The Company maintains a $350,000 line of credit loan from Commercial Bank & Trust Company of Troup County (CB&T) for working capital purposes. This line of credit (LOC) has an initial term of seven (7) years, subject to the satisfactory performance by the Company. The LOC was not used as of September 30, 2012 and was drawn down to $350,000 as of March 31, 2013, respectively. All advances are recorded as current liabilities. The LOC interest rate is tied to prime but has a minimum rate of 5.25%.
The board of directors of the Company approved the offer of two of the Companys directors of to loan the Company an additional $170,000 ($85,000 from each director) on the same terms and conditions as the LOC with CB&T. As of the date of this report, these loans have closed and were fully funded by the directors.
As policy, capital stock shares issued for service to the Company are valued based on market price on the date of issuance. During October 2012, the Company awarded 150,000 shares to six directors for their service on the Board of Directors at a fair market value of $0.01 per share or $1,500. This amount was reported as an expense to operations in 2012.
Officer, directors and their controlled entities own approximately 43% of the outstanding common stock of the Company as of March 31, 2013.
Effective as of June 1, 2009 the Company entered into an employment agreement with Dale Van Voorhis (the Van Voorhis Employment Agreement) to serve as the Companys Chief Operating Officer. As consideration for his services, Mr. Van Voorhis receives an initial base compensation of $75,000 which is reviewed annually by the Board of Directors. The Van Voorhis Agreement has a term of five years and entitles Mr. Van Voorhis to participate in any deferred compensation plan the Company may adopt during the term of his employment with the Company.
The Company entered into an employment agreement as of June 1, 2009, as amended on March 20, 2013 with Jon Laria (such amended agreement the Laria Employment Agreement) pursuant to which Mr. Laria serves as the Companys Chief Financial Officer. The Laria Employment Agreement has an initial term of five years and thereafter will automatically continue on a month-to-month basis. As consideration for his services Mr. Laria receives an initial base compensation of $50,000 per year which is reviewed annually by the Board of Directors. Upon conversion to a month-to-month agreement Mr. Laria will be entitled to a 5% annual automatic pay raise. Under the terms of this Agreement, Mr. Laria is entitled to participate in any deferred compensation plan the Company may adopt during the term of his employment with the Company.
On April 1, 2008 the Company entered into an employment agreement with Jim Meikle (the 2008 Meikle Agreement) pursuant to which Mr. Meikle was hired to serve as the President and Chief Executive Officer of each of the Companys wholly owned subsidiaries. The 2008 Meikle Employment Agreement expired on March 31, 2013 and was replaced by an employment agreement between the Company and Mr. Meikle dated as of April 1, 2013 (the 2013 Meikle Employment Agreement). Pursuant to the 2013 Meikle Employment Agreement, Mr. Meikle receives an initial base compensation in the amount of $135,000 which is reviewed annually by the Board of Directors. The 2013 Meikle Agreement has a term of two years and entitles Mr. Meikle to participate in any deferred compensation plant the Company may adopt during the term of his employment with the Company.
Each of the foregoing employment agreements contains provisions for severance compensation in the event an agreement is (i) terminated early by the Company without cause or (ii) in the event of a change in control of the Company. This additional severance compensation payable totals $410,000.
On January 27, 2011 following the departure of the Companys then President, the Company announced the following actions concerning the Companys executive officers, effective immediately: Dale Van Voorhis was appointed Chief Executive Officer of the Company; James R. Meikle was appointed Chief Operating Officer of the Company and Jeff Lococo was appointed Secretary of the Company.
For the six month period ended March 31, 2013, the Company has reported a loss of $356,236. The current loss will be added to the Companys net operating loss carryforward. The Company has fully reserved for the net deferred tax asset generated by the cumulative net operating losses. The cumulative net operating loss carry-forward is approximately $4,553,000 at March 31, 2013 and will begin to expire in the year 2026.
The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is $1,548,000; however this entire potential asset is reserved as of March 31, 2013. Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards of approximately $4,553,000 for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry forwards may be limited as to use in future years.
We operate two wild animal attractions that are in the same business. Their operations are substantially identical. The only material difference is their geographic location. In previous years, we reported the two parks as different segments; in 2013, with a new loan that covers both parks, and after multiple discussions with lenders who view the Company as having one business/one segment management determined that the parks are now one business and that we do not have multiple segments. While we maintain discrete financial information for each park for review and cost control, the basis for decision making is based on the companys total operating performance, primarily earnings before interest, depreciation and amortization, and taxes. However, we do not believe that eliminating segment information from our financial statements represents a material change.
