UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
For
the quarterly period ended
COMMISSION
FILE NUMBER
(Exact Name of small business issuer as specified in its charter)
| (State
or other jurisdiction of incorporation or organization) |
(I.R.S.
Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
Issuer’s
telephone Number:
Indicate
by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer ☐ | Accelerated filer | ☐ | |
| (Do not check if a smaller reporting company) | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of August 9, 2024, the issuer had outstanding shares of Common Stock.
Securities registered pursuant to Section 12(g) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
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Table of Contents
PARKS! AMERICA, INC and SUBSIDIARIES
INDEX
| 2 |
PARKS! AMERICA, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of June 30, 2024 (UNAUDITED) and October 1, 2023
| June 30, 2024 | October 1, 2023 | |||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Short-term investments | ||||||||
| Accounts receivable | ||||||||
| Inventory | ||||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Other current liabilities | ||||||||
| Current portion of long-term debt, net | ||||||||
| Total current liabilities | ||||||||
| Long-term debt, net | ||||||||
| Deferred tax liability, net | ||||||||
| Total liabilities | ||||||||
| Stockholders’ equity | ||||||||
| Common stock; shares authorized, at $ par value; and shares issued and outstanding, respectively | ||||||||
| Capital in excess of par | ||||||||
| Retained earnings | ||||||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 3 |
PARKS! AMERICA, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For the Three Months and Nine Months Ended June 30, 2024 and July 2, 2023
| For the three months ended | For the nine months ended | |||||||||||||||
| June 30, 2024 | July 2, 2023 | June 30, 2024 | July 2, 2023 | |||||||||||||
| Park revenues | $ | $ | $ | $ | ||||||||||||
| Sale of animals | ||||||||||||||||
| Total revenues | ||||||||||||||||
| Cost of sales | ||||||||||||||||
| Selling, general and administrative | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Contested proxy and related matters | ||||||||||||||||
| Tornado expenses and write-offs, net | ( | ) | ( | ) | ( | ) | ||||||||||
| Legal settlement | ||||||||||||||||
| Loss on asset disposals, net | ||||||||||||||||
| Income (loss) from operations | ( | ) | ( | ) | ||||||||||||
| Other income, net | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income (loss) before income taxes | ( | ) | ( | ) | ||||||||||||
| Income tax expense (benefit) | ( | ) | ( | ) | ||||||||||||
| Net income (loss) | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||
| Income (loss) per share - basic and diluted | $ | $ | $ | ) | $ | ) | ||||||||||
| Weighted average shares outstanding (in 000’s) - basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 4 |
PARKS! AMERICA, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
For the Three and Nine Months Ended June 30, 2024 and July 2, 2023
| Capital in | ||||||||||||||||||||
| Shares | Amount | Excess of Par | Retained Earnings | Total | ||||||||||||||||
| Balance at October 1, 2023 | $ | $ | $ | $ | ||||||||||||||||
| Issuance of common stock to Directors | ||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||
| Net loss for the three months ended December 31, 2023 | - | ( | ) | ( | ) | |||||||||||||||
| Balance at December 31, 2023 | ||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||
| Net loss for the three months ended March 31, 2024 | - | ( | ) | ( | ) | |||||||||||||||
| Balance at March 31, 2024 | ||||||||||||||||||||
| Stock-based compensation | - | ( | ) | ( | ) | |||||||||||||||
| Net income for the three months ended June 30, 2024 | - | |||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | $ | ||||||||||||||||
| Capital in | ||||||||||||||||||||
| Shares | Amount | Excess of Par | Retained Earnings | Total | ||||||||||||||||
| Balance at October 2, 2022 | $ | $ | $ | |||||||||||||||||
| Net loss for the three months ended January 1, 2023 | - | ( | ) | ( | ) | |||||||||||||||
| Balance at January 1, 2023 | ||||||||||||||||||||
| Issuance of common stock to Directors | ||||||||||||||||||||
| Net loss for the three months ended April 2, 2023 | - | ( | ) | ( | ) | |||||||||||||||
| Balance at April 2, 2023 | ||||||||||||||||||||
| Issuance of common stock to an Officer | ||||||||||||||||||||
| Net income for the three months ended July 2, 2023 | - | |||||||||||||||||||
| Balance at July 2, 2023 | $ | $ | $ | $ | ||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 5 |
PARKS! AMERICA, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Nine Months Ended June 30, 2024 and July 2, 2023
| For the nine months ended | ||||||||
| June 30, 2024 | July 2, 2023 | |||||||
| OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Reconciliation of net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization expense | ||||||||
| Interest expense - debt financing cost amortization | ||||||||
| Stock-based compensation | ||||||||
| Interest accrued on certificates of deposit | ( | ) | ||||||
| Deferred tax liability | ||||||||
| Tornado asset write-offs | ||||||||
| Loss (gain) loss on asset disposals | ||||||||
| Changes in assets and liabilities | ||||||||
| (Increase) decrease in accounts receivable | ( | ) | ||||||
| (Increase) decrease in inventory | ||||||||
| (Increase) decrease in prepaid expenses | ( | ) | ( | ) | ||||
| Increase (decrease) in accounts payable | ( | ) | ||||||
| Increase (decrease) in other current liabilities | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| INVESTING ACTIVITIES: | ||||||||
| Investments in certificates of deposit | ( | ) | ||||||
| Maturity of certificate of deposit | ||||||||
| Acquisition of property and equipment | ( | ) | ( | ) | ||||
| Investment in intangible assets | ( | ) | ||||||
| Proceeds from the disposition of property and equipment | ||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| FINANCING ACTIVITIES: | ||||||||
| Payments on 2020 Term Loan | ( | ) | ( | ) | ||||
| Payments on 2021 Term Loan | ( | ) | ( | ) | ||||
| Line-of-credit fees | ( | ) | ||||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| Net decrease in cash | ( | ) | ( | ) | ||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
| Supplemental Cash Flow Information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid (refunded) for income taxes | $ | ( | ) | $ | ||||
The accompanying notes are an integral part of these consolidated financial statements.
| 6 |
PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2024
NOTE 1. ORGANIZATION
Parks! America, Inc. (“Parks!” or the “Company”) owns and operates through wholly owned subsidiaries three regional safari parks and is in the business of acquiring, developing and operating local and regional entertainment assets 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
Company was originally incorporated on
The Company’s Parks are open year-round, but experience increased seasonal attendance, typically beginning in the latter half of March through early September. Combined third and fourth quarter park revenues were 60.4% and 62.1% of annual park revenues for the Company’s 2023 and 2022 fiscal years, respectively.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: The accompanying unaudited condensed consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim information and with instructions to Form 10-Q and Article 10 of Regulation S-X. 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. Interim results are not necessarily indicative of the results for a full fiscal year. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 1, 2023.
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 2024 fiscal year, September 29 will be the closest Sunday, and for the 2023 fiscal year, October 1 was the closest Sunday. 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 in the latter half of March through early September.
| 7 |
PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2024
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial and Concentrations Risk: The Company does not have any significant concentrations.
Fair Value: Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, or an exit price. Inputs to valuation techniques used to measure fair value may be observable or unobservable, and valuation techniques used to measure fair value should maximize the use of relevant observable inputs and minimize the use of unobservable inputs. The fair value hierarchy consists of three broad levels based on the ranks of the quality and reliability of inputs used to determine the fair values. Level 1 inputs consist of quoted prices in active markets for identical assets or liabilities. Level 2 inputs consist of quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data. Level 3 inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Assets and liabilities recognized or disclosed at fair value on a recurring basis include our term debt.
As
of June 30, 2024 and October 1, 2023, the fair value of our long-term debt was $
Cash and Cash Equivalents: The Company maintains its cash and cash equivalents with high credit quality financial institutions. The Company considers all highly liquid financial instruments with maturities of three months or less to be cash equivalents. The Company maintains cash and cash equivalents in deposit accounts which may at times exceed federally insured limits. As of June 30, 2024 and October 1, 2023, cash and cash equivalents consisted of cash on deposit and a money market account.
Short-term
Investments: The Company periodically invests in certificates of deposit and classifies its certificates of deposit as cash and
cash equivalents or short-term investments and reassesses the appropriateness of the classification of its investments at the end of
each reporting period. Certificates of deposit held for investment with an original maturity date greater than three months are carried
at amortized cost and reported as short-term investments on the consolidated balance sheets. As of June 30, 2024, the Company had $
Accounts
Receivable: The Company’s safari parks are principally a payment upfront business; therefore, the Company generally carries
limited accounts receivable. The Company had $
Inventory:
Inventory consists of gift shop items, animal food, and concession and park supplies, and is stated at the lower of cost or net
realizable value. Cost is determined based 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 $
Prepaid Expenses: The Company prepays certain expenses primarily due to legal or contractual requirements. The following is a breakdown of prepaid expenses:
| June 30, 2024 | October 1, 2023 | |||||||
| Prepaid income taxes | $ | $ | ||||||
| Prepaid insurance | ||||||||
| Prepaid advertising | ||||||||
| Other prepaid expenses | ||||||||
| Total prepaid expenses | $ | $ | ||||||
| 8 |
PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2024
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 30, 2024 | October 1, 2023 | Depreciable Lives | ||||||||
| Land | $ | $ | ||||||||
| Mineral rights | ||||||||||
| Ground improvements | ||||||||||
| Buildings and structures | ||||||||||
| Animal shelters and habitats | ||||||||||
| Park animals | ||||||||||
| Equipment - concession and related | ||||||||||
| Equipment and vehicles - yard and field | ||||||||||
| Vehicles - buses and rental | ||||||||||
| Rides and entertainment | ||||||||||
| Furniture and fixtures | ||||||||||
| Projects in process | ||||||||||
| Property and equipment, cost | ||||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||||
| Property and equipment, net | $ | $ | ||||||||
Depreciation
expense for the three months ended June 30, 2024 and July 2, 2023 totaled $
Intangible
Assets: Intangible assets consist primarily of a site master plan, website domains and tradename registrations, which are reported
at cost and are being amortized over a period of to
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 30, 2024 | October 1, 2023 | |||||||
| Deferred revenue | $ | $ | ||||||
| Accrued compensation | ||||||||
| Accrued sales taxes | ||||||||
| Accrued professional fees | ||||||||
| Accrued property taxes | ||||||||
| Other accrued liabilities | ||||||||
| Other current liabilities | $ | $ | ||||||
| 9 |
PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2024
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition: The Company recognizes revenues in accordance with 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.
