UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

 

Commission file number 0-8463

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.         YES [X]      NO [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web Site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Subsection 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).        YES [X]      NO [  ]

 

Indicate by check mark whether the registrant is a large, accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.

 

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

 

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

 

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

 

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13, or 15 (d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.          YES [  ]       NO [  ]

 

APPLICABLE ONLY TO CORPORATE ISSUERS:

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.           1,774

 

PART I – FINANCIAL INFORMATION

 

ITEM 1.      FINANCIAL STATEMENTS

The following financial statements and related information are included in this Form 10-Q, Quarterly Report.

 

1.   Report of Independent Registered Public Accounting Firm

 

2.   Balance Sheets

 

3.   Statement of Operations

 

4.   Statement of Changes in Stockholders’ Equity

 

5.   Statements of Cash Flows

 

6.   Notes to Financial Statements

 

The financial information included in Part I of this Form 10-Q has been reviewed by Brown Armstrong Accountancy Corporation, the Company's Certified Public Accountants, and all adjustments and disclosures proposed by said firm have been reflected in the data presented. The information furnished reflects all adjustments, which, in the opinion of management, are necessary to a fair statement of the results for the interim periods.

 

ITEM 2.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

STATEMENT ON FORWARD-LOOKING INFORMATION

Certain information included herein contains statements that may be considered forward-looking statements, such as statements relating to anticipated expenses, capital spending and financing sources. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ from those expressed in any forward-looking statements made herein. These risks and uncertainties include, but are not limited to, those relating to competitive industry conditions, California tourism and weather conditions, dependence on existing management, leverage and debt service, the regulation of the recreational vehicle industry, domestic or global economic conditions and changes in federal or state tax laws or the administration of such laws.

 

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OVERVIEW

The Company continues to promote and depend upon recreational vehicle camping as the primary source of revenue. The rental of campsites to the general public provides income to cover expenses, complete capital improvements, and allow shareholders up to forty-five free nights camping annually. Additional revenues come from RV storage and spotting, RV service and repair, on-site convenience store, and other ancillary activities such as laundromat, arcade, and bike rental.

 

The 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. Based on advanced reservation deposits, occupancy projections are positive. Long term industry outlook remains strong. In 2023, the industry will continue to normalize and reflect pre-COVID numbers and patterns. 

 

Outdoor recreation continued to be popular throughout 2022, and the Company enjoyed its second highest revenue year. With public school and work schedules returning to normal, the age demographic of RV community is attractive, as the population of retirement age adults in the U.S. is growing. RV Resorts have become a trending vacation opportunity not only for the retiree population, but as an affordable vacation alternative for families and millennials.

 

RV storage and towing continue to be a primary source of revenue for the Company. RV storage provides numerous benefits to the customer including: no stress of towing, no need to own a tow vehicle, use of RV by multiple family members, and convenience. RV storage continues to have a strong demand for both self and tow storage.

 

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 as the resort continues to maintain high standards and again, has been recognized with quality ratings by Good Sam.

 

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, social media content, ads in the leading national directory, and trade magazine advertising formulates most of the business-marketing plan.

 

RESULTS OF OPERATIONS

The Company develops its income from two sources: (a) Resort Operations, consisting of revenues generated from RV site rentals, from RV storage space operations, and from lease revenues from laundry, restaurant, and arcade operations by third party lessees; and (b) Retail Operations, consisting of revenues from General Store operations and from RV parts and service operations.

 

Income from Resort Operations for the three-month period ended March 31, 2023, decreased $287,536, below the same period in 2022. This decrease is primarily due to a decrease in site revenue which relates to COVID and weather cancellations in January, February, and March 2023. Retail revenue, which includes income from the general store, arcade, restaurant, and laundromat, decreased $37,199. This decrease in retail revenue was due to reduced occupancy due to cancellations.

 

The cyclical and seasonal nature of the RV industry may lead to fluctuations in our operating results. The RV industry can experience cycles of growth and downturn due to seasonality patterns. Results of operations in any one period may not be indicative of results in future periods. The RV market typically shows a decline in demand over the winter months, yet usually produces higher growth in the spring and summer months due to higher use by vacationers. Demand for storage increases due to the return to pre-COVID travel patterns. Our results on a quarterly basis can fluctuate due to this cyclicality and seasonality.