On May 16, 2011 the U.S. Department of Agricultures Animal and Plant Health Inspection Service (USDA APHIS) issued a citation to the Company alleging violations of certain USDA APHIS regulations and assessed a penalty in the amount of $76,857. On July 8, 2011 the Company submitted a reply to the USDA APHIS citation which contained, among other things; mitigating factors which the Company believed should be considered in determining the amount of the fine. As of July 1, 2012, USDA APHIS responded to the Company with a reduced assessment of $11,170. The Company reduced its reserve by $65,687 to reflect this revised assessment during the second quarter of 2012. The Company also addressed the compliance issues raised in the citation and is implementing new operational controls to address these matters going forward.
In accordance with ASC 855-10, the Company has analyzed its operations subsequent to March 31, 2013 to the date these financial statements were issued, and have determined that it does not have any material subsequent events to disclose in these consolidated financial statements other than the events described above.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
Managements discussion and analysis of results of operations and financial condition (MD&A) is a supplement to the accompanying consolidated financial statements and provides additional information on the Companys businesses, current developments, financial condition, cash flows and results of operations. The following discussion should be read in conjunction with our consolidated financial statements and notes thereto included elsewhere in this report and with our annual report on Form 10-K for the period ended September 30, 2012.
Forward-Looking Statements
Except for historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements involve risks and uncertainties, including, among other things, statements regarding our business strategy, exploration strategy, future revenues and anticipated costs and expenses. Such forward-looking statements include, among others, those statements including the words expects, anticipates, intends, believes and similar language
or by discussions of our outlook, plans, goals, strategy or intentions
. Our actual results may differ significantly from those projected in the forward-looking statements. For example, assumptions that could cause actual results to vary materially from future results include, but are not limited to: competition from other parks, weather conditions during our primary tourist season, the price of animal feed and the price of gasoline. In addition, factors that might cause or contribute to our results differing materially from forward looking statements include, but are not limited to, those discussed herein as well as in the RISK FACTORS section herein. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this report.
Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the SEC, we assume no obligation to update any of these forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting these forward-looking statements.
Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements.
Overview
Through our wholly-owned subsidiaries, we own and operate two regional theme parks and are in the business of acquiring, developing and operating local and regional theme parks and attractions in the United States. Our wholly-owned subsidiaries are Wild Animal, Inc., a Missouri corporation (Wild Animal - Missouri) and Wild Animal Safari, Inc. a Georgia corporation (Wild Animal Georgia). Wild Animal-Georgia owns and operates the Wild Animal Safari theme park in Pine Mountain, Georgia (the Georgia Park). Wild Animal - Missouri owns and operates the Wild Animal Safari theme park located in Strafford, Missouri (the Missouri Park).
Our goal is to build a family of theme parks primarily through acquisitions of small, local and regional, privately-owned existing parks and to develop a series of compatible, themed attractions,. The Company also may pursue contract management opportunities for themed attractions owned by third parties.
Our philosophy is, if possible, to acquire existing attractions and/or properties. When evaluating possible acquisitions, we rely on the following primary criteria:
·
Properties that have an operating history;
·
Properties that our management team believe have the potential to increase profits and operating efficiencies; and
·
Properties
where there is additional, underutilized land available for expansion of operations.
We believe that acquisitions should not unnecessarily encumber the Company with additional debt that cannot be justified by current operations. By using a combination of equity, debt and other financing options, we intend to carefully monitor shareholder value in conjunction with the pursuit of growth.
As we look at our operations as of March 31, 2013, our principal goal is the continued growth of the Missouri Parks revenue. Management believes that our operations during three months ended March 31, 2013 were adversely affected due to abnormally cold weather during such period.
14
Since the Companys acquisition of the Missouri Park in March, 2008 we have worked to upgrade the Parks physical facilities and dramatically improve its concessions. We raised new capital due to our January 9, 2013 refinancing. As a result we have increased capital spending to upgrade the Parks and to add new attractions.
Our current size and operating model leaves us little room for mistakes. Our highest priority is to continue to improve the Missouri Park operating profit.
