Parks America, Inc 8-K/A, filed Jul 10, 2020
Parks America, Inc (PRKA)
About this 8-K/A
Parks America, Inc filed this 8-K/A on July 10, 2020, reporting on events of July 9, 2020.
Items reported
- Item 2.01: Completed an acquisition or sale of assets
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
July 9, 2020 |
| 000-51254 |
Date of Report (Date of earliest event reported) |
| Commission File Number |
PARKS! AMERICA, INC.
(Exact name of registrant as specified in its charter)
Nevada |
| 91-0626756 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification Number) |
|
|
|
1300 Oak Grove Road Pine Mountain, GA 31822 | ||
(Address of Principal Executive Offices) (Zip Code) | ||
| ||
(706) 663-8744 | ||
(Registrant’s telephone number, including area code) | ||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
EXPLANATORY NOTE
On April 30, 2020, Parks! America, Inc., a Nevada corporation (“Parks”), filed a Current Report on Form 8-K (the “Initial Form 8-K”) to disclose that on April 27, 2020 Parks and its wholly owned subsidiary, AggieLand-Parks, Inc., a Texas corporation (the “Parks Texas Sub”) simultaneously entered and closed an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Aggieland Safari LLC, a Texas limited liability company (“Aggieland”), Ferrill Creek Ranch LLC, a Texas limited liability (“FCR”), and Vernell Investments LLC, a Texas limited liability company (“Vernell,” and together with Aggieland and FCR the “Sellers”). The information previously reported and disclosed in the initial Form 8-K filed with the Securities and Exchange Commission on April 30, 2020 is hereby incorporated by reference into this Current Report on Form 8-K/A (the "Initial Form 8-K"). Parks is filing this Current Report on Form 8-K/A (Amendment No. 1) solely for the purpose of amending Item 9.01 of the Initial Form 8-K to file the financial information required by Items 9.01(a) and 9.01(b), as permitted by Items 9.01(a)(4) and 9.01(b)(2) of Form 8-K. No other changes have been made to the Initial Form 8-K.
Pursuant to the Asset Purchase Agreement Parks Texas Sub acquired substantially all of Sellers’ assets related to Aggieland Safari Adventure Zoo and Safari Park located in Bryan, Texas (the “Aggieland Safari”), including animal inventory, real estate, mineral rights, equipment, and other assets necessary to operate the Texas Park (the “Acquired Assets”). The Acquired Assets were subject to a non-binding letter of intent between Parks and Aggieland that was previously announced on a Current Report on Form 8-K filed with the Securities and Exchange Commission on January 16, 2020.
Item 2.01Completion of Acquisition or Disposition of Assets
On April 27, 2020, Parks, through its wholly owned Parks Texas Sub, acquired substantially all the assets of Aggieland Safari, as reported and disclosed in the Initial Form 8-K. See “Explanatory Note” above.
Item 9.01Financial Statements and Exhibits
(a)Financial Statements of Business Acquired.
The audited combined financial statements of Aggieland Safari LLC and Ferrill Creek Ranch LLC as of December 31, 2019 and for the year then ended, and the report of Akin, Doherty, Klein & Feuge, P.C., independent auditor, thereon, are filed herewith as Exhibit 99.1 and incorporated herein by reference.
The unaudited combined financial statements of Aggieland Safari LLC and Ferrill Creek Ranch LLC as of March 31, 2020 and for the three months then ended, are filed herewith as Exhibit 99.2 and incorporated herein by reference.
(b)Pro Forma Financial Information.
The unaudited pro forma condensed combined balance sheet of Parks, reflecting the acquisition of Aggieland Safari as if it occurred on March 29, 2020, and the pro forma combined income statements of Parks for the fiscal year ended September 29, 2019 and for the subsequent interim six months ended March 29, 2019, are filed herewith as Exhibit 99.3 and incorporated herein by reference. Such unaudited pro forma condensed combined financial statements are not necessarily indicative of the operating results or financial position that actually would have been achieved if the acquisition had been in effect on the dates indicated or that may be achieved in future periods, and should be read in conjunction with the financial statements of Parks and Aggieland Safari.
Not applicable.
(d)Exhibits.
Exhibit No. |
| Description of Exhibit |
10.1 |
| Asset Purchase Agreement by and among AggieLand-Parks, Inc., Parks! America, Inc., Aggieland Safari LLC; Ferrill Creek Ranch LLC; and Vernell Investments LLC. (Filed with the Initial Form 8-K.)
|
10.2 |
| Loan Agreement between AggieLand-Parks, Inc. and First Financial, N.A. (Filed with the Initial Form 8-K.)
|
10.3. |
| Promissory Note made by AggieLand-Parks, Inc. in favor of First Financial, N.A. (Filed with the Initial Form 8-K.)
|
10.4 |
| Deed of Trust Security Agreement and Financing Statement made by AggieLand-Parks, Inc. in favor of First Financial, N.A. (Filed with the Initial Form 8-K.)
|
| The audited combined financial statements of Aggieland Safari LLC and Ferrill Creek Ranch LLC as of December 31, 2019 and for the year then ended. (Filed herewith.)