 

The Company anticipates slight to moderate increases in both income from resort operations, and in retail operations as the fiscal year progresses in a normalizing of the industry.

 

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Operating expenses for the three-month period ending March 31, 2023, increased $271,868 above the same period ended March 31, 2022. This reflects an increase in labor, benefits, professional insurance, vehicle expense, contacted services and credit card processing expense. Other operating costs remain consistent with the prior year and are considered well managed to create an effective operation.

 

Cost of goods sold expenses for the three-month period ended March 31, 2023, are 52.0%, compared to 50.1% for the same period in 2022, which is within the guidelines established by management for the individual category sales of RV supplies and General Store merchandise.

 

Interest expense for the three-month period ended March 31, 2023, was $4,467 compared to $3,050 for the same period ending 2022.

 

Due to the nature of business and economic cycles and trends, rates may be adjusted accordingly, if deemed necessary. Although the supply-demand balance generally remains favorable, future-operating results could be adversely impacted by weak demand. This condition could limit the Company's ability to pass through inflationary increases in operating costs as higher rates.

 

Increases in transportation and fuel costs or sustained recessionary periods could also unfavorably impact future results. However, the Company believes that its financial strength and market presence will enable it to remain extremely competitive. It is anticipated the published rates will continue to market site usage at its highest value and not negatively impact the Company's ability to capture an optimum market share.

 

LIQUIDITY

The Company's current cash position (cash & cash equivalent, Reserves & Investments), as of March 31, 2023, is $11,219,506 which is more than the same position in 2022 of $10,354,721. The cash balance decreased by $298,297 from the fiscal year ended September 30, 2022, primarily due to transfers to Insured Cash Sweep accounts. The Company has maintained cash balances in anticipation of the large capital expenditure necessary to upgrade the resort. Maintaining the principle of easily accessible reserves, the Company purchased US Treasury Bills in the following amounts in November 2022:

 

6-month Treasury at 4.55% for $488k and will mature on May 4, 2023.

12-month Treasury at 4.73% for $477k and will mature on November 2, 2023.

6-month Treasury at 4.55% for $34k and will mature on May 4, 2023.

 

The Company has also maintained a line of credit of $500,000 to ensure funds will be available, if required.

 

Account Payables and Accrued Liabilities totaled $287,829 which is $6,210 below the same period last year and increased $22,385 since the 2022 fiscal year end, which reflects a timing of capital projects. All undisputed payables have been paid in full according to the Company's policy.

 

Total Current Assets increased to $12,146,254 at end of the second quarter of fiscal year 2023, compared with $11,517,900 at the end of fiscal year 2022.

 

CAPITAL RESOURCES AND PLANNED EXPENDITURES

The Company plans capital expenditures up to $175,000 in fiscal year 2023 to further enhance the Resort facilities and services. This would include the purchase of a low-boy tilt trailer, surveillance cameras for storage lots, two golf carts for maintenance, one golf cart for security, and a redesign community space.  Funding for these projects is expected to come from normal operating cash flows and, if necessary, be supplemented with outside financing. These capital expenditures are expected to increase the Resort's value to its shareholders and the general public.

 

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Capital expenditures are consistent with prior years and operations and are expected to provide adequate resources to support the amounts committed to complete the authorized capital projects during the fiscal year. Second Quarter occupancy is expected to be down due to unusual weather patterns and Covid cancellations. Storage continues to be consistent with that of the past year. Capital projects are designed to enhance the marketability of the camping sites and enhance support facilities.

 

DISCLOSURE CONCERNING WEBSITE ACCESS TO COMPANY REPORTS

The Company makes available on its website, www.pismocoastvillage.com, access to its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (SEC).

 

The public may read and copy any materials filed with the Securities and Exchange Commission, on official business days during the hours of 10:00 a.m. to 3:00 p.m., at the SEC's Public Reference Room located at 100 F Street, N. E., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy statements, and other information that the Company files electronically with the SEC.

 

ITEM 3.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.