Revenues from park admission fees are recognized at the point in time control transfers to the customer, which is generally when the customer accepts access to the park and the Company is entitled to payment. Park admission revenues for annual passes and memberships are deferred and recognized as revenue on a pro-rata basis over the term of the pass or membership. Park admission fee revenues from advance online ticket purchases are deferred until the customers’ visit to the parks. Advance online tickets can generally be used anytime during the one year period from the date of purchase. Revenues from retail and concession sales are generally recognized upon the concurrent receipt of payment and delivery of goods to the customer. Sales taxes billed and collected are not included in revenue.
Deferred
revenues from advance online admission tickets, and season passes and memberships were $
The Company periodically sells surplus animals created from the natural breeding process that occurs within the parks. Animal sales are reported as a separate revenue line item. Animal sales are recognized at a point in time when control transfers to the customer, which is generally determined when title, ownership and risk of loss pass to the customer, all of which generally occurs upon delivery of the animal. Based on the Company’s assessment of control indicators, sales are recognized when animals are delivered to the customer.
The Company provides disaggregation of revenue based on geography in “Note 10: Business Segments”, as it believes this best depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.
Advertising
and Marketing Costs: The Company expenses advertising and marketing costs as incurred. Advertising and marketing expense for
the three months ended June 30, 2024 and July 2, 2023 totaled $
A Stock Option and Award Plan (the “Plan”) providing for incentive stock options and performance bonus awards for executives, employees, and directors was approved by the Company’s Board of Directors on February 1, 2005, however, the Plan has not been submitted to the stockholders for approval. The Plan sets aside five million () shares for the award of stock options, including qualified incentive stock options and performance stock bonuses. To date, grants or awards have been made pursuant to the Plan and the Company did not submit the Plan for consideration to the Company’s stockholders at its last meeting of stockholders.
| 10 |
PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2024
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
The
Company follows the guidance in FASB ASC 740 with respect to accounting for uncertainty in income taxes. A tax position is recognized
as a benefit only if it is “more-likely-than-not” that the tax position would be sustained in a tax examination, with a tax
examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than fifty percent likely
of being realized on examination. For tax positions not meeting the “more-likely-than-not” test, no tax benefit is recorded.
The Company has
Basic and diluted net income (loss) per share is computed by dividing net income (loss) available to common stockholders by the applicable weighted average number of common shares outstanding in each period.
Dividend Policy: The Company has not yet adopted a policy regarding payment of dividends.
Recent Accounting Pronouncements:
Credit Losses – Financial Instruments
In June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses (Topic 326), which significantly changes how entities measure credit losses for most financial assets, including accounts receivable and held-to-maturity marketable securities, replacing the “incurred loss” model with an “expected loss” model under which allowances are based on expected rather than incurred losses. ASU No. 2016-13 became effective for the Company in the three months ended December 31, 2023. The adoption of ASU No. 2016-13 had an immaterial impact on the Company.
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. TORNADO EXPENSES AND ASSET WRITE-OFFS
During
March 26-27, 2023, the Company’s Georgia Park experienced extensive damage, caused by an EF-3 tornado and over nine inches of rain,
resulting in more than 4,500 fallen trees and damage to many of the Park’s animal enclosures, fencing and other infrastructure.
The Walkabout Adventure Zoo (“Walkabout”) portion of the property was particularly hard hit. The Georgia Park was closed
for 20 days, including for most of its traditionally busy spring break period, which has historically comprised approximately
| 11 |
PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2024
NOTE 3. TORNADO EXPENSES AND ASSET WRITE-OFFS (CONTINUED)
For
the nine months ended July 2, 2023, the Company recorded $
The
Company also made capital investments of $
While no severe weather and tornado related
expenses or asset write-offs were recorded during the nine months ended June 30, 2024, the Company received the final anticipated tornado
damage related insurance proceeds of $
NOTE 4. LONG-TERM DEBT
On
On
Interest
expense of $
| 12 |
PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2024
NOTE 4. LONG-TERM DEBT (CONTINUED)
The following table represents the aggregate of the Company’s outstanding long-term debt:
| As of | ||||||||
| June 30, 2024 | October 1, 2023 | |||||||
| Loan principal outstanding | $ | $ | ||||||
| Less: unamortized debt financing costs | ( | ) | ( | ) | ||||
| Gross long-term debt | ||||||||
| Less current portion of long-term debt, net of unamortized costs | ( | ) | ( | ) | ||||
| Long-term debt | $ | $ | ||||||
As of June 30, 2024, the scheduled future principal maturities of the Company’s long-term debt by fiscal year are as follows:
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| thereafter | ||||
| Total | $ |
NOTE 5. LINES OF CREDIT
On
October 19, 2023, the Company, through its wholly owned subsidiary Aggieland Wild Animal – Texas, entered a line of credit of up
to $
On
October 24, 2023, the Company, through its wholly owned subsidiary Wild Animal – Georgia, entered a line of credit of up to $
As of June 30, 2024, the Company had not made any borrowings against either of these lines of credit.
Interest
expense for the three months ended June 30, 2024 and July 2, 2023, includes $
| 13 |
PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2024
NOTE 6. STOCKHOLDERS’ EQUITY
Shares of common stock issued for service to the Company are valued based on market price on the date of the award.
On
December 4, 2023, the Company declared its annual compensation award to seven directors for their service on the Board of Directors.
Seven directors were awarded $
On
February 2, 2023, the Company declared its annual compensation award to seven directors for their service on the Board of Directors.
Seven directors were awarded $
Effective
February 14, 2023, Lisa Brady the Company’s President and Chief Executive Officer vested in shares of the Company’s
common stock, in accordance with the terms of her employment agreement. The Company recorded compensation award cost of $
Officers,
directors and their controlled entities own approximately
NOTE 7. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES
Employment Agreements:
Effective
Effective
June 14, 2024, following the conclusion of the contested proxy matter described in “NOTE 11. CONTESTED PROXY AND RELATED
MATTERS”, Ms. Brady stepped down as the Company’s President and Chief Executive Officer and the Company issued her a
severance payment of $
| 14 |
PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2024
NOTE 7. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
Related
to the Brady Employment Agreement, the Company recorded stock-based compensation of $ and $ for the three and nine months
ended July 2, 2023, respectively. For the three months ended June 30, 2024, the Company reversed $
Effective
Effective
as of
NOTE 8. INCOME TAXES
For
the nine months ended June 30, 2024, the Company reported a pre-tax loss of $
NOTE 9. COMMITMENTS AND CONTINGENCIES
On
December 16, 2022, the Company received notice that on August 10, 2022 a former employee of Aggieland Wild Animal – Texas, filed
a Complaint in the 361st District Court of Brazos County, Texas (case no. 22-001839-CV-361), alleging the Company and Aggieland-Parks,
Inc. committed several instances of employment discrimination. The Complaint sought unspecified economic, compensatory and punitive damages,
as well as attorney’s fees and costs. On June 3, 2024, the Company and the former employee entered into a settlement agreement
and mutual release of claims related to this matter and the Company paid the former employee $
On March 1, 2024, Focused Compounding Fund, LP (“Focused Compounding”) filed a Complaint in the Eighth Judicial District Court of Clark County, Nevada (case no. A-24-888295-B) against the Company and each of the members of its Board of Directors, alleging that the defendants were contemplating efforts to entrench themselves as members of the Board of Directors. Simultaneously with filing its Complaint, Focused Compounding sought a Preliminary Injunction that would require the Company and its Directors to take various actions. On June 20, 2024, Focused Compounding, the Company and the named defendants agreed to a stipulation dismissing with prejudice any and all claims by and between the parties outlined in the initial Complaint in light of the results of the Company’s annual meeting of stockholders held on June 6, 2024. See “NOTE 11. CONTESTED PROXY AND RELATED MATTERS” for additional information.
Except as noted 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.
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PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2024
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 measure used to allocate resources are Park earnings before interest, taxes, depreciation and amortization expenses.