| |
| The unaudited combined financial statements of Aggieland Safari LLC and Ferrill Creek Ranch LLC as of March 31, 2020 and for the three months then ended. (Filed herewith.)
| |
| The unaudited pro forma condensed combined balance sheet of Parks, reflecting the acquisition of Aggieland Safari as if it occurred on March 29, 2020, and the unaudited pro forma condensed combined income statement for the fiscal year ended September 29, 2019 and for the subsequent interim six months ended March 29, 2019. (Filed herewith.)
|
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 hereunto duly authorized.
| PARKS! AMERICA, INC. | |
|
|
|
Date: July 9, 2020 | By: | /s/ Dale Van Voorhis |
| Name: | Dale Van Voorhis |
| Title: | Chief Executive Officer and |
|
| Chairman of the Board |
Exhibit 99.1
INDEPENDENT AUDITOR’S REPORT
To the Member
Aggieland Safari LLC and
Ferrill Creek Ranch LLC
Bryan, Texas
Report on the Financial Statements
We have audited the accompanying combined financial statements of Aggieland Safari LLC and Ferrill Creek Ranch LLC which comprise the combined balance sheet as of December 31, 2019, and the related combined statement of operations, members’ equity, and cash flows for year then ended, and the related notes to the financial statements.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these combined financial statements in accordance with U. S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these combined financial statements based on our audit. We conducted our audit in accordance with U. S. generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of Aggieland Safari LLC and Ferrill Creek Ranch LLC as of December 31, 2019, and the results of its operations and cash flows for the year then ended, in accordance with U. S. generally accepted accounting principles.
1
Report on Supplementary Information
Our audit was conducted for the purpose of forming an opinion on the combined financial statements as a whole. The accompanying supplemental information is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with U. S. generally accepted auditing standards. In our opinion, the information is fairly stated in all material respects in relation to the combined financial statements as a whole.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying combined financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the financial statements, the Company incurred a net loss during the year ended December 31, 2019, and, as of that date, had current liabilities in excess of current assets. As described more fully in Note E to the financial statements, the Company’s liquid funds may not be sufficient to settle obligations due over the next twelve months and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding those matters are also described in Note E. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to that matter.
/s/ Akin, Doherty, Klein & Feuge, P.C.
San Antonio, Texas
February 21, 2020
2
AGGIELAND SAFARI LLC AND FERRILL CREEK RANCH LLC
Combined Balance Sheet
December 31, 2019
ASSETS |
|
|
Current Assets: |
|
|
Cash | $ | 14,468 |
Accounts receivable |
| 19,157 |
Inventory |
| 38,270 |
Prepaid expenses |
| 6,877 |
Total current assets |
| 78,772 |
|
|
|
Property and Equipment: |
|
|
Land |
| 5,742,113 |
Buildings and improvements |
| 1,825,075 |
Furniture and equipment |
| 85,899 |
Vehicles |
| 12,309 |
Construction in process |
| 137,967 |
Safari animals |
| 292,070 |
Total property and equipment |
| 8,095,433 |
Less accumulated depreciation |
| (212,078) |
Net property and equipment |
| 7,883,355 |
|
|
|
Total Assets | $ | 7,962,127 |
|
|
|
LIABILITIES AND MEMBERS' EQUITY |
|
|
Current Liabilities: |
|
|
Accounts payable | $ | 663,596 |
Accrued expenses |
| 149,696 |
Accounts payable, related party |
| 21,756 |
Deferred revenues |
| 86,602 |
Line of credit, related party |
| 2,788,523 |
Notes payable |
| 5,895,920 |
Total current liabilities |
| 9,606,093 |
|
|
|
Members’ Equity |
| (1,643,966) |
|
|
|
Total Liabilities and Members' Equity | $ | 7,962,127 |
See notes to the audited financial statements
3
AGGIELAND SAFARI LLC AND FERRILL CREEK RANCH LLC
Combined Statement of Operations
Year Ended December 31, 2019
Safari park revenue | $ | 1,255,616 |
Annual membership revenue |
| 116,002 |
Concessions and gift shop revenue |
| 210,566 |
Sale of animals |
| 8,700 |
Total revenues |
| 1,590,884 |
|
|
|
Cost of goods sold, concessions and gift shop |
| 86,300 |
Selling, general and administrative |
| 1,623,203 |
Impairment of property and equipment |
| 770,164 |
Depreciation |
| 231,356 |
(Gain) on sale of operating assets, net |
| (20,295) |
Loss from operations |
| (1,099,844) |
|
|
|
Interest income (expense), net |
| (536,724) |
|
|
|
Net Loss | $ | (1,636,568) |
See notes to the audited financial statements
4
AGGIELAND SAFARI LLC AND FERRILL CREEK RANCH LLC
Combined Statement of Members’ Equity
Year Ended December 31, 2019
Balance at December 31, 2018 | $ | (7,398) |
|
|
|
Net loss |
| (1,636,568) |
|
|
|
Balance at December 31, 2019 | $ | (1,643,966) |
See notes to the audited financial statements
5
AGGIELAND SAFARI LLC AND FERRILL CREEK RANCH LLC
Combined Statement of Cash Flows
Year Ended December 31, 2019
Operating Activities |
|
|
Net loss | $ | (1,636,568) |
Adjustments to reconcile net income to cash |
|
|
provided by operating activities: |
|
|
Impairment of property and equipment |
| 770,164 |
Depreciation |
| 231,356 |
Loss of animals |
| 76,738 |
Gain on sale of property and equipment |
| (20,295) |
Changes in operating assets: |
|
|
Accounts receivable |
| (19,157) |
Inventory |
| (38,270) |
Prepaid expenses |
| (6,877) |
Accounts payable and accrued expenses |
| 792,792 |