On January 9, 2013, the Company completed a $3,752,000 loan transaction, the proceeds of which were used primarily to refinance the Companys outstanding debt. For more information regarding this refinancing see Note 3 - Long-Term Debt to the Companys financial statements
Results of Operations For the Three Month Period Ended March 31, 2013 as Compared to Three Month Period Ended April 1, 2012
Total Net Sales
The Companys total net sales for the three month period ended March 31, 2013 decreased by $26,520, or 5%, to $547,083 versus the three month period ended April 1, 2012. The Georgia Parks revenue increased by $16,667 as a result of higher revenue per customer during the three month period ended March 31, 2013 versus the same period in 2012. Extreme weather during the quarter forced the Missouri Park to close on multiple occasions, causing a dramatic decrease in Park attendance. Revenue from the Missouri Park decreased by $43,188, or 35%, as compared to this same three month period in 2012.
Operating Expenses
The operating margin for both Parks decreased by $86,080 to an operating loss of $28,880 during the three month period ended March 31, 2013 versus a profit of $57,200 during the three month period ended April 1, 2012, primarily due to lower sales in 2013 and last years results including a $65,956 credit to operating expenses for the reversal of a USDA fine at the Georgia park and settled substantially lower than the original assessment.
Corporate Expenses and Other
Corporate spending increased by $36,617 to $145,707 during the three month period ended March 31, 2013, primarily as a result of higher legal fees. The Company commenced a lawsuit in September, 2009 against a group led by Larry Eastland, a former officer and director of the Company. The litigation was inactive until June 11, 2012 at which time the Company amended its complaint against the Eastland group to, among other things, join as defendants Stanley Harper, LEA Capital Advisors, LLC (an entity controlled by Mr. Eastland) and Computer Contact Service, Inc. (an entity controlled by Mr. Harper) for breaches of contract and fiduciary duty with regards to the Companys purchase of TempSERV on September 30, 2007 and its subsequent re-conveyance of TempSERV to Computer Contact Service, Inc. as of January 1, 2009.
Other Income
Under the terms of the Companys note with the seller of the Missouri Park, the Company was entitled to a discount to this seller financing note if paid in full before its maturity date of March 5, 2013. The Company paid-off this note in full on January 9, 2013 and recorded the gain of $105,656 in Other Income.
Net Loss and Loss Per Share
The Companys net loss increased by $29,998 to a loss of $143,801, or $0.00 per share and fully diluted per share, for the three months ended March 31, 2013 as compared with a loss of $113,803, or $0.00 per share and fully diluted per share, for the three months ended April 1, 2012.
Excluding the impact of the $105,656 gain from the early repayment of the Missouri Park seller-financed debt reported this year and the credit to expenses from the settlement of the USDA fine for $65,956 last year, the Companys net loss was $249,457 in 2013 versus net loss of $179,759 last year. Management believes that this loss is higher in 2013 as compared to the same period in 2012 was primarily due to higher spending on advertising and lower sales (caused by a harsh winter in Missouri) during 2013.
15
Results of Operations For the Six Month Period Ended March 31, 2013 as Compared to Six Month Period Ended April 1, 2012
Total Net Sales
The Companys total net sales for the six month period ended March 31, 2013 increased by $35,955, or 3%, to $1,120,118 versus the six month period ended April 1, 2012. The Georgia Parks revenue increased by nearly $74,828, or 9%, as a result of average revenue per person during the six month period ended March 31, 2013 versus the six months in 2012. Georgia Park attendance was slightly lower this year versus last year. Net sales from the Missouri Park were down $38,874, or 18%, as compared to this same six month period in 2012. The Missouri Parks attendance was down dramatically due to the severe weather in Springfield MO. January 2013 through March 2013.
Operating Expenses
The operating margin for both Parks decreased by $148,640 to an operating loss of $97,373 during the six month period ended March 31, 2013 versus a profit of $51,267 during the six month period ended April 1, 2012, primarily due to higher advertising costs at both parks in 2013 and last years results including a $65,956 credit to operating expenses for the reversal of a USDA fine recorded earlier at the Georgia park and settled substantially lower than the original assessment.
Corporate Expenses and Other
Corporate spending increased by $10,726 to $240,971 during the six month period ended March 31, 2013, primarily as a result of higher legal fees as previously discussed.
Other Income
As discussed above, the Company retired the Missouri Park seller financing debt in full on January 9, 2013 and recorded a gain of $105,656 in Other Income because under the terms of this note, the Company was incentivized to pay off the seller in full before March 5, 2013.
Net Loss and Loss Per Share
The Companys net loss increased by $62,200 to a loss of $356,236, or $0.00 per share and fully diluted per share, for the six months ended March 31, 2013 as compared with a loss of 294,036, or $0.00 per share and fully diluted per share, for the six months ended April 1, 2012.