 

ITEM 4. CONTROLS AND PROCEDURES

 

DISCLOSURE CONTROLS AND PROCEDURES

As required by Rule 13a-15 under the Securities Exchange Act of 1934 (the “1934 Act”), as of March 31, 2023, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our General Manager/Assistant Corporate Secretary and our Chief Financial Officer (our principal financial officer). Based upon and as of the date of that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as described in Item 8A(T) included with our Annual Report on Form 10-K for the year ended September 30, 2022.

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the 1934 Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the 1934 Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

INTERNAL CONTROL OVER FINANCIAL REPORTING

There have not been any changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) promulgated by the SEC under the 1934 Act) during the three-months ended March 31, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II -- OTHER INFORMATION

 

ITEM 1.      LEGAL PROCEEDINGS

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

 

ITEM 2.      UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not Applicable

 

ITEM 3.      DEFAULTS UPON SENIOR SECURITIES

Not Applicable

 

ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not Applicable

 

ITEM 5.      OTHER INFORMATION

Not Applicable

 

ITEM 6.      EXHIBITS

Exhibit No.	Description of Exhibit
31.1	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (George Pappi, Jr., President and Chairman of the Board, and Chief Executive Officer/principal executive officer)
31.2	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Jack Williams, Chief Financial Officer, principal financial officer, and principal accounting officer)
32.1	Certification Pursuant to 18 U. S. C. Subsection 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (George Pappi, Jr., President and Chairman of the Board, and Chief Executive Officer/principal executive officer)
32.2	Certification Pursuant to 18 U. S. C. Subsection 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Jack Williams, Chief Financial Officer, principal financial officer, and principal accounting officer)

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

PISMO COAST VILLAGE, INC.

(Registrant)

 

Date:          May 10, 2023

 

Signature:   /s/ GEORGE PAPPI, JR.

George Pappi, Jr., President and Chairman of the Board

                   (Chief Executive Officer/Principal executive officer)

 

Date:          May 10, 2023

 

Signature:   /s/ JACK WILLIAMS

Jack Williams, V.P. - Finance/Chief Financial Officer

(Principal financial officer and principal accounting officer)

 

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REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

To the Board of Directors

and Stockholders of Pismo Coast Village, Inc.

165 South Dolliver Street

Pismo Beach, California 93449

Results of Review of Interim Financial Information

We have reviewed the balance sheets of Pismo Coast Village, Inc., (the Company) as of March 31, 2023 and 2022; the related statements of operations for the three and six-month periods ended March 31, 2023 and 2022; statement of changes in stockholders’ equity for the three and six-month periods ended March 31, 2023 and 2022; statements of cash flows for the six-month periods ended March 31, 2023 and 2022; and the related notes (collectively referred to as the interim financial statements). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the balance sheet of the Company as of September 30, 2022, and the related statements of income and comprehensive income, and cash flows for the year then ended (not presented herein), and in our report dated November 11, 2022, we expressed an unmodified opinion on those financial statements. In our opinion, the information set forth in the accompanying condensed balance sheet as of September 30, 2022, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived.

Basis for Review Results

These interim financial statements are the responsibility of the Company’s management. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

BROWN ARMSTRONG ACCOUNTANCY CORPORATION

 

Auditor Firm ID: #237

Bakersfield, California

May 10, 2023

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10

 

 

11

 

 

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PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2023 AND 2022 AND SEPTEMBER 30, 2022

 

 

NOTE 1 – NATURE OF BUSINESS

 

Pismo Coast Village, Inc. (the Company) is a recreational vehicle camping resort. Its business is seasonal in nature with the fourth quarter, the summer, being its busiest and most profitable.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Revenue from Contracts with Customers

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

 

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

 

Sales taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue. Finally, the Company collects Transient Occupancy Taxes (TOT) and Tourism Business Improvement District (TBID) assessments from guests which are remitted to the City of Pismo Beach and County of San Luis Obispo and are excluded from revenues. As of March 31, 2023, September 30, 2022, and March 31, 2022, the Company had $67,891, $84,860, and $81,662 in TOT and TBID assessments due to the City of Pismo Beach and the County of San Luis Obispo included in accrued expenses on the combined balance sheet, respectively.