Accounts payable, related party |
| 21,756 |
Deferred revenues |
| 86,602 |
Net cash provided by operating activities |
| 258,241 |
|
|
|
Investing Activities |
|
|
Purchases of property and equipment |
| (3,146,487) |
Proceeds from sale of property and equipment |
| 72,556 |
Net cash (used) by investing activities |
| (3,073,931) |
|
|
|
Financing Activities |
|
|
Borrowings (repayments) on related party line of credit, net |
| 1,594,620 |
Borrowings on notes payable |
| 1,329,657 |
Repayments on notes payable |
| (94,119) |
Net cash provided by financing activities |
| 2,830,158 |
|
|
|
Change in cash and cash equivalents |
| 14,468 |
Cash at beginning of year |
| - |
|
|
|
Cash at End of Year | $ | 14,468 |
|
|
|
|
|
|
Supplemental Disclosures |
|
|
Interest paid in cash | $ | 416,724 |
Income taxes paid in cash | $ | - |
See notes to the audited financial statements
6
AGGIELAND SAFARI LLC AND FERRILL CREEK RANCH LLC
Notes to Audited Combined Financial Statements
December 31, 2019
NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations: Aggieland Safari LLC was formed as a limited liability company on October 25, 2018. The Company provides a recreational, safari-like experience for guests with a focus on conservation and education activities. Ferrill Creek Ranch LLC was formed as a limited liability company on October 31, 2018. The company owns the land used in the operations of Aggieland Safari LLC. Collectively, these entities are referred to herein as the “Company”.
Basis for Combination: Aggieland Safari LLC (AGS) and Ferrill Creek Ranch LLC (FCR) are entities under common control and the land owned by FCR is leased to AGS. Accordingly, the financial statements include the accounts of Aggieland Safari LLC and Ferrill Creek Ranch LLC on a combined basis and have been prepared in accordance with U.S. generally accepted accounting principles. All significant intercompany balances and transactions have been eliminated.
Revenue Recognition: The company recognizes revenues in accordance with FASB ASC Topic 606, Revenues from Contracts with Customers. Prior periods were not impacted by the adoption of Topic 606 as the Company began revenue generating operations in 2019. Under Topic 606, the Company recognizes revenue when a customer obtains control of promised goods or services, in an amount that reflects the consideration which 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 Topic 606, the Company performs the following five steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that it will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.
The Company’s major source of revenue is from the sale of park admissions, retail and concession sales at its sole location in Bryan, Texas. Revenues from park admission fees are generally recognized upon receipt of payment at the time of the customers’ visit to the parks. Admission fee revenues from advance online ticket purchases are deferred until the customers’ visit to the park. Revenue from retail and concession sales is generally recognized upon the concurrent receipt of payment and delivery of goods or services to the customer. Revenue from annual memberships is recognized evenly over the twelve-month membership term. The Company periodically sells surplus animals resulting from the natural breeding process that occurs within the park and revenue from these sales is recognized on delivery of the animal to the customer. Billings for sales of animals are provided at the time of delivery and payment is expected within 30 days of presentation of the bill. Sales taxes billed are reported directly as a liability to the taxing authority and are not included in revenue. Total deferred revenues from advance online ticket sales and annual memberships were $86,602 at December 31, 2019 and $0 at December 31, 2018.
Cash: Cash consists of cash-on-hand and demand deposits held by financial institutions.
Accounts Receivable: Accounts receivable are reported at outstanding principal net of an allowance for doubtful accounts. The allowance is determined based on an account-by-account review. Accounts are charged off when collection efforts have failed, and the account is deemed uncollectible. An allowance was not considered necessary at December 31, 2019. The Company normally does not charge interest on accounts receivable. Accounts receivable were $19,157 at December 31, 2019 and $0 at December 31, 2018.
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 on the first-in, first-out method.
7
AGGIELAND SAFARI LLC AND FERRILL CREEK RANCH LLC
Notes to Audited Combined Financial Statements
December 31, 2019
NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property and Equipment: Property and equipment is initially recognized at cost. Depreciation is recorded using the straight-line method over the estimated useful lives. Major renewals and betterments are capitalized, while replacements, maintenance and repairs which do not improve or extend the lives of the respective assets are expensed. Upon retirement or replacement, both the asset cost and the related allowance for depreciation are written off and gains and losses on sale of assets are included in operations. Included in property and equipment is construction in progress. Once construction is completed and the asset is placed in service, it will be depreciated over the estimated useful life of the asset. Safari animals are depreciated over a useful life of five to ten years. When safari animals are lost due to death, they are written-off as of the date of death. Offspring of the safari animals is not capitalized. Costs incurred in the support of safari animals and related offspring are expensed as incurred.