Excluding the impact of the $105,656 gain from paying off the Missouri debt reported this year and the credit to expenses from the settlement of the USDA fine last year for $65,956, net loss was $461,892 in 2013 versus net loss of $359,992 in 2012. The higher loss in 2013 is primarily from higher spending on advertising and to a lesser degree, higher repairs and maintenance spending this year as compared to the same period last year. The Company has invested more this year in marketing and restoration of the properties in anticipation of what the Company will believes will be the best spring and summer season that we ever enjoyed.
Cash Flows from Operating Activities
The Companys slow season starts after Labor Day in September and runs until Spring break which is typically end of March. These two quarters have historically generated negative cash flow and require us to borrow to fund operations and prepare the parks for the busy season during the third and fourth quarter of the year.
To date for the first six months of this year we had negative cash flow of $374,209 as compared with negative $186,632 for the comparable six-month period during out last fiscal year, primarily due to increased spending on advertising, repairs and maintenance this year as compared to the same period in 2012.
16
Cash Flows from Investing Activities
The Company spent $172,809 on capital improvements at the Parks. In anticipation of our busy season, the Company spent more on repairs and maintenance and adding new attractions at the parks. Improvements at the Missouri Park included: remodeling the Parks gift shop, upgrading the main bathrooms and repaving the Parks main entrance. In addition, we added a new reptile attraction and refurbished many of the animal exhibits. Improvements at the Georgia Park included: renovating many of our animal exhibits, upgrading the rental fleet, building a new food preparation structure for animals on special diets. We also renovated the Parks main food service are and repainted all its main buildings. In addition, the Company invested $182,675 in costs associated with securing the new 20 year mortgage and seven year revolving term loan.
Cash Flows from Investing Activities
On January 9, 2013 the Company completed its loan refinancing and was able to retired all mortgages then outstanding and replaced them with a single new 20-year term loan. As a result of this refinancing, the Company lowered its anticipated annual debt service payments. During the past year, the Companys mortgages required total monthly payments of $40,876 (annual payments totaling $490,512) as compared to the new estimated monthly payments of $26,112 (annual payments totaling $313,344). The new loan will save the Company $177,168 in lower annual debt service payments as compared with the previous year.
Liquidity and Capital Resources
Management believes that it has improved its operations to the point that it can now generate enough cash to fund its operations, make its mortgage payments and spend modestly on capital improvements in the near-term. Any slowdown in revenue or unusual capital outlays may require us to seek additional capital.
The Companys working capital is negative $0.5 million at March 31, 2013 as compared to a negative $1.7 million working capital at September 30, 2012. This improvement in working capital is a result of completing our new term loan and retiring the Missouri Park seller financing loan which was due in March 2013 for $1.6 million. Partially offsetting this was the negative cash flow generated during the slow season requiring us to borrow $520,000 on short-term basis. The Company expects to repay the $520,000 before year-end from the cash flow generated during the next six months, our busy season.
Total debt related to our property mortgage and lines of credit (LOC), including current maturities, at March 31, 2013 was $4.1million as compared to $3.5 million at September 30, 2012. The increase in debt was a result of our negative cash flow. The LOC balance (together with outstanding related party notes) at March 31, 2013 and September 30, 2012 was $521,761 and $0 respectively.
At March 31, 2013 the Company had equity of $2.4 million and total debt of $4.1 million (including LOCs) and a debt to equity ratio of 1.68 to 1. The Companys debt to equity ratio was 1.35 to 1 as of September 30, 2012.
Our principal source of income is from cash sales, which is projected to provide sufficient cash flow to fund operations and service our current debt. During the next twelve months, management will focus on increasing net sales, particularly at Missouri Park, and completing several renovation projects currently underway at both parks. As part of the refinancing, the Company secured more than $230,000 for capital improvements and assets. The Company still has $118,799 available to fund these improvements from the new financing agreement signed on January 9, 2013. The total loan commitment was $3,752,000 and to date the Company has borrowed $3,633,201.
Subsequent Events
None
Off Balance Sheet Arrangements
We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, results of operations, liquidity or capital expenditures.