 

Performance Obligations

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

 

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PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2023 AND 2022 AND SEPTEMBER 30, 2022

PAGE 2

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

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

 

Disaggregation of Revenue

Revenue from performance obligations satisfied at a point in time consists of sales related to the Company accommodations and other ancillary goods and services at the location in Pismo Beach, California.  The geographic nature of the revenue could affect the nature, timing, amount and uncertainty of revenue and cash flows. Revenue from site rentals, storage rental, spotting, and store and accessory sales accounts for approximately 61%, 18%, 5%, and 13% of the Company total revenue for the period ended March 31, 2023, respectively.  Revenue from other ancillary goods and services accounts for the remaining 3% of revenue for the period ended March 31, 2023.

 

Customer Deposits

The Company does not recognize revenue when a customer prepays for resort accommodations. Rather, the Company records a deferred revenue liability equal to the amount received.  Revenue is then recognized when the customer stays at the resort. As of March 31, 2023, September 30, 2022, and March 31, 2022, the Company had customer deposits related to prepaid village accommodations of $3,119,312, $2,268,627, and $3,086,296 on the balance sheet as rental deposits, respectively.

 

Cash and Cash Equivalents

For purposes of the statements of cash flows, the Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. As of March 31, 2023, September 30, 2022, and March 31, 2022, the Company had -$9, $6,089 and $6,095 of cash equivalents.

 

Cash Reserved for Capital Improvements and Deferred Maintenance

The Company keeps separate funds reserved for capital improvements and deferred maintenance. Historically, the Company has not carried a high amount of debt; this separate reserve is kept in order to self-finance major improvement and have cash ready upon project permit approval.

 

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PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2023 AND 2022 AND SEPTEMBER 30, 2022

PAGE 3

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Allowance for Doubtful Accounts

It is the policy of management to review the outstanding accounts receivable at year-end, as well as historical bad debt write-offs, and establish an allowance for doubtful accounts for estimated uncollectible accounts. Management did not believe an allowance for doubtful accounts was necessary as of March 31, 2023, September 30, 2022, and March 31, 2022.

 

Inventories

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

 

Property and Equipment

All property and equipment are recorded at cost. Depreciation of property and equipment is computed using the straight-line method based on the cost of the assets, less allowance for salvage value, where appropriate. Depreciation rates are based upon the following estimated useful lives:

 

 

Earnings per Share

The earnings per share are based on the 1,774 shares issued and outstanding. The financial statements report only basic earnings per share, as there are no potentially dilutive shares outstanding.

 

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

 

Advertising

The Company follows the policy of charging the costs of non-direct advertising as incurred. Advertising expenses were $19,555 and $22,508, for the six months ended March 31, 2023 and 2022, respectively, and $5,829 and $20,275 for the three months ended March 31, 2023 and 2022, respectively. Advertising expenses were included in operating expenses on the statement of operations.

 

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PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2023 AND 2022 AND SEPTEMBER 30, 2022

PAGE 4

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Concentration of Credit Risk

At March 31, 2023, September 30, 2022, and March 31, 2022, the Company had cash deposits of $227,318, $552,851 and $1,175,950, respectively, in excess of the $250,000 federally insured limit with Pacific Premier Bank. However, because Pacific Premier Bank is a member of the Certificate of Deposit Account Registry Service (CDARS), large deposits are divided into smaller amounts and placed with other FDIC insured banks which are also members of the CDARS network. Then, those member banks issue CDs in amounts under $250,000, so that the entire deposit balance is eligible for FDIC insurance.

 

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.

 

Income Taxes

The Company uses the asset-liability method of computing deferred taxes in accordance with ASC Income Taxes topic. ASC 740 requires, among other things, that if income is expected for the entire year, but there is a net loss to date, a tax benefit is recognized based on the annual effective tax rate. 

 

FASB ASC 740 also requires, among other things, the recognition and measurement of uncertain tax positions based on a "more likely than not" (likelihood greater than 50%) approach. As of March 31, 2023, management has considered its tax positions and believes that the Company did not maintain any uncertain tax positions under this approach and, accordingly, all tax positions have been fully recorded in the provision for income taxes. It is the policy of the Company to consistently classify interest and penalties associated with income tax expense separately from the provision for income taxes, and accordingly no interest or penalties associated with income taxes have been included in this calculation, or separately in the Statement of Operations and Retained Earnings. The Company does not expect any material changes through March 31, 2024.  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, 2019 and by the California Franchise Tax Board for fiscal years ending on or after September 30, 2018.

