM 1.    BUSINESS

 

a.         BUSINESS DEVELOPMENT

Pismo Coast Village, Inc., the "Registrant" or the "Company," was incorporated under the laws of the State of California on April 2, 1975. The Company's sole business is owning and operating Pismo Coast Village RV Resort, a recreational vehicle resort (hereinafter the "Resort") in Pismo Beach, California. The Resort has continued to enhance its business by upgrading facilities and services to better serve customers.

 

b.         BUSINESS OF ISSUER

The Company is engaged in only one business, namely, the ownership and operation of the Resort. The Company generates revenue from rental of camping sites, recreational vehicle storage, recreational vehicle repair and retail sales from a general store and recreational vehicle parts store. Accordingly, all of the revenues, operating profit (loss) and identifiable assets of the Company are attributable to a single industry segment.

 

Pismo Coast Village RV Resort is a full-service 400-space recreational vehicle resort. Its resort operations include site rentals, RV storage business, video arcade, laundromat, and other income sources related to the operation. The retail operations include a general store, RV parts store, and RV repair shop. In addition, the Company has a recreation department that provides a summer season youth program and recreational equipment rentals.

 

PUBLIC AND SHAREHOLDER USERS

The present policy of the Company is to offer each shareholder the opportunity for 45 nights of free use of sites at the Resort, 25 nights may be used during prime time and 20 nights during non-prime time. The free use of sites by shareholders is managed by designating the nights of the year as prime time and non-prime time. A prime time night is one that is most in demand, for example, Memorial Day Weekend and the period from June 1 until Labor Day. Non-prime time is that time with the least demand. Each shareholder is furnished annually a calendar that designates the prime and non-prime time nights; it also provides a schedule of when reservations can be made and the procedure for making reservations. Shareholder's free use of sites average approximately 21% to 24% annually (refer to Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, page 9).

 

SEASONAL ASPECTS OF BUSINESS

The business of the Company is seasonal and is concentrated during prime days of the year which are defined as follows: President's Day Weekend, Easter week, Memorial Day Weekend, summer vacation months, Labor Day, Thanksgiving Weekend and Christmas vacation.

 

WORKING CAPITAL REQUIREMENTS

By accumulating reserves during the prime seasons, the Company is able generally to meet its working capital needs during off-season. Industry practice is to accumulate funds during the prime season, and use such funds, as necessary, in the off-season. The Company has arranged, but not used, a $500,000 line of credit to ensure funds are available, if necessary, in the off-season.

 

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COMPETITION

The Company is in competition with nine other RV parks located within a five-mile radius. Since its property is the only property located adjacent to the beach, it has a competitive edge. The Company is recognized as a recreational vehicle resort rather than a park because of its upgraded facilities and amenities, which include 66 Channels of Satellite TV, high-speed wireless Internet service throughout the property, a heated pool, a miniature golf course and a recreational program. The Resort is noted for its ability to provide full service, which includes RV storage and RV repair and service. The Resort is consistently given high ratings by industry travel guides based on resort appearance, facilities offered, and recreational programs. In November 2007, Pismo Coast Village RV Resort was awarded the designation of 2007/2008 RV Park of the Year, Large Park Category, by the National Association of RV Parks and Campgrounds (ARVC), which has a membership of more than 3,900 properties. Pismo Coast Village RV Resort also received national Park of the Year honors in 1999, 1997, and 1995. In fiscal year 2004, Pismo Coast Village RV Resort was awarded the designation of RV Park of the Year - Mega Park Category 2004 by the California Travel Parks Association (CTPA), now known as the California Association of RV Parks and Campgrounds (CalARVC). These factors allow the Resort to price its site rental fees above most of its competition based on perceived value received.

 

Competition for the tourist market is strong between the cities on the Central Coast of California. Resort management and staff are involved with the City of Pismo Beach, Chamber of Commerce, Conference and Visitors Bureau, and are major sponsors in cooperative events and advertising. The Resort continues to market off-season discounts and place advertisements in trade publications and industry directories. In addition, the Company places its brochure with companies selling or renting recreational vehicles and has found the Resort's Internet web page and social media to be very effective. The marketing program also targets groups and clubs by offering group discounts, meeting facilities, and catering services. The Company's marketing plan was funded by $59,890 for fiscal year 2017, which was developed out of operating revenues. The major source of the Company's business is repeat business, which has been developed by attention to good customer service and providing quality recreational facilities.

 

ENVIRONMENTAL REGULATION

The Company is affected by federal, state and local antipollution laws and regulations. Due to the nature of its business operations (camping, RV storage and small retail store sales), the discharge of materials into the environment is not considered to be of a significant concern, and the EPA has not designated the Company as a potentially responsible party for clean up of hazardous waste.

 

The main property of the Resort is located within the boundaries of those lands under the review and purview of the Coastal Commission of the State of California and the City of Pismo Beach. The water and sewer systems are serviced by the City of Pismo Beach. The Company was subject to state and federal regulations regarding the fiscal year 1996 reconstruction of an outflow structure that empties into Pismo Creek at the north boundary of the Resort. Because the Resort is within the wetlands area, the California Coastal Commission required permits for repair and construction to be reviewed by the following agencies: City of Pismo Beach, State Lands Commission, Regional Water Quality Board, State of California, California Department of Fish and Game, State Department of Parks and Recreation and the Army Corps of Engineers.

 

EMPLOYEES

As of September 30, 2017, the Company employed approximately 63 people, with 27 of these on a part-time basis and 36 on a full-time basis. Due to the seasonal nature of the business, additional staff is needed during peak periods and fewer during the off-season. Staffing levels during the fiscal year ranged from approximately 58 employees to 67 employees. Management considers its labor relations to be good.

 

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ADDITIONAL INFORMATION

 

The Company has remained conservative when considering rates and rate increases. As a result of experiencing increasing operational expenses and conducting a local comparative rate study, the Board of Directors (Board) voted to increase the base rate for RV storage $5 per month effective January 1, 2015. The Board also voted at the May 2016 meeting to increase all nightly rates $3 per night effective January 1, 2017. It is anticipated the proposed 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.

 

c.         REPORTS TO SECURITY HOLDERS

Pismo Coast Village, Inc. files quarterly reports, an annual report, and periodic reports, providing the public with current information about the Company and its operations with the Securities and Exchange Commission.

 

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.

 

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 2.  PROPERTIES

 

The Company's principal asset consists of the Resort, which is located at 165 South Dolliver Street in Pismo Beach, California. The Resort is built on a 26-acre site and includes 400 campsites with full hookups and nearby restrooms with showers and common facilities, such as a video arcade, recreation hall, general store, swimming pool, laundromat, and three playgrounds.

 

In 1980, the Company purchased a 2.1-acre parcel of real property located at 2250 22nd Street, Oceano, California, at a price of $66,564. The property is being used by the Company as a storage facility for recreational vehicles. The storage capacity of this lot is approximately 121 units. On October 20, 2014, the Company entered into a long-term lease with Verizon Wireless for the installation of a cell tower. The lease term is for five (5) years with up to four (4) additional five (5) year terms unless lessee terminates the lease at the end of the current term.

 

In 1981, the Company exercised an option and purchased a 3.3-acre parcel located at 424 South Dolliver Street, Pismo Beach, California, at a price of $300,000. The property, which previously had been leased by the Company, is used primarily as a recreational vehicle storage yard. The storage capacity of this lot is approximately 120 units. On June 6, 2016, the Company entered into a long-term lease with Verizon Wireless for the installation of a cell tower. The lease term is for five (5) years with up to four (4) additional five (5) year terms unless lessee terminates the lease at the end of the current term. 

 

In 1988, the Company purchased approximately 0.6 acres of property at 180 South Dolliver Street, Pismo Beach, California, across the street from the main property, consisting of a large building with a storefront and one large maintenance bay in the rear. Also, on the property is a smaller garage-type building with three parking stalls. The Company enlarged its recreational vehicle repair operation, added RV storage for approximately eleven units and developed the storefront into a RV parts store. The property was purchased for $345,000, of which $300,000 was financed and paid in full during fiscal year 1997.

 

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On December 31, 1998, the Company closed escrow on a parcel of property located at 1295 Sand Dollar Avenue, Oceano, California, to be developed as an additional RV storage facility. The 5.5-acre property is located adjacent to existing Company RV storage. On October 14, 1999, construction was completed, and the Company received County approval to occupy the premises. The property was purchased for $495,000, of which $395,000 was financed and paid in full in July 2000. Development cost amounted to $195,723 and was allocated from operational cash flow. Storage capacity for this property is approximately 408 units and is currently full.

 

On February 28, 2003, the Company closed escrow on a parcel of property to be developed as an additional RV storage facility. The 4.7-acre property is located on Fountain Avenue in Oceano, California, and was purchased for $650,000, of which $500,000 was financed. The note on this property was paid off in September 2005. The construction permit granted by the County of San Luis Obispo was contingent upon permit approval by the California Coastal Commission. In January 2006, the Commission denied the permit based on wetland conditions. The property is currently being considered for another use.

 

Due to the continued demand for RV storage and the denial of the aforementioned permit, the Board of Directors elected to purchase additional property. On January 11, 2006, the Company closed escrow on a six-acre property located at 974 Sheridan Road, Arroyo Grande, California, previously developed as an RV storage facility. The purchase price was $2.1 million, and included approximately 80 existing storage customers. This property had been permitted and developed the previous year, and is considered in good condition with a capacity of approximately 229 units.

 

On April 6, 2006, the Company purchased the 2.2-acre property located at 2030 Front Street in Oceano, California, that it previously rented from Union Pacific Railroad for RV storage. The purchase price was $925,000 and the condition is considered good. The lot is operating at full capacity with 181 units.