17
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of any contingent assets and liabilities. On an on-going basis, we evaluate our estimates. We base our estimates on various assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
A number of variables and assumptions could have an affect a valuation of our assets and liabilities. Our assumptions include the following:
·
Revenue and profit growth at our Parks will continue;
·
The existing Park infrastructure will accommodate the additional customers;
·
Cost of improvements and operations will remain a relatively stable budgeted allocation; and
·
Per capita spending by the customers will continue to rise in relation to the rise in capital expenditures;
If any one of these assumptions, or combination of assumptions, proves incorrect, then the values assigned to real estate, per capita revenues, attendance and other variables that have remained consistent over the past two years may not be realized. The same would be true if higher than expected revenue streams occurred.
PART II
ITEM 1. LEGAL PROCEEDINGS
On May 16, 2011, the U.S. Department of Agricultures Animal and Plant Health Inspection Service (USDA APHIS) issued a citation to the Company alleging violations of certain USDA APHIS regulations and assessed a penalty in the amount of $76,857. On July 8, 2011 the Company submitted a reply to the USDA APHIS citation which contained, among other things, mitigating factors which the Company believed should be considered in determining the amount of the fine. As of April 1, 2012, USDA APHIS responded to the Company with a reduced assessment of $11,170. The Company reduced its reserve by $65,687 to reflect this revised assessment. The Company also addressed the compliance issues raised in the citation and is implementing new operational controls to address these matters going forward.
The Company commenced a lawsuit in September, 2009 against a group led by Larry Eastland, a former officer and director of the Company. The litigation was inactive until June 11, 2012 at which time the Company amended its complaint against the Eastland group to, among other things, join as defendants Stanley Harper, LEA Capital Advisors, LLC (an entity controlled by Mr. Eastland) and Computer Contact Service, Inc. (an entity controlled by Mr. Harper) for breaches of contract and fiduciary duty with regards to the Companys purchase of TempSERV on September 30, 2007 and its subsequent re-conveyance of TempSERV to Computer Contact Service, Inc. as of January 1, 2009. The Company is seeking an indefinite amount of damages. For more information regarding the original litigation, see our annual report on Form 10-K for the year ended December 26, 2010.
ITEM 1A. RISK FACTORS
Risk Factors Relating to Our Business:
The Theme Park Industry is Highly Competitive and We May Be Unable to Compete Effectively.
The theme park industry is highly competitive, highly fragmented, rapidly evolving, and subject to technological change and intense marketing by providers with similar products. One of our competitors for attracting general recreation dollars, Callaway Gardens, is located within five miles of our Georgia Park. Branson, Missouri is located just 45 minutes from our Missouri Park.
Many of our current competitors are significantly larger and have substantially greater market presence as well as greater financial, technical, operational, marketing and other resources and experience than we have. In the event that such a competitor expends significant sales and marketing resources in one or several markets we may not be able to compete successfully in such markets. The Company believes that competition will continue to increase, placing downward pressure on prices. Such pressure could adversely affect our gross margins if we are not able to reduce costs commensurate with such price reductions. In addition, the pace of technological change makes it impossible for us to predict whether we will face new competitors using different technologies to provide the same or similar products offered or proposed to be offered by us. If our competitors were to provide better and more cost effective products, our business could be materially and adversely affected.
We Face Strong Competition from Numerous Entertainment Alternatives.
In addition to competing with other themed and amusement parks, our venues compete with other types of recreational venues and entertainment alternatives, including but not limited to movies, sports attractions, vacation travel and video games. There can be no assurance that we will successfully differentiate ourselves from these entertainment alternatives or that consumers will consider our entertainment offerings to be more appealing than those of our competitors. The development of technology-based entertainment has provided families with a wider selection of entertainment alternatives close to or in their homes, including home entertainment units, online gaming, and video game parlors. In addition, traditional theme parks have been able to reduce the cost and increase the variety of their attractions by implementing technologies that cannot be readily incorporated by a wild animal park such as the Georgia Park or Missouri Park.
19
Our Insurance Coverage May Not Be Adequate To Cover All Possible Losses That We Could Suffer, and Our Insurance Costs May Increase.
Companies engaged in the theme park business may be sued for substantial damages in the event of an actual or alleged accident. An accident occurring at our parks or at competing parks may reduce attendance, increase insurance premiums, and negatively impact our operating results. the Georgia Park contains a drive-through, safari style animal park, and there are inherent risks associated with allowing the public to interact with animals. Although we carry liability insurance to cover this risk, there can be no assurance that our coverage will be adequate to cover liabilities, or that we will be able to afford or obtain adequate coverage should a catastrophic incident occur.