 

Investments

Investments in securities have been classified in the balance sheet, according to management’s intent, as securities available-for-sale under the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 320 Investments – Debt and Equity Securities.

 

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PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2023 AND 2022 AND SEPTEMBER 30, 2022

PAGE 5

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Investments (continued)

Available-for-sale securities consist of investment securities not classified as trading securities nor as held- to-maturity securities. Unrealized holding gains and losses, net of deferred taxes, on available-for-sale securities are reported as a net amount in a separate component of stockholders’ equity until realized. Gains and losses on the sale of available-for-sale securities are determined using the specification method.

 

Fair Value Measurements

The Company records its financial assets and liabilities at fair value in accordance with the Fair Value Measurements and Disclosures Topic of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) (the Topic). This Topic provides a framework for measuring fair value, clarifies the definition of fair value and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at that reporting date. The Topic also establishes a three-tier hierarchy, as follows, which prioritizes the inputs used in the valuation methodologies in measuring fair value.

 

Level 1: Inputs to the valuation methodology are unadjusted quoted prices for the identical assets or liabilities in active markets that the Company has the ability to access.

 

Level 2: Inputs to the valuation methodology include:

 

* Quoted prices for similar assets and liabilities in active markets;

 

* Quoted prices for identical or similar assets or liabilities in active markets;

 

* Inputs other than quoted prices that are observable for the asset or liability;

 

* Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

 

If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.

 

Level 3: Inputs to the valuation of methodology are unobservable and significant to the fair value measurement.

 

The following is a description of the valuation methodologies used for assets measured at fair value:

 

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PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2023 AND 2022 AND SEPTEMBER 30, 2022

PAGE 6

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

 

Fair Value Measurements (continued)

Investments: Investments in US treasury bills are recorded at fair value based upon quoted market prices using Level 1 inputs.

 

The hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.

 

At March 31, 2023, the following sets forth by level, within the fair value hierarchy, the Company’s assets at fair value:

 

 

Leases

On October 1, 2022, the Company adopted Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), using the optional transition method, which allowed the application of the new standard at the adoption date and the recognition of a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption without adjusting previously reported results. As a result, the Company’s financial statements for periods prior to September 30, 2022, have not been revised to reflect the new lease accounting guidance.

 

In adopting ASC Topic 842, the Company elected the package of practical expedients permitted under the transition guidance within the new standard. This package allowed the Company to carry forward historical lease classifications, to not reassess whether any expired or existing contracts are or contain leases, and to not reassess the accounting for initial direct costs for any existing leases.

 

The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (ROU) assets, current liabilities and long-term operating lease liabilities in the balance sheet. Finance leases are included in property and equipment, current liabilities and long-term finance lease liabilities in the balance sheet.

 

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. For determining the present value of lease payments, the Company uses the discount rate implicit in the lease when readily determinable. As most of the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate in determining the present value of lease payments that approximates the rate of interest the Company would have to pay to borrow on a collateralized basis over a similar term. At adoption, the ROU asset also includes any lease payment made and excludes lease incentives and initial direct costs. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

 

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PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2023 AND 2022 AND SEPTEMBER 30, 2022

PAGE 7

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Leases (continued)

The Company evaluates contracts to determine if they contain a lease at inception. The Company’s material leases primarily consist of vehicles. In accordance with GAAP, the Company classifies leases as operating or finance leases for financial reporting purposes, beginning at the lease commencement date. The lease term used in the classification includes the non-cancelable period for which the Company has the right to use the underlying asset, along with renewal option periods when the exercise of the renewal option is reasonably certain and failure to exercise such option would result in an economic penalty.

 

The Company has elected to account for short-term leases, those with a lease term of 12 months or less, by recognizing lease payments in profit and loss on a straight-line basis over the term of the lease, and variable lease payments in the period in which the obligation for the payments is incurred. This accounting policy election has been made consistently for all short-term leases within the same asset class. The Company records operating rent expense on a straight-line basis beginning on the lease commencement date (when the Company takes possession of the premises) and ends on the lease termination date. For finance leases, the lease liability is unwound using the effective interest rate method, where interest expense is recognized over the lease term. The right-of-use asset is amortized on a straight-line basis over the shorter of the lease term or the useful life of the underlying asset. Maintenance, insurance, and property tax expenses are accounted for on an accrual basis as variable lease costs. Variable lease costs for operating leases are recognized in the period when changes in facts and circumstances on which the variable lease payments are based occur. For more information on the Company’s lease arrangements, refer to Note 5 – Lease.