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 30, 2024 | July 2, 2023 | June 30, 2024 | July 2, 2023 | |||||||||||||
| Total revenues: | ||||||||||||||||
| Georgia | $ | $ | $ | $ | ||||||||||||
| Missouri | ||||||||||||||||
| Texas | ||||||||||||||||
| Consolidated | $ | $ | $ | $ | ||||||||||||
| Income (loss) before income taxes: | ||||||||||||||||
| Georgia | $ | $ | $ | $ | ||||||||||||
| Missouri | ||||||||||||||||
| Texas | ||||||||||||||||
| Segment EBITDA | ||||||||||||||||
| Corporate expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Depreciation and amortization | ||||||||||||||||
| Loss on asset disposals, net | ||||||||||||||||
| Contested proxy and related matters | ||||||||||||||||
| Tornado expenses and write-offs, net | ( | ) | ( | ) | ( | ) | ||||||||||
| Legal settlement | ||||||||||||||||
| Other income, net | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Consolidated | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||
| As of | ||||||||
| June 30, 2024 | October 1, 2023 | |||||||
| Total assets: | ||||||||
| Georgia | $ | $ | ||||||
| Missouri | ||||||||
| Texas | ||||||||
| Corporate | ||||||||
| Consolidated | $ | $ | ||||||
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PARKS! AMERICA, INC. and SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2024
On December 22, 2023, Focused Compounding Fund, LP (together with the participants in its solicitation, “Focused Compounding”) submitted documents to the Company purporting to provide qualifying notice as to a demand that the Company hold a special meeting of stockholders (the “Special Meeting”). The Special Meeting was held for the purpose of asking stockholders to consider and vote upon five proposals, including a proposal for the removal of all directors currently serving on the Board of Directors and a proposal for the election of a new Board of Directors comprised entirely of Focused Compounding’s slate of three candidates. The Special Meeting was held on February 26, 2024 and Focused Compounding’s proposal to reconstitute the Board of Directors did not pass.
On March 1, 2024, Focused Compounding filed a Complaint in the Eighth Judicial District Court of Clark County against the Company and each of the members of its Board of Directors, alleging that the defendants were contemplating efforts to entrench themselves as members of the Board. See “NOTE 9. COMMITMENTS AND CONTINGENCIES” for additional information.
On June 6, 2024 the Company held its annual meeting of stockholders (the “2024 Annual Meeting”). The purpose of the 2024 Annual Meeting was for the Company’s stockholders to elect seven nominees to serve on the Company’s Board of Directors (the “Board”), as well as consider additional proposals. The Company and Focused Compounding each submitted proxies soliciting the Company’s stockholders to vote for their respective proposed director nominees. The nominees for director included six nominees proposed by the Company and four nominees proposed by Focused Compounding. At the 2024 Annual Meeting, the Company’s stockholders elected four nominees proposed by Focused Compounding and three nominees proposed by the Company.
On June 14, 2024, the Company announced that Lisa Brady stepped down as its President and Chief Executive Officer, and the Company’s Board had appointed Geoffery Gannon as the Company’s President. Mr. Gannon is also the Portfolio Manager at Focused Compounding.
The
Company engaged legal counsel specializing in activist stockholder matters, as well as several other consultants, during this proxy contest and for the nine months ended June 30, 2024, the Company incurred $
NOTE 12. SUBSEQUENT EVENTS
The Company has analyzed its operations subsequent to June 30, 2024 to the date these financial statements were issued and has determined, no material subsequent events have occurred from the date of these unaudited consolidated financial statements.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
Management’s discussion and analysis of results of operations and financial condition (“MD&A”) is a supplement to the accompanying unaudited consolidated financial statements and provides additional information on our businesses, current developments, financial condition, cash flows and results of operations. The following discussion should be read in conjunction with our unaudited consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report”) and with our Annual Report on Form 10-K for the fiscal year ended October 1, 2023.
Forward-Looking Statements
Except for the historical information contained herein, this Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements involve risks and uncertainties, including, among other things, statements concerning: our business strategy; liquidity and capital expenditures; future sources of revenues and anticipated costs and expenses; and trends in industry activity generally. Such forward-looking statements include, among others, those statements including the words such as “may,” “will,” “should,” “expect,” “plan,” “could,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “goal,” or “continue” or similar language or by discussions of our outlook, plans, goals, strategy or intentions.
Our actual results may differ significantly from those projected in the forward-looking statements. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including, but not limited to, the risks outlined under “Risk Factors” in this Quarterly Report, that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. For example, assumptions that could cause actual results to vary materially from future results include, but are not limited to: competition from other parks, inclement weather conditions during our primary tourist season, the price of animal feed and the price of gasoline. Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, we cannot guarantee future results, levels of activity, performance or achievements.
The forward-looking statements we make in this Quarterly Report are based on management’s current views and assumptions regarding future events and speak only as of the date of this report. We assume no obligation to update any of these forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting these forward-looking statements, except as required by applicable law, including the securities laws of the United States and the rules and regulations of the Securities and Exchange Commission.
Contested Proxy and Related Matters
On December 22, 2023, Focused Compounding Fund, LP (together with the participants in its solicitation, “Focused Compounding”) submitted documents to the Company purporting to provide qualifying notice as to a demand that the Company hold a special meeting of stockholders (the “Special Meeting”). The Special Meeting was held for the purpose of asking stockholders to consider and vote upon five proposals, including a proposal for the removal of all directors currently serving on the Board of Directors and a proposal for the election of a new Board of Directors comprised entirely of Focused Compounding’s slate of three candidates. The Special Meeting was held on February 26, 2024 and Focused Compounding’s proposal to reconstitute the Board of Directors did not pass.
On June 6, 2024 we held our annual meeting of stockholders (the “2024 Annual Meeting”). The purpose of the 2024 Annual Meeting was for the Company’s stockholders to elect seven nominees to serve on the Company’s Board of Directors (the “Board”), as well as consider additional proposals. The Company and Focused Compounding each submitted proxies soliciting the Company’s stockholders to vote for their respective proposed director nominees. The nominees for director included six nominees proposed by the Company and four nominees proposed by Focused Compounding. At the 2024 Annual Meeting, the Company’s stockholders elected four nominees proposed by Focused Compounding and three nominees proposed by the Company.
On June 14, 2024, we announced that Lisa Brady stepped down as its President and Chief Executive Officer, and the Company’s Board had appointed Geoffery Gannon as the Company’s President. Mr. Gannon is also the Portfolio Manager at Focused Compounding.
On March 1, 2024, Focused Compounding filed a Complaint in the Eighth Judicial District Court of Clark County against the Company and each of the members of our Board of Directors, alleging that the defendants were contemplating efforts to entrench themselves of members of the Board of Directors. On June 20, 2024, Focused Compounding, the Company and the named defendants agreed to a stipulation dismissing with prejudice any and all claims by and between the parties outlined in the initial Complaint in light of the results of the Company’s annual meeting of stockholders held on June 6, 2024.
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We engaged legal counsel specializing in activist stockholder matters, as well as several other consultants, during this proxy contest and for the nine months ended June 30, 2024, we incurred $2.04 million of associated expenses. As of June 30, 2024, we had approximately $940,000 of unpaid expenses associated with the contested proxy matter. We are working with our directors and officers insurance carrier regarding potential insurance coverage related to the expenses associated with the contested proxy and related matters.
Overview
Through our wholly owned subsidiaries, we own and operate three regional theme parks and are in the business of acquiring, developing and operating local and regional theme parks and attractions in the United States. Our wholly owned subsidiaries are Wild Animal Safari, Inc., a Georgia corporation (“Wild Animal – Georgia”), 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”).
Our parks are open year round, but experience increased seasonal attendance, typically beginning in the latter half of March through early September. Combined third and fourth quarter park revenues were 60.4% and 62.1% of annual park revenues for our 2023 and 2022 fiscal years, respectively. Since the acquisition of our Texas Park, the combined third and fourth quarter concentration of our park revenues has been reduced.
During March 26-27, 2023, our Georgia Park experienced extensive damage, caused by an EF-3 tornado and over nine inches of rain, resulting in more than 4,500 fallen trees and damage to many of the Park’s animal enclosures, fencing and other infrastructure. The Walkabout Adventure Zoo (“Walkabout”) portion of the property was particularly hard hit. Our Georgia Park was closed for 20 days, including for most of its traditionally busy spring break period, which has historically comprised approximately 10%-15% of its annual revenue. The drive-through safari section of the Georgia Park reopened on April 15th. The Walkabout portion of the Park reopened in phases, with the first phase on May 6th and the second phase on July 2nd. Approximately one-quarter of the Walkabout remains closed.
As a result of the near-term needs associated with the tornado recovery effort at our Georgia Park, we revised our 2023 fiscal year capital investment plan. Two significant new marketable attractions in our Georgia Park Walkabout, an enhanced ring-tailed lemur exhibit and new aviary, featuring macaws and a budgie parrot feeding experience, were not significantly impacted by the tornado event and opened on May 6, 2023. In addition, a new marquee otter exhibit opened in May 2023 at our Missouri Park Walkabout and a fourth drive-through pasture at our Texas Park opened in early March 2023, allowing guests to feed zebras and camels directly from their vehicles.
