ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization

Bowl America Incorporated was engaged in the operation of

bowling centers, with food and beverage service in each center. Nine centers are located in metropolitan Washington D.C.,

one

center in metropolitan Baltimore, Maryland,

four

centers in metropolitan Richmond, Virginia, and

three

centers in metropolitan Jacksonville, Florida. These

centers contain a total of

682

lanes. The Company operates in

one

segment.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and all of its wholly-owned subsidiary corporations. All significant inter-company items have been eliminated in the consolidated financial statements.

Fiscal Year

The Company's fiscal year ends on the Sunday nearest to

June 30.

Fiscal year

2020

ended

June 28, 2020,

and fiscal year

2019

ended

June 30, 2019.

Fiscal years

2020

and

2019

each consisted of

weeks.

Subsequent Events

The Company has evaluated subsequent events through the date of filing these financial statements with the Securities and Exchange Commission on

September 24, 2020.

Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results

may

differ from those estimates. Significant estimates include depreciation expense, cash surrender value of officers' life insurance, the Federal and State income taxes (current and deferred), and market assumptions used in estimating the fair value of certain assets such as marketable securities and long-lived assets.

Revenue recognition policy

The Company's performance obligations are generally limited to providing bowling services and food and beverage products at its centers. The obligations are generally incurred and satisfied in the same business day with payment received at the time the obligation is satisfied. Revenue is recognized at the time the performance obligation is satisfied, which generally occurs when the customer pays for games already bowled or receives their food or beverage order.

Merchandise sales are recorded as revenue when the merchandise is provided to the customer which generally is also the time payment is received. Merchandise can be returned

days from purchase for a full refund. Historically, merchandise returns have been minimal.

The Company does occasionally incur contractual obligations for group events that

may

either be prepaid or billed following the event as well as obligations for gift cards. Any prepayments for bowling events and for the sale of gift cards are recorded as deferred revenue. Revenue from gift cards are recognized as the gift card holder purchases services and expends the prepayment amount on the card. The gift cards have

expiration date. Any events that are billed subsequent to occurrence are recognized as revenue when the event has completed. The Company has

$14,877

of billed and uncollected receivables related to events that have occurred which are included in Prepaid expenses and other on the accompanying consolidated balance sheet. Prepaid gift cards and prepaid events totaled

$163,348

and are included in accrued expenses on the accompanying consolidated balance sheet.

Depreciation and Amortization

Depreciation and amortization for financial statement purposes are calculated by use of the straight-line method. Amortization of leasehold improvements is calculated over the estimated useful life of the asset or term of the lease, whichever is shorter. The categories of property, plant, and equipment and the ranges of estimated useful lives on which depreciation and amortization rates are based are as follows:

	years
Bowling lanes and equipment	3	-	10
Building and building improvements	10	-	39
Leasehold improvements	5	-	15
Amusement games	3	-	5

Maintenance and repairs and minor replacements are charged to expense when incurred. Major replacements and betterments are capitalized. The accounts are adjusted for the sale or other disposition of property, and the resulting gain or loss is credited or charged to income.

Impairment of Long-Lived Assets

The Company reviews long-lived assets whenever events or changes indicate that the carrying amount of an asset

may

not

be recoverable. In making such evaluations, the Company compares the expected future cash flows to the carrying amount of the assets. An impairment loss, equal to the difference between the assets' fair value and carrying value, is recognized when the estimated undiscounted future cash flows are less than the carrying amount.

Dividends

It is the Company's policy to accrue a dividend liability at the time the dividends are declared.

Advertising Expense

It is the Company's policy to expense advertising expenditures as they are incurred. The Company's advertising expenses for the years ending

June 28, 2020,

and

June 30, 2019,

were

$288,021

and

$361,744,

respectively.

Inventories

Inventories are stated at the lower of cost (

first

-in,

first

-out method) or market. Inventories consist of resale merchandise including food and beverage and bowling supplies.

Income Taxes

Deferred income tax liabilities and assets are based on the differences between the financial statement and tax bases of assets and liabilities, using tax rates currently in effect. A valuation allowance is provided when it is more likely than

not

that a deferred tax asset will

not

be realized.

