PARKS! AMERICA, INC. AND SUBSIDIARIES
|
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
|
As of April 1, 2018 and October 1, 2017
|
|
|
|
|
|
|
|
April 1, 2018
|
|
October 1, 2017
|
ASSETS
|
|
|
|
|
|
Cash
|
$
|
2,377,929
|
|
$
|
3,204,043
|
Inventory
|
|
235,870
|
|
|
157,320
|
Prepaid expenses
|
|
216,405
|
|
|
309,626
|
Total current assets
|
|
2,830,204
|
|
|
3,670,989
|
|
|
|
|
|
|
Property and equipment, net
|
|
6,704,625
|
|
|
6,464,850
|
Intangible assets, net
|
|
1,800
|
|
|
2,200
|
Deferred tax asset
|
|
93,500
|
|
|
160,355
|
Other assets
|
|
10,426
|
|
|
9,199
|
Total assets
|
$
|
9,640,555
|
|
$
|
10,307,593
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Accounts payable
|
$
|
38,871
|
|
$
|
137,717
|
Other current liabilities
|
|
216,255
|
|
|
281,155
|
Current portion of long-term debt, net
|
|
92,373
|
|
|
111,496
|
Total current liabilities
|
|
347,499
|
|
|
530,368
|
|
|
|
|
|
|
Long-term debt, net
|
|
2,664,285
|
|
|
2,990,417
|
Total liabilities
|
|
3,011,784
|
|
|
3,520,785
|
|
|
|
|
|
|
Stockholders’ equity
|
|
|
|
|
|
Common stock; 300,000,000 shares authorized,
|
|
|
|
|
|
at $.001 par value; 74,721,537 and 74,671,537
|
|
|
|
|
|
shares issued and outstanding, respectively
|
|
74,721
|
|
|
74,671
|
Capital in excess of par
|
|
4,837,116
|
|
|
4,825,666
|
Treasury stock
|
|
(3,250)
|
|
|
(3,250)
|
Retained earnings
|
|
1,720,184
|
|
|
1,889,721
|
Total stockholders’ equity
|
|
6,628,771
|
|
|
6,786,808
|
Total liabilities and stockholders’ equity
|
$
|
9,640,555
|
|
$
|
10,307,593
|
The accompanying notes are an integral part of these consolidated financial statements.
3
PARKS! AMERICA, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For the Three Months and Six Months Ended April 1, 2018 and April 2, 2017
|
For the three months ended
|
|
For the six months ended
|
|
April 1, 2018
|
|
April 2, 2017
|
|
April 1, 2018
|
|
April 2, 2017
|
Net sales
|
$
|
918,579
|
|
$
|
1,201,917
|
|
$
|
1,876,219
|
|
$
|
2,149,181
|
Sale of animals
|
|
25,519
|
|
|
17,941
|
|
|
64,230
|
|
|
70,107
|
Total net sales
|
|
944,098
|
|
|
1,219,858
|
|
|
1,940,449
|
|
|
2,219,288
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
122,638
|
|
|
144,750
|
|
|
233,723
|
|
|
251,094
|
Selling, general and administrative
|
|
695,173
|
|
|
671,733
|
|
|
1,515,205
|
|
|
1,418,499
|
Depreciation and amortization
|
|
93,950
|
|
|
89,450
|
|
|
191,400
|
|
|
178,900
|
(Gain) loss on disposal of operating assets, net
|
|
26,022
|
|
|
(259)
|
|
|
25,303
|
|
|
(309)
|
Income (loss) from operations
|
|
6,315
|
|
|
314,184
|
|
|
(25,182)
|
|
|
371,104
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense), net
|
|
4,924
|
|
|
2,828
|
|
|
8,854
|
|
|
4,659
|
Write-off of loan fees - prepayment
|
|
-
|
|
|
-
|
|
|
(12,495)
|
|
|
-
|
Interest expense
|
|
(51,656)
|
|
|
(50,796)
|
|
|
(99,516)
|
|
|
(101,020)
|
Income (loss) before income taxes
|
|
(40,417)
|
|
|
266,216
|
|
|
(128,339)
|
|
|
274,743
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
(5,757)
|
|
|
100,700
|
|
|
41,198
|
|
|
104,000
|
Net income (loss)
|
$
|
(34,660)
|
|
$
|
165,516
|
|
$
|
(169,537)
|
|
$
|
170,743
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per share - basic and diluted
|
$
|
(0.00)
|
|
$
|
0.00
|
|
$
|
(0.00)
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
|
|
|
|
|
|
|
|
|
|
|
|
outstanding (in 000's) - basic and diluted
|
|
74,717
|
|
|
74,681
|
|
|
74,694
|
|
|
74,618
|
The accompanying notes are an integral part of these consolidated financial statements.
4
PARKS! AMERICA, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
For the Six Months Ended April 1, 2018 and Year Ended October 1, 2017
|
|
|
|
|
|
Capital in
|
|
Treasury
|
|
Retained
|
|
|
|
|
Shares
|
|
Amount
|
|
Excess of Par
|
|
Stock
|
|
Earnings
|
|
Total
|
Balance at October 2, 2016
|
74,531,537
|
|
$
|
74,531
|
|
$
|
4,809,606
|
|
$
|
(3,250)
|
|
$
|
629,067
|
|
$
|
5,509,954
|
Issuance of common stock to Directors
|
150,000
|
|
|
150
|
|
|
16,050
|
|
|
-
|
|
|
-
|
|
|
16,200
|
Common stock returned to the Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in conjunction with a legal settlement
|
(10,000)
|
|
|
(10)
|
|
|
10
|
|
|
-
|
|
|
-
|
|
|
-
|
Net income for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ended October 1, 2017
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,260,654
|
|
|
1,260,654
|
Balance at October 1, 2017
|
74,671,537
|
|
|
74,671
|
|
|
4,825,666
|
|
|
(3,250)
|
|
|
1,889,721
|
|
|
6,786,808
|
Issuance of common stock to Directors
|
50,000
|
|
|
50
|
|
|
11,450
|
|
|
-
|
|
|
-
|
|
|
11,500
|
Net loss for the six months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ended April 1, 2018
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(169,537)
|
|
|
(169,537)
|
Balance at April 1, 2018
|
74,721,537
|
|
$
|
74,721
|
|
$
|
4,837,116
|
|
$
|
(3,250)
|
|
$
|
1,720,184
|
|
$
|
6,628,771
|
The accompanying notes are an integral part of these condensed financial statements.