Our 2024 fiscal year capital plan reflects the further rebuild of our Georgia Park following the March 2023 severe weather event. The largest component of our 2024 capital plan is a new restroom building and main entry plaza at our Georgia Park. The existing restroom building was near the end of its useful life, and the tornado damage rendered it beyond repair. The new restroom building and entry portal project is expected to be completed near the end of the first quarter of our 2025 fiscal year. Also in Georgia, our carnivore night house has been rebuilt, a capybara encounter area has been added, roadway infrastructure improved, and additional fencing and sidewalks repaired. We continue to take a strategic and measured approach to the rebuild at our Georgia Park, ensuring we put in place a product that will withstand the test of time and improve the guest, animal and staff experience.
At our Missouri Park, the 2024 capital plan has been focused on activation of a guest-facing pond within the Walkabout featuring a nature trail and pond access for a fish feeding experience, the expansion of shade structures, additional rental vehicles, and equipment capital. Capital spending for 2024 at our Texas Park has been focused on key infrastructure needs, including electrical build out to right-size the service within the facility, hay storage, the completion of the keeper facility and general safety related improvements.
Our 2024 fiscal year capital spending plan was initially targeted at $1.4 million, however, will likely come in closer to $1.0 million due to the timing of completion of the new restroom building and entry portal at our Georgia Park.
We are committed to leveraging the strong operating model established at our Georgia Park at all three of our properties, with a focus on increasing attendance through enhanced marketing efforts and focused capital investments, as well as continuing to prudently increase the average revenue generated per guest visit via concession and gift shop revenues. One of our highest priorities over the next several years is rebuilding and improving our Georgia Park Walkabout. Our Texas Park opened to the public in May 2019 and we believe there remains long-term potential to increase attendance by increasing the local and regional awareness of this facility via advertising and promotion. We are encouraged by the higher levels of attendance and park revenues at our Missouri Park which began in the spring of 2020 and plan on prudently leveraging the increased exposure of this facility to continue to build on this success.
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Strong annual operating cash flow over the past several fiscal years has provided us with incremental operating margin, funded significant increases in capital investment, allowed us to paydown debt following the Aggieland Safari acquisition in 2020, as well as spend to quickly reopen after the significant damage and business interruption caused by the March 2023 severe weather event at our Georgia Park. Our near-term financial capability has also been negatively impacted by expenses related to the contested proxy and related matters. Our current size and operating model leave us little room for error. Any future capital raised by us may result in dilution to existing stockholders. It is possible that the cash generated by, or available to, us may not be sufficient to fund our capital and liquidity needs for the near term.
We manage our operations on an individual location basis. Discrete financial information is maintained for each park and provided to our corporate management for review and as a basis for decision-making. The primary performance measure used to allocate resources are park earnings before interest, taxes, depreciation and amortization expenses (commonly referred to as “EBITDA”). We use EBITDA as a measure of operating profit to gauge segment performance because we believe this measure is the most indicative of performance trends and the overall earnings potential of each segment.
Results of Operations for the Three Months Ended June 30, 2024 as Compared to Three Months Ended July 2, 2023
The following table shows our consolidated and segment operating results for the three months ended June 30, 2024 and July 2, 2023:
| Georgia Park | Missouri Park | Texas Park | Consolidated | |||||||||||||||||||||||||||||
| Fiscal 2024 | Fiscal 2023 | Fiscal 2024 | Fiscal 2023 | Fiscal 2024 | Fiscal 2023 | Fiscal 2024 | Fiscal 2023 | |||||||||||||||||||||||||
| Total revenues | $ | 2,200,174 | $ | 1,713,536 | $ | 675,283 | $ | 570,888 | $ | 573,287 | $ | 565,708 | $ | 3,448,744 | $ | 2,850,132 | ||||||||||||||||
| Segment income | 1,172,530 | 709,499 | 222,714 | 167,503 | 107,086 | 82,010 | 1,502,330 | 959,012 | ||||||||||||||||||||||||
| Segment operating margin % | 53.3 | % | 41.4 | % | 33.0 | % | 29.3 | % | 18.7 | % | 14.5 | % | 43.6 | % | 33.6 | % | ||||||||||||||||
| Corporate expenses | (401,082 | ) | (308,044 | ) | ||||||||||||||||||||||||||||
| Depreciation and amortization | 230,852 | 222,124 | ||||||||||||||||||||||||||||||
| Contested proxy and related matters | 746,570 | - | ||||||||||||||||||||||||||||||
| Tornado expenses and write-offs, net | (53,755 | ) | (268,776 | ) | ||||||||||||||||||||||||||||
| Legal settlement | 75,000 | - | ||||||||||||||||||||||||||||||
| Other income, net | 31,412 | 3,429 | ||||||||||||||||||||||||||||||
| Interest expense | (46,923 | ) | (54,514 | ) | ||||||||||||||||||||||||||||
| Income before income taxes | $ | 87,070 | $ | 646,535 | ||||||||||||||||||||||||||||
Total Revenues
| For the three months ended | ||||||||||||
| July 2, 2023 | ||||||||||||
| June 30, 2024 | Actual | Pro Forma | ||||||||||
| Georgia Park | $ | 2,166,574 | $ | 1,713,205 | $ | 2,348,677 | ||||||
| Missouri Park | 668,097 | 570,888 | 556,619 | |||||||||
| Texas Park | 522,052 | 517,419 | 508,858 | |||||||||
| Total park revenues | $ | 3,356,723 | $ | 2,801,512 | $ | 3,414,154 | ||||||
Our total revenues for the three months ended June 30, 2024 totaled $3.49 million, an increase of $598,612, compared to the three months ended July 2, 2023. Our total park revenues were $3.36 million, an increase of $555,211 or 19.8%, while animal sales were $92,021, an increase of $43,401. In mid-January 2024 we completed the strategic switch to a new ticketing platform, which we believe improves the guest experience, while also providing improved functionality for our park customer services teams. While this change had a net neutral impact on our profitability, we no longer directly up-charge customer transaction fees. On a pro forma basis, adjusting for the impact of our Georgia Park closure and phased reopening that extended for the first six weeks of the three months ended July 2, 2023, as well as the change in accounting for customer transaction processing fees, our park revenues for the three months ended June 30, 2024 decreased by approximately $57,400 or 1.7%.
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Georgia park revenues were $2.17 million, an increase of $453,369 or 26.5%. On a pro forma basis, adjusting for the tornado damage closure and phased reopening, as well as the change in accounting for transaction processing fees, Georgia park revenue decreased by approximately $182,100 or 7.8%. Missouri park revenues were $668,097, an increase of $97,209 or 17.0%, representing a 20.0% increase on a pro forma basis. Texas park revenues were $522,052, an increase of $4,633 or 0.9%, representing a 2.6% increase on a pro forma basis.
For the three months ended June 30, 2024, paid attendance at our Georgia and Missouri Parks increased by approximately 28.1% and 15.7%, while attendance at our Texas Park was essentially flat. While higher on a reported basis due to the impact of the 2023 tornado related closure, we believe attendance at our Georgia Park continues to be negatively impacted by increased competition in the greater Atlanta market, as well as a continuing overhang from the March 2023 tornado as we work to fully rebuild.
Segment Income
Our segment income was $1.50 million for the three months ended June 30, 2024, an increase of $543,318, compared to a segment income of $959,012 for the three months ended July 2, 2023. Our Georgia Park generated segment income of $1.17 million, an increase of $463,031, primarily attributable to higher park revenues and higher animal sales, and lower advertising expense, partially offset by lower food service margins and higher staffing related costs. Our Missouri Park generated segment income of $222,714, an increase of $55,211, primarily attributable to higher park revenues, partially offset by higher staffing related and advertising costs. Our Texas Park generated segment income of $107,086, an increase of $25,076, primarily attributable to lower advertising and general operating expenses, as well as higher park revenues and animal sales, partially offset by higher staffing related costs.
Corporate Expenses
Corporate expenses increased by $93,038 to $401,082 during the three months ended June 30, 2024, primarily due to higher severance costs and annual stockholders meeting costs, partially offset by lower other compensation expense.
Depreciation and Amortization Expense
Depreciation and amortization expense for the three months ended June 30, 2024 increased by $8,728, to $230,852, primarily attributable to higher depreciation expense for our Georgia and Texas Parks, partially offset by lower depreciation expense for our Missouri Park.
Contested Proxy and Related Matters
During the three months ended June 30, 2024, we recorded $746,570 of expenses associated with a contested proxy and related matters. This includes legal costs associated with a lawsuit filed in the State of Nevada by Focused Compounding on March 1, 2024, as well as costs leading up to and associated with our annual stockholder meeting on June 6, 2024 considered by management to be above and beyond the costs of a normal stockholders meeting. See “NOTE 11. CONTESTED PROXY AND RELATED MATTERS” of the Notes to the Consolidated Financial Statements (Unaudited) included in this Quarterly Report for additional information.
Tornado Expenses and Write-offs, Net
As a result of the tornado and severe weather damage at our Georgia Park during March 26-27, 2023, for the three months ended July 2, 2023, we recorded $397,749 of tornado related expenses, primarily due to tree and other debris removal, repairing and replacing underground water pipes throughout the property, as well as general clean-up and reopening efforts. In addition, we recorded tornado and severe weather-related asset write-offs of $20,728. These expenses and write-offs were more than offset by $687,253 of insurance proceeds from our commercial property coverage, resulting a net insurance recovery of $268.776 for the three months ended July 2, 2023. During the three months ended June 30, 2024, we received the final expected insurance proceeds of $53,755 related to the Georgia Park 2023 tornado event.