Accounting rules require that property and equipment should be evaluated for impairment on the occurrence of a triggering event. Examples of such triggering events include a significant disposal of a portion of such assets, an adverse change in the market involving the business employing the related asset, a significant decrease in the benefits realized from an acquired business, difficulties or delays in integrating the business, and a significant change in the operations of an acquired business.
During 2019, the Company adopted a plan to sell substantially all assets of the Company which resulted in a triggering event for the evaluation of impairment of property and equipment. The Company expects that the final sale of the assets will be completed in the year 2020. In connection with the plan of sale, the Company determined that the carrying values of some of the property and equipment exceeded their fair values. Consequently, the Company recorded an impairment loss of $770,164, which represents the excess of the carrying values of the property and equipment over their fair values, less cost to sell. The impairment loss is recorded as a separate line item (“Impairment of property and equipment”) in the combined statement of operations for the year ended December 31, 2019. All assets included in the accompanying combined balance sheet are deemed to be held for sale and these assets are no longer depreciated subsequent to December 31, 2019.
Income Taxes: The Company is taxed as a partnership for federal income tax purposes. Accordingly, income and loss is passed directly to the members and taxed at their individual level. The Company is subject to the Texas margin tax. Management is not aware of any tax positions that would have significant impact on its financial position. The Company’s federal tax returns since inception, remain subject to examination.
Advertising: The Company expenses advertising and promotional costs as incurred and incurred approximately $120,000 in advertising costs for the year ended December 31, 2019.
Commitments and Contingencies: Liabilities for loss contingencies arising from claims, assessments, litigation, and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. No such liabilities have been accrued as of December 31, 2019.
Concentrations of Credit Risk: Financial instruments that potentially expose the Company to credit risk consist principally of cash. The Company occasionally maintains cash balances in the financial institutions that exceed the amounts insured by the FDIC. The Company periodically accesses the financial condition of the institutions and believes the risk of loss is minimal.
Subsequent Events: Subsequent events have been evaluated by management through the date of the independent auditor’s report. Material subsequent events, if any, are disclosed in a separate footnote to these financial statements.
New Accounting Pronouncements: In February 2016, the FASB issued a new accounting pronouncement regarding lease accounting for reporting periods beginning after December 15, 2020. A lessee will be required to recognize on the balance sheet the assets and liabilities for leases with lease terms of more than 12 months. Management is currently evaluating the effect this pronouncement will have on the financial statements and related disclosures.
Use of Estimates: The preparation of financial statements in conformity with U. S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
8
AGGIELAND SAFARI LLC AND FERRILL CREEK RANCH LLC
Notes to Audited Combined Financial Statements
December 31, 2019
NOTE B – OPERATING LEASES
The company leases certain equipment under month-to-month leasing arrangements. Total equipment rent expense recognized during 2019 was approximately $67,000.
NOTE C – NOTES PAYABLE
On December 28, 2018, the Company entered into a mortgage loan with a bank to borrow a total of $4,660,382. The loan has an outstanding balance of $4,583,041 at December 31, 2019, requires minimum interest only payments of 6.38% on a monthly basis, is secured by all assets of Ferrill Creek Ranch, LLC and matures on March 28, 2020.
The Company entered into an improvement loan with a bank on February 15, 2019 to borrow an initial principal amount of $1,200,000. The loan has an outstanding balance of $1,183,222 at December 31, 2019, bears interest at the United States Treasury Securities rate plus 3.50% (5.125% at December 31, 2019) and requires minimum interest only payments on a monthly basis. This loan is secured by all assets of Ferrill Creek Ranch, LLC and matures on March 15, 2020.
On April 18, 2019, the Company entered into a note payable with a vendor for the construction of improvements on land owned by the Company. This note bears interest at 6.0% and has an outstanding balance of $129,657 at December 31, 2019. Payments are due in twelve equal monthly installments beginning July 1, 2019. As of December 31, 2019, no payments had been applied to this note.
NOTE D – RELATED PARTY TRANSACTIONS
Aggieland Safari LLC leases land used for its safari park operations from Ferrill Creek Ranch LLC. Total rent under this related party leasing arrangement totaled $166,425 during 2019. Amounts payable from AGS to FCR under this arrangement totaled $123,960 at December 31, 2019. These transactions are eliminated in the combined financial statements.
The Company entered into a related party line of credit with its sole member during 2018. The line of credit bears interest at 10% annually, is due on demand, and is subordinate to the third-party notes payable.
A direct family member of the sole member of the Company provided services to operate the on-site restaurant during 2019. Accounts payable for these services owed to this related party totaled $21,756 at December 31, 2019.
NOTE E – GOING CONCERN
The Company incurred a net loss in 2019, all outstanding debt at December 31, 2019 is classified as current, and total current liabilities are in excess of current assets at December 31, 2019. These matters raise substantial doubt about the Company’s ability to continue as a going concern within one year after issuance date of the combined financial statements. The Company is a start-up organization and management is actively marketing the organization to boost sales revenues and become profitable. The Company may also seek alternative financing sources including the refinancing of its debts or additional contributions from the sole member. However, there can be no assurance that the Company will be successful in achieving these objectives.