5
PARKS! AMERICA, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Six Months Ended April 1, 2018 and April 2, 2017
|
|
For the six months ended
|
|
|
April 1, 2018
|
|
April 2, 2017
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(169,537)
|
|
$
|
170,743
|
Reconciliation of net income (loss) to net cash
|
|
|
|
|
|
|
used in operating activities:
|
|
|
|
|
|
|
Depreciation and amortization expense
|
|
|
191,400
|
|
|
178,900
|
Interest expense - loan fee amortization
|
|
|
4,874
|
|
|
5,204
|
Write-off of loan fees - prepayment
|
|
|
12,495
|
|
|
-
|
(Gain) loss on disposal of assets
|
|
|
25,303
|
|
|
(309)
|
Stock-based compensation
|
|
|
11,500
|
|
|
16,200
|
Deferred taxes
|
|
|
66,855
|
|
|
75,500
|
Changes in assets and liabilities
|
|
|
|
|
|
|
(Increase) decrease in inventory
|
|
|
(78,550)
|
|
|
(21,750)
|
(Increase) decrease in prepaid expenses
|
|
|
93,221
|
|
|
(13,800)
|
Increase (decrease) in accounts payable
|
|
|
(98,846)
|
|
|
(14,729)
|
Increase (decrease) in other current liabilities
|
|
|
(64,900)
|
|
|
(25,917)
|
Increase (decrease) in accrued judgment award
|
|
|
-
|
|
|
(372,416)
|
Net cash used in operating activities
|
|
|
(6,185)
|
|
|
(2,374)
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
Acquisition of property and equipment
|
|
|
(459,340)
|
|
|
(335,984)
|
Proceeds from the disposition of property and equipment
|
|
|
2,035
|
|
|
-
|
(Increase) decrease in restricted cash
|
|
|
-
|
|
|
456,492
|
Net cash provided by (used in) investing activities
|
|
|
(457,305)
|
|
|
120,508
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
Payments on notes payable
|
|
|
(362,624)
|
|
|
(61,169)
|
Net cash used in financing activities
|
|
|
(362,624)
|
|
|
(61,169)
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
(826,114)
|
|
|
56,965
|
Cash at beginning of period
|
|
|
3,204,043
|
|
|
1,482,777
|
Cash at end of period
|
|
$
|
2,377,929
|
|
$
|
1,539,742
|
|
|
|
|
|
|
|
Supplemental Cash Flow Information:
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
98,273
|
|
$
|
96,887
|
Cash paid for income taxes
|
|
$
|
98,792
|
|
$
|
87,500
|
The accompanying notes are an integral part of these consolidated financial statements.
6
PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
April 1, 2018
NOTE 1. ORGANIZATION
Parks! America, Inc. (“Parks” or the “Company”) was originally incorporated on July 30, 1954 as Painted Desert Uranium & Oil Co., Inc. in Washington State. On October 1, 2002, Painted Desert Uranium & Oil Co., Inc. changed its name to Royal Pacific Resources, Inc. and its corporate domicile to the State of Nevada.
On December 19, 2003, Royal Pacific Resources, Inc. acquired the assets of Great Western Parks LLC pursuant to a Share Exchange Agreement that resulted in the Company assuming control and changing the corporate name to Great American Family Parks, Inc. The acquisition was accounted for as a reverse acquisition in which Great Western Parks was considered to be the acquirer of Royal Pacific Resources for reporting purposes. On June 11, 2008, the Company changed its name from Great American Family Parks, Inc. to Parks! America, Inc.
The Company owns and operates through wholly owned subsidiaries two regional theme parks and is in the business of acquiring, developing and operating local and regional theme parks and attractions in the United States. The Company’s wholly owned subsidiaries are Wild Animal Safari, Inc., a Georgia corporation (“Wild Animal – Georgia”) and Wild Animal, Inc., a Missouri corporation (“Wild Animal – Missouri”). 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”). The Company acquired the Georgia Park on June 13, 2005, and the Missouri Park on March 5, 2008.
The Parks are open year round but experience increased seasonal attendance, typically beginning in the latter half of March through early September. On a combined basis, net sales for the third and fourth quarter of the last two fiscal years represented approximately 64% to 67% of annual net sales.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation:
The Company’s unaudited consolidated financial statements for the three months and six months ended April 1, 2018 and April 2, 2017 are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The Company believes that the disclosures made are adequate to make the information presented not misleading. The information reflects all adjustments that, in the opinion of management, are necessary for a fair presentation of the financial position and results of operations for the periods set forth herein. In the opinion of management interim results reflect all normal and recurring adjustments, and are not necessarily indicative of the results for a full fiscal year.
These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 1, 2017.
Principles of Consolidation:
The accompanying unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries (Wild Animal – Georgia and Wild Animal – Missouri). All material inter-company accounts and transactions have been eliminated in consolidation.
Accounting Method:
The Company recognizes income and expenses based on the accrual method of accounting.
Estimates and Assumptions:
Management uses estimates and assumptions in preparing financial statements in accordance with GAAP. Those estimates and assumptions affect the reported amounts of the assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were assumed in preparing these financial statements.
Fiscal Year End:
The Company’s fiscal year-end is the Sunday closest to September 30, and its quarterly close dates are also determined by the Sunday closest to the end of each quarterly reporting period. For the 2018 fiscal year, September 30 will be the closest Sunday, and for the 2017 fiscal year, October 1 was the closest Sunday. Both fiscal years will be comprised of 52-weeks. This fiscal calendar aligns the Company’s fiscal periods more closely with the seasonality of its business. The high season typically ends after the Labor Day holiday weekend. The period from October through early March is geared towards maintenance and preparation for the next busy season, which typically begins at Spring Break and runs through Labor Day.
7
PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
April 1, 2018
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Reclassifications:
Certain accounts and financial statement captions in the prior periods have been reclassified to conform to the current period financial statements.
Financial and Concentrations Risk:
The Company does not have any concentration or related financial credit risks. The Company maintains its cash in bank deposit accounts, which at times may exceed federally insured limits.
Trade Accounts Receivable:
The theme parks are a payment upfront business; therefore, the Company typically carries little or no accounts receivable. The Company had no accounts receivable as of April 1, 2018 and October 1, 2017, respectively.