Legal Settlement
During the three months ended June 30, 2024, we entered into a settlement agreement and paid $75,000 to settle a lawsuit initiated by a former employee alleging several instances of employment discrimination. See “NOTE 9. COMMITMENTS AND CONTINGENCIES” of the Notes to the Consolidated Financial Statements (Unaudited) included in this Quarterly Report for additional information.
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Other Income, Net
Other income, net for the three months ended June 30, 2024 increased by $27,983, to $31,412, attributable to lower non-operating expenses and higher interest income, partially offset by lower mineral rights royalty income from our Texas Park property.
Interest Expense
Interest expense for the three months ended June 30, 2024 decreased by $7,591, to $46,923, attributable to a reduction in term loan interest.
Income Taxes
For the three months ended June 30, 2024, we reported pre-tax income of $87,070. Based on a year-to-date blend of federal and State of Georgia pre-tax losses, we recorded an income tax expense of $19,200 for the three months ended June 30, 2024.
Net Income (Loss) and Income (Loss) Per Share
For the three months ended June 30, 2024, we reported a net income of $67,870 or $0.00 per basic share and per fully diluted share, compared to net income of $512,035 or $0.01 per basic share and per fully diluted share, for the three months ended July 2, 2023, resulting in a decrease of $444,165.
| For the three months ended | ||||||||
| June 30, 2024 | July 2, 2023 | |||||||
| Net income | $ | 67,870 | $ | 512,035 | ||||
| Contested proxy and related matters | 746,570 | - | ||||||
| Tax impact - contested proxy and related matters | (201,570 | ) | - | |||||
| Tornado expenses and write-offs, net | (53,755 | ) | (268,776 | ) | ||||
| Tax impact - tornado expenses and write-offs | 14,510 | 72,570 | ||||||
| Legal settlement | 75,000 | - | ||||||
| Tax impact - legal settlement | (20,250 | ) | - | |||||
| Adjusted net income | $ | 628,375 | $ | 315,829 | ||||
As shown in the table above, several items impacted our year-over-year reported net income comparison for the three months ended June 30, 2024. Our reported net income for the three months ended June 30, 2024 included $746,570 of expenses associated with a contested proxy and related matters, $53,755 of Georgia Park tornado related insurance proceeds, and a legal settlement of $75,000. Our reported net income for the three months ended July 2, 2023 included $268,776 of net insurance proceeds associated with the Georgia Park tornado. Management believes that our adjusted net income, excluding one-time items, should be considered in evaluating the ongoing operating performance of our business. Excluding the after-tax impacts of these items, our adjusted net income was $628,375 for the three months ended June 30, 2024 compared to $315,829 for three months ended July 2, 2023, resulting in an increase of $312,546. Our higher adjusted net income for the three months ended June 30, 2024 is primarily attributable to a $463,031 increase in Georgia Park segment income, in part attributable to prior year lost revenue associated with the tornado related closure and phased reopening, a $55,211 increase in Missouri Park segment income, a $25,076 increase in Texas Park segment income, a $27,983 increase in other income, and a $7,591 decrease in interest expense, partially offset by a $93,038 increase in Corporate expenses, a $8,728 increase in depreciation and amortization expense, and a $164,580 increase in our adjusted income tax expense.
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Results of Operations for the Nine Months Ended June 30, 2024 as Compared to Nine Months Ended July 2, 2023
The following table shows our consolidated and segment operating results for the nine months ended June 30, 2024 and July 2, 2023:
| Georgia Park | Missouri Park | Texas Park | Consolidated | |||||||||||||||||||||||||||||
| Fiscal 2024 | Fiscal 2023 | Fiscal 2024 | Fiscal 2023 | Fiscal 2024 | Fiscal 2023 | Fiscal 2024 | Fiscal 2023 | |||||||||||||||||||||||||
| Total revenues | $ | 4,489,128 | $ | 4,103,132 | $ | 1,317,737 | $ | 1,061,480 | $ | 1,497,704 | $ | 1,422,364 | $ | 7,304,569 | $ | 6,586,976 | ||||||||||||||||
| Segment income | 1,724,017 | 1,364,639 | 166,886 | 30,098 | 102,137 | 19,228 | 1,993,040 | 1,413,965 | ||||||||||||||||||||||||
| Segment operating margin % | 38.4 | % | 33.3 | % | 12.7 | % | 2.8 | % | 6.8 | % | 1.4 | % | 27.3 | % | 21.5 | % | ||||||||||||||||
| Corporate expenses | (911,490 | ) | (928,961 | ) | ||||||||||||||||||||||||||||
| Depreciation and amortization | 672,648 | 648,757 | ||||||||||||||||||||||||||||||
| Loss on asset disposals, net | 35,754 | 30,584 | ||||||||||||||||||||||||||||||
| Contested proxy and related matters | 2,037,822 | - | ||||||||||||||||||||||||||||||
| Tornado expenses and write-offs, net | (53,755 | ) | 363,596 | |||||||||||||||||||||||||||||
| Legal settlement | 75,000 | - | ||||||||||||||||||||||||||||||
| Other income, net | 101,325 | 64,708 | ||||||||||||||||||||||||||||||
| Interest expense | (147,515 | ) | (169,739 | ) | ||||||||||||||||||||||||||||
| Loss before income taxes | $ | (1,732,109 | ) | $ | (662,964 | ) | ||||||||||||||||||||||||||
Total Revenues
| For the nine months ended | ||||||||||||
| July 2, 2023 | ||||||||||||
| June 30, 2024 | Actual | Pro Forma | ||||||||||
| Georgia Park | $ | 4,419,214 | $ | 4,059,002 | $ | 5,050,530 | ||||||
| Missouri Park | 1,293,101 | 1,061,480 | 1,039,008 | |||||||||
| Texas Park | 1,377,882 | 1,356,174 | 1,334,449 | |||||||||
| Total park revenues | $ | 7,090,197 | $ | 6,476,656 | $ | 7,423,987 | ||||||
Our total revenues for the nine months ended June 30, 2024 totaled $7.30 million, an increase of $717,593, compared to the nine months ended July 2, 2023. Our total park revenues were $7.09 million, an increase of $613,541 or 9.5%, while animal sales were $214,372, an increase of $104,052. In mid-January 2024 we completed the strategic switch to a new ticketing platform, which we believe improves the guest experience, while also providing improved functionality for our park customer services teams. While this change had a net neutral impact on our profitability, we no longer directly up-charge customer transaction fees. On a pro forma basis, adjusting for our Georgia Park tornado damage closure and phased reopening that extended over a roughly eight week period during the nine months ended July 2, 2023, as well as the change in accounting for customer transaction processing fees, our park revenues for the nine months ended June 30, 2024 decreased by approximately $333,800 or 4.5%.
Georgia park revenues were $4.42 million, an increase of $360,212 or 8.9%. On a pro forma basis, adjusting for the tornado damage closure and phased reopening, as well as the change in accounting for transaction processing fees, Georgia park revenue decreased by approximately $631,300 or 12.5%. Missouri park revenues were $1.29 million, an increase of $231,621 or 21.8%, representing a 24.5% increase on a pro forma basis. Texas park revenues were $1.38 million, an increase of $21,708 or 1.6%, representing a 3.3% increase on a pro forma basis.
For the nine months ended June 30, 2024, paid attendance at our Georgia, Missouri and Texas Parks increased by approximately 14.4%, 24.0% and 2.7%, respectively. We believe favorable weather in the three months ended December 31, 2023, benefited our Texas and Missouri Parks, however, our Georgia Park was negatively impacted by unfavorable weather during several key weekends and holidays. Each park was negatively impacted by unfavorable comparable weather in January, which had the most significant impact on attendance at our Georgia and Texas Parks. While higher on a reported basis due to the impact of the 2023 tornado related closure, we believe attendance at our Georgia Park continues to be negatively impacted by increased competition in the greater Atlanta market, as well as a continuing overhang from the March 2023 tornado.
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Segment Income
Our segment income was $1.99 million for the nine months ended June 30, 2024, an increase of $579,075, compared to a segment income of $1.41 million for the nine months ended July 2, 2023. Our Georgia Park generated segment income of $1.72 million, an increase of $359,378, primarily attributable to higher park revenues and higher animal sales, and lower advertising expense, partially offset by lower food service margins, higher insurance expense and higher staffing related costs. Our Missouri Park generated segment income of $166,886, an increase of $136,788, primarily attributable to higher park revenues and animal sales, partially offset by higher staffing related costs, as well as higher animal feed and advertising expenses. Our Texas Park generated segment income of $102,137, an increase of $82,909, primarily attributable to higher animal sales and park revenues, as well as lower advertising and general operating expenses, partially offset by higher animal feed and staffing related costs.
Corporate Expenses
Corporate expenses decreased by $17,471 to $911,490 during the nine months ended June 30, 2024, primarily due to lower other compensation related expense and travel costs, partially offset by higher severance costs and annual stockholders meeting costs.
Depreciation and Amortization Expense
Depreciation and amortization expense for the nine months ended June 30, 2024 increased by $23,891, to $672,648, primarily attributable to higher depreciation expense for our Georgia and Texas Parks, partially offset by lower depreciation expense for our Missouri Park.