 

On May 9, 2008, the Company closed escrow on a 19.55-acre property located at 2180 Arriba Place in Arroyo Grande, California, to be developed for RV storage. The purchase price was $3.1 million for the undeveloped land. The Company received a development permit through the County of San Luis Obispo Planning Commission. The development was completed in May 2010, and the storage capacity is expected to be approximately 900 units. On January 21, 2013, the Company entered into a long-term lease with Verizon Wireless for the installation of a cell tower. The lease term is for five (5) years with up to four (4) additional five (5) year terms unless lessee terminates the lease at the end of the current term.

 

On May 20, 2015, the Company closed escrow on a one-acre property located at 2096 Nipomo Street in Oceano, California, to be developed as an RV Repair and Service facility. The purchase price was $425,000 and required the demolition of a two-story residence. The Company successfully expanded the usable property area by seeking road abandonment. On September 1, 2017, the Company received a Minor Use Permit with conditions from San Luis Obispo County. Currently, construction plans are being finalized in order to obtain the necessary grading and building permits. The Company anticipates beginning construction during the first quarter of 2018.

 

There is no deferred maintenance on any of the Resort's facilities. The Company's facilities are in good condition and adequate to meet the needs of the shareholder users as well as the public users. The Company continues to develop sufficient revenue from general public sites sales to support a continued positive maintenance program and to meet the demands of shareholders use of free sites.

 

Management considers the Company's insurance policies offer adequate coverage for risk and liability exposure.

 

6

 

1.         TRAILER STORAGE YARDS

In 1986, the Company leased a parcel of land 100 feet wide by 960 feet long, located at 2030 Front Street in Oceano, California, from the Union Pacific Railroad Corporation. The property is being used by the Company as a storage facility for recreational vehicles. Capital improvements in the amount of $40,000 were made to this property, which provides storage for approximately 180 units. On July 29, 2005, Union Pacific Railroad Corporation sold the property to the Weyrick Family Trust, who, after entering into a five-year lease, agreed to sell the property to the Company for $925,000. This transaction was completed April 6, 2006.

 

Associated with the previously mentioned property, and included within the fenced storage perimeter, is the lease of a ten-foot by 960-foot section belonging to Union Pacific Railroad. This lease also allows for the Company's fence to encroach upon the lessor's property. This annual lease is currently $6,556, with a 3% automatic annual increase.

 

In 1991, the Company developed a lease for a five-acre RV storage lot at the Oceano Airport clear zone as storage for approximately 310 RVs. This lot, which is located at 1909 Delta Lane in Oceano, was developed to replace a 100-unit storage lot that was closed when the lease was not renewed. Construction was completed in January 1992 and capital improvements in the amount of $330,768 were made to this property of which $300,000 was financed and paid in full during fiscal year 1997. The original lease on the storage lot was for five years and the Company has executed a third five-year option with the County of San Luis Obispo that expired December 31, 2006. In response to the Company's request for another five-year extension, the County has answered that, until the Oceano Airport Master Plan is updated, the lease will be a month-to-month holdover.

 

Lease payments for the first year of control and occupancy area were $1,500 per month, $2,000 per month for the second year, and continuing years are tied to the "CPI" index. During fiscal year 2017, lease payments were made in the amount of $37,372. Current rent payments are $3,172 and may be impacted in the future by the flood district assessment.

 

The Resort leases out areas to other companies to ensure that the best service and equipment are available for guest use or creates cash flow for the Company. These areas are leased from the Company pursuant to the herein below described leases.

 

2.         RECREATIONAL ARCADE AGREEMENT WITH COIN AMUSEMENTS, INC.

This agreement is dated November 1, 2016, and pursuant to this agreement, the Company granted Coin Amusements, Inc. the concession to operate various coin-operated game units at the Resort. The one-year term expires on October 31, 2017, and continued renewal is expected without significant impact.

 

3.         WASH MULTIFAMILY LAUNDRY SYSTEMS, GOLETA, CA

The seven-year lease that expired October 31, 2016, was renewed for another seven years effective September 1, 2016. The lease grants Wash Multifamily Laundry Systems (“Wash”) the right to place and service coin-operated laundry machines on the Resort. The agreement provides that 70% of the Lessee's gross income be paid to the Company as rent. On September 8, 2016, Wash replaced all 18 washers and 18 dryers with new equipment. Continued renewal is expected without significant impact.

 

4.         PISMO COAST INVESTMENTS

The Company renewed a lease agreement with Ms. Jeanne Sousa, a California Corporations Licensed Broker, for the lease of a 200-square foot building at the Resort from which she conducts sales activities in the Company's stock. The term of the lease is for three years commencing on January 1, 2017, and ending on December 31, 2019. Continued renewal is expected without significant impact. Termination or cancellation may be made by either Lessor or Lessee by giving the other party sixty (60) days written notice.

 

 

7

5.         VERIZON WIRELESS

The Company entered into a lease with GTE Mobilnet of Santa Barbara Limited Partnership, d/b/a Verizon Wireless, for a 42-foot by 37-foot portion of the RV storage lot located at 2180 Arriba Place, Arroyo Grande, California, for the construction and operation of a cell tower communications facility. The term of the lease is for five years commencing on January 21, 2013, and ending on January 20, 2018. Continued renewal is expected without significant impact. The Lessee, upon the annual anniversary date of the agreement, may terminate provided that three (3) months prior notice is given to Lessor.

 

On October 20, 2014, the Company entered into a second lease with GTE Mobilnet of Santa Barbara Limited Partnership, d/b/a Verizon Wireless, for a 40-foot by 40-foot portion of the RV storage lot located at 2250 22^nd Street, Oceano, California, for the construction and operation of a cell tower communications facility. The term of the lease is for five years commencing on October 20, 2014, and ending on October 19, 2019. Continued renewal is expected without significant impact. The Lessee, upon the annual anniversary date of the agreement, may terminate provided that three (3) months prior notice is given to Lessor.

 

On January 14, 2016, the Company entered into a third lease with GTE Mobilnet of Santa Barbara Limited Partnership, d/b/a Verizon Wireless, for the placement of a 22-foot tall flagpole cell tower at 165 South Dolliver, Pismo Beach, California. The lease includes space for the flagpole and equipment enclosure, conduits, and right of way. The term of the lease is for five years commencing on January 14, 2016, and ending on January 13, 2021. Continued renewal is expected without significant impact. The Lessee, upon the annual anniversary date of the agreement, may terminate provided that three (3) months prior notice is given to Lessor.

 

On June 6, 2016, the Company entered into a fourth lease with GTE Mobilnet of Santa Barbara Limited Partnership, d/b/a Verizon Wireless, for a 40-foot by 40-foot portion of the RV storage lot located at 424 South Dolliver Street, Pismo Beach, California, for the construction and operation of a cell tower communications facility. The term of the lease is for five years commencing on June 6, 2016, and ending on June 5, 2021. Continued renewal is expected without significant impact. The Lessee, upon the annual anniversary date of the agreement, may terminate provided that three (3) months prior notice is given to Lessor.

 

6.       ROCK AND ROLL DINER OF OCEANO INC. d/b/a PISMO COAST VILLAGE GRILL

The Company entered into a lease with Mr. Marios Pouyioukkas, owner/operator of Rock and Roll Diner of Oceano Inc., for the lease of a 708-square foot space at the Resort from which the concessionaire operates the restaurant facilities as an independent food service operation. The term of the initial lease was for two years commencing November 1, 2012 and ending December 31, 2013. The lease was renewed January 1, 2017 for a three-year period, and the current lease will expire December 31, 2019. Continued renewal is expected without significant impact. Termination or cancellation may be made by either Lessor or Lessee by giving the other party thirty (30) days written notice.

 

ITEM 3.    LEGAL PROCEEDINGS

 

No pending legal proceedings against the Company other than routine litigation incidental to the business.

 

ITEM 4.    (REMOVED AND RESERVED).

 

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PART II

 

ITEM 5.           MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

 

a.             MARKET INFORMATION

 

There is no market for the Company's common stock, and there are only limited or sporadic transactions in its stock. Ms. Jeanne E. Sousa, a licensed broker/dealer, handled sales of the Company shares as Pismo Coast Investments. The last transaction the Company is aware of occurred September 8, 2017, at a price of $38,000 for one share conveyed. This price was used for computation of aggregate market value of Company stock on page 2 of this Report.

 

b.         HOLDERS

 

The approximate number of holders of the Company's common stock on September 30, 2017, was 1,512.

 

c.         DIVIDENDS

 

The Company has paid no dividends since it was organized in 1975, and although there is no legal restriction impairing the right of the Company to pay dividends, the Company does not intend to pay dividends in the foreseeable future. The Company selects to invest its available working capital to enhance the facilities at the Resort, or develop properties supporting the Resort operations.

 

d.         SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

 

The Company does not currently have securities authorized for issuance under equity compensation plans.

 

e.         RECENT SALES OF UNREGISTERED SECURITIES: USE OF PROCEEDS FROM REGISTERED SECURITIES

 

The Company does not have sales of unregistered securities.

 

f.          COMPANY PURCHASES OF EQUITY SECURITIES

 

The Company redeemed eight shares from the estate of a single shareholder in April 2016 for $27,000 each. At this time the stock has not been retired.

 

ITEM 6.     SELECTED FINANCIAL DATA

 

Not applicable to smaller reporting companies. See Management’s Discussion and Analysis.

 

ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following analysis discusses the Company's financial condition as of September 30, 2017, compared with September 30, 2016. The discussion should be read in conjunction with the audited financial statement and the related notes to the financial statement and the other financial information included elsewhere in this Form 10-K.

 

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.

 

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OVERVIEW

Pismo Coast Village, Inc. operates as a 400-space recreational vehicle resort. The Company includes additional business operations to provide its users with a full range of services expected of a recreational resort. These services include a store, video arcade, laundromat, recreational vehicle repair, RV parts shop and an RV storage operation.

 

The Company is authorized to issue 1,800 shares, of one class, all with equal voting rights and all being without par value. Transfers of shares are restricted by Company bylaws. One such restriction is that transferees must acquire shares with intent to hold the same for the purpose of enjoying camping rights and other benefits to which a shareholder is entitled. Each share of stock is intended to provide the shareholder with the opportunity for 45 nights of free site use per year. However, if the Company is unable to generate sufficient funds from the public, the Company may be required to charge shareholders for services.