Inventory:
Inventory consists of gift shops items, animal food, concession and park supplies, and is stated at the lower of cost or market. Cost is determined on the first-in, first-out method. Inventories are reviewed and reconciled annually, because inventory levels turn over rapidly.
Property and Equipment:
Property and equipment is stated at cost. Depreciation is computed on the straight-line method over the estimated useful lives of the assets, which range from three to thirty-nine years. A summary is included below.
|
April 1, 2018
|
|
October 1, 2017
|
|
Depreciable Lives
|
Land
|
$
|
2,507,180
|
|
$
|
2,507,180
|
|
|
not applicable
|
Ground improvements
|
|
981,782
|
|
|
935,904
|
|
|
7-25 years
|
Buildings and structures
|
|
2,900,017
|
|
|
2,891,668
|
|
|
10-39 years
|
Animal shelters and habitats
|
|
1,370,369
|
|
|
1,330,653
|
|
|
10-39 years
|
Park animals
|
|
961,559
|
|
|
741,894
|
|
|
5-10 years
|
Equipment - concession and related
|
|
212,831
|
|
|
209,665
|
|
|
3-15 years
|
Equipment and vehicles - yard and field
|
|
570,267
|
|
|
541,703
|
|
|
3-15 years
|
Vehicles - buses and rental
|
|
232,963
|
|
|
200,764
|
|
|
3-5 years
|
Rides and entertainment
|
|
189,038
|
|
|
180,466
|
|
|
5-7 years
|
Furniture and fixtures
|
|
60,485
|
|
|
60,485
|
|
|
5-10 years
|
Projects in process
|
|
41,217
|
|
|
-
|
|
|
|
Property and equipment, cost
|
|
10,027,708
|
|
|
9,600,382
|
|
|
|
Less accumulated depreciation
|
|
(3,323,083)
|
|
|
(3,135,532)
|
|
|
|
Property and equipment, net
|
$
|
6,704,625
|
|
$
|
6,464,850
|
|
|
|
Intangible assets:
Intangible assets consist of franchising fees, which are reported at cost and are being amortized over a period of 60 months.
Impairment of Long-Lived Assets:
The Company reviews its major assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If an asset is considered impaired, then impairment will be recognized in an amount determined by the excess of the carrying amount of the asset over its fair value.
Other Current Liabilities:
The following is a breakdown of other current liabilities:
|
April 1, 2018
|
|
October 1, 2017
|
Accrued wages and payroll taxes
|
$
|
55,210
|
|
$
|
22,644
|
Deferred revenue
|
|
47,607
|
|
|
47,607
|
Accrued sales taxes
|
|
41,789
|
|
|
32,865
|
Accrued property taxes
|
|
16,950
|
|
|
37,557
|
Accrued income taxes
|
|
-
|
|
|
62,650
|
Other accrued liabilities
|
|
54,699
|
|
|
77,832
|
Other current liabilities
|
$
|
216,255
|
|
$
|
281,155
|
8
PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
April 1, 2018
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial Instruments:
The carrying amounts of financial instruments are considered by management to be their estimated fair values due to their short-term maturities. Securities that are publicly traded are valued at their fair market value as of the balance sheet date presented.
Revenue Recognition:
The Company’s major source of income is from theme park admissions. Theme park revenues from admission fees are generally recognized upon receipt of payment at the time of the customers’ visit to the parks. Theme park revenues from advance online ticket purchases are deferred until the customers’ visit to the parks. Short-term seasonal passes are sold primarily during the spring and summer seasons, are negligible to our results of operations and are not material. The Company periodically sells surplus animals created from the natural breeding process that occurs within the parks. All animal sales are reported as a separate revenue line item.
Advertising and Market Development:
The Company expenses advertising and marketing costs as incurred.
Stock Based Compensation:
The Company recognizes compensation costs on a straight-line basis over the requisite service period associated with the grant. No activity has occurred in relation to stock options during any period presented. The Company awards shares of its common stock to members of its Board of Directors for service on the Board. The shares issued to the Board are “restricted” and are not to be re-sold unless an exemption from registration is available, such as the exemption afforded by Rule 144 promulgated under the Securities Act of 1933, as amended (the “Securities Act”). The Company recognizes the expense based on the fair market value at time of the grant. Each director is typically granted 25,000 restricted shares or the cash equivalent annually, usually toward the end of the calendar year.
Income Taxes:
The Company utilizes the asset and liability method of accounting for income taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting basis and the tax basis of the assets and liabilities, and are measured using the enacted tax rates and laws. Management periodically reviews the Company’s deferred tax assets to determine whether their value can be realized based on available evidence. A valuation allowance is established when management believes it is more likely than not, that such tax benefits will not be realized. Changes in valuation allowances from period to period are included in the Company’s income tax provision in the period of change.
On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted into federal law, which includes significant changes to the U.S. corporate federal tax code. Among other changes, the Tax Act lowered the U.S. statutory corporate federal income tax rate from 35% to 21%. As the Company’s 2018 fiscal year end falls on September 30, the U.S. statutory federal income tax rate for its 2018 fiscal year will be a blended rate of 24.5%, with the statutory rate of 21% applicable for its fiscal years beginning with 2019. See “NOTE 8. INCOME TAXES” for additional information.
Basic and Diluted Net Income (Loss) Per Share:
Basic net income (loss) per share amounts are computed based on the weighted average number of shares actually outstanding. Diluted net income (loss) per share amounts are computed using the weighted average number of common shares and common equivalent shares outstanding as if shares had been issued on the exercise any common share rights unless the exercise becomes anti-dilutive and then only the basic per share amounts are shown in the report.
Basic and diluted net income (loss) per share is computed by dividing net income (loss) available to common stockholders by the applicable weighted average number of common shares outstanding in each period.
Dividend Policy:
The Company has not yet adopted a policy regarding payment of dividends.
Recent Accounting Pronouncements:
The Company does not expect recently issued accounting standards or interpretations to have a material impact on the Company’s financial position, results of operations, cash flows or financial statement disclosures.
9
PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
April 1, 2018
NOTE 3. RESTRICTED CASH
As more fully described in “NOTE 9. COMMITMENTS AND CONTINGENCIES” herein, on November 8, 2016, the Company paid out $372,416 of restricted cash, which had been supported by a bank letter of credit totaling $456,492, as a final resolution of a legal judgment and settlement. As a result, the balance of the bank letter of credit, net of fees, was no longer restricted and on November 17, 2016 approximately $79,300 was returned to the Company as unrestricted funds.