Investment Securities

All of the Company's readily marketable debt and equity securities are classified as trading. Accordingly, these securities are recorded at fair value with any unrealized gains and losses reported in earnings. Realized gains or losses on the sale of debt and equity securities are reported in earnings and determined using the adjusted cost of the specific security sold.

Earnings Per Share

Earnings per share basic and diluted, have been calculated using the weighted average number of shares of Class A and Class B common stock outstanding of

5,160,971

for both fiscal years

2020

and

2019.

Cash and Cash Equivalents

For purposes of the consolidated statements of cash flows, the Company considers money market funds and certificates of deposits, with original maturities of

three

months or less to be cash equivalents. The Company maintains cash accounts which

may

exceed federally insured limits during the year, but does

not

believe that this results in any significant credit risk.

Other Current Liabilities

Other current liabilities include prize fund monies held by the Company for bowling leagues. The funds are returned to the leagues at the end of the league bowling season. At

June 28, 2020

and

June 30, 2019

other current liabilities included

$243,500

and

$300,920,

respectively, in prize fund monies.

Reclassifications

Certain previous year amounts have been reclassified to conform with the current year presentation.

Accounting Standards

January 2016,

the Financial Accounting Standards Board (FASB) issued guidance on equity securities that requires entities to recognize changes in unrealized gains and losses on equity securities in income in the current period unless the entity is recording the related investment under the equity method or consolidating the related entity. The Company adopted this standard effective

July 2, 2018.

The result was the reclassification of

$2,102,745

(after adoption of ASU

2018

) from accumulated other comprehensive income to retained earnings. The Company also reclassified all of its marketable equity securities as current assets on consolidated balance sheet.

The following table summarizes the impact of the adoption on accumulated other comprehensive earnings and retained earnings:

	Amount
Accumulated other comprehensive earnings, 7/2/2018	$	2,102,745
Reclassification to retained earnings of cumulative effect adjustment to initially apply new accounting guidance for equity investments which were previously classified as available-for-sale, net of tax $1,394,695		(2,102,745	)
Accumulated other comprehensive earnings as adjusted, 7/2/2018		-

Retained earnings, 7/2/2018		14,010,725
Reclassification from accumulated other comprehensive income of cumulative effect adjustment to initially apply new accounting guidance for equity investments which were previously classified as available-for-sale, net of tax, $1,394,695		2,102,745
Retained earnings as adjusted, 7/2/2018	$	16,113,470

February 2016,

the FASB issued guidance on leases which requires entities to recognize right-of-use assets and lease liabilities on the balance sheet for the rights and obligations created by all leases, including operating leases, with terms of more than

months. The new guidance also requires additional disclosures on the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative information. This amendment is effective for the Company's fiscal year ended

June 2020.

The adoption of this guidance resulted in a right to use asset of

$1,977,523

and a corresponding lease liability for the same amount being recorded on

July 1, 2019.

The adoption was done on a modified retrospective basis with

adjustments made to periods prior to

July 1, 2019.

May 2014,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

No.

2014

09,

Revenue from Contracts with Customers (“ASU

2014

09”

), which creates a single, comprehensive revenue recognition model for all contracts with customers. Under this ASU and subsequently issued amendments, an entity should recognize revenue to reflect the transfer of promised goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods and services. ASU

2014

may

be adopted either retrospectively or on a modified retrospective basis. The standard is effective for interim and annual reporting periods beginning after

December 15, 2017.

The FASB permits early adoption of the standard, but

not

before the original effective date of

December 15, 2016.

The Company adopted the standard for its

2019

fiscal year. The impact of adopting the standard was

not

material.

August 2018,

the FASB issued ASU

No.

2018

13,

Fair Value Measurement Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement

. As part of the FASB's disclosure framework project, it has eliminated, amended and added disclosure requirements for fair value measurements. Entities will

longer be required to disclose the amount of, and reasons for, transfers between Level

and Level

of the fair value hierarchy, the policy of timing of transfers between levels of the fair value hierarchy and the valuation processes for Level

fair value measurements. Public companies will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level

fair value measurements. This ASU is effective for public entities for annual and interim periods beginning after

December 15, 2019.

Early adoption is permitted as of the beginning of any interim or annual reporting period. The Company adopted the standard for its

March 2020

fiscal quarter. The impact of adopting the standard was

not

material.