NOTE 3 – PROPERTY AND EQUIPMENT

 

At March 31, 2023, September 30, 2022, and March 31, 2022, property and equipment included the following:

 

 

Total depreciation and amortization expenses were $234,188 and $239,087 for the six months ended March 31, 2023 and 2022, respectively, and $117,605 and $119,103 for the three months ended March 31, 2023 and 2022, respectively.

 

19

PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2023 AND 2022 AND SEPTEMBER 30, 2022

PAGE 8

 

NOTE 3 – PROPERTY AND EQUIPMENT  (continued)

 

At March 31, 2023, September 30, 2022, and March 31, 2022, the cost of assets under finance lease was $434,573, $405,819, and $405,819 and related accumulated amortization was $359,999, $331,071 and $251,631 respectively. Amortization expense on assets under finance lease was $28,928 and $31,839 for the six months ended March 31, 2023 and 2022, respectively, and $14,464 and $15,920 for the three months ended March 31, 2023 and 2022, respectively.

 

NOTE 4 – LINE OF CREDIT

 

The Company has a revolving line of credit with Pacific Premier Bank (formerly Heritage Oaks Bank) for $500,000, expiring April 1, 2023. There was no outstanding balance on the line of credit as of March 31, 2023.

 

NOTE 5 – LEASES

 

At March 31, 2023, September 30, 2022, and March 31, 2022, finance lease obligations consisted of the following:

 

 

20

 

PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2022 AND 2021 AND SEPTEMBER 30, 2022

PAGE 9

 

NOTE 5 – LEASES (continued)

 

At March 31, 2023, future minimum payments on finance lease obligations were as follows:

 

 

The following presents supplemental lease information:

 

21

 

PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2022 AND 2021 AND SEPTEMBER 30, 2022

PAGE 10

 

NOTE 5 – LEASES (continued)

 

 

 

NOTE 6 – COMMON STOCK

 

Each share of stock is intended to provide the shareholder with free use of the resort for a maximum of 45 days per year. If the Company is unable to generate sufficient funds from the public, the Company may be required to charge shareholders for services.

 

A shareholder is entitled to a pro rata share of any dividends as well as a pro rata share of the assets of the Company in the event of its liquidation or sale. The shares are personal property and do not constitute an interest in real property. The ownership of a share does not entitle the owner to any interest in any particular site or camping period.

 

22

 

PISMO COAST VILLAGE, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2022 AND 2021 AND SEPTEMBER 30, 2022

PAGE 11

 

NOTE 7 – INCOME TAXES

 

The provision for income taxes for the three and six months ended March 31, 2023, and 2022 is as follows:

 

 

NOTE 7 – INCOME TAXES (continued)

 

The Company uses the asset-liability method of computing deferred taxes in accordance with FASB ASC Topic 740. The difference between the effective tax rate and the statutory tax rates is due primarily to the effects of state taxes net of the federal tax benefit and nondeductible variable costs of shareholder usage.

 

As of March 31, 2023, September 30, 2022, and March 31, 2022, the Company’s deferred tax liability was $437,000, $424,900 and $422,000, respectively. Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future. The majority of the balance is due to timing differences of depreciation expense, caused by the use of accelerated depreciation methods for tax calculations. 

 

NOTE 8 – EMPLOYEE RETIREMENT PLANS

 

The Company is the sponsor of a 401(k) profit sharing pension plan, which covers substantially all full-time employees.  Employer contributions are discretionary and are determined on an annual basis. The Company’s matching portion of the 401(k) safe harbor plan was $48,811 and $36,028 for the six months ended March 31, 2023 and 2022, respectively, and $24,634 and $17,484 for the three months ended March 31, 2023 and 2022, respectively.

 

NOTE 9 – SUBSEQUENT EVENTS

 

Events subsequent to March 31, 2023 have been evaluated through May 10, 2023, which is the date the financial statements were available to be issued. Management did not identify any subsequent events that required disclosure.

 

23

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