NOTE 4. LONG-TERM DEBT
On January 9, 2013, the Company completed a refinancing transaction (the “Refinancing Loan”) with Commercial Bank & Trust Company of Troup County (“CB&T”) as lender. The Refinancing Loan was for a principal amount of $3,752,000 and has a 20-year term. The Refinancing Loan is secured by substantially all the assets of the Company and its wholly owned subsidiaries. The Refinancing Loan bears interest at the rate of Prime Rate plus 2.50%, resulting in a rate of 5.75% during the first five years of the loan term. Thereafter, the interest rate will be re-priced every five years based on the then-Prime Rate plus 2.50%, as a result the interest rate was reset to 7.00% effective January 9, 2018. During the first four months following the closing of the Refinancing Loan the Company made interest-only payments. The closing costs for the Refinancing Loan totaled $175,369.
On December 13, 2017, the Company made a prepayment of $300,000 against the Refinancing Loan. As a result of this prepayment, the Company wrote-off $12,495 of the Refinancing Loan closing costs, leaving $122,911 of Refinancing Loan costs to be amortized over its remaining 15-year life. The minimum required monthly payment is approximately $25,800 for the next five years of the Refinancing Loan term, commencing in February 2018.
Interest expense of $51,656 and $50,796 for the three month period ended April 1, 2018 and April 2, 2017, respectively, includes $2,437 and $2,602 of amortization of debt closing costs, respectively. Interest expense of $99,516 and $101,020 for the six month period ended April 1, 2018 and April 2, 2017, respectively, includes $4,874 and $5,204 of amortization of debt closing costs, respectively.
|
|
As of
|
|
|
April 1, 2018
|
|
October 1, 2017
|
Refinancing Loan principal outstanding
|
$
|
2,877,132
|
|
$
|
3,239,756
|
Less: unamortized debt closing costs
|
|
(120,474)
|
|
|
(137,843)
|
Gross long-term debt
|
|
2,756,658
|
|
|
3,101,913
|
Less current portion of long-term debt,
|
|
|
|
|
|
|
net of unamortized debt closing costs
|
|
(92,373)
|
|
|
(111,496)
|
Long-term debt
|
$
|
2,664,285
|
|
$
|
2,990,417
|
As of April 1, 2018, the scheduled future principal maturities by fiscal year are as follows:
2018
|
$
|
45,608
|
2019
|
|
115,028
|
2020
|
|
123,343
|
2021
|
|
132,260
|
2022
|
|
141,821
|
thereafter
|
|
2,319,072
|
Total
|
$
|
2,877,132
|
10
PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
April 1, 2018
NOTE 5. LINES OF CREDIT
The Company maintains a $350,000 line of credit loan (the “LOC”) from CB&T for working capital purposes. This LOC has an initial term of seven years, ending on January 8, 2020, and is subject to the satisfactory performance by the Company. The LOC interest rate is tied to the prime rate and was 6.75% as of April 1, 2018, with a minimum rate of 5.25%. The closing costs for the LOC totaled $11,482 and are being amortized over the initial seven-year term of the loan. As of April 1, 2018 and October 1, 2017, respectively, there was no outstanding balance against the LOC. When applicable, all advances on the Company’s LOC are recorded as current liabilities.
NOTE 6. STOCKHOLDERS’ EQUITY
Shares of common stock issued for service to the Company are valued based on market price on the date of issuance.
On December 20, 2017, the Company declared its annual award to five Directors for their service on the Board of Directors. Each director was awarded 25,000 shares at $0.230 per share or the cash equivalent of $5,750. Three directors elected to receive their award in cash and two directors elected to receive shares of the Company’s common stock. The total award cost of $28,750 was reported as an expense in the first quarter of the 2018 fiscal year, and the Company subsequently distributed each award on January 9, 2018.
On December 20, 2016, the Company awarded a total of 150,000 shares of its common stock to six Directors for their service on the Board of Directors at a fair market value of $0.108 per share or $16,200, which was reported as an expense in the first quarter of the 2017 fiscal year.
Officers, Directors and their controlled entities own approximately 51.8% of the outstanding common stock of the Company as of April 1, 2018.
NOTE 7. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES
Employment Agreements:
Effective June 1, 2009, the Company entered into an employment agreement with Dale Van Voorhis (the “2009 Van Voorhis Employment Agreement”) to serve as the Company’s Chief Operating Officer. Effective January 27, 2011, Mr. Van Voorhis was appointed as the Company’s Chief Executive Officer. Effective June 1, 2016, the Company and Mr. Van Voorhis entered into the “2016 Van Voorhis Employment Agreement”. Pursuant to the 2016 Van Voorhis Employment Agreement, Mr. Van Voorhis receives an initial base annual compensation in the amount of $90,000 per year, subject to annual review by the Board of Directors. The 2016 Van Voorhis Employment Agreement has a term of two 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.
On April 1, 2008, the Company entered into an employment agreement with Jim Meikle (the “2008 Meikle Employment Agreement”) pursuant to which Mr. Meikle was hired to serve as the President and Chief Executive Officer of each of the Company’s wholly owned subsidiaries. Effective January 27, 2011, Mr. Meikle was appointed as the Company’s Chief Operating Officer. Effective April 1, 2017, the Company and Mr. Meikle entered into the “2017 Meikle Employment Agreement”. Pursuant to the 2017 Meikle Employment Agreement, Mr. Meikle receives an initial base annual compensation in the amount of $135,000 per year, subject to annual review by the Board of Directors. The 2017 Meikle Employment Agreement has a term of two years and entitles Mr. Meikle to participate in any deferred compensation plan the Company may adopt during the term of his employment with the Company.
Effective April 2, 2014, the Company entered into an employment agreement with Todd R. White (the “White Employment Agreement”) to serve as the Company’s Chief Financial Officer. Pursuant to the White Employment Agreement, Mr. White received an initial base annual compensation of $50,000 per year, subject to annual review by the Board of Directors. Mr. White also received a $10,000 signing bonus. Effective April 2, 2015, Mr. White’s annual base compensation was increased to $60,000. The White Employment Agreement has a term of five years and entitles Mr. White to participate in any deferred compensation plan the Company may adopt during the term of his employment with the Company.
