UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
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| [ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the quarterly period ended | |
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| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the transition period from __________ to ___________ | |
Commission file number
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| (Former name, former address, and former fiscal year, if changed since last report) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [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 [] 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 | |
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1
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 [
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.
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.
2
OVERVIEW
The Company continues to promote and depend upon recreational vehicle camping as the primary source of revenue. The rental of campsites to the general public provides income to cover expenses, complete capital improvements, and allow shareholders up to forty-five free nights camping annually. Additional revenues come from RV storage and spotting, 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. According to industry reports such as the 2023 KOA Camping Report published May 12, 2023, it indicates that camping continues to be robust and resilient, even in economic downturns. Camping is increasingly popular, with more people than ever viewing it as a way to relax, unwind, and connect with family, friends, and nature.
Camping is an important leisure activity for many people. This may be because, even in an economic downturn, camping remains economically accessible for most individuals. Faced with a failing economic climate, 38% of campers are willing to give up other vacation activities to go camping. 80% of survey respondents from the 2023 KOA Camping Report said they would give up other leisure travel options to camp more.
Most (56%) RVers plan to RV camp the same amount or more in the event of an economic downturn. 33% of RVers say they’ll use their RVs more, and 23% said they would use their RVs the same amount as usual. This is significant and helps demonstrate the economic resilience of outdoor hospitality.
RV storage and towing continue to be a primary source of revenue for the Company. In April 2023, the company purchased 4.42 acres to develop a 150 site self-storage lot due to having a 300+ waitlist for new clients. 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.
Income from Resort Operations for the three-month period ended June 30, 2023, increased $126,718 above the same period in 2022. This increase is primarily due to a rate increase and percentage of occupied sites by the General Public. Retail revenue, which includes income from the general store, arcade, restaurant, and laundromat, decreased $183,652. This decrease in retail revenue was due to ageing laundry machines and closing the RV Service Shop in April 2023.
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.
3
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.
Operating expenses for the three-month period ending June 30, 2023, increased $170,552 above the same period ended June 30, 2022. This reflects an increase in labor, benefits, professional insurance, vehicle expense, contracted 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 June 30, 2023, are 81.3%, compared to 46.7% 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 June 30, 2023, was ($10,308) compared to ($3,251) 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 June 30, 2023, is $10,217,854 which is less than the same position in 2022 of $10,940,515. The cash balance decreased by $1,396,410 from the fiscal year ended September 30, 2022, primarily due to the purchase of the Nipomo vacant land for $1,203,433. 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. Maintaining the principle of easily accessible reserves, the Company has $1,028,432 secured in US Treasury Bills.
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 $420,528 which is $143,568 above the same period last year and increased $155,084 since the 2022 fiscal year end, which reflects a timing of capital projects and payment of sales tax assessments due. All undisputed payables have been paid in full according to the Company's policy.
Total Current Assets decreased to $11,344,793 at end of the third 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.
4
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 June 30, 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 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 9A(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 June 30, 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
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Exhibit No. |
Description of Exhibit |
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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)
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PISMO COAST VILLAGE, INC. BALANCE SHEETS JUNE 30, 2023 AND 2022 AND SEPTEMBER 30, 2022 |
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June 30, 2023 |
September 30, 2022 |
June 30, 2022 |
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Assets |
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Current assets |
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Cash and cash equivalents |
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Cash Reserved for Capital Improvements |
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Investments |
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Accounts receivable |
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Inventories |
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Prepaid income taxes |
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Prepaid expenses |
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Total current assets |
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Other Assets |
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Property and equipment, net of accumulated |
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Operating right of use assets, net of amortization |
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Total assets |
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Liabilities and Stockholders’ Equity |
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Current liabilities |
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Accounts payable and accrued liabilities |
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Accrued salaries and vacation |
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Rental deposits |
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Current portion of operating lease obligations |
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Current portion of finance lease obligations |
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Total current liabilities |
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Long-term liabilities |
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Deferred taxes |
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Operating lease obligations, net of current portion |
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Finance lease obligations, net of current portion |
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Total liabilities |
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Stockholders' equity |
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Common stock no par value, |
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Retained earnings |
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Accumulated other comprehensive income |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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The accompanying notes are an integral part of these financial statements. |
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PISMO COAST VILLAGE, INC. STATEMENT OF OPERATIONS THREE AND NINE MONTHS ENDED JUNE 30, 2023 AND 2022 |
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Three Months Ended June 30, |
Nine Months Ended June 30, |
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2022 |
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Income |
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Resort operations |
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Retail operations |
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Total income |
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Cost and expenses |
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Operating expenses |
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Cost of goods sold |
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Depreciation and amortization |