 

Management is charged with the task of developing sufficient funds to operate the Resort through site sales to general public guests by allocating a minimum of 175 sites to general public use and allocating a maximum of 225 sites for shareholder free use. The other service centers are expected to generate sufficient revenue to support themselves and/or produce a profit.

 

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 45 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 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. Site occupancy for fiscal year 2017 was up 0.05%, following last year’s record occupancy, due to good weather, the improving economy, and a nationwide increased demand for outdoor recreation and camping. Revenues from ancillary operations, such as the General Store, RV service, laundromat, arcade, and bike rental, all contribute to the profitability of the Company.

 

RV storage continues to provide a significant portion of the Company’s revenue. 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.

 

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 affect timely construction and successful marketing in order to maximize return on this investment.

 

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 - 2008. In addition, in 2008 the resort was the only industry rated "A" park in California for customer satisfaction based on Internet visitor surveys collected nationally by Guest Reviews. The resort also received the Guest Reviews “A” rated park recognition for the years 2011, 2012, 2013, 2014, and one of 32 parks nationally 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 directories, and trade magazine advertising formulates most of the business-marketing plan.

 

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CURRENT OPERATING PLANS

The Board of Directors continues its previously established policy by adopting a stringent conservative budget for fiscal year 2018, which projects a positive cash flow of approximately $1,886,810 from operations. This projection is based on paid site occupancy reflecting similar occupancy as experienced in fiscal year 2017. The 2018 budget plan does not include any rate increases. While the Company projects a positive cash flow, this cannot be assured for fiscal year 2018.

 

FINANCIAL CONDITION

The business of the Company is seasonal and is concentrated on prime days of the year which are defined as follows: President's Day Weekend, Easter week, Memorial Day Weekend, summer vacation months, Labor Day, Thanksgiving Weekend, and Christmas vacation. There are no known trends that affect business or affect revenue.

 

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 laundromat, arcade, restaurant operations and property leases for cell tower communications facilities by third party lessees; and (b) Retail Operations, consisting of revenues from general store operations and from RV parts and service operations.

 

The Company has arranged a $500,000 line of credit that is currently not drawn on. The financing resulting from the purchase of RV storage property was paid off through accelerated payments and eliminated in September 2017. The Company has no other liabilities to creditors other than current accounts payable arising from its normal day-to-day operations and advance Resort rental reservation deposits, none of which are in arrears.

 

LIQUIDITY

The Company's policy is to use its ability to generate operating cash flow to meet its expected future needs for internal growth. The Company has continued to maintain sufficient cash so as to not require the use of a short-term line of credit during the off-season period, and the Company expects to be able to do so (although no assurance of continued cash flow can be given).

 

Net cash provided by operating activities totaled $1,903,655 in 2017, compared to $1,287,902 for the 2016 fiscal year.

 

During fiscal year 2017, capital investment of $339,329 was made that included three utility pick-ups, fiberglass swimming pool, upgrade parking lot and sport court, upgrade TV system, a new trailer tow truck, and engineering and permits for the new RV service facility. During fiscal year 2016, capital investment of $288,045 was made that included road paving, a new trailer tow truck, a new forklift, ice cream freezer, Wi-Fi equipment, golf cart, and engineering and permits for the new RV service facility. These projects were completed on time and within budget. As of September 30, 2017, the Company eliminated all debt as a result of acquiring the three RV storage properties.

 

With the possibility of requiring additional funds for planned capital improvements and the winter season, the Company maintains a $500,000 Line of Credit to insure funds will be available if required. In anticipation of future large projects, the Board of Directors has instructed management to build operational cash balances.

 

Fiscal year 2017's current ratio (current assets to current liabilities) of 1.39 decreased from fiscal year 2016's current ratio of 1.48. The decrease in current ratio is the result of decreased prepaid income taxes, increase in rental deposits and Income taxes payable, and the elimination of current portion of note payable.

 

Working Capital decreased to $861,070 at the end of fiscal year 2017, compared with $981,514 at the end of fiscal year 2016. This decrease is primarily a result of increased rental deposits and accrued salaries and vacation. It should be noted the Company paid off all remaining balance of the note payable of $1,431,890 during fiscal year 2017.

 

11

CAPITAL RESOURCES AND PLANNED EXPENDITURES

The Company plans capital expenditures up to $1,000,000 in fiscal year 2018 to further enhance the Resort facilities and services. This would include construction of a new RV service and repair facility, a new trailer tow truck, resort surveillance upgrade, and installation of a new HVAC system in the General Store. 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.

 

RESULTS OF OPERATIONS

 

YEAR-TO-YEAR COMPARISON

Revenue: Operating revenue, interest and other income increased above the prior fiscal year ended September 30, 2016, by $229,189, or 2.9%.

 

 

 

Occupancy rates on the previous table are calculated based on the quantity occupied as compared to the total sites available for occupancy (i.e., total occupied to number of total available). Average paid site is based on site revenue and paid sites. Resort support operations include revenues received from the arcade, laundromat, recreational activities, and other less significant sources.

 

2017 COMPARED WITH 2016

Resort operations income increased $397,690, or 6.0%, primarily due to a $308,594, or 6.6%, increase in site rental revenue. This increase reflects a 0.7% increase in paid site occupancy and rate increases effective January 1, 2017. RV storage and spotting activity increased $109,636, or 6.4%, above the previous year.

 

12

Retail operations income decreased $168,791, or 12.4%, partly due to a $125,701, or 19.4%, decrease in the RV Service Department revenue. The RV Service Department operated most of the year with less technical staff than the previous year which significantly decreased labor related income. In an effort to maximize revenue, management continues to stock more appropriate items, more effectively merchandise, and pay greater attention to customer service. In addition, management has actively promoted the RV service and retail operation locally compared to previous years.

 

Interest/Dividend Income increased $290, or 7.2%, above the previous year. Loss on Disposal of Assets for fiscal year 2017 increased to $5,248 compared to $1,551 the previous year. In addition, Interest Expense decreased $35,195, or 35.4%, due to accelerating the payments and interest adjustments on financing the RV storage properties.

 

Operating Expenses increased $39,816, or 0.76%, as a result of labor, payroll taxes, credit card processing, computer expenses, water and sewer, electrical, and RV storage lot maintenance. Expenses that were significantly below the previous year included workers’ compensation, interest, garbage, and landscaping (specifically tree maintenance). 

 

Maintaining a conservative approach, most expense items were managed well below plan and in many categories below the previous year. The Board of Directors has directed management to continue maintenance projects as needed to provide a first-class resort for campers using recreational vehicles.

 

Income before provision for income taxes of $1,926,302, a 16.6% increase above last year, is reflective of increased income from operations and decreased interest expense.

 

Net income of $1,092,302 for fiscal year 2017 shows an increase of $163,413, or 17.6%, above a net income of $928,889 in 2016. This increase in net income is a reflection of increased resort income and decreased interest expense.

 

INFLATION has not had a significant impact on our profit position. The Company has increased rates, which have more than compensated for the rate of inflation.

 

FUTURE OPERATING RESULTS could be unfavorably impacted to the extent that changing prices result in lower discretionary income for customers and/or increased transportation costs to the Resort. In addition, increasing prices affect operations and liquidity by raising the replacement cost of property and equipment.

 

FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS:

 

A number of factors, many of which are common to the lodging industry and beyond our control, could affect our business, including the following:

 

·                 increased gas prices;

 

·                 increased competition from other resorts in our market;

 

·                 increases in operating costs due to inflation, labor costs, workers' compensation and healthcare related costs, utility costs, insurance and unanticipated costs such as acts of nature and their consequences and other factors that may not be offset by increased rates;

 

·                 changes in interest rates and in the availability, cost and terms of debt financing;

 

·                 changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related costs of compliance with laws and regulations, fiscal policies and ordinances;

 

·                 adverse effects of market conditions, which may diminish the desire for leisure travel; and

 

·                 adverse effects of a downturn in the leisure industry.

 

13

 

 

The leisure and travel business is seasonal and seasonal variations in revenue at our resort can be expected to cause quarterly fluctuations in our revenue.

 

Our revenue is generally highest in the third and fourth quarters. Quarterly revenue also may be harmed by events beyond our control, such as extreme weather conditions, terrorist attacks or alerts, contagious diseases, economic factors and other considerations affecting travel. To the extent that cash flow from operations is insufficient during any quarter due to temporary or seasonal fluctuations in revenue, we have to rely on our short-term line of credit for operations.

 

In the recent past, events beyond our control, including an economic slowdown and terrorism, harmed the operating performance of the leisure industry generally, and if these or similar events occur again, our operating and financial results may be harmed by declines in average daily rates or occupancy.

 

Carrying our outstanding debt may harm our business and financial results by:

 

·                 requiring us to use a substantial portion of our funds from operations to make required payments on principal and interest, which will reduce the amount of cash available to us for our operations and capital expenditures, future business opportunities and other purposes;

 

·                 making us more vulnerable to economic and industry downturns and reducing our flexibility in responding to changing business and economic conditions;

 

·                 limiting our ability to borrow more money for operations, capital expenditures or to finance acquisitions in the future; and

 

·                 requiring us to sell one or more properties, possibly on disadvantageous terms, in order to make required payments of interest and principal.

 

Our resort has a need for ongoing renovations and potentially significant capital expenditures in connection with improvements, and the costs of such renovations or improvements may exceed our expectations.

 

Occupancy and the rates we are able to charge are often affected by the maintenance and capital improvements at a resort, especially in the event that the maintenance of improvements are not completed on schedule, or if the improvements result in the closure of the General Store or a significant number of sites. The costs of capital expenditures we need to make could harm our financial condition and reduce amounts available for operations. These capital improvements may also give rise to additional risks including:

 

·                 construction cost overruns and delays;

 

·                   a possible shortage of available cash to fund capital improvements and the related possibility that financing of these expenditures may not be available to us on favorable terms;

 

·                 uncertainties as to market demand or a loss of market demand after capital improvements have begun;

 

·                 disruption in service and site availability causing reduced demand, occupancy, and rates; and

 

·                 possible environmental issues.