11
PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
April 1, 2018
NOTE 7. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
Effective May 1, 2018, the Company entered into an employment agreement with Michael D. Newman (the “Newman Employment Agreement”) to serve as the Company’s Vice President of Safari Operations. Mr. Newman has been the general manager of Wild Animal – Georgia since February 2011. Pursuant to the Newman Employment Agreement, Mr. Newman received an initial base annual compensation of $95,000 per year, subject to annual review by the Board of Directors. Mr. Newman also received a $5,000 signing bonus. The Newman Employment Agreement has a term of five years and entitles Mr. Newman to participate in any deferred compensation plan 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 ($545,000 in aggregate) or (ii) in the event of a change in control of the Company ($495,000 in aggregate).
NOTE 8. INCOME TAXES
On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted into federal law, which includes significant changes to the U.S. corporate federal tax code. Among other changes, the Tax Act lowered the U.S. statutory corporate federal income tax rate from 35% to 21% effective January 1, 2018. As the Company’s 2018 fiscal year end falls on September 30, the U.S. statutory federal income tax rate for its 2018 fiscal year will be a blended rate of 24.5%, with the statutory rate of 21% applicable for its fiscal years beginning with 2019.
As of October 1, 2017, the Company had a net deferred tax asset of $160,355, primarily associated with its remaining cumulative federal net operating loss carry-forward. For the three month period ended April 1, 2018, the Company recognized a one-time net deferred tax charge of $66,855, of which $36,595 was associated with the revaluation of its net deferred tax liability at its 2018 fiscal year blended federal income tax rate. The remaining net deferred tax charge of $30,260 was associated with a reassessment of the Company’s remaining cumulative federal net operating loss carry-forward.
For the six month period ended April 1, 2018, the Company reported a pre-tax loss of $128,339. For the fiscal year ending September 30, 2018 the Company expects to generate pre-tax income and to record a tax provision at a blended effective federal and state income tax rate of approximately 29.2%. As such, the Company recorded a regular net tax benefit of approximately $25,700 for the six month period ended April 1, 2018.
The Company’s remaining cumulative federal net operating loss carry-forward was approximately $382,000 at October 1, 2017 and will expire beginning in the year 2026. For the fiscal year ending September 30, 2018 the Company expects to utilize all of its remaining federal net tax operating loss carry-forwards to offset a portion of the regular federal cash tax due for its 2018 fiscal year.
NOTE 9. COMMITMENTS AND CONTINGENCIES
As of March 30, 2017, the Company entered into a settlement and release agreement (the “Eastland Settlement Agreement”) with Larry Eastland, the Company’s former President and CEO and certain parties affiliated with Mr. Eastland (collectively the “Eastland Defendants”) thereby bringing to a close litigation commenced by the Company in September of 2009 and identified as Parks! America, Inc. vs. Eastland; et al., Case No. 09-A-599668 in the Eighth Judicial District Court of the State of Nevada. Prior to that, in November of 2016, the Company reached a settlement with Stanley Harper and Computer Contact Service, Inc., an entity controlled by Mr. Harper (together the “Harper Defendants”) who were also defendants in that case. As a result, this litigation was terminated. The Harper Defendants received $372,416, inclusive of additional attorney’s fees, costs and interest (the “Harper Judgment Award”), which was paid on November 8, 2016. The Eastland Defendants agreed to make a settlement payment to the Company of $80,000 and assign 10,000 shares of the Company’s common stock, beneficially owned by one of the Eastland Defendants, to the Company (the “Settlement Shares”). Furthermore, the Company consented to the sale of 10,010,000 shares of common stock beneficially owned by the Eastland Defendants to Nicholas Parks (the “NP Transaction”). On April 20, 2017, the Company received the $80,000 settlement payment and the Settlement Shares. A Stipulation and Order to Dismiss the Litigation with Prejudice was filed on April 24, 2017. As part of the NP Transaction, the Company entered into a Settlement Agreement and Release with Nicholas Parks, dated as of March 30, 2017 (the “NP Settlement Agreement”). As a result of the NP Transaction, Nicholas Parks holds shares representing approximately 13.4% of the outstanding common stock of the Company.
12
PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
April 1, 2018
NOTE 9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Except as described above, the Company is not a party to any pending legal proceeding, nor is its property the subject of a pending legal proceeding, that is not in the ordinary course of business or otherwise material to the financial condition of its business. None of the Company’s directors, officers or affiliates is involved in a proceeding adverse to its business or has a material interest adverse to its business.
NOTE 10. BUSINESS SEGMENTS
The Company manages its operations on an individual location basis. Discrete financial information is maintained for each Park and provided to management for review and as a basis for decision-making. The primary performance measures used to allocate resources are Park earnings before interest and tax expense, and free cash flow.
The following tables present financial information regarding each of the Company’s reportable segments:
|
For the three months ended
|
|
For the six months ended
|
|
April 1, 2018
|
|
April 2, 2017
|
|
April 1, 2018
|
|
April 2, 2017
|
Total net sales:
|
|
|
|
|
|
|
|
|
|
|
|
Georgia
|
$
|
827,907
|
|
$
|
1,068,555
|
|
$
|
1,716,432
|
|
$
|
1,948,381
|
Missouri
|
|
116,191
|
|
|
151,303
|
|
|
224,017
|
|
|
270,907
|
Consolidated
|
$
|
944,098
|
|
$
|
1,219,858
|
|
$
|
1,940,449
|
|
$
|
2,219,288
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
Georgia
|
$
|
234,104
|
|
$
|
552,206
|
|
$
|
530,379
|
|
|
943,766
|
Missouri
|
|
(113,640)
|
|
|
(65,804)
|
|
|
(217,766)
|
|
|
(139,463)
|
Segment total
|
|
120,464
|
|
|
486,402
|
|
|
312,613
|
|
|
804,303
|
Corporate
|
|
(114,149)
|
|
|
(172,218)
|
|
|
(337,795)
|
|
|
(433,199)
|
Other income (expense), net
|
|
4,924
|
|
|
2,828
|
|
|
8,854
|
|
|
4,659
|
Write-off of loan fees - prepayment
|
|
-
|
|
|
-
|
|
|
(12,495)
|
|
|
-
|
Interest expense
|
|
(51,656)
|
|
|
(50,796)
|
|
|
(99,516)
|
|
|
(101,020)
|
Consolidated
|
$
|
(40,417)
|
|
$
|
266,216
|
|
$
|
(128,339)
|
|
$
|
274,743
|
|
As of
|
|
April 1, 2018
|
|
October 1, 2017
|
Total assets:
|
|
|
|
|
|
Georgia
|
$
|
6,894,949
|
|
$
|
7,206,865
|
Missouri
|
|
2,492,199
|
|
|
2,714,869
|
Corporate
|
|
253,407
|
|
|
385,859
|
Consolidated
|
$
|
9,640,555
|
|
$
|
10,307,593
|
NOTE 11. SUBSEQUENT EVENTS
In accordance with ASC 855-10, except as noted in “NOTE 7. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES”, the Company has analyzed its operations subsequent to April 1, 2018 to the date these financial statements were issued and has determined that it does not have any material subsequent events to disclose in these unaudited consolidated financial statements.