Loss on Asset Disposals, Net
Our net loss on asset disposals for the nine months ended June 30, 2024 totaled $35,754, an increase of $5,170, primarily attributable to animal deaths prior to the end of their estimated life expectancy as well as the disposal of certain assets no longer useful to the business or deemed too costly to maintain or repair.
Contested Proxy and Related Matters
During the nine months ended June 30, 2024, we recorded $2.04 million of expenses associated with a contested proxy and related matters. This includes costs associated with preparation for and conducting a Special Meeting of Stockholders held on February 26, 2024 at the request of Focused Compounding, legal costs associated with a lawsuit filed in the State of Nevada by Focused Compounding on March 1, 2024, as well as costs leading up to and associated with the annual stockholder meeting on June 6, 2024 considered by management to be above and beyond the costs of a normal stockholders meeting. See “NOTE 11. CONTESTED PROXY AND RELATED MATTERS” of the Notes to the Consolidated Financial Statements (Unaudited) included in this Quarterly Report for additional information.
Tornado Expenses and Write-offs, Net
As a result of the tornado and severe weather damage at our Georgia Park during March 26-27, 2023, for the nine months ended July 2, 2023, we recorded $779,425 of tornado related expenses, primarily due to tree and other debris removal, repairing and replacing underground water pipes throughout the property, as well as general clean-up and reopening efforts. In addition, we recorded tornado and severe weather-related asset write-offs of $271,424, primarily associated with damage to various animal exhibits, several buildings, fencing and other infrastructure. These expenses and write-offs were partially offset by $687,253 of insurance proceeds from our commercial property coverage, resulting net expenses and write-offs of $363,596 for the nine months ended July 2, 2023. During the nine months ended June 30, 2024, we received the final expected insurance proceeds of $53,755 related to the Georgia Park 2023 tornado event.
Legal Settlement
During the nine months ended June 30, 2024, we entered into a settlement agreement and paid $75,000 to settle a lawsuit initiated by a former employee alleging several instances of employment discrimination. See “NOTE 9. COMMITMENTS AND CONTINGENCIES” of the Notes to the Consolidated Financial Statements (Unaudited) included in this Quarterly Report for additional information.
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Other Income, Net
Other income, net for the nine months ended June 30, 2024 increased by $36,617, to $101,325, attributable to lower non-operating expenses and higher interest income, partially offset by lower mineral rights royalty income from our Texas Park property.
Interest Expense
Interest expense for the nine months ended June 30, 2024 decreased by $22,224 to $147,515, attributable to a reduction in term loan interest.
Income Taxes
For the nine months ended June 30, 2024, we reported a pre-tax loss of $1.73 million. Based on a year-to-date blend of federal and State of Georgia pre-tax losses, we recorded an income tax benefit of $430,400 for the nine months ended June 30, 2024.
Net Income (Loss) and Income (Loss) Per Share
For the nine months ended June 30, 2024, we reported a net loss of $1.30 million or $0.02 per basic share and per fully diluted share, compared to a net loss of $487,064 or $0.01 per basic share and per fully diluted share, for the nine months ended July 2, 2023, resulting in an increase of $814,645.
| For the nine months ended | ||||||||
| June 30, 2024 | July 2, 2023 | |||||||
| Net loss | $ | (1,301,709 | ) | $ | (487,064 | ) | ||
| Contested proxy and related matters | 2,037,822 | - | ||||||
| Tax impact - contested proxy and related matters | (550,210 | ) | - | |||||
| Tornado expenses and write-offs, net | (53,755 | ) | 363,596 | |||||
| Tax impact - tornado expenses and write-offs | 14,510 | (98,170 | ) | |||||
| Legal settlement | 75,000 | - | ||||||
| Tax impact - legal settlement | (20,250 | ) | - | |||||
| Adjusted net income (loss) | $ | 201,408 | $ | (221,638 | ) | |||
As shown in the table above, several items impacted our year-over-year reported net income comparison for the nine months ended June 30, 2024. Our reported net income for the nine months ended June 30, 2024 included $2.04 million of expenses associated with a contested proxy and related matters, $53,755 of Georgia Park tornado related insurance proceeds, and a legal settlement of $75,000. Our reported net income for the nine months ended July 2, 2023 included $363,596 of severe weather and tornado related expenses and asset write-offs, net of insurance proceeds. Management believes that our adjusted net income (loss), excluding one-time items, should be considered in evaluating the ongoing operating performance of our business. Excluding the after-tax impacts of these items, our adjusted net income was $201,408 for the nine months ended June 30, 2024 compared to an adjusted net loss of $221,638 for nine months ended July 2, 2023, resulting in a net improvement of $423,046. The improvement in adjusted net income for the nine months ended June 30, 2024 is primarily attributable to a $359,378 increase in Georgia Park segment income, in part attributable to prior year lost revenue associated with the tornado related closure and phased reopening, a $136,788 increase in Missouri Park segment income, a $82,909 increase in Texas Park segment income, a $17,471 decrease in Corporate expenses, a $36,617 increase in other income, and a $22,224 decrease in interest expense, partially offset by a $23,891 increase in depreciation and amortization expense, a $5,170 increase in losses on asset disposals and a $203,280 increase in our adjusted income tax expense.
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Financial Condition, Liquidity and Capital Resources
Financial Condition and Liquidity
Our primary sources of liquidity are cash generated by operations and borrowings under our loan agreements. Historically, our slow season starts after Labor Day in September and runs until Spring Break, which typically begins toward the middle to end of March. The first and second quarters of our fiscal year have historically generated negative cash flow, requiring us to use cash generated from prior fiscal years, as well as borrowing on a seasonal basis, to fund operations and prepare our Parks for the busy season during the third and fourth quarters of our fiscal year.
In October 2023, we established two lines of credit totaling $800,000, primarily to provide seasonal borrowing capacity for our 2024 fiscal year, each secured by a certificate of deposit. See “NOTE 5. LINES OF CREDIT” of the Notes to the Consolidated Financial Statements (Unaudited) included in this Quarterly Report for additional information. During our 2023 fiscal year we did not utilize any seasonal borrowing, nor have we used any seasonal borrowing during our 2024 fiscal year through the date of this report.
Our working capital was $1.93 million as of June 30, 2024, compared to $3.69 million as of October 1, 2023. The decrease in working capital primarily reflects cash used for capital investments, scheduled term loan payments, as well as expenses associated with the contested proxy and related matters during the nine months ended June 30, 2024, partially offset by cash generated from operations excluding the contested proxy expenses.
Total loan debt, including current maturities, as of June 30, 2024 was $3.65 million compared to $4.23 million as of October 1, 2023. The decrease in total loan debt is the result of scheduled term loan payments during the nine months ended June 30, 2024.
As of June 30, 2024, we had equity of $13.74 million and total loan debt of $3.65 million, resulting in a debt-to-equity ratio of 0.27 to 1.0, compared to 0.28 to 1.0 as of October 1, 2023.
Operating Activities
Net cash used in operating activities was $63,742 for the nine months ended June 30, 2024, compared to $518,526 for the nine months ended July 2, 2023, resulting in a decrease of $454,784, as our higher net loss was more than offset by lower cash used for working capital.
Investing Activities
Net cash used in investing activities was $1.43 million for the nine months ended June 30, 2024, compared to $1.53 million for the nine months ended July 2, 2023, resulting in a decrease of $99,488. Our investing activity for the nine months ended June 30, 2024 included $800,000 million for investments in certificates of deposit. Our capital spending for the nine months ended June 30, 2024 was $669,791, resulting in a decrease of $851,189 compared to the nine months ended July 2, 2023.
Financing Activities
Net cash used in financing activities was $581,603 for the nine months ended June 30, 2024, compared to $551,175 for the nine months ended July 2, 2023, resulting in an increase of $30,428.
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, results of operations, liquidity or capital expenditures.
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Critical Accounting Policies and Estimates
The preceding discussion and analysis of our consolidated financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements included elsewhere in this Quarterly Report. Our significant accounting policies are set forth in “NOTE 2. SIGNIFICANT ACCOUNTING POLICIES” of the Notes to the Consolidated Financial Statements (Unaudited) included in this Quarterly Report, which should be reviewed as they are integral to understanding results of operations and financial position. The Parks! America, Inc. Annual Report on Form 10-K for the fiscal year ended October 1, 2023 includes additional information about us, and our operations, financial condition, critical accounting policies and accounting estimates, and should be read in conjunction with this Quarterly Report.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
ITEM 4. CONTROLS AND PROCEDURES
Parks! America, Inc. (the “Registrant”) maintains “controls and procedures,” as such term is defined under the Securities Exchange Act of 1934, as amended (“the Exchange Act”) in Rule 13a-15(e) promulgated thereunder, that are designed to ensure that information required to be disclosed in the Registrant’s Exchange Act filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, the Registrant’s management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, the Registrant’s management was necessarily required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
With the participation of its principal executive officer and principal financial officer of the Registrant, the Registrant’s management has evaluated the effectiveness of the Registrant’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Exchange Act) as of the end of the fiscal quarter covered by this Quarterly Report. Based upon the evaluation, the Registrant’s principal executive officer and principal financial officer have concluded that the Registrant’s disclosure controls and procedures were effective at a reasonable assurance level.