 

We rely on our executive officers, the loss of whom could significantly harm our business.

 

14

 

Our continued success will depend to a significant extent on the efforts and abilities of our C.E.O. and General Manager, Jay Jamison. Mr. Jamison is important to our business and strategy and to the extent that were he to depart and is not replaced with an experienced substitute, Mr. Jamison's departure could harm our operations, financial condition and operating results.

 

Uninsured and underinsured losses could harm our financial condition, and results of operations.

 

Various types of catastrophic issues, such as losses due to wars, terrorist acts, earthquakes, floods, pollution or environmental matters, generally are either uninsurable or not economically insurable, or may be subject to insurance coverage limitations, such as large deductibles or co-payments. Our resort is located on the coast of California, which has been historically at greater risk to certain acts of nature (such as severe storms, fires and earthquakes).

 

In the event of a catastrophic loss, our insurance coverage may not be sufficient to cover the full current market value or replacement cost of our lost properties. Should an uninsured loss or a loss in excess of insured limits occur, we could lose all or a portion of the capital we have invested in the resort, as well as the anticipated future revenue from the resort. In that event, we might nevertheless remain obligated for any notes payable or other financial obligations related to the property. Inflation, changes in building codes and ordinances, environmental considerations and other factors might also keep us from using insurance proceeds to replace or renovate the resort after it has been damaged or destroyed. Under these circumstances, the insurance proceeds we receive might be inadequate to restore our economic position on the damaged or destroyed property.

 

ITEM 8.                      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

Pismo Coast Village, Inc. is responsible for the information and representations contained in this report. The financial statements have been prepared in conformity with the generally accepted accounting principles we considered appropriate in the circumstances and include some amounts based on our best estimates and judgments. Other financial information in this report is consistent with these financial statements.

 

Our accounting systems include controls designed to reasonably assure assets are safeguarded from unauthorized use or disposition and provide for the preparation of financial statements in conformity with generally accepted accounting principles. These systems are supplemented by the selection and training of qualified financial personnel and an organizational structure provide for appropriate segregation of duties.

 

15

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REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

 

 

To the Board of Directors and

Shareholders of Pismo Coast Village, Inc.

Pismo Beach, California

 

We have audited the accompanying balance sheets of Pismo Coast Village, Inc. (the Company) (a California corporation) as of September 30, 2017 and 2016, and the related statements of income and retained earnings and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 30, 2017 and 2016, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

 

 

BROWN ARMSTRONG ACCOUNTANCY CORPORATION

 

Bakersfield, California

November 15, 2017

 

16

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PISMO COAST VILLAGE, INC. BALANCE SHEETS SEPTEMBER 30, 2017 AND 2016
	2017			2016
ASSETS
Current Assets
Cash and cash equivalents	$	2,811,766		$	2,616,670
Accounts receivable		21,261			42,327
Inventories		191,023			191,229
Prepaid income taxes		-			156,200
Prepaid expenses		19,976			23,745
Total current assets		3,044,026			3,030,171
Pismo Coast Village Recreational Vehicle Resort    and Related Assets –
Net of accumulated depreciation and amortization		14,725,872			14,827,813
Other Assets		-			3,688
Total Assets	$	17,769,898		$	17,861,672
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable and accrued liabilities	$	267,750		$	266,482
Accrued salaries and vacation		326,082			285,679
Rental deposits		1,488,886			1,340,592
Income taxes payable		52,600			-
Current portion of note payable		-			116,048
Current portion of capital lease obligations		47,638			39,856
Total current liabilities		2,182,956			2,048,657
Long-Term Liabilities
Long-term deferred taxes		810,600			846,200
Note payable, net of current portion		-			1,315,842
Capital lease obligations, net of current portion		131,101			98,034
Total Liabilities		3,124,657			4,308,733
Shareholders’ Equity
Common stock – no par value, 1,800 shares issued,     1,775 and 1,775 shares outstanding at     September 30, 2017 and 2016, respectively		5,569,268			5,569,268
Retained earnings		9,075,973			7,983,671
Total shareholders’ equity		14,645,241			13,552,939
Total Liabilities and Shareholders’ Equity	$	17,769,898		$	17,861,672

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

 

17

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PISMO COAST VILLAGE, INC. STATEMENTS OF INCOME AND RETAINED EARNINGS YEARS ENDED SEPTEMBER 30, 2017 AND 2016
	2017			2016
Income
Resort operations	$	7,012,503		$	6,614,813
Retail operations		1,194,560			1,363,351
Total income		8,207,063			7,978,164
Costs and Expenses
Operating expenses		5,287,893			5,248,077
Cost of goods sold		509,810			566,279
Depreciation		417,899			414,472
Total costs and expenses		6,215,602			6,228,828
Income from operations		1,991,461			1,749,336
Other Income (Expense)
Interest/dividend income		4,331			4,041
Interest expense		(64,242)			(99,437)
Loss on disposal of fixed assets		(5,248)			(1,551)
Total other income (expense)		(65,159)			(96,947)
Income Before Provision for Income Tax		1,926,302			1,652,389
Provision for Income Tax		834,000			723,500
Net Income		1,092,302			928,889
Retained Earnings – Beginning of Year		7,983,671			7,245,681
Redemption of Stock		-			(190,899)
Retained Earnings – End of Year	$	9,075,973		$	7,983,671
Earnings Per Share	$	615.38		$	523.32

 

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

 

18

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PISMO COAST VILLAGE, INC. STATEMENTS OF CASH FLOWS YEARS ENDED SEPTEMBER 30, 2017 AND 2016
	2017			2016
Cash Flows From Operating Activities
Net income	$	1,092,302		$	928,889
Adjustments to reconcile net income to net cash     provided by operating activities:
Depreciation and amortization		417,899			414,472
(Increase) Decrease in deferred income tax		(35,600)			21,300
Loss on disposal of fixed assets		5,248			1,551
Decrease in accounts receivable		21,066			1,589
(Increase) Decrease in inventory		206			(787)
(Increase) Decrease in prepaid income taxes		156,200			(156,200)
Decrease in prepaid expenses		3,769			5,291
Increase in accounts payable and accrued liabilities		1,268			41,843
Increase in accrued salaries and vacation		40,403			1,253
Increase in rental deposits		148,294			79,401
Increase (Decrease) in income taxes payable		52,600			(50,700)
Total adjustments		811,353			359,013
Net cash provided by operating activities		1,903,655			1,287,902
Cash Flows From Investing Activities
Proceeds from sale of fixed assets		21,811			-
Capital expenditures		(339,329)			(288,045)
Net cash used in investing activities		(317,518)			(288,045)
Cash Flows from Financing Activities
Redemption of stock		-			(216,000)
Principal payments on note payable		(1,431,890)			(446,149)
Principal payments on capital lease obligations		(39,857)			43,155
Acquisition of capital lease assets		80,706			-
Net cash used in financing activities		(1,391,041)			(618,994)
Net increase in cash and cash equivalents		195,096			380,863
Cash and Cash Equivalents – Beginning of Year		2,616,670			2,235,807
Cash and Cash Equivalents – End of Year	$	2,811,766		$	2,616,670
Schedule of Payments of Interest and Taxes
Cash paid for income tax	$	860,000		$	860,000
Cash paid for interest	$	64,242		$	99,437

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

 

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PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2017 AND 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 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.

 

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 September 30, 2017 or 2016.

 

Inventory

 

Inventory has been valued at the lower of cost or market on a first-in, first-out basis. Inventory is comprised primarily of furnished goods in the general store and in the RV repair shop.

 

Property and Equipment – Pismo Coast Village

 

All property and equipment are recorded at cost. Depreciation of property and equipment is computed using straight-line method based on 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 Per Share

 

The earnings per share reported on the financial statements are based on the 1,775 shares 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.

 

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PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2017 AND 2016

PAGE 2

 

 

NOTE 2- Summary of Significant Accounting Policies (Continued)

 

Advertising

 

The Company follows the policy of charging the costs of non-direct advertising as incurred. Advertising expense was $59,890 and $46,998 for the years ended September 30, 2017 and 2016, respectively. Advertising expense was included in operating expenses on the statement of operations.

 

Concentration of Credit Risk

 

At September 30, 2017 and 2016, the Company had cash deposits of $946,168 and $725,895, respectively, in excess of the $250,000 federally insured limit with Pacific Premier Bank (formerly Heritage Oaks 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.

 

Reclassifications

 

Certain reclassifications have been made to prior year balances to conform to current year presentation. These reclassifications had no effect on the Company’s results of operations or financial position.

 

Subsequent Events

 

Events subsequent to September 30, 2017, have been evaluated through November 15, 2017, which is the date the financial statements were available to be issued. Management did not identify any subsequent events that required disclosure.

 

Income Taxes

 

The Company uses the asset-liability method of computing deferred taxes in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Income Taxes topic. FASB 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 September 30, 2017, 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 September 30, 2018. 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, 2014 and by the California Franchise Tax Board for fiscal years ending on or after September 30, 2013.

 

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PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2017 AND 2016

PAGE 3

 

 

NOTE 3 – Pismo Coast Village Recreational Vehicle Resort and Related Assets

 

At September 30, 2017 and 2016, property and equipment included the following:

 

	2017			2016
Land	$	10,394,746		$	10,394,746
Building and resort improvements		11,343,482			11,295,967
Furniture, fixtures, equipment and leasehold improvements		666,766			661,583
Transportation equipment		704,358			632,779
Construction in progress		144,328			105,660
		23,253,680			23,090,735
Less: accumulated depreciation		(8,527,808)			(8,262,922)
	$	14,725,872		$	14,827,813

 

Depreciation and amortization expense was $417,899 and $414,472 for the years ended September 30, 2017 and 2016, respectively.