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
Management’s discussion and analysis of results of operations and financial condition (“MD&A”) is a supplement to the accompanying unaudited consolidated financial statements and provides additional information on the Company’s businesses, current developments, financial condition, cash flows and results of operations. The following discussion should be read in conjunction with our unaudited consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report”) and with our Annual Report on Form 10-K for the fiscal year ended October 1, 2017.
Forward-Looking Statements
Except for the historical information contained herein, this Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements involve risks and uncertainties, including, among other things, statements concerning: our business strategy; liquidity and capital expenditures; future sources of revenues and anticipated costs and expenses; and trends in industry activity generally. Such forward-looking statements include, among others, those statements including the words such as "may," "will," "should," "expect," "plan," "could," "anticipate," "intend," "believe," "estimate," "predict," "potential," "goal," or "continue" or 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. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including, but not limited to, the risks outlined under "RISK FACTORS" in this Quarterly Report, that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such 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. Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, we cannot guarantee future results, levels of activity, performance or achievements.
The forward-looking statements we make in this Quarterly Report are based on management’s current views and assumptions regarding future events and speak only as of the date of this report.
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, except as required by applicable law, including the securities laws of the United States and the rules and regulations of the Securities and Exchange Commission.
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 Safari, Inc., a Georgia corporation (“Wild Animal – Georgia”) and Wild Animal, Inc., a Missouri corporation (“Wild Animal – Missouri”). 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 Parks are open year round but experience increased seasonal attendance, typically beginning in the latter half of March through early September. On a combined basis, net sales for the third and fourth quarter of our last two fiscal years represented approximately 64% to 67% of annual net sales.
Through our fiscal year ended October 1, 2017, our annual net sales, adjusted income before income taxes and net cash provided by operating activities have improved significantly in each of the past four fiscal years. These improvements are primarily attributable to a combination of increased attendance revenues and strong operating cost controls. Our Georgia Park in particular has benefitted from several positive factors including strong and stable management, the addition of online ticket sales in June 2015, growth and positive economic conditions in the greater Atlanta area, as well as positive guest perceptions of this Park. We are committed to leveraging the strong operating model we have established at our Georgia Park, with a focus on increasing attendance, as well as increasing the average revenue generated per guest visit via concession and gift shop revenues.
14
Among our highest priorities is the continued improvement of the operating performance and profit at our Missouri Park. Since we acquired our Missouri Park in March 2008, we have worked to upgrade the Park’s physical facilities and dramatically improve its concessions. We will continue to focus our efforts to promote our Missouri Park and make additional improvements as our capital budget allows. We expect that over the course of several years these efforts will ultimately yield favorable results.
On January 9, 2013, we completed a $3,752,000 loan transaction (the “Refinancing Loan”), the proceeds of which were used primarily to refinance the Company’s then-outstanding debt and fund $230,000 of new construction and renovations at our Parks. Over the last five fiscal years, the Refinancing Loan lowered our annual debt service payments by approximately $170,000, freeing up cash flow to fund operations and capital improvements at our Parks.
Our business plan includes expansion via the acquisition of additional local or regional theme parks and attractions, if attractive opportunities arise. However, we have not made an acquisition since 2008 and there can be no assurance that we will be successful in acquiring and operating additional local or regional theme parks and attractions. We believe acquisitions, if any, should not unnecessarily encumber the Company with additional debt that cannot be justified by current operations. We may also pursue contract management opportunities for themed attractions owned by third parties. By using a combination of equity, debt and other financing options, we intend to carefully monitor stockholder value in conjunction with the pursuit of growth.
Strong growth in our operating cash flow and the lower annual debt service associated with the Refinancing Loan have provided us with incremental cash flow margin over the past four fiscal years. However, our current size and operating model leave us little room for error. Any future capital raised by us is likely to result in dilution to existing stockholders. It is possible that cash generated by, or available to, us may not be sufficient to fund our capital and liquidity needs for the near-term.
We manage our operations on an individual location basis. Discrete financial information is maintained for each Park and provided to our corporate management for review and as a basis for decision-making. The primary performance measures used to allocate resources are Park earnings before interest and tax expense, and free cash flow. We use this measure of operating profit to gauge segment performance because we believe this measure is the most indicative of performance trends and the overall earnings potential of each reportable segment.
Results of Operations For the Three Month Period Ended April 1, 2018 as Compared to Three Month Period Ended April 2, 2017
The following table shows our consolidated and segment operating results for the three month periods ended April 1, 2018 and April 2, 2017:
|
Georgia Park
|
|
Missouri Park
|
|
Consolidated
|
|
Fiscal 2018
|
|
Fiscal 2017
|
|
Fiscal 2018
|
|
Fiscal 2017
|
|
Fiscal 2018
|
|
Fiscal 2017
|
Total net sales
|
$
|
827,907
|
|
$
|
1,068,555
|
|
$
|
116,191
|
|
$
|
151,303
|
|
$
|
944,098
|
|
$
|
1,219,858
|
Segment income (loss) from
operations
|
|
234,104
|
|
|
552,206
|
|
|
(113,640)
|
|
|
(65,804)
|
|
|
120,464
|
|
|
486,402
|
Segment operating margin %
|
|
28.3%
|
|
|
51.7%
|
|
|
-97.8%
|
|
|
-43.5%
|
|
|
12.8%
|
|
|
39.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(114,149)
|
|
|
(172,218)
|
Other income (expense), net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,924
|
|
|
2,828
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(51,656)
|
|
|
(50,796)
|
Income (loss) before income
taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(40,417)
|
|
$
|
266,216
|
Total Net Sales
Our total net sales for the three month period ended April 1, 2018 decreased by $275,760, to $944,098 versus the three month period ended April 2, 2017. Our Parks’ combined attendance based net sales decreased by $283,338 or 23.6%, while animal sales increased by $7,578.
