The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these condensed financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 28, 2020
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 three 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”), Wild Animal, Inc., a Missouri corporation (“Wild Animal – Missouri”), and Aggieland-Parks, Inc., a Texas corporation (“Aggieland Wild Animal – Texas”). 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”). Aggieland Wild Animal – Texas owns and operates the Aggieland Wild Animal Safari theme park near Bryan/College Station, Texas (the “Texas Park”). The Company acquired the Georgia Park on June 13, 2005, the Missouri Park on March 5, 2008, and the Texas Park on April 27, 2020.
The Parks are open year round but experience increased seasonal attendance, typically beginning in the latter half of March through early September. On a historical basis, the Company’s net sales for the third and fourth quarter of the last two fiscal years represented approximately 67% to 68% of annual net sales.
COVID-19
In March 2020, the World Health Organization characterized COVID-19, a disease caused by a novel strain of a coronavirus, as a pandemic. The rapid spread of COVID-19 has resulted in governmental authorities throughout the United States implementing a variety of containment measures with the objective of slowing the spread of the virus, including travel restrictions, shelter-in-place orders and business shutdowns. The COVID-19 pandemic and these containment measures have had, and could continue to have, a material impact on the Company’s business.
The rapid acceleration of the COVID-19 pandemic in the United States occurred at the beginning of the Company’s annual high season. The Company began to see a significant reduction in paid attendance at its Georgia and Missouri Parks beginning the week of March 9, 2020. Effective April 3, 2020, the Company’s Georgia and Missouri Parks were closed as a result of shelter-in-place mandates in Georgia and Missouri. Also note that prior to the Company’s acquisition of the Texas Park, its operations were suspended for the majority of April 2020 due to a shelter-in-place mandate in Texas.
In compliance with respective state issued guidelines, the Georgia Park and the Texas Park each reopened on May 1, 2020, and the Missouri Park reopened on May 4, 2020. Attendance levels have been strong at each of the Company’s three Parks from mid-May through the end of June 2020, which has continued through July. However, there may be longer-term negative impacts to the Company’s business, results of operations and cash flows, and financial condition as a result of the COVID-19 pandemic. These negative impacts include changes in customer behavior and preferences causing significant volatility or reductions in Park attendance, increases in operating expenses to comply with additional hygiene-related protocols, limitations in our ability to recruit and maintain staffing, limitations on our employees ability to work and travel, and significant changes in the economic or political conditions in the areas the Company’s Parks are located. Despite the Company’s efforts to manage these impacts, the ultimate impact may be material, and will depend on a number of factors beyond its control, including the duration and severity of the COVID-19 pandemic and actions by governmental authorities taken to contain its spread and mitigate its public health effects.
7
PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 28, 2020
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: The Company’s unaudited consolidated financial statements for the three months and nine months ended June 28, 2020 and June 30, 2019 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 September 29, 2019.
Principles of Consolidation: The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries (Wild Animal – Georgia, Wild Animal – Missouri and Aggieland Wild Animal – Texas). 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 2020 fiscal year, September 27 will be the closest Sunday, and for the 2019 fiscal year, September 29 was the closest Sunday. Both fiscal years will be comprised of 52-weeks. This fiscal calendar aligns the Company’s fiscal periods 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.
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 June 28, 2020 and September 29, 2019, respectively.
Inventory: Inventory consists of gift shop items, animal food, and concession and park supplies, and is stated at the lower of cost or market. Cost is determined on the first-in, first-out method. The gross profit method is used to determine the change in gift shop inventory for interim periods. Inventories are reviewed and reconciled annually, because inventory levels turn over rapidly. The Company had inventory of $203,721 and $195,201 as of June 28, 2020 and September 29, 2019, respectively.