 

At September 30, 2017 and 2016, the cost of assets under capital lease was $292,802 and $263,077, respectively, and related accumulated amortization was $147,336 and $160,772, respectively. Depreciation expense on assets under capital lease was $37,545 and $25,685 for the years ended September 30, 2017 and 2016, 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 March 20, 2018. There was no outstanding balance on the line of credit at September 30, 2017 or 2016.

 

NOTE 5 – Notes Payable

 

As of September 30, 2016, the Company had a note payable to Pacific Premier Bank (formerly Heritage Oaks Bank) with a remaining outstanding balance of $1,431,890. Although the note’s original maturity was May 2018, during 2017 the Company paid off the note in its entirety. As of September 30, 2017, there was no remaining balance on this note.

 

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PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2017 AND 2016

PAGE 4

 

 

NOTE 6 – Capital Lease Obligations

 

At September 30, 2017 and 2016, capital lease obligations consisted of the following:

 

	2017			2016
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.	$	19,115		$	30,469
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.		15,576			28,072
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.		63,342			73,610
A 2018 Hino truck leased from Donahue Transportation Services Corp, payable in monthly installments of $1,116, including interest at 4.644% per annum, through January 2024.		80,706			-
Total capital lease obligations	$	178,739		$	132,151

 

 

At September 30, 2017, future minimum payments on capital lease obligations were as follows:

 

For the Twelve Months Ending September 30,
2018	$	55,686
2019		35,404
2020		26,784
2021		26,784
2022		26,784
Thereafter		31,248
Present value of future minimum payments		202,690
Less amount representing interest		(23,951)
		178,739
Less current portion of capital lease obligations		(47,638)
Total capital lease obligations, net of current portion	$	131,101

 

NOTE 7 – Common Stock

 

Each share of stock is intended to provide the shareholder with a 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.

 

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PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2017 AND 2016

PAGE 5

NOTE 7 – Common Stock (continued)

 

On March 31, 2016, the Company repurchased 8 shares of the stock for $27,000 per share for a total purchase price of $216,000. This stock redemption reduced the number of outstanding shares from 1,783 to 1,775.

 

NOTE 8 – Income Taxes

 

The provision for income taxes for the years ended September 30, 2017 and 2016 are as follows:

 

	2017			2016
Income tax provision	$	834,000		$	723,500

 

The effective income tax rate varies from the statutory federal income tax rate as follows:

 

	2017			2016
Statutory federal income tax rate	34.0	%		34.0	%
Increase (decrease):
State income taxes, net of federal benefit	5.7			5.8
Nondeductible variable costs of shareholder usage	2.9			4.0
Other miscellaneous adjustments	(1.1)			0.0
Effective income tax rate	41.5	%		43.8	%

 

 

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

 

The Company has early adopted Accounting Standards Update (ASU) 2015-2017, Balance Sheet Classification of Deferred Taxes, to simplify and improve the usefulness of the financial statements. The amendments in this ASU require that deferred tax liabilities and assets be classified as noncurrent in a 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. The Company has made this classification update as of October 1, 2016, and has applied this change retrospectively to all periods presented. Below is a table summarizing the changes in presentation for the periods ended September 30, 2017 and 2016:

 

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PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2017 AND 2016

PAGE 6

 

NOTE 8 – Income Taxes (continued)

 

	2017			2016
Total assets – original presentation	$	17,888,598		$	17,969,672
Total liabilities – original presentation		3,243,357			4,416,733
Total assets – change in presentation		(118,700)			(108,000)
Total liabilities – change in presentation		(118,700)			(108,000)
Total assets – updated presentation		17,769,898			17,861,672
Total liabilities – updated presentation		3,124,657			4,308,733

 

 

As of September 30, 2017 and 2016, the Company’s deferred tax liability was $810,600 and $846,200, 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 9 – Operating Leases

 

The Company leases a lot located in Oceano, California, for $2,933 per month. The lease has converted to a month-to-month lease; however, the lessor is considering a long-term renewal at this time.

 

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

 

For the Twelve Months Ending September 30,
2018	$	4,608
2019		4,608
2020		4,608
2021		4,608
2022		1,920
	$	20,352

 

Rent expense under these lease agreements was $43,928 and $43,066 for the years ended September 30, 2017 and 2016, respectively.

 

NOTE 10 – Employee Retirement Plan

 

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 $57,083 and $56,717 for the years ended September 30, 2017 and 2016, respectively.

 

25

---

PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2017 AND 2016

PAGE 7

 

 

NOTE 11 – Operating Expenses

 

Operating expenses for the years ended September 30, 2017 and 2016, consisted of the following:

 

 

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INDEPENDENT AUDITOR'S REPORT

ON ADDITIONAL INFORMATION

 

 

 

To the Board of Directors and

Shareholders of Pismo Coast Village, Inc.

Pismo Beach, California

 

 

Our report on our audits of the basic financial statements of Pismo Coast Village, Inc. as of September 30, 2017 and 2016 appears on page 16. Those audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The statements of income (unaudited) for the three months ended September 30, 2017 and 2016 are presented for purposes of additional analysis and are not a required part of the basic financial statements. These statements are the responsibility of management and were derived from, and relate directly to, the underlying accounting and other records used to prepare the financial statements. Such information has not been subjected to the auditing procedures applied in the audits of the basic financial statements, and accordingly, we express no opinion on it.

 

BROWN ARMSTRONG ACCOUNTANCY CORPORATION

 

Bakersfield, California

November 15, 2017

 

27

 

 

 

28

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

There has been no change of accountants nor any disagreement with accountants on any matter of accounting principle or practices or financial statement disclosure required to be reported under this item.

 

ITEM 9A(T).           CONTROLS AND PROCEDURES

 

DISCLOSURE CONTROLS AND PROCEDURES

 

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 Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission'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 Exchange Act is accumulated and communicated to management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Our management, under the direction of our Chief Executive Officer and Chief Financial Officer (who is our principal accounting officer), has evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of September 30, 2017 (the end of the period covered by this report). Based on that evaluation, our principal executive officer and our principal accounting officer concluded that these disclosure controls and procedures were effective as of such date.

 

INTERNAL CONTROL OVER FINANCIAL REPORTING

 

Our management is also responsible for establishing internal control over financial reporting ("ICFR") as defined in Rules 13a-I5(f) and 15(d)-15(f) under the 1934 Act. Our ICFR are intended to be designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Our ICFR are expected to include those policies and procedures that management believes are necessary that:

 

1.             pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

 

2.             provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and our directors; and

 

3.             provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.

 

Management recognizes that there are inherent limitations in the effectiveness of any system of internal control, and accordingly, even effective internal control can provide only reasonable assurance with respect of financial statement preparation and may not prevent or detect misstatements. In addition, effective internal control at a point in time may become ineffective in future periods because of changes in conditions or due to deterioration in the degree of compliance with our established policies and procedures.

 

29

As of September 30, 2017, management assessed the effectiveness of the Company's internal control over financial reporting (ICFR) based on the criteria for effective ICFR established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and SEC guidance on conducting such assessments by smaller reporting companies and non-accelerated filers. Based on that assessment, management concluded that, during the period covered by this report, such internal controls and procedures were effective as of September 30, 2017.

 

This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management's report in this Annual Report.

 

There were no changes in our internal control over financial reporting during the quarter ended September 30, 2017, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

ITEM 9B.  OTHER INFORMATION

No disclosure is required under this item.

 

PART III

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

 

a. The Company's Directors were chosen at the Shareholders’ Annual Meeting held January 21, 2017. Director Glenn Hickman resigned from the Board for personal reasons on September 16, 2017. At the Board of Directors’ Meeting held November 11, 2017, shareholder David Bessom was duly nominated and elected to fill the vacancy on the Board to serve until the next election at the Annual Shareholders’ Meeting set for January 20, 2018. The Directors serve for one year, or until their successors are elected. The names, ages, background and other information concerning the Directors, including other offices held by the Directors with the Company, are set forth below.

 

The following is a list of the Company's Directors and Executive Officers setting forth their functions and experience. There is no understanding or agreement under which the Directors hold office.

 

SAM BLANK, Director                                                                                              Age 72

Sam Blank served as a public-school teacher and administrator for more than 30 years. He earned Associate, Bachelor’s, Master’s, and Doctoral degrees from Citrus College, CSU Fullerton, Whittier College, and Brigham Young University, respectively. He holds lifetime California teaching and administrative credentials. Dr. Blank began his career in 1967 as a middle school teacher in the West Covina Unified School District. He soon became an assistant principal in neighboring Charter Oak USD. In 1979, he joined Poway USD in Poway, CA, where he served as principal of elementary and middle schools until he retired in 2001. He has been principal of schools that received California Distinguished Schools and National Blue Ribbon Schools honors. He is an emeritus member of the Association of California School Administrators and past member of Rancho Bernardo Chamber of Commerce, RB Business Association, and RB Rotary. Following his retirement from public education, Dr. Blank obtained a real estate salesperson license and is currently affiliated with Coldwell Banker Residential Real Estate. He is a member of local, state, and national realtor associations. From 2008 to 2013, he served as a member and treasurer for the board of directors for the Rancho Obispo HOA in San Luis Obispo, CA. He and his wife, Bonnie, have been married since 1968 and have resided in Escondido since 1979. Bonnie is also retired with more than 25 years of service as a teacher and high school counselor. Their married daughter and grandson live in the Bay Area. Dr. Blank has served on the Board of Directors since November 12, 2016.

 

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HARRY BUCHAKLIAN, Director                                                                                Age 85

Harry Buchaklian has a B.A. degree from California State University, Fresno, in industrial arts, and a secondary level teaching credential in laboratory electronics and small engine repair. His career included employment as an assistant manager with Western Auto Stores, electronics instructor at Fresno Technical College, and technical supervisor for Sears Roebuck. He retired from Sears Roebuck in 1994. He has been a member of the Board from March 1981 to January 1992 and from September 1995 to present, serving one year as Executive Vice President, and as a chairman of the Policy and Audit Committees. Mr. Buchaklian is currently chairman of the Environmental, Health and Safety Advisory Committee.