Our Georgia Park’s attendance based net sales decreased by $256,168 or 24.1%, while animal sales increased by $15,520. Our Missouri Park’s attendance based net sales decreased by $27,170 or 19.6%, and animal sales decreased by $7,942.
For the three month period ended April 1, 2018, attendance at our Georgia Park and our Missouri Park decreased by 27.9% and 21.0%, respectively. We believe attendance at each Park was negatively impacted by cold, wet winter weather during the three month period ended April 1, 2018.
15
Segment Operating Margin
Our consolidated segment operating margin decreased by $365,938, resulting in segment income from operations of $120,464 for the three month period ended April 1, 2018 compared to $486,402 for the three month period ended April 2, 2017. Our Georgia Park’s segment operating income was $234,104, resulting in a decrease of $318,102, principally as a result of lower attendance based net sales, and higher insurance, compensation and advertising costs, as well as losses on asset disposals, partially offset by increased animal sales and lower cost of sales. Our Missouri Park generated a segment operating loss of $113,640, an increase of $47,836, as a result of lower attendance based net sales and lower animal sales, as well as losses on asset disposals.
Corporate Expenses and Other
Corporate spending decreased by $58,069 to $114,149 during the three month period ended April 1, 2018, primarily due to lower legal fees.
Interest Expense
Interest expense for the three month period ended April 1, 2018 was $51,656, an increase of $860 compared with the three month period ended April 2, 2017, primarily as a result of a 125 basis point increase in the interest rate on our term loan effective January 8, 2018, partially offset by lower average term loan borrowing.
Income Taxes
For the three month period ended April 1, 2018, we reported a pre-tax loss of $40,417. For the fiscal year ending September 30, 2018 we expect to generate pre-tax income and to record a tax provision at a blended effective federal and state income tax rate of approximately 29.2%. As such, we recorded a regular net tax benefit of approximately $5,800 for the three month period ended April 1, 2018.
For additional information, see “NOTE 8. INCOME TAXES” of the Notes to the Consolidated Financial Statements (Unaudited).
Net Income and Income Per Share
During the three month period ended April 1, 2018, we reported a net loss of $34,660 or $0.00 per basic share and per fully diluted share, compared to net income of $165,516 or $0.00 per basic share and per fully diluted share, for the three month period ended April 2, 2017, resulting in an decrease of $200,176. The primary drivers for the decrease in net income for this quarter are a $318,102 decrease in operating income for our Georgia Park, a $47,836 increase in the operating loss for our Missouri Park, partially offset by a $58,069 decrease in Corporate spending and a $106,457 decrease in our income tax provision
Results of Operations For the Six Month Period Ended April 1, 2018 as Compared to Six Month Period Ended
April 2, 2017
The following table shows our consolidated and segment operating results for the six month periods ended April 1, 2018 and April 2, 2017:
|
Georgia Park
|
|
Missouri Park
|
|
Consolidated
|
|
Fiscal 2018
|
|
Fiscal 2017
|
|
Fiscal 2018
|
|
Fiscal 2017
|
|
Fiscal 2018
|
|
Fiscal 2017
|
Total net sales
|
$
|
1,716,432
|
|
$
|
1,948,381
|
|
$
|
224,017
|
|
$
|
270,907
|
|
$
|
1,940,449
|
|
$
|
2,219,288
|
Segment income (loss) from
operations
|
|
530,379
|
|
|
943,766
|
|
|
(217,766)
|
|
|
(139,463)
|
|
|
312,613
|
|
|
804,303
|
Segment operating margin %
|
|
30.9%
|
|
|
48.4%
|
|
|
-97.2%
|
|
|
-51.5%
|
|
|
16.1%
|
|
|
36.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(337,795)
|
|
|
(433,199)
|
Other income (expense), net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,854
|
|
|
4,659
|
Write-off of loan fees –
prepayment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,495)
|
|
|
-
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(99,516)
|
|
|
(101,020)
|
Income before income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(128,339)
|
|
$
|
274,743
|
16
Total Net Sales
Our total net sales for the six month period ended April 1, 2018 decreased by $278,839, to $1,940,449 versus the six month period ended April 2, 2017. Our Parks’ combined attendance based net sales decreased by $272,962 or 12.7%, and animal sales decreased by $5,877.
Our Georgia Park’s attendance based net sales decreased by $239,087 or 12.5%, while animal sales increased by $7,138. Our Missouri Park’s attendance based net sales decreased by $33,875 or 14.2%, and animal sales decreased by 13,015.
For the six month period ended April 1, 2018, attendance at our Georgia Park and our Missouri Park decreased by 14.8% and 15.4%, respectively. We believe attendance at each Park was negatively impacted by several significant weather events that caused unplanned closures, in addition to generally cold, wet winter weather conditions.
Segment Operating Margin
Our consolidated segment operating margin decreased by $491,690, resulting in segment income from operations of $312,613 for the six month period ended April 1, 2018 compared to $804,303 for the six month period ended April 2, 2017. Our Georgia Park’s segment operating income was $530,379, resulting in a decrease of $413,387, principally as a result of lower attendance based net sales, and higher insurance, compensation and advertising costs, as well as losses on asset disposals, partially offset by increased animal sales and lower cost of sales. Our Missouri Park generated a segment operating loss of $217,766, an increase of $78,303, as a result of lower attendance based net sales and lower animal sales, and higher cost of sales, as well as losses on asset disposals.
Corporate Expenses and Other
Corporate spending decreased by $95,404 to $337,795 during the six month period ended April 1, 2018, primarily due to lower legal fees, partially offset by higher compensation expense.
Write-off of loan fees – prepayment
During the six month period ended April 1, 2018, the Company wrote-off $12,495 of deferred loan fees associated with a $300,000 prepayment against its Refinancing Loan.
Interest Expense
Interest expense for the six month period ended April 1, 2018 was $99,516, a decrease of $1,504 compared with the six month period ended April 2, 2017, primarily as a result of lower average term loan borrowing, partially offset by a 125 basis point increase in the interest rate on our term loan effective January 8, 2018.