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Total cost and expenses |
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Income from operations |
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Other income (expense) |
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Interest and dividend income |
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$ |
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Interest expense |
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Employee Retention Credit Income |
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Gain (loss) on disposal of fixed assets |
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Total other income (expense) |
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Income before provision for income tax |
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Income tax (expense) |
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Net income |
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Other comprehensive income |
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Change in unrealized holding gains on |
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Total other comprehensive income |
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Total comprehensive income |
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Net income per share |
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The accompanying notes are an integral part of these financial statements. |
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PISMO COAST VILLAGE, INC. STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY THREE AND NINE MONTHS ENDED JUNE 30, 2023 AND 2022 |
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Common Stock |
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Accumulated Other Comprehensive Income |
Total |
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Shares |
Amount |
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Balance - June 30, 2022 |
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Net Income |
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Balance - September 30, 2022 |
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Net Income |
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Balance - December 31, 2022 |
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Net Income (loss) |
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Other comprehensive income |
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Balance - March 31, 2023 |
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Net Income |
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Other comprehensive income |
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Balance - June 30, 2023 |
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The accompanying notes are an integral part of these financial statements. |
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PISMO COAST VILLAGE, INC. STATEMENTS OF CASH FLOWS NINE MONTHS ENDED JUNE 30, 2023, AND 2022 |
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Cash flows from operating activities |
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Net income |
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Adjustments to reconcile net income to |
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Depreciation and amortization |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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Inventory |
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Prepaid income taxes |
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Prepaid expenses |
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Accounts payable and accrued liabilities |
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Accrued salaries and vacation |
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Rental deposits |
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Income taxes payable |
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Long term deferred income taxes |
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Total adjustments |
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Net cash provided by operating activities |
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Cash flows from investing activities |
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Capital expenditures |
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Purchase of Investments |
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Net cash used in investing activities |
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( |
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Cash flows from financing activities |
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Repurchase of capital stock |
( |
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Principal payments on operating lease obligations |
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Principal payments on finance lease obligations |
( |
( |
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Net cash used in financing activities |
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( |
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( |
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Net (decrease)/ increase in cash and cash equivalents |
( |
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Cash and cash equivalents - beginning of period |
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Cash and cash equivalents - end of period |
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$ |
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Reconciliation of Cash and Cash Equivalents Per Balance Sheet |
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Cash and equivalents |
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Cash reserved for capital improvements |
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Cash and cash equivalents per statement of cash flows |
$ |
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$ |
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Schedule of payments of interest and taxes: |
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Cash paid for income tax |
$ |
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$ |
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Cash paid for interest |
$ |
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$ |
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Supplemental schedule of non-cash activities |
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Net of unrealized holdings gain on available-for-sale investment securities |
$ |
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The accompanying notes are an integral part of these financial statements. |
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12
PISMO COAST VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 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 June 30, 2023, September 30, 2022, and June 30, 2022, the Company had $
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.
13
PISMO COAST VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF JUNE 30, 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
Customer Deposits
The Company does not recognize revenue when a customer prepays for resort accommodation. 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 June 30, 2023, September 30, 2022, and June 30, 2022, the Company had Customer deposits related to prepaid village accommodations was $
Cash and Cash Equivalents
For the purposes of the statement of cash flows, the Company considers all highly liquid investments including certificates of deposit with an original maturity of three months or less when purchased to be cash equivalents. As of June 30, 2023, September 30, 2022, and June 30, 2022, the Company had $
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.
14
PISMO COAST VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF JUNE 30, 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 June 30, 2023, September 30, 2022, and June 30, 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:
| Building and resort improvements | |
| Furniture, fixtures, equipment, and leasehold improvements | |
| Transportation equipment | |
Earnings per Share
The earnings per share are based on the
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 $
15
PISMO COAST VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF JUNE 30, 2023, AND 2022 AND SEPTEMBER 30, 2022
PAGE 4
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Concentration of Credit Risk
At June 30, 2023, September 30, 2022, and June 30, 2022, the Company had cash deposits of $
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 June 30, 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 June 30, 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, 2020, and by the California Franchise Tax Board for fiscal years ending on or after September 30, 2019.