 

RODNEY ENNS, Director                                                                                         Age 64

Rodney Enns has a B.S. degree in computer engineering from California State University, Fresno, and a secondary math teaching credential from the State of California. He was president, owned and operated, Ennsbrook Ent., an incorporated poultry enterprise, from 1975 to 1995. Mr. Enns then worked as an electrical engineer at Voltage Multiplers, Inc., and was promoted to senior engineer before leaving in August 2005. He is currently teaching high school mathematics and engineering at Mission Oak High School in Tulare, California. He has been a member of the Board of Directors since November 2007.

 

WILLIAM FISCHER, Director                                                                                    Age 84

William (Bill) Fischer resides in Simi Valley, California. He served four years in the U.S. Air Force during the Korean War, attaining the rank of Staff Sergeant. He is a graduate of California State University, Northridge, with a B.S. degree in accounting. He worked in the aerospace, entertainment and public utility industries until 1969 when he was hired by Getty Oil Company’s corporate office in Los Angeles, California, as an accounting supervisor. Texaco, Inc. acquired Getty Oil in 1985, and he was promoted to Manager of Benefits Plans Accounting and transferred to Houston, Texas. Mr. Fischer was responsible for the Savings/Thrift, 401(k), and ESOP Plans administration until 1989 when he elected early retirement. He was an independent financial consultant to various companies until 2006. Mr. Fischer also was active in residential real estate from 1989 to 1997, and, since 1980, has had an active real estate broker’s license. He is a member of the Veterans of Foreign Wars, Elks, Moose, and Knights of Columbus organizations. He looks forward to contributing his financial background to the Board. Mr. Fischer served two years as Executive Vice President and five years as Nominating Committee Chairman. He has been on the Board since January 2002.

 

WAYNE HARDESTY, Director, Chief Financial Officer                                                 Age 84

and Vice President - Finance

Wayne Hardesty graduated from Arizona State University in 1955. He was commissioned an Ensign from the Naval Office Candidate School in Newport, Rhode Island, in 1956, and was immediately assigned to the Navy Area Audit Office in Los Angeles, California, for duty at U.S.C. and General Dynamics-Pomona. He entered civil service in 1959, and remained with the Audit Office until 1973, at which time he became a price analyst for the U.S. Air Force at Norton Air Force Base working on the MX and Minuteman Projects. Mr. Hardesty received his MBA from Southern Illinois University in 1980. He retired from civil service in 1988 and became self-employed, primarily in tax preparation for both individual and business returns. He became a licensed Enrolled Agent in 1989 and currently operates Hardesty Financial Services in Rancho Cucamonga, California. Mr. Hardesty has been a member of the Board since September 2008, has served three years as Chairman of the Audit Committee, and is currently serving a fifth year as Chief Financial Officer and Vice President – Finance.

 

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DENNIS HEARNE, Director                                                                                      Age 79

Dennis Hearne holds an A.A. degree in business administration from Hartnell Junior College in California. He served two years in the Navy. Prior to retirement, he was employed in a family agriculture business, L.A. Hearne Company, located in the Salinas Valley in California, for thirty-seven years, and presently serves as a director of the company’s board. Mr. Hearne has also served on the board of directors of the California Feed and Grain Association in Sacramento and the California Crop Improvement Association in Davis. He is a member of Knights of Columbus, serving as treasurer and financial secretary for fifteen years. Mr. Hearne is a retired volunteer fireman with forty years service, serving the rural area in King City, California. He has been a member of the Board of Directors since September 2006, and is currently serving a seventh year as Chairman of the Nominating Committee.

 

GLENN HICKMAN, Director                                                                                      Age 84

Glenn Hickman has a B.A. in business and a secondary teaching credential from Fresno State University in California. His occupation prior to retirement in 1995 was as a financial analyst and office supervisor for Cal Resources, a subsidiary of Shell Oil Company. Mr. Hickman served nine years as Executive Vice President. Mr. Hickman has been a member of the Board since July 1999 and served nine years as Executive Vice President. He submitted his resignation for personal reasons on November 11, 2017.

 

TERRIS HUGHES, Director and President                                                                 Age 68

Terris (Terry) Hughes holds an A.A. degree from Bakersfield Junior College in California in police science. He was employed by Belridge/Shell Oil for twenty-three years, from 1973 to 1997, holding the position of senior training technician for the last ten years of that time. He was employed as an internal consultant for Aera Energy LLC, an oil industry company formed in 1997 between the Shell Oil and Mobil Oil Corporations. His duties were to serve as a behavior base safety advisor and provide safety training to Aera Energy LLC employees. He retired from Aera Energy LLC on December 31, 2014. Mr. Hughes then opened his own business entitled Saf-T-Treasures, and travels the country providing safety motivational presentations to employees of various industries. He has been a member of the Board since January 1996, has served one year as Vice President – Policy, three years as Executive Vice President, and is currently serving a second year as President.

 

KAREN KING, Director                                                                                             Age 59

Karen King studied business finance and management at California Lutheran University in Thousand Oaks, California, and at the University of Phoenix. From 1991 to 2006, she was employed as Director of Credit Risk and Underwriting Management, Credit Risk Manager, Customer Account Team Lead Underwriting and Quality Control, and as Desktop Underwriter Technology Instructor with Fannie Mae, and, from 2006 to 2008, she was employed with PMI Mortgage Insurance Company as Vice President, National Account Operations in Walnut Creek, California. In June 2008, Mrs. King and her family relocated to Camarillo, California, where she was employed until December 2009 as a sales agent for Camarillo Properties, a local real estate brokerage firm. In December 2009, she accepted employment with Bank of America, and held the positions of Vice President - Investor Audit, Vice President - Executive Customer Relations, Office of the CEO, and Vice President - Operations Risk. She left Bank of America in September 2015 when she was hired by Wells Fargo Bank as Vice President, Operations Risk Consultant. Since 2014, Ms. King has served on the Camarillo Ranch Foundation Board as Community Relations Chairperson. She has also been involved with the Camarillo City Ambassadors, the Camarillo Council on Aging, and the Ventura County Council on Aging, representing the City of Camarillo. Mrs. King has been a member of the Board of Directors since November 2016.

 

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GARRY NELSON, Director and Executive Vice President                                            Age 67

Garry Nelson is a graduate of Cal Poly University, San Luis Obispo, California, and has been involved in agriculture for more than forty years. From 2003 until his retirement in 2014, he was employed as the General Manager of Vintage Nurseries in Wasco, California, a company that specializes in grapevines. Prior to his employment at Vintage Nurseries, he was vice president and chief operating officer for Belridge Farms for many years. Mr. Nelson was a member of the Shafter City Council for twenty years, serving as mayor for eight of those years. He also serves on the board of Bakersfield Memorial Hospital Foundation and has served on numerous agricultural industry boards. Mr. Nelson has been a member of the Company's Board of Directors since November 2008, and is currently serving a second year as Executive Vice President.

 

RONALD NUNLIST, Director                                                                                      Age 79

Ronald Nunlist was employed in the oil business for many years. From 1995 to 1997, he was employed as an operations foreman by Cal Resources LLC, an oil industry company owned by Shell Oil Corporation. From 1997 until his retirement in 1999, Mr. Nunlist was employed as a logistics specialist by Aera Energy LLC, an oil industry company formed between the Shell Oil and Mobil Oil Corporations. Mr. Nunlist presently serves as a planning commissioner for the City of Shafter, California. He has been a member of the Board since January 1986, serving ten years as President (1992 to 1997 and from 2011 to 2016), and ten years as Vice President – Operations.

 

GEORGE PAPPI, JR., Director Vice President - Secretary                                           Age 55

Mr. Pappi’s current occupation is as a property major case general adjuster for The Hartford Insurance. Other positions held during his more than thirty years of employment include office manager, property and bodily injury adjustor, fire and casualty (with extensive construction background), risk management and commercial insurance. He graduated from Cal Poly Pomona with a B.S. in management and human resources. He resides in La Verne, California, and is actively involved in local community and church activities and the United Way organization. Mr. Pappi has been a member of the Board of Directors since January 2004, and is currently serving a fourth year as Vice President – Secretary.

 

JERALD PETTIBONE, Director                                                                                   Age 91

Jerry Pettibone sold and retired from his company, Pettibone Signs, in Santa Cruz, California, in 1988. He started the company, which operated statewide, in 1960. Active in trade associations, he served on the board of directors of the National Electric Sign Association, and on the board of directors of the World Sign Association, serving as national president in 1985 and 1986. He served on the board of directors of the California Electric Sign Association for twenty-two years, including four years as state president, and was elected a director emeritus. He was active in Rotary International for forty years, serving as district governor for District 5170 with 4,500 members that included the Silicon Valley. A life member of the Disabled American Veterans, he served in the Navy in the South Pacific during World War II. Mr. Pettibone is also a fifty-year life member of the Elks. He has been a member of the Board since January 1993, serving three years as Chief Financial Officer, in addition to serving fifteen years as President of the Company.

 

DWIGHT PLUMLEY, Director and Vice President - Operations                                      Age 65

Dwight Plumley attended College of the Sequoias in California, studying electronic engineering and construction real estate. In 1973, he started in the produce equipment industry working for Packers Manufacturing, Inc. as a service and installation supervisor. In 1979, he became employed by Pennwalt Corporation, an international equipment producer, as a project manager and supervisor. Mr. Plumley purchased Packers Manufacturing, Inc. in 1987, and, as President, produces fruit and vegetable packing and processing systems, from small to multimillion dollar projects, nationwide and internationally. He has also served on the board of directors for Yosemite Bible Camp, a 60-acre facility for up to 350 campers and staff from 1994 to 2006, and served as church deacon from 1984 to 2004. Mr. Plumley has been a member of the Board of Directors since January 2010, and is currently serving a sixth year as Vice President – Operations.