Income Taxes
On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted into federal law, which includes significant changes to the U.S. corporate federal tax code. Among other changes, the Tax Act lowered the U.S. statutory corporate federal income tax rate from 35% to 21% effective January 1, 2018. As our 2018 fiscal year end falls on September 30, the U.S. statutory federal income tax rate for our 2018 fiscal year will be a blended rate of 24.5%, with the statutory rate of 21% applicable for our fiscal years beginning with 2019.
As of October 1, 2017, we had a net deferred tax asset of $160,355, primarily associated with our remaining cumulative federal net operating loss carry-forward. For the six month period ended April 1, 2018, we recognized a one-time net deferred tax charge of $66,855, of which $36,595 was associated with the revaluation of our net deferred tax liability at the 2018 fiscal year blended tax rate. The remaining net deferred tax charge of $30,260 was associated with a reassessment of our remaining cumulative Federal net operating loss carry-forward.
For the six month period ended April 1, 2018, we reported a pre-tax loss of $128,339. For the fiscal year ending September 30, 2018 we expect to generate pre-tax income and to record a tax provision at a blended effective federal and state income tax rate of approximately 29.2%. As such, we recorded a regular net tax benefit of approximately $25,700 for the six month period ended April 1, 2018.
17
Our remaining cumulative federal net operating loss carry-forward was approximately $382,000 at October 1, 2017 and will expire beginning in the year 2026. For the fiscal year ending September 30, 2018 we expects to utilize all of our remaining federal net tax operating loss carry-forwards to offset a portion of the regular federal cash tax due for our 2018 fiscal year.
For additional information, see “NOTE 8. INCOME TAXES” of the Notes to the Consolidated Financial Statements (Unaudited).
Net Income and Income Per Share
During the six month period ended April 1, 2018, we reported a net loss of $169,537 or $0.00 per basic share and per fully diluted share, compared to net income of $170,743 or $0.00 per basic share and per fully diluted share, for the six month period ended April 2, 2017, resulting in a decrease of $340,280. Net income for the six month period ended April 1, 2018 included a one-time deferred tax charge of $66,855. The primary drivers for the remaining $273,425 decrease in net income for this six month period are a $413,387 decrease in operating income for our Georgia Park, a $78,303 increase in the operating loss for our Missouri Park, and the write-off of loan fees of $12,495 associated with a partial prepayment against our term loan, partially offset by a $95,404 decrease in Corporate spending, and $129,657 decrease in our regular income tax provision.
Financial Condition, Liquidity and Capital Resources
Financial Condition and Liquidity
Our primary sources of liquidity are cash generated by operations and borrowings under our loan agreements. Our slow season starts after Labor Day in September and runs until Spring Break, which typically begins toward the end of March. The first and second quarters of our fiscal year have historically generated negative cash flow, requiring us to borrow on a seasonal basis to fund operations and prepare our Parks for the busy season during the third and fourth quarters of our fiscal year. However, as a result of our improved cash position, during our 2017 fiscal year we did not utilize any seasonal borrowing and we do not anticipate utilizing any seasonal borrowing during our 2018 fiscal year.
We believe that our performance has improved to the point that annual cash flow from operations will be sufficient to fund operations, make debt-service payments and spend modestly on capital improvements in the near-term. During the next twelve months, our focus will continue on increasing Park attendance revenues. Any slowdown in revenue or unusual capital outlays may require us to seek additional capital.
Our working capital was $2.48 million as of April 1, 2018, compared to $3.14 million as of October 1, 2017. This decrease in working capital primarily reflects the use of $300,000 in cash as a partial prepayment against our Refinancing Loan, as well as capital expenditures and scheduled payments on our term debt during the six months ended April 1, 2018.
Total loan debt, including current maturities, as of April 1, 2018 was $2.76 million compared to $3.10 million as of October 1, 2017. The decrease in total loan debt was a result of a $300,000 prepayment made on December 13, 2017, as well as scheduled payments against our term loan during the six months ended April 1, 2018. There were no borrowings on our CB&T LOC as of April 1, 2018 and October 1, 2017, respectively.
As of April 1, 2018, we had equity of $6.63 million and total loan debt of $2.76 million, resulting in a debt to equity ratio of 0.42 to 1.0. Our debt to equity ratio was 0.46 to 1.0 as of October 1, 2017.
Operating Activities
Net cash used in operating activities was $6,185 for the six month period ended April 1, 2018, compared to $2,374 for the six month period ended April 2, 2017. Excluding the $372,416 of restricted cash paid out for the Harper Judgment Award (as further described in PART II, ITEM 1. “LEGAL PROCEEDINGS” herein) during the six months ended April 2, 2017, cash flow used in operating activities increased by $376,227 during the six months ended April 1, 2018, primarily as a result of reduction in our net income.
Investing Activities
During the six months ended April 1, 2018, we spent $459,340 on capital improvements at our Parks, compared to $335,984 spent on capital improvements during the six months ended April 2, 2017. The six month ended April 2, 2017 also included the one-time $456,492 reduction in restricted cash associated with the payout of the Harper Judgment Award, as further described in PART II, ITEM 1. “LEGAL PROCEEDINGS” herein.
18
Financing Activities
Net cash used in financing activities was $362,624 for the six month period ended April 1, 2018, compared to $61,169 for the six month period ended April 2, 2017. During the six month period ended April 1, 2018, we made a $300,000 prepayment against our term loan, and other payments during both periods reflect scheduled payments on our term loan.
Subsequent Events
See “NOTE 7. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES” of the Notes to the Consolidated Financial Statements (Unaudited).
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, results of operations, liquidity or capital expenditures.
Critical Accounting Policies and Estimates
The preceding discussion and analysis of our consolidated financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements included elsewhere in this Quarterly Report. Our significant accounting policies are set forth in “NOTE 2. SIGNIFICANT ACCOUNTING POLICIES” of the Notes to the Consolidated Financial Statements (Unaudited) included in this Quarterly Report, which should be reviewed as they are integral to understanding results of operations and financial position. The Parks! America, Inc. Annual Report on Form 10-K for the fiscal year ended October 1, 2017 includes additional information about us, and our operations, financial condition, critical accounting policies and accounting estimates, and should be read in conjunction with this Quarterly Report.