In addition, there were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 13a-15(e) promulgated under the Exchange Act) that occurred during the Registrant’s fiscal quarter ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting.
PART II
ITEM 1. LEGAL PROCEEDINGS
On December 16, 2022, we received notice that on August 10, 2022 a former employee of Aggieland Wild Animal – Texas, filed a Complaint in the 361st District Court of Brazos County, Texas (case no. 22-001839-CV-361), alleging the Company and Aggieland-Parks, Inc. committed several instances of employment discrimination. The Complaint sought unspecified economic, compensatory and punitive damages, as well as attorney’s fees and costs. On June 3, 2024, we entered into a settlement agreement and mutual release of claims with the former employee related to this matter, within which we agreed to pay the former employee $75,000.
On March 1, 2024, Focused Compounding Fund, LP (“Focused Compounding”) filed a Complaint in the Eighth Judicial District Court of Clark County, Nevada (case no. A-24-888295-B) against the Company and each of our Board of Directors, alleging that the defendants were contemplating efforts to entrench themselves as members of the Board of Directors. Simultaneously with filing its Complaint, Focused Compounding sought a Preliminary Injunction that would require the Company and our Directors to take various actions. On June 20, 2024, Focused Compounding, the Company and the named defendants agreed to a stipulation dismissing with prejudice any and all claims by and between the parties outlined in the initial Complaint in light of the results of the Company’s annual meeting of stockholders held on June 6, 2024. See “NOTE 11. CONTESTED PROXY AND RELATED MATTERS” of the Notes to the Consolidated Financial Statements (Unaudited) included in this Quarterly Report for additional information.
Except as noted above, we are not a party to any pending legal proceeding, nor are any of our properties 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 our directors, officers or affiliates is involved in a proceeding adverse to our business or has a material interest adverse to our business.
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ITEM 1A. RISK FACTORS
You should read the MD&A together with our unaudited consolidated financial statements and related notes, each included elsewhere in this Quarterly Report, in conjunction with the Parks! America, Inc. Annual Report on Form 10-K for the fiscal year ended October 1, 2023. Some of the information contained in the MD&A or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategies for our business, includes forward-looking statements that involve risks and uncertainties. You should review the “Risk Factors” below for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in this report. If any of the following risks actually occur, our business, financial condition and results of operations could be adversely affected.
Risk Factors Relating to Our Business:
Conditions beyond our control, including natural disasters or extreme weather, could damage our properties and could adversely impact attendance at our parks and result in decreased revenues.
Natural disasters, public heath crises, epidemics, pandemics, such as the outbreak of COVID-19, power outages, terrorist activities or other events outside our control could disrupt our operations, impair critical systems, damage our properties or reduce attendance at our parks or require temporary park closures. Damage to our properties could take a long time to repair and there is no guarantee that we would have adequate insurance to cover the costs of repair or the expense of the interruption to our business. Furthermore, natural disasters such as tornados, fires, hurricanes, earthquakes, or extreme weather events linked to climate change, may interrupt or impede access to our affected properties or require evacuations and may cause attendance at our affected properties to decrease for an indefinite period.
For example, during March 26-27, 2023, our Georgia Park experienced extensive damage, caused by an EF-3 tornado and over nine inches of rain, resulting in more than 4,500 fallen trees and damage to many of the Park’s animal enclosures, fencing and other infrastructure. Our Georgia park was subsequently closed for 20 days, including for most of its traditionally busy spring break period, which has historically comprised approximately 10%-15% of its annual revenue. Also, during February 2021 our Texas Park was closed for several weeks, experienced power outages and sustained property damage associated with several severe winter storms.
The occurrence of such events could have a material adverse effect on our business, financial condition and results of operations. We cannot predict the frequency, duration or severity of these activities and the effect that they may have on our business, financial condition or results of operations.
General economic conditions may have an adverse impact on our business, financial condition or results of operations.
Our business and operating results can be impacted by several macroeconomic factors, including but not limited to consumer confidence and spending levels, tax rates, unemployment, consumer credit availability, raw materials costs, pandemics (such as the COVID-19 pandemic) and natural disasters, fuel and energy costs (including oil prices), and credit market conditions. A general economic slowdown or recession resulting in a decrease in discretionary spending could adversely affect the frequency with which guests choose to visit our parks and the amount that our guests spend when they visit. Our ability to source supplies, materials and services at reasonable costs and in a timely manner could be impacted by adverse economic conditions in the U.S. and abroad. For example, our ability to obtain gift shop merchandise was adversely impacted by supply chain distributions at least in part attributed to collateral impacts from COVID-19. Similarly, our plans to open a new giraffe exhibit at out Georgia Park during our 2022 fiscal year experienced delays and have been suspended indefinitely, in large part due to building material price increases and labor shortages in the construction industry.
The Theme Park Industry is highly competitive, and we may be unable to compete effectively.
The theme park industry is highly competitive, highly fragmented, rapidly evolving, and subject to technological change and intense marketing by providers with similar products. One of our competitors for attracting general recreation dollars, Callaway Gardens, is located within 10 miles of our Georgia Park. Within approximately 90 minutes east of Atlanta a new safari-themed attraction opened in the Spring of 2023, and another safari-themed attraction opened in June 2024 approximately 60 minutes southeast of Atlanta. In May 2018, Great Wolf Resorts opened an expansive lodge and indoor waterpark within 10 miles of our Georgia Park. In September 2017, the founder of Bass Pro Shops opened “Johnny Morris’ Wonders of Wildlife National Museum and Aquarium”, approximately 12 miles from our Missouri Park in Springfield, Missouri. Branson, Missouri is located just 45 minutes from our Missouri Park. There are a variety of animal attractions throughout southeastern Texas; the nearest is Franklin Drive Thru Safari, within a 35-40 minute drive of our Texas Park. Many of our
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current competitors are significantly larger and have substantially greater market presence as well as greater financial, technical, operational, marketing and other resources and experience than we have. In the event a competitor expends significant sales and marketing resources in one or several markets we may not be able to compete successfully in such markets. We believe that competition will continue to increase, potentially placing downward pressure on prices. Such pressure could adversely affect our gross margins if we are not able to reduce costs commensurate with such price reductions. In addition, the pace of technological change makes it impossible for us to predict whether we will face new competitors using different technologies to provide the same or similar products offered or proposed to be offered by us. If our competitors were to provide better and more cost effective products, our business could be materially and adversely affected.
We face strong competition from numerous entertainment alternatives.
In addition to competing with other themed and amusement parks, our venues compete with other types of recreational venues and entertainment alternatives, including but not limited to movies, sports attractions, vacation travel and video games. There can be no assurance that we will successfully differentiate ourselves from these entertainment alternatives or that consumers will consider our entertainment offerings to be more appealing than those of our competitors. The increasing availability and quality of technology-based entertainment has provided families with a wider selection of entertainment alternatives in their homes, including home entertainment units, in-home and online gaming, as well as on-demand streaming video and related access to various forms of entertainment. In addition, traditional theme parks have been able to reduce the cost and increase the variety of their attractions by implementing technologies that cannot be readily incorporated by wild animal attractions such as our Parks.
The suspension or termination of any of our business licenses may have a negative impact on our business.
We maintain a variety of business licenses issued by federal, state and local government agencies that are required to be renewed periodically. We cannot guarantee that we will be successful in renewing all our licenses on a periodic basis. The suspension, termination or expiration of one or more of these licenses could have a significant adverse effect on our revenues and profits. In addition, any changes to the requirements for any of our licenses could affect our ability to maintain the licenses.
Our insurance coverage may not be adequate to cover all possible losses that we could suffer, and our insurance costs may increase.
Companies engaged in the theme park business may be sued for substantial damages in the event of an actual or alleged accident. An accident occurring at our Parks or at competing parks may reduce attendance, increase insurance premiums, and negatively impact our operating results. Our properties contain drive-through, safari style animal parks, and there are inherent risks associated with allowing the public to interact with animals. Although we carry liability insurance to cover this risk, there can be no assurance that our coverage will be adequate to cover liabilities, or that we will be able to afford or obtain adequate coverage should a catastrophic incident occur.
We currently have $6.0 million of liability insurance per occurrence, which is capped at $10.0 million in aggregate. We will continue to use reasonable commercial efforts to maintain policies of liability, fire and casualty insurance sufficient to provide reasonable coverage for risks arising from accidents, fire, weather, other acts of God, and other potential casualties. There can be no assurance that we will be able to obtain adequate levels of insurance to protect against suits and judgments in connection with accidents or other disasters that may occur in our Parks.
We may not identify or complete acquisitions in a timely, cost-effective manner, if at all.
Our business plan includes expansion via the acquisition of additional local or regional theme parks and attractions. There can be no assurance that we will be successful in acquiring and operating additional local or regional theme parks and attractions. Competition for acquisition opportunities in the theme park industry is intense as there are a limited number of parks within the United States that could reasonably qualify as acquisition targets for us. Our acquisition strategy is dependent upon, among other things, our ability to: identify acquisition opportunities; obtain debt and equity financing; and obtain necessary regulatory approvals. Our ability to pursue our acquisition strategy may be hindered if we are not able to successfully identify acquisition targets or obtain the necessary financing or regulatory approvals, including but not limited to those arising under federal and state antitrust and environmental laws.