 

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JERRY ROBERTS, Director                                                                                       Age 64

Jerry Roberts has an associate of arts degree in math and science from the College of the Sequoias, Visalia, California; a bachelor’s degree in biological sciences from the University of the Pacific, Stockton, California; an MBA degree from the Santa Clara University Graduate School of Business, Santa Clara, California; and is licensed by the California State Board of Accountancy as a Certified Public Accountant. He was first licensed in 1982 after fulfilling experience requirements while in the employment of the international accounting firm of Arthur Andersen & Co., and has been a member of the California Society of Certified Public Accountants since 1982. Mr. Roberts is currently a partner in the accounting, tax and consulting firm of Lampros & Roberts, established in 1985, and is Chief Executive Officer of Maximum Living, Inc., a national brand dietary supplement company. Mr. Roberts has been married to his wife Denise since 1978. They have three sons and currently reside in Los Gatos, California. Mr. Roberts has been a member of the Board since March 2013.

 

Brian Skaggs, Director                                                                                         Age 59

Brian Skaggs received his Bachelor of Science degree in Civil Engineering in 1980, and, in 1988, received a Masters degree in engineering, both degrees from California State University, Fresno. He became a Registered Civil Engineer in the State of California in 1983. In 1980, Mr. Skaggs was hired as Assistant Engineer by Summers Engineering, Inc., was promoted to Civil Engineer in 1983, and in March 1991 was promoted to Senior Civil Engineer and became a partner in the firm. During his years of employment with Summers Engineering, he has worked in the field of water resources engineering in the San Joaquin Valley and other areas in California. Mr. Skaggs has been a member, past vice-president and past president of the American Council of Engineering Companies (ACEC), Sequoia Chapter, and the ACEC Sequoia Chapter was named chapter of the year while he was serving as President. He is also a member of the American Water Works Association, a member of the U. S. Committee on Irrigation and Drainage, and a member of American Society of Civil Engineers. Mr. Skaggs is a member, past vice-president and current president of the Hanford Fraternal Hall Association; a member, past treasurer and past president of the Hanford Celebration Committee; and a member and past treasurer of the Kit Carson Volunteer Fire Department. Mr. Skaggs has been a member of the Board of Directors since May 2016.

 

GARY WILLEMS, Director                                                                                         Age 63

Gary Willems holds a B.A. degree in music education and a California life teaching credential from Fresno Pacific University, as well as a professional clear administrative services credential. Mr. Willems started teaching in 1977 and was a Band Director for thirty years in the Dinuba/Reedley area. He was also Head Marching Band Director of the Reedley High School Band from 1985 to 2007. Mr. Willems is an active member of the Music Educators’ Association and is the past president of Fresno and Madera Counties Music Educators’ Association. In 2007, he moved into school administration where he was employed as the Visual and Performing Arts Coordinator and the Administrator of the Dunlap Leadership Academy Charter School (an on-line high school) at Kings Canyon Unified School District. In 2014, Mr. Willems retired from education, and he is now enjoying time with his wife, children and grandchildren. Mr. Willems has served on the Board of Directors since January 2001, and served two years as Vice President – Secretary.

 

JACK WILLIAMS, Director                                                                                         Age 67

Mr. Williams graduated from San Diego State University in 1974 with a B.S. in accounting. Following that, he has been employed in the field of accounting in a variety of industries, including agriculture, construction, heavy equipment sales, and manufacturing. He was employed as a financial analyst by Texaco Oil Corporation in the Bakersfield, California, area from 1997 until 1999, and as Chief Financial Officer for Goodwill Industries of South-Central California from March 2000 to November 2004. Mr. Williams was an interim-controller for Diversified Utilities Services, a position he held from April 2005 to December 2005. He established his own C.P.A. practice in 1983, which he continues to own and operate. Mr. Williams has been a member of the Board since January 1995, and served sixteen years as Chief Financial Officer and Vice President – Finance.

 

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b.            OTHER OFFICERS AND SIGNIFICANT EMPLOYEES

 

JAY JAMISON, Chief Executive Officer/General Manager and                                       Age 64

Assistant Corporate Secretary

Jay Jamison has been employed by the Company since June 1997 as General Manager and serves as Assistant Corporate Secretary. In March 2007, the Board changed his title to Chief Executive Officer/General Manager. He has a B.S. degree in Agricultural Management from Cal Poly San Luis Obispo, graduating in 1976. Mr. Jamison was raised on his family’s guest ranch, Rancho Oso, in Santa Barbara County, which included a recreational vehicle park, resident summer camp, equestrian facilities and numerous resort amenities. He worked on the ranch throughout his childhood and after college. The family business was sold in 1983, at which time Mr. Jamison was hired by Thousand Trails, Inc., a private membership resort, as a Resort Operations Manager. His last ten years at Thousand Trails were spent managing a 200-acre, 518-site, full-service resort near Hollister, California. He also managed Thousand Trails resorts in Acton and Idyllwild in Southern California. Prior to his employment with the Company, Mr. Jamison was a General Manager with Skycrest Enterprises in Redding and managed Sugarloaf Marina and Resort on Lake Shasta in Northern California between January 1995 and June 1997. Mr. Jamison was appointed to and served as a commissioner on the Pismo Beach Conference and Visitors Bureau from February 1998 to January 2010, serving as Chair from August 1999 until February 2009. At the 1999 National Association of RV Parks and Campgrounds Annual Convention, he was elected to serve on the Board of Directors representing the ten western states. During his two three-year terms on the Board, he served four years as Treasurer of the National Association, a position he held until he termed out December 2005. In June of 2002, Mr. Jamison was installed as a Director on the Board for the San Luis Obispo County Chapter of the American Red Cross, and served until June 2011, including from June 2006 until July 2008 as Board Chairman. In February 2006, Mr. Jamison was elected to serve as a commissioner on the California Travel and Tourism Commission, which markets California to potential domestic and international visitors. During his two four-year terms, he served on the Audit Committee, two years as committee Chairman, and one year on the Executive Committee. He termed out as a commissioner in June 2014; however, he still remains a member of the Audit Committee. Mr. Jamison was installed as a member of the Board of Directors for the San Luis Obispo County Conference and Visitors Bureau (Visit San Luis Obispo County) in 2012, and currently serves on the Executive Committee following two years as Board Chair. Since 2014 Mr. Jamison has served as a member of the Advisory Council for the Recreation, Parks, and Tourism Administration (RPTA) Department at Cal Poly San Luis Obispo.

 

c.           FAMILY RELATIONSHIPS

There are no familial relationships between the Directors nor between the Directors and the Officers.

 

d.           INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS

To the knowledge of the Company, none of the officers or directors have been personally involved in any bankruptcy or insolvency proceedings. To the knowledge of the Company, none of the directors or officers have been convicted in any criminal proceedings (excluding traffic violations and other minor offenses) or are the subject of a criminal proceeding which is presently pending, nor have such persons been the subject of any order, judgment, or decree of any court of competent jurisdiction, permanently or temporarily enjoining them from acting as an investment advisor, underwriter, broker or dealer in securities, or as an affiliated person, director or insurance company, or from engaging in or continuing in any conduct or practice in connection with any such activity or in connection with the purchase or sale of any security, nor were any of such persons the subject of a federal or state authority barring or suspending, for more than 60 days, the right of such person to be engaged in any such activity, which order has not been reversed or suspended.

 

35

 

e.           AUDIT COMMITTEE FINANCIAL EXPERT

Our Board of Directors has determined that it does not have a member of its audit committee that qualifies as an "audit committee financial expert" as defined in Item 401(e) of Regulation S-B, and is "independent" as the term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934, as amended.

 

We believe that the members of our Audit Committee are collectively capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. Due to the fact that the directors of Pismo Coast Village, Inc. do not receive compensation for the services they provide in that capacity, the Company has been unable to nominate and retain a director with the required expertise to stand for election to the Board of Directors. However, until the time that our Audit Committee has a qualified audit committee financial expert, we believe our engagement of Glenn Burdette (GB), Certified Public Accountants, satisfies this requirement. GB provides the Company's quarterly compilation of the balance sheets and the related statements of operations, and retained earnings, and cash flows in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants.

 

f.          CODE OF ETHICS

On November 8, 2003, the Company's Board of Directors adopted the introduction to our code of ethical conduct. After further review, consideration was given to adopting a more comprehensive and detailed Code. At the meeting of the Executive Committee held June 19, 2009, the committee approved a recommendation to present a revised Code of Ethics to the full Board for adoption. At the Board of Directors’ meeting held July 18, 2009, the Board unanimously approved the revised and complete Code of Ethics that applies to all the Company's employees and directors, including our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions.

 

The complete text of the revised Code of Ethics is filed with this Form 10-K as Exhibit 14. In addition, the Company has posted the Code of Ethics on its website,www.pismocoastvillage.com.

 

A copy of the Company’s Code of Ethics will be provided to any person, without charge, upon written request. Requests for the Company’s Code of Ethics should be addressed to:

 

Mr. Jay Jamison, Chief Executive Officer/General Manager

Pismo Coast Village, Inc.

165 South Dolliver Street

Pismo Beach CA 93449

 

g.           SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s directors, officers, and persons who beneficially own more than ten percent of a registered class of our equity securities within specified time periods to file with the SEC initial reports (“Form 3”) of beneficial ownership and reports of changes (“Form 4” and “Form 5”) in beneficial ownership of Common Stock of the Company. To the Company’s knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, all of the Company’s officers, directors and beneficial owners of greater than ten percent of the outstanding Common Stock complied with the Section 16(a) filing requirements for the fiscal year ending September 30, 2017.

 

ITEM 11.  EXECUTIVE COMPENSATION

 

STOCK OPTIONS AND STOCK APPRECIATION RIGHTS GRANTED DURING THE LAST FISCAL YEAR

 

This information required by Item 11 is incorporated by reference in the Company’s Definitive Proxy Statement for the Annual Meeting of Shareholders to be held January 20, 2018, under the caption “Compensation of Directors and Executive Officers.” The Definitive Proxy Statement is expected to be filed with the Commission on or before December 20, 2017.