The accompanying combined financial statements have been prepared assuming that the Company will continue as a going concern; however, the above conditions raise substantial doubt about the Company’s ability to do so. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.
NOTE F – SUBSEQUENT EVENT
On February 6, 2020, Ferrill Creek Ranch, LLC executed an agreement to sell 76.2 acres land which was not being utilized for the safari park operations in exchange for total consideration of approximately $700,000.
9
AGGIELAND SAFARI LLC
AND
FERRILL CREEK RANCH LLC
Supplemental Information
December 31, 2019
10
AGGIELAND SAFARI LLC AND FERRILL CREEK RANCH LLC
Combining Balance Sheet
December 31, 2019
| Aggieland Safari LLC |
| Ferrill Creek Ranch LLC |
| Eliminations |
| Combined | ||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
|
|
|
Cash | $ | 14,462 |
| $ | 6 |
| $ | - |
| $ | 14,468 |
Accounts receivable |
| 19,157 |
|
| 123,960 |
|
| (123,960) |
|
| 19,157 |
Inventory |
| 38,270 |
|
| - |
|
| - |
|
| 38,270 |
Prepaid expenses |
| 6,877 |
|
| - |
|
| - |
|
| 6,877 |
Total current assets |
| 78,766 |
|
| 123,966 |
|
| (123,960) |
|
| 78,772 |
|
|
|
|
|
|
|
|
|
|
|
|
Property and Equipment: |
|
|
|
|
|
|
|
|
|
|
|
Land |
| - |
|
| 5,742,113 |
|
| - |
|
| 5,742,113 |
Buildings and improvements |
| 1,825,075 |
|
| - |
|
| - |
|
| 1,825,075 |
Furniture and equipment |
| 85,899 |
|
| - |
|
| - |
|
| 85,899 |
Vehicles |
| 12,309 |
|
| - |
|
| - |
|
| 12,309 |
Construction in process |
| 137,967 |
|
| - |
|
| - |
|
| 137,967 |
Safari animals |
| 292,070 |
|
| - |
|
| - |
|
| 292,070 |
Total property and equipment |
| 2,353,320 |
|
| 5,742,113 |
|
| - |
|
| 8,095,433 |
Less accumulated depreciation |
| (212,078) |
|
| - |
|
| - |
|
| (212,078) |
Net property and equipment |
| 2,141,242 |
|
| 5,742,113 |
|
| - |
|
| 7,883,355 |
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets | $ | 2,220,008 |
| $ | 5,866,079 |
| $ | (123,960) |
| $ | 7,962,127 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND MEMBERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Accounts payable | $ | 787,556 |
| $ | - |
| $ | (123,960) |
| $ | 663,596 |
Accrued expenses |
| 29,696 |
|
| 120,000 |
|
| - |
|
| 149,696 |
Accounts payable, related party |
| 21,756 |
|
| - |
|
| - |
|
| 21,756 |
Deferred revenues |
| 86,602 |
|
| - |
|
| - |
|
| 86,602 |
Line of credit, related party |
| 2,575,064 |
|
| 213,459 |
|
| - |
|
| 2,788,523 |
Notes payable |
| 129,657 |
|
| 5,766,263 |
|
| - |
|
| 5,895,920 |
Total current liabilities |
| 3,630,331 |
|
| 6,099,722 |
|
| (123,960) |
|
| 9,606,093 |
|
|
|
|
|
|
|
|
|
|
|
|
Members’ Equity |
| (1,410,323) |
|
| (233,643) |
|
| - |
|
| (1,643,966) |
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Members' Equity | $ | 2,220,008 |
| $ | 5,866,079 |
| $ | (123,960) |
| $ | 7,962,127 |
11
AGGIELAND SAFARI LLC AND FERRILL CREEK RANCH LLC
Combining Statement of Operations
Year Ended December 31, 2019
| Aggieland Safari LLC |
| Ferrill Creek Ranch LLC |
| Eliminations |
| Combined | ||||
|
|
|
|
|
|
|
|
|
|
|
|
Safari park revenue | $ | 1,255,616 |
| $ | - |
| $ | - |
| $ | 1,255,616 |
Annual membership revenue |
| 116,002 |
|
| - |
|
| - |
|
| 116,002 |
Concessions and gift shop revenue |
| 210,566 |
|
| - |
|
| - |
|
| 210,566 |
Sale of animals |
| 8,700 |
|
| - |
|
| - |
|
| 8,700 |
Total revenues |
| 1,590,884 |
|
| - |
|
| - |
|
| 1,590,884 |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold, concessions and gift shop |
| 86,300 |
|
| - |
|
| - |
|
| 86,300 |
Selling, general and administrative |
| 1,787,384 |
|
| 2,244 |
|
| (166,425) |
|
| 1,623,203 |
Impairment of property and equipment |
| 770,164 |
|
| - |
|
| - |
|
| 770,164 |
Depreciation |
| 231,356 |
|
| - |
|
| - |
|
| 231,356 |
(Gain) loss on sale of operating assets, net |
| (20,295) |
|
| - |
|
| - |
|
| (20,295) |
Loss from operations |
| (1,264,025) |
|
| (2,244) |
|
| 166,425 |
|
| (1,099,844) |
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense), net |
| - |
|
| 166,425 |
|
| (166,425) |
|
| - |
Interest income (expense), net |
| (141,997) |
|
| (394,727) |
|
| - |
|
| (536,724) |
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss | $ | (1,406,022) |
| $ | (230,546) |
| $ | - |
| $ | (1,636,568) |
12
Exhibit 99.2
Combined Balance Sheets (Unaudited)
March 31, 2020 and December 31, 2020
| March 31, 2020 |
| December 31, 2019 | ||
ASSETS |
|
|
|
|
|
Current Assets: |
|
|
|
|
|
Cash | $ | 20,731 |
| $ | 14,468 |
Accounts receivable |
| 6,118 |
|
| 19,157 |
Inventory |
| 18,572 |
|
| 38,270 |
Prepaid expenses |
| 5,677 |
|
| 6,877 |
Total current assets |