8
PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 28, 2020
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property and Equipment: Property and equipment are 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.
|
June 28,
2020
|
|
September 29,
2019
|
|
Depreciable
Lives
|
Land
|
$
|
6,486,180
|
|
$
|
2,507,180
|
|
not applicable
|
Mineral rights
|
|
466,000
|
|
|
-
|
|
25 years
|
Ground improvements
|
|
2,174,701
|
|
|
1,142,926
|
|
7-25 years
|
Buildings and structures
|
|
3,721,729
|
|
|
3,023,569
|
|
10-39 years
|
Animal shelters and habitats
|
|
2,029,639
|
|
|
1,412,802
|
|
10-39 years
|
Park animals
|
|
1,174,284
|
|
|
559,425
|
|
5-10 years
|
Equipment - concession and related
|
|
307,771
|
|
|
184,441
|
|
3-15 years
|
Equipment and vehicles - yard and field
|
|
541,124
|
|
|
451,459
|
|
3-15 years
|
Vehicles - buses and rental
|
|
256,461
|
|
|
219,910
|
|
3-5 years
|
Rides and entertainment
|
|
208,148
|
|
|
204,778
|
|
5-7 years
|
Furniture and fixtures
|
|
10,427
|
|
|
10,427
|
|
5-10 years
|
Projects in process
|
|
33,568
|
|
|
100,616
|
|
|
Property and equipment, cost
|
|
17,410,032
|
|
|
9,817,533
|
|
|
Less accumulated depreciation
|
|
(3,582,361)
|
|
|
(3,197,128)
|
|
|
Property and equipment, net
|
$
|
13,827,671
|
|
$
|
6,620,405
|
|
|
Depreciation expense for the three months ended June 28, 2020 and June 30, 2019 totaled $150,633 and $114,999, respectively, and depreciation expense for the nine months ended June 28, 2020 and June 30, 2019 totaled $385,233 and $344,997, respectively.
Intangible assets: Intangible assets consist of franchising fees, which are reported at cost and are being amortized over a period of 60 months. Amortization expense on the Company’s intangible assets for the three months and nine months ended June 28, 2020 and June 30, 2019 totaled $200 and $600, in each period, respectively.
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:
|
June 28,
2020
|
|
September 29,
2019
|
Deferred revenue
|
$
|
278,755
|
|
$
|
100,704
|
Accrued income taxes
|
|
174,489
|
|
|
-
|
Accrued sales taxes
|
|
123,238
|
|
|
31,674
|
Accrued advertising
|
|
94,149
|
|
|
76,251
|
Accrued wages and payroll taxes
|
|
79,709
|
|
|
111,150
|
Accrued property taxes
|
|
53,369
|
|
|
59,723
|
Other accrued liabilities
|
|
51,455
|
|
|
4,658
|
Other current liabilities
|
$
|
855,164
|
|
$
|
384,160
|
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.
9
PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 28, 2020
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition: The Company recognizes revenues in accordance with Financial Accounting Standards Board (“FASB”) ASC 606, Revenues from Contracts with Customers. Under ASC 606, the Company recognizes revenue when a customer obtains control of promised goods or services, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocation the transaction price to the performance obligation in the contract; and (5) recognize revenue when (or as) the Company satisfies the performance obligation. The Company only applies the five-step model to contracts when it is probable that it will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.
The Company’s major source of income is from park admissions, retail and concessions sales at its parks. Revenues from park admission fees are generally recognized upon receipt of payment at the time of the customers’ visit to the parks. Park admission fee revenues from advance online ticket purchases are deferred until the customers’ visit to the parks. Revenue from retail and concessions sales is generally recognized upon the concurrent receipt of payment and delivery of goods or services to the customer. 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. Sales taxes billed and collected are not included in revenue. Deferred revenues from advance online admission tickets were $278,755 and $100,704 as of June 28, 2020 and September 29, 2019, respectively.
Advertising and Market Development: The Company expenses advertising and marketing costs as incurred. Advertising expense for the three months ended June 28, 2020 and June 30, 2019 totaled $194,396 and $177,289, respectively, and advertising expense for the nine months ended June 28, 2020 and June 30, 2019 totaled $431,711 and $435,981, respectively.
Stock Based Compensation: The Company recognizes stock based 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 has historically awarded shares to its Board of Directors for service on the Board. Beginning in fiscal 2018, the Company has allowed its Directors to elect to receive their annual compensation award in all shares, all cash or a combination thereof. Company shares issued to its Directors are “restricted” and are not to be re-sold unless an exemption 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. The Company typically awards its annual Director compensation around the end of each 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.
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.
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.
10
PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 28, 2020
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent Accounting Pronouncements: In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes (“Update 2019-12”), which removes certain exceptions for investments, intraperiod allocations and interim tax calculations, and adds guidance to reduce the complexity in accounting for income taxes. Update 2019-12 is effective for annual periods beginning after December 15, 2020, with early adoption permitted. The various amendments in Update 2019-12 are applied on a retrospective basis, modified retrospective basis and prospective basis, depending upon the amendment. The Company is in the process of evaluating the impact of this amendment on our consolidated financial statements; however, it is not anticipated to be material.
Except as noted, 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.
NOTE 3. ACQUISITION
On April 27, 2020, the Company, through a newly formed subsidiary, Aggieland-Parks, Inc., a Texas corporation, acquired substantially all the assets of Aggieland Safari LLC, Ferrill Creek Ranch LLC, and Vernell Investments LLC (combined the “Aggieland Assets”), primarily consisting of the Aggieland Safari Adventure Zoo and Safari Park (“Aggieland Safari”), including animal inventory, real estate, mineral rights, and certain equipment and other assets necessary to operate Aggieland Wild Animal – Texas. Aggieland Wild Animal – Texas is situated on 250 acres of a 450-acre property, located approximately 25 miles northeast of Bryan/College Station, Texas and 120 miles northwest of downtown Houston. The total purchase price for the Aggieland Assets was $7,102,000, after determination of the fair value of the seller note. The transaction was financed with a $5,000,000 loan (the “2020 Term Loan”) from First Financial Bank, N.A. (“First Financial”), a seller note with a face value of $750,000 (the “Aggieland Seller Note”), and cash totaling $1,375,000. The 2020 Term Loan is secured by substantially all of the Aggieland Assets, as well as guarantees from the Company and its subsidiaries. The 2020 Term Loan bears interest at a rate of 5.0% per annum, has a maturity date of April 27, 2031, with interest only payable monthly through April 2021. The Aggieland Seller Note represents a deferred portion of the purchase price, bears no interest, has a maturity date of June 30, 2021 and is secured by a second priority subordinated lien and security interest in the acquired mineral rights and the animal inventory. The Company applied a 2.5% discount rate to determine a fair value of $728,500 for the Aggieland Seller Note as of April 27, 2020.
The following table sets forth the purchase consideration paid to the members of Aggieland Safari and the amount of assets acquired and liabilities assumed as of the acquisition date:
Sources of consideration paid to Aggieland Safari Members:
|
|
|
Cash advances
|
$
|
125,000
|
Cash at closing
|
|
1,250,000
|
2020 Term Loan
|
|
5,000,000
|
Aggieland Seller Note
|
|
728,500
|
Less cash received
|
|
(1,500)
|
Total consideration
|
$
|
7,102,000
|
|
|
|
Preliminary purchase price allocation:
|
|
|
Inventories
|
$
|
10,000
|
Property and equipment
|
|
7,131,000
|
Deferred revenue
|
|
(39,000)
|
Total net assets acquired
|
$
|
7,102,000
|
|
|
|
The purchase price has been preliminarily allocated based on an estimate of the fair value of assets acquired and liabilities assumed as of the acquisition date. The determination of estimated fair value requires management to make significant estimates and assumptions. The final valuation of assets acquired and liabilities assumed is expected to be completed as soon as possible but no later than one year from the acquisition date. The Company will adjust its estimates as needed upon the final valuation.
11
PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 28, 2020
NOTE 3. ACQUISITION (CONTINUED)
The following table presents supplemental pro forma information for the nine month period ended June 28, 2020 as if the acquisition had occurred at the beginning of the Company’s 2019 fiscal year. The unaudited pro forma information includes adjustments for depreciation expense on property and equipment acquired, interest expense on debt incurred related to the acquisition, and the related income tax effects, as well as the elimination of property and equipment impairment charges recorded by Aggieland Safari prior to the acquisition. The pro forma financial information is not necessarily indicative of the results of operations that would have occurred had the transaction been effected at the beginning of the Company’s 2019 fiscal year.
|
For the nine
months ended
June 28, 2020
|
Total net sales
|
$
|
5,617,050
|
|
|
|
Net income
|
$
|
803,860
|
|
|
|
Income per share - basic and diluted
|
$
|
0.01
|
NOTE 4. LONG-TERM DEBT
On April 27, 2020, the Company acquired Aggieland Wild Animal – Texas., see “NOTE 3. ACQUISITION”, financing the transaction with the 2020 Term Loan from First Financial and the Aggieland Seller Note. The 2020 Term Loan in the original principal amount of $5,000,000 from First Financial, is secured by substantially all of the Aggieland Wild Animal – Texas assets, as well as guarantees from the Company and its subsidiaries. The 2020 Term Loan bears interest at a rate of 5.0% per annum, has a maturity date of April 27, 2031, with interest only payable monthly through April 2021. The Company paid a total of approximately $62,375 in fees and expenses in connection with the 2020 Term Loan. The Aggieland Seller Note represent a deferred portion of the purchase price, has a face value of $750,000, bears no interest, has a maturity date of June 30, 2021, and is secured by a second priority subordinated lien and security interest in the acquired mineral rights and the animal inventory. The Company applied a 2.5% discount rate to determine a fair value of $728,500 for the Aggieland Seller Note as of April 27, 2020 and the resulting $21,500 discount will be amortized as interest expense over the 14 month period until the note matures. Including the remaining unamortized discount, the recorded value of the Aggieland Seller Note as of June 28, 2020 was $731,497.
As a result of the significant negative economic impacts and uncertainties caused by the COVID-19 pandemic, Wild Animal – Georgia and Wild Animal – Missouri each applied for Paycheck Protection Program (“PPP”) loans. On April 14, 2020 and April 16, 2020, the Company received two unsecured PPP loans totaling $188,087. Including accrued interest, the principal outstanding on the Company’s PPP loans was $188,479 as of June 28, 2020. The PPP was established under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was signed into law on March 27, 2020, and is administered by the U.S. Small Business Administration (the “SBA”). The term of the PPP loans is two years, with an interest rate of 1.0% per annum. All payments are deferred for the first six month term of the PPP loans, with accrued interest being added to the principal during the payment deferral period. After the initial six-month deferral period, monthly principal and interest payments will be due until maturity for any portion of the PPP loans not forgiven. Under the terms of the CARES Act, some or all of the PPP loan proceeds are eligible to be forgiven. The amount of the loans eligible to be forgiven are based on the use of the proceeds for payroll costs, mortgage interest, rent or utility costs, and the maintenance of employee and compensation levels, subject to limitations and ongoing rulemaking by the SBA. While not assured, the Company anticipates a substantial portion of its PPP loan proceeds will be used for costs that are eligible for forgiveness, based on the current SBA guidelines.
On July 11, 2018, the Company, through its wholly owned subsidiary Wild Animal – Georgia, completed a refinancing transaction (the “2018 Refinancing”) with Synovus Bank (“Synovus”). The 2018 Refinancing included a term loan in the original principal amount of $1,600,000 (the “2018 Term Loan”). The 2018 Term Loan bears interest at a rate of 5.0% per annum and is payable in monthly payments of approximately $22,672, based on a seven year amortization period. The 2018 Term Loan has a maturity date of June 11, 2021, with an option to renew at 5.0% per annum for an additional 49 month term. The 2018 Term Loan is secured by a security deed on the assets of Wild Animal – Georgia. The Company paid a total of approximately $15,680 in fees and expenses in connection with the 2018 Refinancing.
12
PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 28, 2020
NOTE 4. LONG-TERM DEBT (CONTINUED)
Interest expense of $64,165 and $18,811 for the three months ended June 28, 2020 and June 30, 2019, respectively, includes $1,505 and $560 of amortization of debt financing costs, respectively. Interest expense of $99,077 and $57,632 for the nine months ended June 28, 2020 and June 30, 2019, respectively, includes $2,625 and $1,680 of amortization of debt financing costs, respectively. In addition, interest expense for the three months and nine months ended June 28, 2020 includes $2,997 of loan discount amortization expense in each period.