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.
16
PISMO COAST VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF JUNE 30, 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:
17
PISMO COAST VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF JUNE 30, 2023, AND 2022 AND SEPTEMBER 30, 2022
PAGE 6
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair Value Measurements (continued)
Investments: Investments in common stock rerecorded 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.
On June 30, 2023, the following sets forth by level, within the fair value hierarchy, the Company’s assets at fair value:
| Level 1 | Level 2 | Level 3 | |||||||
| Investment in US Treasury Bills | $ | | $ | $ | |||||
| Total 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 the 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.
18
PISMO COAST VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF JUNE 30, 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
On June 30, 2023, September 30, 2022, and June 30, 2022, property and equipment included the following:
| June 30, 2023 | September 30, 2022 PY | June 30, 2022 PY | |||||||
| Land | $ | | $ | | $ | | |||
| Building and resort improvements | | | | ||||||
| Furniture, fixtures, equipment and | | | | ||||||
| Transportation equipment | | | | ||||||
| Construction in progress |
| |
| |
| | |||
| | | | |||||||
| Less accumulated depreciation |
| ( |
| ( |
| ( | |||
| Property and equipment, net | $ | | $ | | $ | | |||
Total depreciation and amortization expenses were $
19
PISMO COAST VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF JUNE 30, 2023, AND 2022 AND SEPTEMBER 30, 2022
PAGE 8
NOTE 3 – PROPERTY AND EQUIPMENT (continued)
On June 30, 2023, September 30, 2022, and June 30, 2022, the cost of assets under capital lease was $
NOTE 4 – LINE OF CREDIT
The Company has a revolving line of credit with Pacific Premier Bank (formerly Heritage Oaks Bank) for $
NOTE 5 – LEASES
On June 30, 2023, September 30, 2022, and June 30, 2022, finance lease obligations consisted of the following:
|
June 30, 2023 |
September 30, 2022 |
June 30, 2022 |
|||||||
|
|
|
|
|
|
|
PY |
|
|
PY |
|
A 2016 Hino truck leased from Donahue Transportation Services Corp, payable in monthly installments of $ |
$ |
|
$ |
|
$ |
|
|||
|
A 2018 Hino truck leased from Donahue Transportation Services Corp, payable in monthly installments of $ |
|
|
|
||||||
|
A 2019 Hino truck leased from Donahue Transportation Services Corp, payable in monthly installments of $ |
|
|
|
||||||
|
A 2019 Hino truck leased from Donahue Transportation Services Corp, payable in monthly installments of $ |
|
|
|
||||||
|
A 2020 Hino truck leased from Donahue Transportation Services Corp, payable in monthly installments of $ |
|
|
|
|
|
|
|||
|
|
|
|
|
||||||
|
Less current portion |
|
( |
|
( |
|
( |
|||
|
Total finance lease obligations |
$ |
|
$ |
|
$ |
|
|||
20
PISMO COAST VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF JUNE 30, 2022, AND 2021 AND SEPTEMBER 30, 2022
PAGE 9
NOTE 5 – LEASES (continued)
The following table is a summary of the components of the net lease cost for the three months ended June 30, 2023, and 2022, and the nine months ended June 30, 2023, and 2022.
|
Three months |
Three months |
Nine months |
Nine months |
|||||||||
|
Ended |
Ended |
Ended |
Ended |
|||||||||
|
June 30, 2023 |
June 30, 2022 |
June 30, 2023 |
June 30, 2022 |
|||||||||
|
|
PY |
PY |
||||||||||
|
Finance lease cost: |
||||||||||||
|
Amortization of ROU assets |
$ |
|
$ |
|
$ |
|
$ |
|
||||
|
Interest on lease liabilities |
|
|
|
|
||||||||
|
Operating lease cost |
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|||||
|
Total finance lease cost |
$ |
|
$ |
|
$ |
|
$ |
|
||||
Supplemental cash flow information related to leases for the three months ended June 30, 2023, and 2022, and the nine months ended June 30, 2023, and 2022 are as follows.
|
Three months |
Three months |
Nine months |
Nine months |
|||||||||
|
Ended |
Ended |
Ended |
Ended |
|||||||||
|
June 30, 2023 |
June 30, 2022 |
June 30, 2023 |
June 30, 2022 |
|||||||||
|
PY |
PY |
|||||||||||
|
Cash paid for amounts included in the |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating cash flows paid for interest |
$ |
|
$ |
|
$ |
|
$ |
|
||||
|
Financing cash flows paid for principal |
|
|
|
|
||||||||
|
Operating cash flows paid for operating |
|
|
||||||||||
21
Pismo Coast Village, Inc.