| 51,098 |
|
| 78,772 |
|
|
|
|
|
|
Property and Equipment: |
|
|
|
|
|
Land |
| 5,277,566 |
|
| 5,742,113 |
Buildings and improvements |
| 1,555,236 |
|
| 1,825,075 |
Furniture and equipment |
| 72,191 |
|
| 85,899 |
Vehicles |
| 10,757 |
|
| 12,309 |
Construction in process |
| 115,587 |
|
| 137,967 |
Safari animals |
| 252,217 |
|
| 292,070 |
Total property and equipment |
| 7,283,554 |
|
| 8,095,433 |
Less accumulated depreciation |
| (212,078) |
|
| (212,078) |
Net property and equipment |
| 7,071,476 |
|
| 7,883,355 |
|
|
|
|
|
|
Total Assets | $ | 7,122,574 |
| $ | 7,962,127 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND MEMBERS' EQUITY |
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
Accounts payable | $ | 532,947 |
| $ | $ 663,596 |
Accrued expenses |
| 137,378 |
|
| 149,696 |
Accounts payable, related party |
| 21,756 |
|
| 21,756 |
Deferred revenues |
| 54,244 |
|
| 86,602 |
Advance on sale of assets |
| 100,000 |
|
| - |
Line of credit, related party |
| 2,937,622 |
|
| 2,788,523 |
Notes payable |
| 5,335,786 |
|
| 5,895,920 |
Total current liabilities |
| 9,119,733 |
|
| 9,606,093 |
|
|
|
|
|
|
Members’ Equity |
| (1,997,159) |
|
| (1,643,966) |
|
|
|
|
|
|
Total Liabilities and Members' Equity | $ | 7,122,574 |
| $ | 7,962,127 |
See notes to unaudited financial statements
1
AGGIELAND SAFARI LLC AND FERRILL CREEK RANCH LLC
Combined Statement of Operations (Unaudited)
Three Months Ended March 31, 2020 and March 31, 2019
| Three Months Ended | ||||
| March 31, 2020 |
| March 31, 2019 | ||
Safari park revenue | $ | 269,682 |
| $ | - |
Annual membership revenue |
| 34,074 |
|
| - |
Concessions and gift shop revenue |
| 15,124 |
|
| - |
Total revenues |
| 318,880 |
|
| - |
|
|
|
|
|
|
Cost of goods sold, concessions and gift shop |
| 20,196 |
|
| - |
Selling, general and administrative |
| 242,549 |
|
| 170,221 |
Impairment of property and equipment |
| 347,332 |
|
| - |
Depreciation |
| - |
|
| 51,659 |
(Gain) loss on sale of operating assets, net |
| (43,305) |
|
| (1,500) |
Loss from operations |
| (247,892) |
|
| (220,380) |
|
|
|
|
|
|
Interest income (expense), net |
| (105,301) |
|
| (99,331) |
|
|
|
|
|
|
Net Loss | $ | (353,193) |
| $ | (319,711) |
See notes to unaudited financial statements
2
AGGIELAND SAFARI LLC AND FERRILL CREEK RANCH LLC
Combined Statement of Member's Equity (Unaudited)
Three Months Ended March 31, 2020 and March 31, 2019
Balance at December 31, 2019 | $ | (1,643,966) |
Net loss |
| (353,193) |
|
|
|
Balance at March 31, 2020 | $ | (1,997,159) |
|
|
|
Balance at December 31, 2018 | $ | (7,398) |
Net loss |
| (319,711) |
|
|
|
Balance at March 31, 2019 | $ | (327,109) |
See notes to unaudited financial statements
3
AGGIELAND SAFARI LLC AND FERRILL CREEK RANCH LLC
Combined Statement of Cash Flows (Unaudited)
Three Months Ended March 31, 2020 and March 31, 2019
| Three Months Ended | ||||
| March 31, 2020 |
| March 31, 2019 | ||
Operating Activities |
|
|
|
|
|
Net loss | $ | (353,193) |
| $ | (319,711) |
Adjustments to reconcile net loss to cash |
|
|
|
|
|
provided by (used in) operating activities: |
|
|
|
|
|
Impairment of property and equipment |
| 347,332 |
|
| - |
Depreciation |
| - |
|
| 51,659 |
Gain on sale of property and equipment |
| (43,305) |
|
| (1,500) |
Changes in operating assets: |
|
|
|
|
|
Accounts receivable |
| 13,039 |
|
| (340) |
Inventory |
| 19,698 |
|
| (6,388) |
Prepaid expenses |
| 1,200 |
|
| (8,890) |
Accounts payable and accrued expenses |
| (142,967) |
|
| 535,636 |
Deferred revenues |
| (32,358) |
|
| - |
Net cash provided by (used in) operating activities |
| (190,554) |
|
| 250,466 |
|
|
|
|
|
|
Investing Activities |
|
|
|
|
|
Purchases of property and equipment |
| - |
|
| (1,764,373) |
Advance on sale of assets |
| 100,000 |
|
| - |
Proceeds from sale of property and equipment |
| 607,853 |
|
| 1,500 |
Net cash provided by (used in) investing activities |
| 707,853 |
|
| (1,762,873) |
|
|
|
|
|
|
Financing Activities |
|
|
|
|
|
Borrowings (repayments) on related party line of credit, net |
| 49,099 |
|
| 342,353 |
Borrowings on notes payable |
| - |
|
| 1,200,000 |
Repayments on notes payable |
| (560,135) |
|
| (29,829) |
Net cash provided by (used in) financing activities |
| (511,036) |
|
| 1,512,524 |
|
|
|
|
|
|
Change in cash and cash equivalents |
| 6,263 |
|
| 117 |
Cash at beginning of period |
| 14,468 |
|
| - |
|
|
|
|
|
|
Cash at end of period | $ | 20,731 |
| $ | 117 |
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures |
|
|
|
|
|
Interest paid in cash | $ | 47,505 |
| $ | 74,147 |
Income taxes paid in cash | $ | - |
| $ | - |
See notes to unaudited financial statements
4
AGGIELAND SAFARI LLC AND FERRILL CREEK RANCH LLC
Notes to Combined Financial Statements (Unaudited)
March 31, 2020
NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations: Aggieland Safari LLC was formed as a limited liability company on October 25, 2018. Aggieland Safari LLC provides a recreational, safari-like experience for guests with a focus on conservation and education activities. Ferrill Creek Ranch LLC was formed as a limited liability company on October 31, 2018. Ferrill Creek Ranch LLC owns the land used in the operations of Aggieland Safari LLC. Collectively, these entities are referred to herein as the “Company”.
Basis for Combination: Aggieland Safari LLC (AGS) and Ferrill Creek Ranch LLC (FCR) are entities under common control and the land owned by FCR is leased to AGS. Accordingly, the financial statements include the accounts of Aggieland Safari LLC and Ferrill Creek Ranch LLC on a combined basis and have been prepared in accordance with U.S. generally accepted accounting principles. All significant intercompany balances and transactions have been eliminated. These unaudited combined financial statements should be read in conjunction with the Company’s audited combined financial statements and the notes thereto for the year ended December 31, 2019.
COVID-19 Impacts: In March 2020, the World Health Organization characterized COVID-19, a disease caused by a novel strain of a coronavirus, as a pandemic. The rapid spread of COVID-19 has resulted in governmental authorities throughout the United States implementing a variety of containment measures with the objective of slowing the spread of the virus, including travel restrictions, shelter-in-place orders and business shutdowns. The COVID-19 pandemic and these containment measures have had, and are anticipated to continue to have, a material impact on the Company’s business. The Company began to see a significant reduction in paid attendance beginning in early March 2020. Effective April 1, 2020, AGS was closed to the public as a result of shelter-in-place mandate in Texas and by order of Brazos County.
Revenue Recognition: The Company recognizes revenues in accordance with FASB ASC Topic 606, Revenues from Contracts with Customers. Prior periods were not impacted by the adoption of Topic 606 as the Company began revenue generating operations in 2019. Under Topic 606, the Company recognizes revenue when a customer obtains control of promised goods or services, in an amount that reflects the consideration, which 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 Topic 606, the Company performs the following five steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that it will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.
The Company’s major source of revenue is from the sale of park admissions, retail and concession sales at its sole location in Bryan, Texas. Revenues from park admission fees are generally recognized upon receipt of payment at the time of the customers’ visit to the parks. Admission fee revenues from advance online ticket purchases are deferred until the customers’ visit to the park. Revenue from retail and concession sales is generally recognized upon the concurrent receipt of payment and delivery of goods or services to the customer. Revenue from annual memberships is recognized evenly over the twelve-month membership term. The Company periodically sells surplus animals resulting from the natural breeding process that occurs within the park and revenue from these sales is recognized on delivery of the animal to the customer. Billings for sales of animals are provided at the time of delivery and payment is expected within 30 days of presentation of the bill. Sales taxes billed are reported directly as a liability to the taxing authority and are not included in revenue. Total deferred revenues from advance online ticket sales and annual memberships were $54,244 at March 31, 2020 and $86,602 at December 31, 2019.
Cash: Cash consists of cash-on-hand and demand deposits held by financial institutions.
Accounts Receivable: Accounts receivable are reported at outstanding principal net of an allowance for doubtful accounts. The allowance is determined based on an account-by-account review. Accounts are charged off when collection efforts have failed, and the account is deemed uncollectible. An allowance was not considered necessary at March 31, 2020 and December 31, 2019. The Company normally does not charge interest on accounts receivable. Accounts receivable were at $6,118 at March 31, 2020 and $19,157 at December 31, 2019.