We currently have $6,000,000 of liability insurance. We will continue to use reasonable commercial efforts to maintain policies of liability, fire and casualty insurance sufficient to provide reasonable coverage for risks arising from accidents, fire, weather, other acts of God, and other potential casualties. There can be no assurance that we will be able to obtain adequate levels of insurance to protect against suits and judgments in connection with accidents or other disasters that may occur in our theme parks.
Our Ownership of Real Property Subjects Us to Environmental Regulation, Which Creates Uncertainty Regarding Future Environmental Expenditures and Liabilities.
We may be required to incur costs to comply with environmental requirements, such as those relating to discharges to air, water and land; the handling and disposal of solid and hazardous waste; and the cleanup of properties affected by hazardous substances. Under these and other environmental requirements we may be required to investigate and clean up hazardous or toxic substances or chemical releases at one of our properties. As an owner or operator, we could also be held responsible to a governmental entity or third party for property damage, personal injury and investigation and cleanup costs incurred by them in connection with any contamination. Environmental laws typically impose cleanup responsibility and liability without regard to whether the owner or operator knew of or caused the presence of the contaminants. The liability under those laws has been interpreted to be joint and several unless the harm is divisible and there is a reasonable basis for allocation of the responsibility. The costs of investigation, remediation or removal of those substances may be substantial, and the presence of those substances, or the failure to remediate a property properly, may impair our ability to use our property. We are not currently aware of any material environmental risks regarding our properties. However, we may be required to incur costs to remediate potential environmental hazards or to mitigate environmental risks in the future.
The Suspension or Termination of Any of our Business Licenses May Have a Negative Impact On Our Business
We maintain a variety of standard business licenses issued by federal, state and city government agencies that are renewable on a periodic basis. We cannot guarantee that we will be successful in renewing all of our licenses on a periodic basis. The suspension, termination or expiration of one or more of these licenses could have a significant adverse affect on our revenues and profits. In addition, any changes to the licensing requirements for any of our licenses could affect our ability to maintain the licenses.
We Are Dependent Upon the Services of Our Executive Officers and Consultants.
Our success is heavily dependent on the continued active participation of our executive officers. Loss of the services of one or more of these officers could have a material adverse effect upon our business, financial condition or results of operations. In particular, we place substantial reliance upon the efforts and abilities of Dale Van Voorhis, Chairman of the Board of Directors and the Companys Chief Executive Officer and Jim Meikle, the Companys Chief Operating Office, President of Wild Animal-Georgia and Wild Animal-Missouri, a member of the Companys Board of Directors. The loss of Mr. Van Voorhis or Mr. Meikle's services could have a serious adverse effect on our business, operations, revenues or prospects.
Further, our success and achievement of our growth plans depend on our ability to recruit, hire, train and retain other highly qualified technical and managerial personnel. Competition for qualified employees among companies in the theme park industry is intense, and the loss of any such persons, or an inability to attract, retain and motivate any additional highly skilled employees required for the expansion of the Companys activities, could have a materially adverse effect on the Company. The inability of the Company to attract and retain the necessary personnel and consultants and advisors could have a material adverse effect on the Companys business, financial condition or results of operations.
20
Our Common Stock is Subject to the Penny Stock Rules of the SEC and the Trading Market in Our Securities is Limited, Which Makes Transactions In Our Stock Cumbersome and May Reduce the Value of an Investment in Our Stock.
The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:
●
that a broker or dealer approve a person's account for transactions in penny stocks; and
●
the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
In order to approve a person's account for transactions in penny stocks, the broker or dealer must:
●
obtain financial information and investment experience objectives of the person; and
●
make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form:
●
sets forth the basis on which the broker or dealer made the suitability determination; and
●
that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.
Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
We Do Not Expect to Pay Dividends for Some Time, if At All.
No cash dividends have been paid on our common stock. We expect that any income received from operations will be devoted to our future operations and growth. We do not expect to pay cash dividends in the near future. Payment of dividends would depend upon our profitability at the time, cash available for those dividends, and other factors.
Future Capital Needs Could Result in Dilution to Investors; Additional Financing Could be Unavailable or Have Unfavorable Terms.
Our future capital requirements will depend on many factors, including cash flow from operations, progress in our present operations, competing market developments, and our ability to market our products successfully. It may be necessary to raise additional funds through equity or debt financings. Any equity financings could result in dilution to our then-existing stockholders. Sources of debt financing may result in higher interest expense. Any financing, if available, may be on terms unfavorable to us.
21
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
N/A
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS.