PARKS! AMERICA, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
As of March 31, 2013 and September 30, 2012
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ASSETS
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|
March 31,
2013
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|
September 30,
2012
|
Current Assets
|
|
|
|
|
Cash unrestricted
|
$
|
159,449
|
$
|
147,962
|
Inventory
|
|
145,701
|
|
147,792
|
Prepaid expenses
|
|
43,842
|
|
44,808
|
Total Current Assets
|
|
348,992
|
|
340,562
|
|
|
|
|
|
Property and Equipment, net
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|
6,243,661
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|
6,196,845
|
Other Assets
|
|
|
|
|
Intangible assets, net
|
|
185,314
|
|
5,097
|
Deposits
|
|
8,500
|
|
8,500
|
Total Other Assets
|
|
193,814
|
|
13,597
|
TOTAL ASSETS
|
$
|
6,786,467
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$
|
6,551,004
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LIABILITIES AND STOCKHOLDERS EQUITY
|
|
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|
|
Current Liabilities
|
|
|
|
|
Accounts payable
|
$
|
81,460
|
$
|
134,758
|
Accrued expenses
|
|
121,827
|
|
113,854
|
Notes payable lines of credit
|
|
350,000
|
|
0
|
Notes payable related parties
|
|
171,761
|
|
0
|
Current maturities of long term debt
|
|
83,113
|
|
1,773,935
|
Total Current Liabilities
|
|
808,161
|
|
2,022,547
|
Long-term Debt
|
|
|
|
|
Long term obligations
|
|
3,550,088
|
|
1,745,503
|
TOTAL LIABILITIES
|
|
4,358,249
|
|
3,768,050
|
STOCKHOLDERS EQUITY
|
|
|
|
|
Common stock; 300,000,000 shares authorized, at $.001 par value; 74,106,537 and 73,956,537 shares issued and outstanding, respectively
|
|
74,106
|
|
73,956
|
Capital in excess of par
|
|
4,794,006
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|
4,792,656
|
Treasury stock
|
|
(3,250)
|
|
(3,250)
|
Accumulated deficit
|
|
(2,436,644)
|
|
(2,080,408)
|
TOTAL STOCKHOLDERS EQUITY
|
|
2,428,218
|
|
2,782,954
|
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
|
$
|
6,786,467
|
$
|
6,551,004
|
The accompanying notes are an integral part of these consolidated financial statements
.
4
PARKS! AMERICA, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For the Three Month and Six Months Ended March 31, 2013 and April 1, 2012
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For 3 Months Ended
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For 6 Months Ended
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|
March 31,
2013
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April 1,
2012
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|
March 31,
2013
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|
April 1,
2012
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NET SALES
|
$
|
542,693
|
$
|
565,824
|
$
|
1,120,118
|
$
|
1,080,549
|
Sale of animals
|
|
4,390
|
|
7,779
|
|
4,390
|
|
8,004
|
TOTAL NET SALES
|
|
547,083
|
|
573,603
|
|
1,124,508
|
|
1,088,553
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
108,821
|
|
135,565
|
|
186,327
|
|
209,606
|
Selling, general and administrative
|
|
547,060
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|
418,333
|
|
1,148,074
|
|
908,774
|
Depreciation & amortization
|
|
65,789
|
|
77,554
|
|
139,611
|
|
155,110
|
(Gain) loss on disposal of operating assets
|
|
0
|
|
(5,959)
|
|
(11,160)
|
|
(5,959)
|
Total Operating Expenses
|
|
721,670
|
|
625,493
|
|
1,462,852
|
|
1,267,531
|
INCOME FROM OPERATIONS
|
|
(174,587)
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|
(51,890)
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|
(338,344)
|
|
(178,978)
|
OTHER INCOME (EXPENSES)
|
|
|
|
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|
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Other income (expense)
|
|
(1,798)
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|
11,085
|
|
4,371
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|
15,633
|
Gain on retirement of debt
|
|
105,656
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|
0
|
|
105,656
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|
0
|
Interest expense
|
|
(73,072)
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|
(72,998)
|
|
(127,919)
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|
(130,691)
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Total Other Income (Expenses)
|
|
30,786
|
|
(61,913)
|
|
(17,892)
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|
(115,058)
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NET INCOME (LOSS) BEFORE INCOME TAXES
|
|
(143,801)
|
|
(113,803)
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|
(356,236)
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|
(294,036)
|
PROVISION FOR TAXES
|
|
0
|
|
0
|
|
0
|
|
0
|
NET PROFIT (LOSS)
|
$
|
(143,801)
|
$
|
(113,803)
|
$
|
(356,236)
|
$
|
(294,036)
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WEIGHTED OUTSTANDING SHARES (in 000's)
|
|
74,107
|
|
73,957
|
|
74,107
|
|
73,893
|
NET INCOME (LOSS) PER SHARE / FULLY DILUTED SHARE
|
$
|
(0.00)
|
$
|
(0.00)
|
$
|
(0.00)
|
$
|
(0.00)
|
The accompanying notes are an integral part of these consolidated financial statements.
5
PARKS! AMERICA, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY (UNAUDITED)
As of March 31, 2013
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|
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Common Stock
|
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Additional Paid
|
|
Treasury
|
|
Accumulated
|
|
|
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Shares
|
|
Amount
|
|
in Capital
|
|
Stock
|
|
Deficit
|
|
Total
|
Balance at October 2, 2011
|
73,781,537
|
$
|
73,781
|
$
|
4,791,081
|
$
|
(3,250)
|
$
|
(2,376,260)
|
$
|
2,485,352
|
Issuance of common stock to directors and officers
|
175,000
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|
175
|
|
1,575
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|
0
|
|
0
|
|
1,750
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Net Income for the Year Ended September 30, 2012
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0
|
|
0
|
|
0
|
|
0
|
|
295,852
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|
295,852
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Balance at September 30, 2012
|
73,956,537
|
$
|
73,956
|
$
|
4,792,656
|
$
|
(3,250)
|
$
|
(2,080,408)
|
$
|
2,782,954
|
Issuance of common stock to directors and officers
|
150,000
|
|
150
|
|
1,350
|
|
0
|
|
0
|
|
1,500
|
Net (Loss) Income for the Period Ended March 31, 2013
|
0
|
|
0
|
|
0
|
|
0
|
|
(356,236)
|
|
(356,236)
|
Balance at March 31, 2013
|
74,106,537
|
$
|
74,106
|
$
|
4,794,006
|
$
|
(3,250)
|
$
|
(2,436,644)
|
$
|
2,428,218
|
The accompanying notes are an integral part of these financial statements.
6
PARKS! AMERICA, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Six Months Ended March 31, 2013 and April 1, 2012
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Six Months
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
March 31, 2013
|
|
April 1, 2012
|
Net (loss) for the period
|
$
|
(356,236)
|
$
|
(294,036)
|
Adjustments to Reconcile Net Income to Net Cash Used in Operating Activities:
|
|
|
|
|
Depreciation expense and amortization
|
|
139,611
|
|
155,110
|
(Gain) on disposal of assets
|
|
(11,160)
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|
0
|
Share-based compensation
|
|
1,500
|
|
1,750
|
(Gain) from retirement of debt
|
|
(105,656)
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|
0
|
Changes in Assets and Liabilities
|
|
|
|
|
(Increase) decrease in prepaid expenses
|
|
966
|
|
15,016
|
(Increase) decrease in inventory
|
|
2,091
|
|
6,000
|
(Increase) decrease in accounts receivable
|
|
0
|
|
20,253
|
Increase (decrease) in accrued expenses
|
|
7,973
|
|
(71,594)
|
Increase (decrease) in accounts payable
|
|
(53,298)
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|
(19,131)
|
Net Cash Used In Operating Activities
|
|
(374,209)
|
|
(186,632)
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
Acquisition of property and equipment
|
|
(172,809)
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|
(44,036)
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Capitalization of loan fees
|
|
(182,675)
|
|
0
|
Net Cash Used In Investing Activities
|
|
(355,484)
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|
(44,036)
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|
|
|
|
|
Cash Flows from Financing Activities:
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|
|
|
|
Proceeds (payments) on lines of credit (LOC)
|
|
350,000
|
|
451,000
|
Pay-off all mortgages
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|
(3,413,782)
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|
(111,390)
|
Proceeds from refinancing
|
|
3,633,201
|
|
0
|
Proceeds from related party borrowings
|
|
171,761
|
|
0
|
Net Cash Provided By Financing Activities
|
|
741,180
|
|
339,610
|
|
|
|
|
|
Net Increase in Cash
|
|
11,487
|
|
108,942
|
Cash at beginning of period
|
|
147,962
|
|
41,097
|
Cash at end of period
|
$
|
159,449
|
$
|
150,039
|
|
|
|
|
|
Supplemental Cash Flow Information:
|
|
|
|
|
Cash paid for interest
|
$
|
129,502
|
$
|
141,633
|
Cash paid for income taxes
|
$
|
0
|
$
|
0
|
The accompanying notes are an integral part of these consolidated financial statements.
7
PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
1. ORGANIZATION
Parks! America (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, including the Crossroads Convenience Center LLC., pursuant to a Share Exchange Agreement that resulted in our 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. Our common stock outstanding increased from 2,533,000 to 29,600,000 as a result of the acquisition. 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. Our wholly-owned subsidiaries are Wild Animal, Inc., a Missouri corporation (Wild Animal - Missouri) and Wild Animal Safari, Inc. a Georgia corporation (Wild Animal - Georgia). Wild Animal - Georgia owns and operates the Wild Animal Safari theme park in Pine Mountain, Georgia (the Georgia Park). Wild Animal - Missouri owns and operates the Wild Animal Safari theme park located in Strafford, Missouri (the Missouri Park). On June 13, 2005, the Company acquired the Georgia Park and on March 5, 2008, the Company acquired the Missouri Park.
The Parks are open year round but experience increased seasonal attendance during the months of April through August.
Important factors that could cause actual results to differ materially from those in the forward-looking statements include accidents occurring at our parks, competition from other parks, weather conditions during our primary tourist season, the price of animal feed, the price of gasoline, changes in consumer spending patterns and general economic conditions.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation:
Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. We believe that the disclosures are adequate to make the financial information presented not misleading. These condensed financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for the year ended September 30, 2012. All adjustments were of a normal recurring nature unless otherwise disclosed. In the opinion of management, all adjustments necessary for a fair statement of the results of operations for the interim period have been included. The results of operations for such interim periods are not necessarily indicative of the results for the full year.
8
PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
Accounting Method:
The Company recognizes income and expenses based on the accrual method of accounting.
Reclassifications:
Certain accounts and financial statement captions in the prior periods have been reclassified to conform to the current period financial statements.
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 weighted average number of common shares outstanding in each period.
Dividend Policy:
The Company has not yet adopted a policy regarding payment of dividends.
Trade Accounts Receivable:
The theme parks are a cash business therefore there are typically no receivables on the books of the Company. As of March 31, 2013 and September 30, 2012, respectively, the Company had no outstanding receivables.
Revenue Recognition:
The major source of income is received from theme park admissions. Theme park revenues from admission fees are recognized upon receipt of the cash at the time of our customers visit to the parks. No theme park ticket sales are made in advance. Short term seasonal passes are sold primarily during the summer seasons and are negligible to our results of operations and are not material. The Company is currently developing a new product line of selling surplus animals created from the natural breeding process that occurs within the parks. All sales will be reported as a separate line item.
Advertising and Market Development:
The Company expenses advertising and marketing costs as incurred.
9
PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
Income Taxes:
The Company utilizes the liability method of accounting for income taxes. Under the liability method deferred tax assets and liabilities are determined based on the differences between financial reporting and the tax basis of the assets and liabilities and are measured using the enacted tax rates and laws is recorded, when it is more likely than not, that such tax benefits will not be realized.
Financial and Concentrations Risk:
The Company does not have any concentration or related financial credit risks except for. The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits.
Principles of Consolidation:
The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries (Wild Animal-Georgia and Wild Animal-Missouri). All material inter-company accounts and transactions have been eliminated in consolidation.
Fiscal Year End:
During 2011, the Company changed its fiscal year-end from December 31 to September 30, and changed its quarterly close dates to the last Sunday that falls at the end of each reporting period. For the quarter ended December 31, 2012 the Sunday closest to the end of the reporting period was December 30, 2012. This decision was made to align the Companys 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.
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 five to thirty nine years. A summary is included below.
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|
|
|
|
|
|
|
|
March 31,
2013
|
|
September 30,
2012
|
|
Depreciable
Lives
|
Land
|
$
|
2,507,180
|
$
|
2,507,180
|
|
none
|
Buildings
|
|
2,958,706
|
|
2,952,983
|
|
40 years
|
Facilities and Improvements & Equipment
|
|
881,373
|
|
754,312
|
|
5 - 15 years
|
Furniture & Fixtures
|
|
75,663
|
|
75,189
|
|
7 years
|
Ground Improvements
|
|
753,797
|
|
751,149
|
|
15 years
|
Park animals
|
|
599,758
|
|
589,234
|
|
5 - 10 years
|
Rides & entertainment
|
|
22,000
|
|
22,000
|
|
7 years
|
Vehicles
|
|
306,816
|
|
291,429
|
|
5 years
|
Sub-total
|
|
8,105,293
|
|
7,943,476
|
|
|
Accumulated Depreciation
|
|
(1,861,632)
|
|
(1,746,631)
|
|
|
Total Net Assets
|
$
|
6,243,661
|
$
|
6,196,845
|
|
|
10
PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
Inventory:
Inventory consists of 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.
Estimates and Assumptions:
Management uses estimates and assumptions in preparing financial statements in accordance with accounting principles generally accepted in the United States of America. 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.
Other Intangible assets:
Historically, other intangible assets included franchising fees, loan fees, payroll software, and they were reported at cost. As of March 31, 2013 franchise fees and payroll software are amortized to $0. The closing costs associated with the Companys refinancing on January 9, 2013 totaled $186,851 and will be amortized over the life of the loan. See Footnote 3 - LONG-TERM DEBT for more information.
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.
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 based as of the balance sheet date presented.
Uncertainties:
The accompanying financial statements have been prepared on a going concern basis. The ability of the Company to continue as a going concern during the next twelve months depends on the ability of the Company to generate revenues from operations, to maintain its existing sources of capital and to obtain refinancing on existing debt maturities or obtain new sources of financing sufficient to sustain operations. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Stock Based Compensation:
Prior to January 1, 2006 the company accounted for stock based compensation under recognition and measurement principles of ASC 718 and as permitted under APB Opinion No. 25, and related interpretations. Effective January 1, 2006 the company adopted ASC 718 using the modified prospective method which recognizes compensation costs on a straight-line basis over the requisite service period of the ASC 718 requires that cash flows resulting from tax deductions in excess of the cumulative compensation cost recognized for options exercised be classified as cash inflows from financing activities and cash outflows from operating activities. The company also applies ASC 718 and EITF No. 96-18 stock based compensation to non-employees. No activity has occurred in relation to stock options during any period presented. The Company awards shares to 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 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. Directors are granted 25,000 shares a year for each year of service in December.
Recent Accounting Pronouncements:
The Company does not expect recently issued accounting standards or interpretations to have a material impact on the Companys financial position, operations or cash flows.
11
PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
3. LONG-TERM DEBT
On January 9, 2013 the Company completed a refinancing transaction (the Refinancing Loan) with Commercial Bank & Trust Co. as lender. The Refinancing Loan was for a principal amount of $3,752,000 and has a twenty year term. The Refinancing Loan bears interest at the rate of Prime Rate plus 2.50% (currently 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%. During the first four months following the closing of the Refinancing Loan the Company may make interest-only payments. The estimated full monthly payment will be $26,112 during the first five years of the Loan term.
The closing costs for the Refinancing Loan totaled $175,369 and they are being amortized over the 20 year life of the Loan. The Company used the proceeds from the Refinancing Loan to pay off all of its then outstanding debt (including the seller financing from the purchase of the Missouri Park) and will spend approximately $230,000 for new construction and renovations at the Parks.
12
PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
During fiscal year 2012, the Companys mortgages required total monthly payments of $40,876 (annual payments totaling $490,512) as compared to the new estimated annual payments of $313,344, or $26,112 monthly. The Company anticipates that the Refinancing Loan will reduce the Companys total debt service payments by $177,168 annually.
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2013
|
|
September 30,
2012
|
The Commercial Bank and Trust of Troup County loan required monthly payments of $18,048.55 based on a 14 year amortization. The loan has a fixed interest rate of 6.5%, and a balloon payment due in June 2014. The loan was secured by a first priority security agreement and a first priority security deed on the assets of the Georgia Park. This note was retired on January 9, 2013,
|
$
|
Retired
|
$
|
1,843,278
|
|
|
|
|
|
In addition, the Company refinanced its revolving line of credit loan from Commercial Bank & Trust Company of Troup County (CB&T) for working capital purposes for $350,000. This revolving line of credit is for seven (7) years and the loan cost was $11,482 which will be amortized over the loan term. The LOC was not used as of September 30, 2012 and was drawn down to $350,000 as of March 31, 2013. All advances are recorded as current liabilities. The LOC interest rates are tied to prime but have a minimum rate of 5.25% for $350,000.
|
|
|
|
|
|
|
|
|
|
On March 5, 2008 the Company issued a note payable to Oak Oak, Inc. in the amount of $1,750,000 for debt incurred in the purchase of the Missouri park. The note bears interest at 8% and is payable in 36 monthly installments of $12,841, and a final balloon payment at the end of the 3
rd
year. In March, 2011, the Company made an additional one-time lump sum payment of $50,000 that allowed it to extend the loan for an additional 2 years on the same terms until March 2013. This note was repaid in full on January 9, 2013 and as part of the terms of the original note, the Company was entitled to a discount of $105,656 if this note was paid in full before maturity. This discount is recorded as a gain in other income.
|
|
Retired
|
|
1,617,622
|
|
|
|
|
|
On March 5, 2008 the Company obtained a loan from Commercial Bank & Trust in the amount of $500,000 to improve and upgrade facilities of the Missouri Park. This loan bears interest at a rate of 7.25% and is payable in 60 monthly payments of $9,986. This loan was repaid in full on January 9, 2013.
|
|
Retired
|
|
58,538
|
|
|
|
|
|
On January 9, 2013 the Company completed a refinancing transaction with Commercial Bank & Trust Co. as lender. The Refinancing Loan was for a principal amount of $3,752,000 and has a twenty year term. The Refinancing Loan bears interest at the rate of Prime Rate plus 2.50% (currently 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%. During the first four months of the Refinancing Loan the Company makes interest-only payments. The Company has $118,799 still available to draw on this loan for improvements being done at the parks. The estimated full monthly payment will be $26,112, after all funding is in place, during the first five years of the Loan term.
|
|
3,633,201
|
|
0
|
|
|
|
|
|
Total Debt
|
|
3,633,201
|
|
3,519,438
|
Less current portion of long-term debt
|
|
(83,113)
|
|
(1,773,935)
|
Long-term Debt
|
$
|
3,550,088
|
$
|
1,745,503
|
13
PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
At March 31, 2013 the scheduled future principal maturities are as follows:
|
|
|
2013
|
$
|
83,113
|
2014
|
|
105,125
|
2015
|
|
111,331
|
2016
|
|
117,904
|
2017
|
|
124,865
|
thereafter
|
|
3,090,863
|
|
|
3,633,201
|
Less: current portion
|
|
(83,113)
|
Long-term portion
|
$
|
3,550,088
|
4. LINES OF CREDIT
The Company maintains a $350,000 line of credit loan from Commercial Bank & Trust Company of Troup County (CB&T) for working capital purposes. This line of credit (LOC) has an initial term of seven (7) years, subject to the satisfactory performance by the Company. The LOC was not used as of September 30, 2012 and was drawn down to $350,000 as of March 31, 2013, respectively. All advances are recorded as current liabilities. The LOC interest rate is tied to prime but has a minimum rate of 5.25%.
The board of directors of the Company approved the offer of two of the Companys directors of to loan the Company an additional $170,000 ($85,000 from each director) on the same terms and conditions as the LOC with CB&T. As of the date of this report, these loans have closed and were fully funded by the directors.
5. STOCKHOLDERS EQUITY
As policy, capital stock shares issued for service to the Company are valued based on market price on the date of issuance. During October 2012, the Company awarded 150,000 shares to six directors for their service on the Board of Directors at a fair market value of $0.01 per share or $1,500. This amount was reported as an expense to operations in 2012.
Officer, directors and their controlled entities own approximately 43% of the outstanding common stock of the Company as of March 31, 2013.
6. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES
Employment Agreements:
Effective as of June 1, 2009 the Company entered into an employment agreement with Dale Van Voorhis (the Van Voorhis Employment Agreement) to serve as the Companys Chief Operating Officer. As consideration for his services, Mr. Van Voorhis receives an initial base compensation of $75,000 which is reviewed annually by the Board of Directors. The Van Voorhis Agreement has a term of five years and entitles Mr. Van Voorhis to participate in any deferred compensation plan the Company may adopt during the term of his employment with the Company.
14
PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
The Company entered into an employment agreement as of June 1, 2009, as amended on March 20, 2013 with Jon Laria (such amended agreement the Laria Employment Agreement) pursuant to which Mr. Laria serves as the Companys Chief Financial Officer. The Laria Employment Agreement has an initial term of five years and thereafter will automatically continue on a month-to-month basis. As consideration for his services Mr. Laria receives an initial base compensation of $50,000 per year which is reviewed annually by the Board of Directors. Upon conversion to a month-to-month agreement Mr. Laria will be entitled to a 5% annual automatic pay raise. Under the terms of this Agreement, Mr. Laria is entitled to participate in any deferred compensation plan the Company may adopt during the term of his employment with the Company.
On April 1, 2008 the Company entered into an employment agreement with Jim Meikle (the 2008 Meikle Agreement) pursuant to which Mr. Meikle was hired to serve as the President and Chief Executive Officer of each of the Companys wholly owned subsidiaries. The 2008 Meikle Employment Agreement expired on March 31, 2013 and was replaced by an employment agreement between the Company and Mr. Meikle dated as of April 1, 2013 (the 2013 Meikle Employment Agreement). Pursuant to the 2013 Meikle Employment Agreement, Mr. Meikle receives an initial base compensation in the amount of $135,000 which is reviewed annually by the Board of Directors. The 2013 Meikle Agreement has a term of two years and entitles Mr. Meikle to participate in any deferred compensation plant the Company may adopt during the term of his employment with the Company.
Each of the foregoing employment agreements contains provisions for severance compensation in the event an agreement is (i) terminated early by the Company without cause or (ii) in the event of a change in control of the Company. This additional severance compensation payable totals $410,000.
Reorganization of Officers
On January 27, 2011 following the departure of the Companys then President, the Company announced the following actions concerning the Companys executive officers, effective immediately: Dale Van Voorhis was appointed Chief Executive Officer of the Company; James R. Meikle was appointed Chief Operating Officer of the Company and Jeff Lococo was appointed Secretary of the Company.
7. INCOME TAXES
For the six month period ended March 31, 2013, the Company has reported a loss of $356,236. The current loss will be added to the Companys net operating loss carryforward. The Company has fully reserved for the net deferred tax asset generated by the cumulative net operating losses. The cumulative net operating loss carry-forward is approximately $4,553,000 at March 31, 2013 and will begin to expire in the year 2026.
The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is $1,548,000; however this entire potential asset is reserved as of March 31, 2013. Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards of approximately $4,553,000 for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry forwards may be limited as to use in future years.
15
PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
8. BUSINESS SEGMENTS
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.
|
|
|
|
|
|
|
|
|
|
|
For 3 Months Ended March 31, 2013
|
|
For 6 Months Ended March 31, 2013
|
|
Georgia
|
Missouri
|
Corporate
|
Total
|
|
Georgia
|
Missouri
|
Corporate
|
Total
|
Total Revenue
|
$ 470,064
|
$ 77,019
|
$ -
|
$ 547,083
|
|
$ 945,468
|
$ 179,040
|
$ -
|
$ 1,124,508
|
Operating Expenses
|
(402,745)
|
(171,574)
|
(147,351)
|
(721,670)
|
|
(820,297)
|
(399,940)
|
(242,615)
|
(1,462,852)
|
Operating Profit (Loss)
|
67,319
|
(94,555)
|
(147,351)
|
(174,587)
|
|
125,171
|
(220,900)
|
(242,615)
|
(338,344)
|
Other Income (Expense), Net
|
(119,417)
|
1,134
|
116,485
|
(1,798)
|
|
(244,321)
|
1,207
|
247,485
|
4,371
|
Gain on Retirement of Debt
|
-
|
105,656
|
-
|
105,656
|
|
-
|
105,656
|
-
|
105,656
|
Interest Expense
|
(39,658)
|
(33,314)
|
(100)
|
(73,072)
|
|
(60,881)
|
(65,634)
|
(1,404)
|
(127,919)
|
Income (Loss) Before Taxes
|
$ (91,756)
|
$ (21,079)
|
$ (30,966)
|
$ (143,801)
|
|
$ (180,031)
|
$ (179,671)
|
$ 3,466
|
$ (356,236)
|
|
|
|
|
|
|
|
|
|
|
|
For 3 Months Ended April 1, 2012
|
|
For 6 Months Ended April 1, 2012
|
|
Georgia
|
Missouri
|
Corporate
|
Total
|
|
Georgia
|
Missouri
|
Corporate
|
Total
|
Total Revenue
|
$ 451,798
|
$ 121,805
|
$ -
|
$ 573,603
|
|
$ 869,041
|
$ 219,512
|
$ -
|
$ 1,088,553
|
Operating Expenses
|
(325,191)
|
(191,212)
|
(109,090)
|
(625,493)
|
|
(676,947)
|
(360,339)
|
(230,245)
|
(1,267,531)
|
Operating Profit (Loss)
|
126,607
|
(69,407)
|
(109,090)
|
(51,890)
|
|
192,094
|
(140,827)
|
(230,245)
|
(178,978)
|
Other Income (Expense), Net
|
(76,682)
|
1,267
|
86,500
|
11,085
|
|
(241,734)
|
1,267
|
256,100
|
15,633
|
Interest Expense
|
(37,518)
|
(33,029)
|
(2,451)
|
(72,998)
|
|
(70,596)
|
(54,702)
|
(5,393)
|
(130,691)
|
Income (Loss) Before Taxes
|
$ 12,407
|
$ (101,169)
|
$ (25,041)
|
$ (113,803)
|
|
$ (120,236)
|
$ (194,262)
|
$ 20,462
|
$ (294,036)
|
9. COMMITMENTS AND CONTINGENCIES
On May 16, 2011 the U.S. Department of Agricultures Animal and Plant Health Inspection Service (USDA APHIS) issued a citation to the Company alleging violations of certain USDA APHIS regulations and assessed a penalty in the amount of $76,857. On July 8, 2011 the Company submitted a reply to the USDA APHIS citation which contained, among other things; mitigating factors which the Company believed should be considered in determining the amount of the fine. As of July 1, 2012, USDA APHIS responded to the Company with a reduced assessment of $11,170. The Company reduced its reserve by $65,687 to reflect this revised assessment during the second quarter of 2012. The Company also addressed the compliance issues raised in the citation and is implementing new operational controls to address these matters going forward.
10. SUBSEQUENT EVENTS
In accordance with ASC 855-10, the Company has analyzed its operations subsequent to March 31, 2013 to the date these financial statements were issued, and have determined that it does not have any material subsequent events to disclose in these consolidated financial statements other than the events described above.
16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
Managements discussion and analysis of results of operations and financial condition (MD&A) is a supplement to the accompanying consolidated financial statements and provides additional information on the Companys businesses, current developments, financial condition, cash flows and results of operations. The following discussion should be read in conjunction with our consolidated financial statements and notes thereto included elsewhere in this report and with our annual report on Form 10-K for the period ended September 30, 2012.
Forward-Looking Statements
Except for historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements involve risks and uncertainties, including, among other things, statements regarding our business strategy, exploration strategy, future revenues and anticipated costs and expenses. Such forward-looking statements include, among others, those statements including the words expects, anticipates, intends, believes and similar language
or by discussions of our outlook, plans, goals, strategy or intentions
. Our actual results may differ significantly from those projected in the forward-looking statements. For example, assumptions that could cause actual results to vary materially from future results include, but are not limited to: competition from other parks, weather conditions during our primary tourist season, the price of animal feed and the price of gasoline. In addition, factors that might cause or contribute to our results differing materially from forward looking statements include, but are not limited to, those discussed herein as well as in the RISK FACTORS section herein. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this report.
Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the SEC, we assume no obligation to update any of these forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting these forward-looking statements.
Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements.
Overview
Through our wholly-owned subsidiaries, we own and operate two regional theme parks and are in the business of acquiring, developing and operating local and regional theme parks and attractions in the United States. Our wholly-owned subsidiaries are Wild Animal, Inc., a Missouri corporation (Wild Animal - Missouri) and Wild Animal Safari, Inc. a Georgia corporation (Wild Animal Georgia). Wild Animal-Georgia owns and operates the Wild Animal Safari theme park in Pine Mountain, Georgia (the Georgia Park). Wild Animal - Missouri owns and operates the Wild Animal Safari theme park located in Strafford, Missouri (the Missouri Park).
Our goal is to build a family of theme parks primarily through acquisitions of small, local and regional, privately-owned existing parks and to develop a series of compatible, themed attractions,. The Company also may pursue contract management opportunities for themed attractions owned by third parties.
Our philosophy is, if possible, to acquire existing attractions and/or properties. When evaluating possible acquisitions, we rely on the following primary criteria:
·
Properties that have an operating history;
·
Properties that our management team believe have the potential to increase profits and operating efficiencies; and
·
Properties where there is additional, underutilized land available for expansion of operations.
We believe that acquisitions should not unnecessarily encumber the Company with additional debt that cannot be justified by current operations. By using a combination of equity, debt and other financing options, we intend to carefully monitor shareholder value in conjunction with the pursuit of growth.
As we look at our operations as of March 31, 2013, our principal goal is the continued growth of the Missouri Parks revenue. Management believes that our operations during three months ended March 31, 2013 were adversely affected due to abnormally cold weather during such period.
17
Since the Companys acquisition of the Missouri Park in March, 2008 we have worked to upgrade the Parks physical facilities and dramatically improve its concessions. We raised new capital due to our January 9, 2013 refinancing. As a result we have increased capital spending to upgrade the Parks and to add new attractions.
Our current size and operating model leaves us little room for mistakes. Our highest priority is to continue to improve the Missouri Park operating profit.
On January 9, 2013, the Company completed a $3,752,000 loan transaction, the proceeds of which were used primarily to refinance the Companys outstanding debt. For more information regarding this refinancing see Note 3 - Long-Term Debt to the Companys financial statements.
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 the Company believes this measure is the most indicative of performance trends and the overall earnings potential of each segment.
Results of Operations For the Three Month Period Ended March 31, 2013 as Compared to Three Month Period Ended April 1, 2012
The following table shows the operating results for both of our Parks for the three months ended March 31, 2013 and April 1, 2012.
|
|
|
|
|
|
|
|
|
For 3 Months Ended
|
|
|
|
March 31, 2013
|
|
April 1, 2012
|
Net sales
|
|
|
|
|
|
Georgia
|
$
|
470,064
|
$
|
451,798
|
|
Missouri
|
|
77,019
|
|
121,805
|
|
Total net sales
|
$
|
547,083
|
$
|
573,603
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
|
|
|
Georgia
|
$
|
67,319
|
$
|
126,607
|
|
Missouri
|
|
(94,555)
|
|
(69,407)
|
|
Segment total
|
|
(27,236)
|
|
57,200
|
|
Corporate
|
|
(147,351)
|
|
(109,090)
|
|
Other income (expense)
|
|
(1,798)
|
|
11,085
|
|
Gain on retirement of debt
|
|
105,656
|
|
-
|
|
Interest expense
|
|
(73,072)
|
|
(72,998)
|
|
Income (loss) before income taxes
|
$
|
(143,801)
|
$
|
(113,803)
|
Total Net Sales and Segment Information
The Companys total net sales for the three month period ended March 31, 2013 decreased by $26,520, or 5%, to $547,083 versus the three month period ended April 1, 2012. The Georgia Parks revenue increased by $18,266 as a result of higher revenue per customer during the three month period ended March 31, 2013 versus the same period in 2012. Extreme weather during the quarter forced the Missouri Park to close on multiple occasions, causing a dramatic decrease in Park attendance. Revenue from the Missouri Park decreased by $44,786, or 37%, as compared to this same three month period in 2012.
Operating Expenses
The operating margin for both Parks decreased by $84,436 to an operating loss of $27,236 during the three month period ended March 31, 2013 versus a profit of $57,200 during the three month period ended April 1, 2012, primarily due to lower sales in 2013 and last years results including a $65,956 credit to operating expenses for the reversal of a USDA fine at the Georgia park and settled substantially lower than the original assessment.
18
Corporate Expenses and Other
Corporate spending increased by $38,261 to $147,351 during the three month period ended March 31, 2013, primarily as a result of higher legal fees. The Company commenced a lawsuit in September, 2009 against a group led by Larry Eastland, a former officer and director of the Company. The litigation was inactive until June 11, 2012 at which time the Company amended its complaint against the Eastland group to, among other things, join as defendants Stanley Harper, LEA Capital Advisors, LLC (an entity controlled by Mr. Eastland) and Computer Contact Service, Inc. (an entity controlled by Mr. Harper) for breaches of contract and fiduciary duty with regards to the Companys purchase of TempSERV on September 30, 2007 and its subsequent re-conveyance of TempSERV to Computer Contact Service, Inc. as of January 1, 2009.
Other Income
Under the terms of the Companys note with the seller of the Missouri Park, the Company was entitled to a discount to this seller financing note if paid in full before its maturity date of March 5, 2013. The Company paid-off this note in full on January 9, 2013 and recorded the gain of $105,656 in Other Income.
Net Loss and Loss Per Share
The Companys net loss increased by $29,998 to a loss of $143,801, or $0.00 per share and fully diluted per share, for the three months ended March 31, 2013 as compared with a loss of $113,803, or $0.00 per share and fully diluted per share, for the three months ended April 1, 2012.
Excluding the impact of the $105,656 gain from the early repayment of the Missouri Park seller-financed debt reported this year and the credit to expenses from the settlement of the USDA fine for $65,956 last year, the Companys net loss was $249,457 in 2013 versus net loss of $179,759 last year. Management believes that this loss is higher in 2013 as compared to the same period in 2012 was primarily due to higher spending on advertising and lower sales (caused by a harsh winter in Missouri) during 2013.
Results of Operations For the Six Month Period Ended March 31, 2013 as Compared to Six Month Period Ended April 1, 2012
The following table shows the operating results for both our Parks for the six month periods ended March 31, 2013 and April 1, 2012
|
|
|
|
|
|
|
|
|
For 6 Months Ended
|
|
|
|
March 31, 2013
|
|
April 1, 2012
|
Net sales
|
|
|
|
|
|
Georgia
|
$
|
945,468
|
$
|
869,041
|
|
Missouri
|
|
179,040
|
|
219,512
|
|
Total net sales
|
$
|
1,124,508
|
$
|
1,088,553
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
|
|
|
Georgia
|
$
|
125,171
|
$
|
192,094
|
|
Missouri
|
|
(220,900)
|
|
(140,827)
|
|
Segment total
|
|
(95,729)
|
|
51,267
|
|
Corporate
|
|
(242,615)
|
|
(230,245)
|
|
Other income (expense)
|
|
4,371
|
|
15,633
|
|
Gain on retirement of debt
|
|
105,656
|
|
-
|
|
Interest expense
|
|
(127,919)
|
|
(130,691)
|
|
Income (loss) before income taxes
|
$
|
(356,236)
|
$
|
(294,036)
|
Total Net Sales and Segment Information
The Companys total net sales for the six month period ended March 31, 2013 increased by $35,955, or 3%, to $1,124,508 versus the six month period ended April 1, 2012. The Georgia Parks revenue increased by nearly $76,427, or 9%, as a result of average revenue per person during the six month period ended March 31, 2013 versus the six months in 2012. Georgia Park attendance was slightly lower this year versus last year. Net sales from the Missouri Park were down $40,472, or 18%, as compared to this same six month period in 2012. The Missouri Parks attendance was down dramatically due to the severe weather in Springfield, Missouri for January 2013 through March 2013.
19
Operating Expenses
The operating margin for both Parks decreased by $146,996 to an operating loss of $95,729 during the six month period ended March 31, 2013 versus a profit of $51,267 during the six month period ended April 1, 2012, primarily due to higher advertising costs at both parks in 2013 and last years results including a $65,956 credit to operating expenses for the reversal of a USDA fine recorded earlier at the Georgia park and settled substantially lower than the original assessment.
Corporate Expenses and Other
Corporate spending increased by $12,370 to $242,615 during the six month period ended March 31, 2013, primarily as a result of higher legal fees as previously discussed.
Other Income
As discussed above, the Company retired the Missouri Park seller financing debt in full on January 9, 2013 and recorded a gain of $105,656 in Other Income because under the terms of this note, the Company was incentivized to pay off the seller in full before March 5, 2013.
Net Loss and Loss Per Share
The Companys net loss increased by $62,200 to a loss of $356,236, or $0.00 per share and fully diluted per share, for the six months ended March 31, 2013 as compared with a loss of 294,036, or $0.00 per share and fully diluted per share, for the six months ended April 1, 2012.
Excluding the impact of the $105,656 gain from paying off the Missouri debt reported this year and the credit to expenses from the settlement of the USDA fine last year for $65,956, net loss was $461,892 in 2013 versus net loss of $359,992 in 2012. The higher loss in 2013 is primarily from higher spending on advertising and to a lesser degree, higher repairs and maintenance spending this year as compared to the same period last year. The Company has invested more this year in marketing and restoration of the properties in anticipation of what the Company believes will be the best spring and summer season that we ever enjoyed.
Cash Flows from Operating Activities
The Companys slow season starts after Labor Day in September and runs until Spring break which is typically end of March. These two quarters have historically generated negative cash flow and require us to borrow to fund operations and prepare the parks for the busy season during the third and fourth quarter of the year.
To date for the first six months of this year we had negative cash flow of $374,209 as compared with negative $186,632 for the comparable six-month period during out last fiscal year, primarily due to increased spending on advertising, repairs and maintenance this year as compared to the same period in 2012.
Cash Flows from Investing Activities
The Company spent $172,809 on capital improvements at the Parks. In anticipation of our busy season, the Company spent more on repairs and maintenance and adding new attractions at the parks. Improvements at the Missouri Park included: remodeling the Parks gift shop, upgrading the main bathrooms and repaving the Parks main entrance. In addition, we added a new reptile attraction and refurbished many of the animal exhibits. Improvements at the Georgia Park included: renovating many of our animal exhibits, upgrading the rental fleet, building a new food preparation structure for animals on special diets. We also renovated the Parks main food service are and repainted all its main buildings. In addition, the Company invested $182,675 in costs associated with securing the new 20 year mortgage and seven year revolving term loan.
20
Cash Flows from Investing Activities
On January 9, 2013 the Company completed its loan refinancing and was able to retired all mortgages then outstanding and replaced them with a single new 20-year term loan. As a result of this refinancing, the Company lowered its anticipated annual debt service payments. During the past year, the Companys mortgages required total monthly payments of $40,876 (annual payments totaling $490,512) as compared to the new estimated monthly payments of $26,112 (annual payments totaling $313,344). The new loan will save the Company $177,168 in lower annual debt service payments as compared with the previous year.
Liquidity and Capital Resources
Management believes that it has improved its operations to the point that it can now generate enough cash to fund its operations, make its mortgage payments and spend modestly on capital improvements in the near-term. Any slowdown in revenue or unusual capital outlays may require us to seek additional capital.
The Companys working capital is negative $0.5 million at March 31, 2013 as compared to a negative $1.7 million working capital at September 30, 2012. This improvement in working capital is a result of completing our new term loan and retiring the Missouri Park seller financing loan which was due in March 2013 for $1.6 million. Partially offsetting this was the negative cash flow generated during the slow season requiring us to borrow $520,000 on short-term basis. The Company expects to repay the $520,000 before year-end from the cash flow generated during the next six months, our busy season.
Total debt related to our property mortgage and lines of credit (LOC), including current maturities, at March 31, 2013 was $4.1million as compared to $3.5 million at September 30, 2012. The increase in debt was a result of our negative cash flow. The LOC balance (together with outstanding related party notes) at March 31, 2013 and September 30, 2012 was $521,761 and $0 respectively.
At March 31, 2013 the Company had equity of $2.4 million and total debt of $4.1 million (including LOCs) and a debt to equity ratio of 1.68 to 1. The Companys debt to equity ratio was 1.35 to 1 as of September 30, 2012.
Our principal source of income is from cash sales, which is projected to provide sufficient cash flow to fund operations and service our current debt. During the next twelve months, management will focus on increasing net sales, particularly at Missouri Park, and completing several renovation projects currently underway at both parks. As part of the refinancing, the Company secured more than $230,000 for capital improvements and assets. The Company still has $118,799 available to fund these improvements from the new financing agreement signed on January 9, 2013. The total loan commitment was $3,752,000 and to date the Company has borrowed $3,633,201.
Subsequent Events
None
Off Balance Sheet Arrangements
We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, results of operations, liquidity or capital expenditures.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of any contingent assets and liabilities. On an on-going basis, we evaluate our estimates. We base our estimates on various assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
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A number of variables and assumptions could have an affect a valuation of our assets and liabilities. Our assumptions include the following:
·
Revenue and profit growth at our Parks will continue;
·
The existing Park infrastructure will accommodate the additional customers;
·
Cost of improvements and operations will remain a relatively stable budgeted allocation; and
·
Per capita spending by the customers will continue to rise in relation to the rise in capital expenditures;
If any one of these assumptions, or combination of assumptions, proves incorrect, then the values assigned to real estate, per capita revenues, attendance and other variables that have remained consistent over the past two years may not be realized. The same would be true if higher than expected revenue streams occurred.