Significant amounts of additional financing may be necessary for the implementation of our Business Plan.
The Company may require additional debt and equity financing to pursue its business plan. There can be no assurance that we will be successful in obtaining additional financing. Lack of additional funding could force us to substantially curtail our expansion plans. Furthermore, the issuance by the Company of any additional securities would dilute the ownership of existing stockholders and may affect the price of our common stock.
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Our ownership of real property subjects us to environmental regulation, which creates uncertainty regarding future environmental expenditures and liabilities.
We may be required to incur costs to comply with environmental requirements, such as those relating to discharges to air, water and land; the handling and disposal of solid and hazardous waste; and the cleanup of properties affected by hazardous substances. Under these and other environmental requirements we may be required to investigate and clean up hazardous or toxic substances or chemical releases at one of our properties. As an owner or operator, we could also be held responsible to a governmental entity or third party for property damage, personal injury and investigation and cleanup costs incurred by them in connection with any contamination. Environmental laws typically impose cleanup responsibility and liability without regard to whether the owner or operator knew of or caused the presence of the contaminants. The liability under environmental laws has been interpreted to be joint and several unless the harm is divisible and there is a reasonable basis for allocation of the responsibility. The costs of investigation, remediation or removal of those substances may be substantial, and the presence of those substances, or the failure to remediate a property properly, may impair our ability to use our property. We are not currently aware of any material environmental risks regarding our properties. However, we may be required to incur costs to remediate potential environmental hazards or to mitigate environmental risks in the future.
We are dependent upon the services of our key personnel.
Our success is dependent on the continued active participation of our key personnel. Our success and achievement of our growth plans depend on our ability to recruit, hire, train and retain qualified technical and managerial personnel. Competition for qualified employees among companies in the theme park industry is intense, and the loss of any such persons, or an inability to attract, retain and motivate any additional highly skilled employees required for the expansion of the Company’s activities, could have a materially adverse effect on the Company. The inability of the Company to attract and retain the necessary personnel could have a material adverse effect on the Company’s business, financial condition or results of operations.
Increased labor and employee benefit costs may negatively impact our results of operations. We also depend on a seasonal workforce, many of whom are paid at or near minimum wage.
Labor is a primary component in the cost of operating our business. Our ability to control labor costs is subject to numerous external factors, including market pressures with respect to prevailing wage rates, unemployment levels, and health, workers compensation and other insurance costs, as well as the impact of legislation or regulations governing labor relations, minimum wage, and healthcare benefits. Furthermore, our operations are dependent in part on a seasonal workforce, many of whom are paid at or near minimum wage. We seek to manage seasonal wages and the timing of the hiring process to ensure the appropriate workforce is in place for peak and low seasons; however, we may be unable to recruit and hire sufficient personnel to meet our business needs. In addition, we cannot guarantee that material increases in the cost of securing our workforce will not occur in the future. Increased state or federal minimum wage requirements, general wages or an inadequate workforce could have an adverse impact on our results of operations. We anticipate that the recent upward pressures on general wage rates may increase our salary, wage and benefit expenses in our 2024 fiscal year and beyond, and further legislative changes or competitive wage rates could continue to increase these expenses in the future.
Data privacy regulation and our ability to comply could harm our business.
We (or third parties on our behalf) collect, store and use personal information and other customer data we receive through online ticket sales, marketing, mailing lists, and guest reservations. There are multiple federal, state and local laws regarding privacy and protection of personal information and data, and these laws and regulations continue to evolve. For example, many states have passed laws requiring notification to customers when there is a security breach involving their personal data and multiple jurisdictions are considering legislation that may impose liability if a business fails to properly safeguard personal information of its customers. Maintaining compliance with applicable security and privacy regulations may increase our operating costs. While we believe our cybersecurity measures are adequate, if we were to experience a data breach, we could be subject to fines, penalties and/or costly litigation.
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Risk Factors Relating to Our Common Stock:
Our Common Stock is subject to the “penny stock” rules of the SEC and the trading market in our Common Stock is limited, which makes transactions in our Common Stock cumbersome and may reduce the value of an investment in our Common Stock.
Our common stock is considered a “penny stock” and the sale of our stock by you will be subject to the “penny stock rules” of the SEC. The penny stock rules require broker-dealers to take steps before making any penny stock trades in customer accounts. As a result, the market for our shares could be illiquid and there could be delays in the trading of our stock, which would negatively affect your ability to sell your shares and could negatively affect the trading price of your shares.
We have not historically paid any dividends.
As of the date of this report, no cash dividends have been paid on our common stock. Any future determination as to the payment of dividends on our common stock will be at the discretion of our Board of Directors and will depend on our earnings, operating and financial condition, capital requirements and other factors deemed relevant by our Board of Directors. The provisions of credit agreements, which we may enter from time to time, may also restrict the declaration of dividends on our common stock.
The actions of activist stockholders could materially and adversely affect our business, results of operations and share price.
Activist stockholders may from time to time engage in proxy solicitations, advance stockholder proposals or otherwise attempt to effect changes or acquire control over us. We value constructive input from investors and regularly engage in dialogue with our stockholders, and we welcome their views and opinions, we may be subject to actions or proposals from activist stockholders that may not align with our business strategy or with the interests of our stockholders. Because our Board and management team are committed to acting in the best interests of all of our stockholders, there is no assurance that the actions taken by the Board and management in seeking to maintain constructive engagement with certain stockholders will be successful in preventing the occurrence of stockholder activist campaigns.
Campaigns by activist stockholders to effect changes at publicly traded companies often demand that companies undertake or pursue financial restructuring, increase debt, issue special dividends, repurchase shares, or undertake sales of assets or other transactions, including strategic transactions. Campaigns may also be initiated by activist stockholders advocating for particular social causes. Activist stockholders who disagree with the composition of a publicly traded company’s board of directors, or with its strategy or management team often seek to involve themselves in the governance and strategic direction of a company through various activities that range from private engagement to publicity campaigns, proxy contests, efforts to force transactions not supported by the company’s board, and in some instances, litigation.
We have been and may in the future be subject to activities initiated by activist stockholders. For example, on December 22, 2023, Focused Compounding Fund, LP (together with the participants in its solicitation, “Focused Compounding”) submitted documents to the Company demanding that the Company hold a special meeting of stockholders (the “Special Meeting”). A Special Meeting was held on February 26, 2024, with the primary purpose of asking stockholders to consider and vote upon a proposal for the removal of all directors then currently serving on the Board and a proposal for the election of a new Board comprised entirely of Focused Compounding’s slate of three candidates, each of which failed. Subsequently, on March 1, 2024, Focused Compounding filed a legal action alleging the then current Board members were contemplating efforts to entrench themselves, causing the Company to incur significant legal costs. On June 6, 2024, the Company held its annual meeting of stockholders, during which four directors nominated by Focused Compounding and three directors nominated by the Company were elected. On June 14 2024, Lisa Brady stepped down as the Company’s President and Chief Executive Officer, and the Board appointed Geoffery Gannon as the Company’s President. Mr. Gannon is also the Portfolio Manager at Focused Compounding.
Responding to potential proxy contests, and any other actions by activist stockholders, has been and may be costly and time-consuming and may divert the attention of our Board, management team and employees from the management of our operations and the pursuit of our business strategies. Further, the actions of activist stockholders may cause fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business. Perceived uncertainties as to our future direction, strategy or leadership created because of activist stockholder initiatives may result in the loss of potential business opportunities and make it more difficult to attract and retain investors, customers, employees, qualified directors and officers and business partners. Also, we will be required to incur significant expenses related to any activist stockholder matters (including legal fees, fees for financial advisors, fees for public relation advisors and proxy solicitation expenses).
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In connection with any activist campaign, we may choose to initiate, or may become subject to, litigation, which would serve as a further distraction to our Board, management and employees and would require us to incur significant additional costs. We cannot predict, and no assurances can be given, as to the outcome or timing of any matters relating to the foregoing actions by stockholders and our responses thereto or the ultimate impact on our business, liquidity, financial condition or results of operations.
Our rights plan may discourage potential acquirers of the Company.
On January 19, 2024, we adopted a rights plan (the “Rights Plan”), which provides, among other things, that when specified events occur, our stockholders will be entitled to purchase additional shares of our common stock. The Rights Plan will expire on January 18, 2025, unless earlier redeemed, exchanged or extended. The preferred stock purchase rights are triggered ten days after the date of a public announcement that a person or group has acquired, or obtained the right to acquire, beneficial ownership of 10% or more of our outstanding shares of common stock. The rights would cause significant dilution to a person or group that attempts to acquire the Company on terms that are not approved by the Board. These provisions, either alone or in combination with each other, give the Board an ability to influence the outcome of a proposed acquisition of the Company and could have the effect of discouraging, delaying or preventing a change in control over us. The Rights Plan is similar to plans adopted by other public companies and is intended to position the Board to fulfill its duties by ensuring the Board has sufficient time to make informed judgments that are in the best interests of the Company and its stockholders.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable
ITEM 5. OTHER INFORMATION
None
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ITEM 6. EXHIBITS
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| PARKS! AMERICA, INC. | ||
| August 13, 2024 | By: | /s/ Geoffrey Gannon |
| Geoffrey Gannon | ||
| President | ||
| (Principal Executive Officer) | ||
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