The following table represents the aggregate of the Company’s outstanding long-term debt:
|
As of
|
|
June 28,
2020
|
|
September 29,
2019
|
Loan principal outstanding
|
$
|
7,155,281
|
|
$
|
1,371,248
|
Less: unamortized debt financing costs
|
|
(72,630)
|
|
|
(12,880)
|
Less: unamortized discount on note payable
|
|
(18,503)
|
|
|
-
|
Gross long-term debt
|
|
7,064,148
|
|
|
1,358,368
|
Less current portion of long-term debt,
|
|
|
|
|
|
net of unamortized costs and discount
|
|
(354,425)
|
|
|
(204,355)
|
Long-term debt
|
$
|
6,709,723
|
|
$
|
1,154,013
|
As of June 28, 2020, the scheduled future principal maturities of the Company’s long-term debt by fiscal year are as follows:
2020
|
$
|
52,694
|
2021
|
|
1,242,904
|
2022
|
|
702,502
|
2023
|
|
661,959
|
2024
|
|
696,447
|
thereafter
|
|
3,798,775
|
Total
|
$
|
7,155,281
|
NOTE 5. LINE OF CREDIT
On July 11, 2018, the Company, through its wholly owned subsidiary Wild Animal – Georgia, completed the 2018 Refinancing with Synovus. The 2018 Refinancing includes a line of credit of up to $350,000 (the “2018 LOC”). The 2018 LOC bears interest at a rate of 4.75% and interest only payments are due monthly. The 2018 LOC is secured by a security deed on the assets of Wild Animal – Georgia. The 2018 LOC matures on July 11, 2021, with an option to renew for an additional three-year term. If necessary, the Company intends to utilize the 2018 LOC to fund seasonal working capital needs. As of June 28, 2020 and September 29, 2019, respectively, there was no outstanding balance against the Company’s LOC. When applicable, any advance on a Company LOC is recorded as a current liability.
13
PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 28, 2020
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 5, 2019, the Company declared its annual compensation award to four Directors for their service on the Board of Directors. Each Director was awarded $8,500, to be paid all in shares, all in cash or a combination thereof, at each Director’s election. All four Directors elected to receive shares of the Company’s common stock, totaling 50,000 each, based on the closing stock price of $0.17 per share on December 5, 2019. The total award cost of $34,000 was reported as an expense in the first quarter of the 2020 fiscal year, and the Company distributed each award on January 8, 2020.
On January 14, 2019, 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 $0.185 per share or the cash equivalent of $4,625. Four Directors elected to receive shares of the Company’s common stock, while the estate of one Director elected to receive its award in cash. The total award cost of $23,125 was reported as an expense in the second quarter of the 2019 fiscal year, and the Company distributed each award on January 16, 2019.
Officers, Directors and their controlled entities own approximately 52.0% of the outstanding common stock of the Company as of June 28, 2020.
NOTE 7. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES
Employment Agreements:
Effective June 1, 2020, the Company and Dale Van Voorhis, the Company’s Chairman and Chief Executive Officer, entered into the “2020 Van Voorhis Employment Agreement”. Pursuant to the 2020 Van Voorhis Employment Agreement, Mr. Van Voorhis receives an initial base annual compensation in the amount of $100,000 per year, subject to annual review by the Board of Directors. The 2020 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.
Effective January 1, 2019, the Company and Todd R. White, the Company’s Chief Financial Officer, entered into the “2019 White Employment Agreement”. The 2019 White Employment Agreement has a term of three years, with minimum annual compensation of $70,000 in year one, $75,000 in year two and $80,000 in year three, and entitles Mr. White to participate in any deferred compensation plan the Company may adopt during the term of his employment with the Company.
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 had 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. Effective May 1, 2020, Mr. Newman’s annual compensation was set at $108,000. 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 ($291,700 in aggregate) or (ii) in the event of a change in control of the Company ($506,700 in aggregate), as well as disability and death payment provisions ($141,500 in aggregate).
Effective July 1, 2017, the Company and James Meikle, then the Company’s President and Chief Operating Officer, entered into the “2017 Meikle Employment Agreement”. The 2017 Meikle Employment Agreement had a term of two years, with an initial base annual compensation in the amount of $135,000 per year. On November 28, 2018, Mr. Meikle passed away. Pursuant to the death benefit terms of the 2017 Meikle Employment Agreement, during the three month period ended December 30, 2019, the Company recorded a provision of approximately $88,000, which was distributed to his estate on January 15, 2020.
14
PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 28, 2020
NOTE 8. INCOME TAXES
For the nine month period ended June 28, 2020, the Company reported pre-tax income of $1,331,772. For the fiscal year ending September 27, 2020, 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 26.0%. The Company recorded a net income tax provision of $344,900 for the nine month period ended June 28, 2020, comprised of a federal expense of $263,200 and a State of Georgia expense of $81,700. The Company’s net income tax provision for the nine month period ended June 30, 2019 was a tax expense of $221,500, comprised of a federal expense of $151,400 and a State of Georgia expense of $70,100.