Notes to Financial Statements
June 30, 2023, and 2022 and September 30, 2022
Page 10
NOTE 5: LEASES (continued)
Supplemental balance sheet information related to leases at June 30, 2023 and 2022, and September 30, 2022 are as follows.
|
June 30, 2023 |
September 30 |
June 30, 2022 |
||||||
|
|
PY |
PY |
||||||
|
Operating lease: |
||||||||
|
Operating lease ROU asset, net |
$ |
|
$ |
$ |
||||
|
Current portion of operating lease liability |
$ |
|
$ |
$ |
||||
|
Long-term operating lease liability |
|
|
||||||
|
Total operating lease liability |
$ |
|
$ |
$ |
||||
|
Finance leases: |
||||||||
|
Property and equipment, gross |
$ |
|
$ |
|
$ |
|
||
|
Accumulated amortization |
|
( |
|
( |
|
( |
||
|
Property and equipment, net |
$ |
|
$ |
|
$ |
|
||
|
Current portion of long-term liabilities |
$ |
|
$ |
|
$ |
|
||
|
Long-term liabilities, less current portion |
|
|
|
|
|
|
||
|
Total finance lease liabilities |
$ |
|
$ |
|
$ |
|
||
| Weighted average remaining lease term |
|
|
|
|
|
|
| |
| Finance leases |
| |
|
| |
|
| |
| Operating leases | | - | - | |||||
| Weighted average discount rate | ||||||||
| Finance leases | | | | |||||
| Operating leases | | - | - |
22
Pismo Coast Village, Inc.
Notes to Financial Statements
June 30, 2023, and 2022 and September 30, 2022
Page 11
NOTE 5: LEASES (continued)
The following table summarized the maturity of the lease liabilities at June 30, 2023.
| Finance | Operating | |||||
| For the Twelve Months Ending June 30, | Lease | Lease | ||||
| 2024 | $ | | $ | | ||
| 2025 | | | ||||
| 2026 | | | ||||
| 2027 | | | ||||
| 2028 | | |||||
| Thereafter |
|
| | |||
| Total minimum lease payments | | | ||||
| Less amount representing interest |
| ( |
| ( | ||
| Present value of lease payments | | | ||||
| Less current portion |
| ( |
| ( | ||
|
|
|
|
|
|
|
|
| Finance lease obligations, net of current portion | $ | | $ | | ||
NOTE 6: COMMON STOCK
Each share of stock is intended to provide the shareholder with free use of the resort for a maximum of
A shareholder is entitled to a pro rata share of any dividends as well as a pro rata share of the assets of the Company in the event of its liquidation or sale. The shares are personal property and do not constitute an interest in real property. The ownership of a share does not entitle the owner to any interest in any particular site or camping period.
NOTE 7: INCOME TAXES
The provision for income taxes for the three months and nine months ending June 30, 2023, and 2022 is as follows:
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||
| 2023 |
| 2022 | 2023 |
| 2022 | |||||||
| Income tax expense | $ | | $ | | $ | | $ | | ||||
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.
23
Pismo Coast Village, Inc.
Notes to Financial Statements
June 30, 2023, and 2022 and September 30, 2022
Page 12
NOTE 7: INCOME TAXES (continued)
As of June 30, 2023, September 30, 2022, and June 30, 2022, the Company’s deferred tax liability was $
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 $71,563 , and $54,465 for the nine months ended June 30, 2023, and 2022, respectively, and $22,752 and $18,437 for the three months ended June 30, 2023, and 2022, respectively.
NOTE 9: SUBSEQUENT EVENTS
Events subsequent to June 30, 2023, have been evaluated through August 10, 2023, which is the date the financial statements were available to be issued. Management did not identify any subsequent events that require disclosure.
24