 

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ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

 

Not applicable.

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

a.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

 

No person owns beneficially of record more than 5% of the Company's securities.

 

b.            SECURITY OWNERSHIP OF MANAGEMENT.

 

The following sets forth the securities beneficially owned, directly, by all directors and officers as a group as of September 30, 2017:                

 

Board Member	Title of Class		*Amount of Ownership		Percent of Class
Sam Blank	Common Stock		1 Share		0.056%
124 Helen Way
Escondido CA 92025
Harry Buchaklian	Common Stock		1 Share		0.056%
1361 East Ticonderoga Drive
Fresno CA 93720
Rodney Enns	Common Stock		1 Share		0.056%
2577 Sandell Avenue
Kingsburg CA 93631
William Fischer	Common Stock		1 Share		0.056%
1947 Sienna Lane
Simi Valley CA 93065
Wayne Hardesty	Common Stock		1 Share		0.056%
8651 Foothill Boulevard Space 110
Rancho Cucamonga CA 91730
Dennis Hearne	Common Stock		2 Shares		0.111%
45075 Merritt Street
King City CA 93930
Terris Hughes	Common Stock		1 Share		0.056%
2426 Sunset Street
Wasco CA 93280
Karen King	Common Stock		1 Share		0.056%
52 Maxine Drive
Camarillo CA 93010
Garry Nelson	Common Stock		1 Share		0.056%
727 Acacia Street
Shafter CA 93263

 

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Board Member	Title of Class		*Amount of Ownership		Percent of Class
Ronald Nunlist	Common Stock		4 Shares		0.222%
1105 Minter Avenue
Shafter CA 93263
George Pappi, Jr.	Common Stock		1 Share		0.056%
5728 Via De Mansion
La Verne CA 91750
Jerald Pettibone	Common Stock		3 Shares		0.166%
4179 Court Drive
Santa Cruz CA 95062
Dwight Plumley	Common Stock		3 Shares		0.166%
4212 West Hemlock Avenue
Visalia CA 93277
Jerry Roberts	Common Stock		2 Shares		0.111%
16230 Camino Del Sol
Los Gatos CA 95032
Brian Skaggs	Common Stock		1 Share		0.056%
371 Northstar Drive
Hanford CA 93230
Gary Willems	Common Stock		1 Share		0.056%
2015 Dorking Avenue
Cambria CA 93428
Jack Williams	Common Stock		1 Share		0.056%
7801 Revelstoke Way
Bakersfield CA 93309
All Officers and	Common Stock		26 Shares		1.444%
Directors as a Group

 

* Amount of Ownership: All such shares are owned beneficially and of record, and there are no additional shares known to the Company for which the listed beneficial owner has the right to acquire beneficial ownership as specified in Rule 13D-3(d)(1) of the Exchange Act.

 

c.             CHANGES IN CONTROL

 

Not applicable.

 

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

There have been no transactions during the past two years, or proposed transactions, to which the Company was or is to be a party, in which any of the officers, directors, nominees, named shareholders, or family members of any such persons, had or is to have a direct or indirect material interest, other than transactions where competitive bids determine the rates or charges involved, or where the amount involved does not exceed $120,000, or where the interest of the party arises solely from the ownership of securities of the Company and the party received no extra or special benefit that was not shared by all shareholders.

 

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EMPLOYMENT AGREEMENTS

 

See Item 10, Executive Compensation - Employment contracts and termination of employment and change in control arrangements, for a discussion of the current employment contracts between Pismo Coast Village, Inc. and Mr. Jamison.

 

OTHER ARRANGEMENTS

 

During the fiscal years 2017 and 2016, Pismo Coast Village, Inc. paid for various hospitality functions and for travel, lodging and hospitality expenses for spouses who occasionally accompanied directors when they were traveling on company business. Management believes that the expenditures were to Pismo Coast Village, Inc.'s benefit.

 

CERTAIN BUSINESS RELATIONSHIPS

 

None.

 

(1)-(5)       INDEBTEDNESS OF MANAGEMENT

 

None.

 

TRANSACTIONS WITH PROMOTERS

 

Not applicable.

 

DIRECTOR INDEPENDENCE

 

Our Board of Directors consists of shareholders of the Resort and therefore are not considered to be "independent" as defined by Section 121A of the American Stock Exchange Listing Standards. The Board considers all relevant facts and circumstances in its determination of independence of all members of the Board (including any relationships set forth in this Form 10-K under the heading "Certain Related Person Transactions"). As disclosed above, the Audit Committee, the Nominating Committee and the Personnel and Compensation/Benefits Committee members are not considered to be independent.

 

ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES

 

The shareholders will vote on the independent audit firm for the fiscal year ending September 30, 2018 at the annual shareholders’ meeting held on January 20, 2018.

 

The following table discloses the fees that the Company was billed for professional services rendered by its independent public accounting firm, Brown Armstrong Accountancy Corporation, in each of the last two fiscal years.

 

 

 

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Reflects fees billed for the audit of the Company's consolidated financial statements included in its Form 10-K and review of its quarterly reports on Form 10-Q.

 

(1)     Reflects fees, if any, for consulting services related to financial accounting and reporting matters.

 

(2)     Reflects fees billed for tax compliance, tax advice and preparation of the Company's federal tax return.

 

(3)     Reflects fees, if any, for other products or professional services not related to the audit of the Company's consolidated financial statements and review of its quarterly reports, or for tax services.

 

(4)     AUDIT COMMITTEE'S PREAPPROVAL POLICIES AND PROCEDURES

 

For the fiscal years ending September 30, 2017 and September 30, 2016, all audit related services, tax services and other services were pre-approved by the Audit Committee, which concluded that the provision of such services by Brown Armstrong were compatible with the maintenance of that firm's independence in the conduct of its auditing function.

 

(5)     No effort expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year was attributed to work performed by persons other than the accountant's full-time, permanent employees.

 

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PART IV

 

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

EXHIBITS AND INDEX OF EXHIBITS

 

1.   Financial Statements included in this Form 10-K Report:

 

Description	Page
Report of Independent Registered Accounting Firm	16
Balance Sheets as of September 30, 2017 and 2016	17
Statements of Income and Retained Earnings for the years ended September 30, 2017 and 2016	18
Statements of Cash Flows for the years ended September 30, 2017 and 2016	19
Notes to Financial Statements for the years ended September 30, 2017 and 2016	20
Independent Auditor's Report on Additional Information	27
Statements of Income (Unaudited) for the three months ended September 30, 2017 and 2016	28

 

 

2.   Exhibits filed with this Form 10-K Report:

 

Exhibit No.	Description of Exhibit
14	Code of Ethics
31.1	Certification of the President of the Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of the Chief Executive Officer (principal executive officer) of the Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.3	Certification of the Chief Financial Officer (principal financial officer and principal accounting officer) of the Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of the President of the Company Pursuant to 18 U.S.C. Subsection 1350, as adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002
32.2	Certification of the Chief Executive Officer (principal executive officer) of the Company pursuant to 18 U.S.C. Subsection 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002
32.3	Certification of the Chief Financial Officer (principal financial officer and principal accounting officer) of the Company pursuant to 18 U.S.C. Subsection 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002

 

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SIGNATURES

 

 

Pursuant to the requirements of Section 13 or 15(d) 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.

 

Registrant :              PISMO COAST VILLAGE, INC.

 

 

By:          /s/ TERRIS HUGHES                                                             Date:       November 15, 2017

               Terris Hughes, President

               and Chairman of the Board

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

 

By:          /s/ JAY JAMISON                                                                 Date:       November 15, 2017

               Jay Jamison, Chief Executive Officer,

               General Manager and Assistant Corporate Secretary

               (principal executive officer)

 

 

By:          /s/ WAYNE HARDESTY                                                        Date:       November 15, 2017

               Wayne Hardesty, Chief Financial Officer,

               Vice President – Finance, and Director

               (principal financial officer and

               principal accounting officer)

 

 

By:          /s/ TERRIS HUGHES                                                             Date:       November 15, 2017

               Terris Hughes, President

               and Chairman of the Board, and Director

 

 

By:          /s/ GARRY NELSON                                                             Date:       November 15, 2017

               Garry Nelson, Executive Vice President

               and Director

 

 

By:          /s/ GEORGE PAPPI, JR.                                                       Date:       November 15, 2017

               George Pappi, Jr., Vice President - Secretary

               and Director

 

 

By:          /s/ DWIGHT PLUMLEY                                                          Date:       November 15, 2017

               Dwight Plumley, Vice President - Operations

               and Director

 

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By:          /s/ SAM BLANK                                                                    Date:       November 15, 2017

               Sam Blank, Director

 

 

By:          /s/ HARRY BUCHAKLIAN                                                      Date:       November 15, 2017

               Harry Buchaklian, Director

 

 

By:          /s/ RODNEY ENNS                                                               Date:       November 15, 2017

               Rodney Enns, Director

 

 

By:          /s/ WILLIAM FISCHER                                                           Date:       November 15, 2017

               William Fischer, Director

 

 

By:          /s/ DENNIS HEARNE                                                            Date:       November 15, 2017

               Dennis Hearne, Director

 

 

By:          /s/ KAREN KING                                                                   Date:       November 15, 2017

               Karen King, Director

 

 

By:          /s/ RONALD NUNLIST                                                           Date:       November 15, 2017

               Ronald Nunlist, Director

 

 

By:          /s/ JERALD PETTIBONE                                                       Date:       November 15, 2017

               Jerald Pettibone, Director

 

 

By:          /s/ JERRY ROBERTS                                                            Date:       November 15, 2017

               Jerry Roberts, Director

 

 

By:          /s/ BRIAN SKAGGS                                                              Date:       November 15, 2017

               Brian Skaggs, Director

 

 

By:          /s/ GARY WILLEMS                                                              Date:       November 15, 2017

               Gary Willems, Director

 

 

By:          /s/ JACK WILLIAMS                                                              Date:       November 15, 2017

               Jack Williams, Director

 

 

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