NOTE 9. COMMITMENTS AND CONTINGENCIES
On May 21, 2019, the Company’s Missouri Park was struck by a tornado and sustained property damage, primarily to the “walk about”, the more traditional zoo-like section of the park, as well as to several auxiliary buildings. The park was closed at the time of this event and no employees were injured. While a few animals sustained non-life threatening injuries, no animals were killed or escaped.
As a result of the tornado damage, through September 29, 2019, the Company had written-off $56,339 related to the net book value of property destroyed and damaged, and incurred $24,105 of cleanup and repair expenses. Through September 29, 2019, the Company had capitalized $66,376 of expenditures related to improvements associated with the tornado damage. The Company capitalized an additional $82,585 of improvements associated with the tornado damage during the nine months ended June 28, 2020. On April 15, 2020, the Company received $24,373 of insurance proceeds, partially offsetting the costs and expenses incurred in the recovery from the tornado damage.
On August 14, 2019, Marlton Wayne LP (“Marlton”) filed a complaint in the Eighth Judicial District Court, Clark County, Nevada (case no. A-19-800214-8) (the “Complaint”), seeking ten categories of documents from the Company. This Complaint followed a letter from Marlton sent on July 22, 2019, demanding an inspection of certain books and records of the Company. On March 13, 2020, the Company and Marlton entered into an agreement to dismiss the case without prejudice, with each party reserving their respective rights as related to attorney fees.
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.
15
PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 28, 2020
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 nine
months ended
|
|
June 28,
2020
|
|
June 30,
2019
|
|
June 28,
2020
|
|
June 30,
2019
|
Total net sales:
|
|
|
|
|
|
|
|
|
|
|
|
Georgia
|
$
|
2,376,593
|
|
$
|
1,795,262
|
|
$
|
3,906,651
|
|
$
|
3,614,584
|
Missouri
|
|
464,540
|
|
|
341,199
|
|
|
672,924
|
|
|
542,598
|
Texas
|
|
379,075
|
|
|
-
|
|
|
379,075
|
|
|
-
|
Consolidated
|
$
|
3,220,208
|
|
$
|
2,136,461
|
|
$
|
4,958,650
|
|
$
|
4,157,182
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
Georgia
|
$
|
1,666,295
|
|
$
|
1,094,596
|
|
$
|
2,077,917
|
|
$
|
1,784,071
|
Missouri
|
|
123,448
|
|
|
(65,389)
|
|
|
(190,241)
|
|
|
(377,141)
|
Texas
|
|
126,432
|
|
|
-
|
|
|
126,432
|
|
|
-
|
Segment total
|
|
1,916,175
|
|
|
1,029,207
|
|
|
2,014,108
|
|
|
1,406,930
|
Corporate
|
|
(167,328)
|
|
|
(178,744)
|
|
|
(602,056)
|
|
|
(580,154)
|
Other income, net
|
|
3,293
|
|
|
5,843
|
|
|
18,797
|
|
|
21,361
|
Interest expense
|
|
(64,165)
|
|
|
(18,811)
|
|
|
(99,077)
|
|
|
(57,632)
|
Consolidated
|
$
|
1,687,975
|
|
$
|
837,495
|
|
$
|
1,331,772
|
|
$
|
790,505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
|
June 28,
2020
|
|
September 29,
2019
|
|
|
|
|
|
|
Total assets:
|
|
|
|
|
|
|
|
|
|
|
|
Georgia
|
$
|
7,266,668
|
|
$
|
7,910,710
|
|
|
|
|
|
|
Missouri
|
|
2,819,823
|
|
|
2,690,572
|
|
|
|
|
|
|
Texas
|
|
7,597,895
|
|
|
-
|
|
|
|
|
|
|
Corporate
|
|
253,608
|
|
|
162,054
|
|
|
|
|
|
|
Consolidated
|
$
|
17,937,994
|
|
$
|
10,763,336
|
|
|
|
|
|
|
NOTE 10. SUBSEQUENT EVENTS
The Company has analyzed its operations subsequent to June 28, 2020 to the date these financial statements were issued and has determined that no material subsequent events have occurred from the date of these unaudited consolidated financial statements through the date of filing.
16