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 on the first-in, first-out method. Inventories were $18,572 at March 31, 2020 and $38,270 at December 31, 2019, respectively.
5
AGGIELAND SAFARI LLC AND FERRILL CREEK RANCH LLC
Notes to Combined Financial Statements (Unaudited)
March 31, 2020
NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property and Equipment: Property and equipment is initially recognized at cost. Depreciation is recorded using the straight-line method over the estimated useful lives. Major renewals and betterments are capitalized, while replacements, maintenance and repairs which do not improve or extend the lives of the respective assets are expensed. Upon retirement or replacement, both the asset cost and the related allowance for depreciation are written off and gains and losses on sale of assets are included in operations. Included in property and equipment is construction in progress. Once construction is completed and the asset is placed in service, it will be depreciated over the estimated useful life of the asset. Safari animals are depreciated over a useful life of five to ten years. When safari animals are lost due to death, they are written-off as of the date of death. Offspring of the safari animals is not capitalized. Costs incurred in the support of safari animals and related offspring are expensed as incurred.
Accounting rules require that property and equipment should be evaluated for impairment on the occurrence of a triggering event. Examples of such triggering events include a significant disposal of a portion of such assets, an adverse change in the market involving the business employing the related asset, a significant decrease in the benefits realized from an acquired business, difficulties or delays in integrating the business, and a significant change in the operations of an acquired business.
During 2019, the Company adopted a plan to sell substantially all assets of the Company, which resulted in a triggering event for the evaluation of impairment of property and equipment, see NOTE F – SUBSEQUENT EVENTS. In connection with the plan of sale, the Company determined that the carrying values of some of the property and equipment exceeded their fair values. Consequently, the Company recorded impairment losses of $347,332 and $770,164, for the three months ended March 31, 2020 and the year ended December 31, 2019, respectively. These impairment losses represent the excess of the carrying values of the property and equipment over their fair values, less cost to sell. The impairment loss is recorded as a separate line item (“Impairment of property and equipment”) in the combined statement of operations. All assets included in the accompanying combined balance sheet are deemed to be held for sale and these assets are no longer depreciated subsequent to December 31, 2019.
On February 6, 2020, Ferrill Creek Ranch, LLC executed an agreement to sell 76.2 acres land which was not being utilized for the safari park operations in exchange for total consideration of approximately $700,000.
Income Taxes: The Company is taxed as a partnership for federal income tax purposes. Accordingly, income and loss is passed directly to the members and taxed at their individual level. The Company is subject to the Texas margin tax. Management is not aware of any tax positions that would have significant impact on its financial position. The Company’s federal tax returns since inception remain subject to examination.
Advertising: The Company expenses advertising and promotional costs as incurred. No advertising costs were incurred for the three months ended March 31, 2020 and March 31, 2019, respectively.
Commitments and Contingencies: Liabilities for loss contingencies arising from claims, assessments, litigation, and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. No such liabilities have been accrued as of March 31, 2020 and December 31, 2019.
Concentrations of Credit Risk: Financial instruments that potentially expose the Company to credit risk consist principally of cash. The Company occasionally maintains cash balances in the financial institutions that exceed the amounts insured by the FDIC. The Company periodically accesses the financial condition of the institutions and believes the risk of loss is minimal.
Subsequent Events: Subsequent events have been evaluated by management through the date of the issuance of these financial statements. Material subsequent events, if any, are disclosed in a separate footnote to these financial statements.
New Accounting Pronouncements: In February 2016, the FASB issued a new accounting pronouncement regarding lease accounting for reporting periods beginning after December 15, 2020. A lessee will be required to recognize on the balance sheet the assets and liabilities for leases with lease terms of more than 12 months. Management is currently evaluating the effect this pronouncement will have on the financial statements and related disclosures.
Use of Estimates: The preparation of financial statements in conformity with U. S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
6
AGGIELAND SAFARI LLC AND FERRILL CREEK RANCH LLC
Notes to Combined Financial Statements (Unaudited)
March 31, 2020
NOTE B – OPERATING LEASES
The company leases certain equipment under month-to-month leasing arrangements. Total equipment rent expense recognized during the three months ended March 31, 2020 and March 31, 2019 were approximately $8,200 and $12,400, respectively.
NOTE C – NOTES PAYABLE
On December 28, 2018, the Company entered into a mortgage loan with a bank to borrow a total of $4,660,382. The loan had an outstanding balance of $4,583,041 at March 31, 2020 and December 31, 2019, respectively, requires minimum interest only payments of 6.38% on a monthly basis, is secured by all assets of FCR and matured on March 28, 2020.
The Company entered into an improvement loan with a bank on February 15, 2019 to borrow an initial principal amount of $1,200,000. The loan had an outstanding balance of $623,088 and $1,183,222 at March 31, 2020 and December 31, 2019, respectively, bears interest at the United States Treasury Securities rate plus 3.50% (5.125% at March 31, 2020) and requires minimum interest only payments on a monthly basis. This loan is secured by all assets of FCR and matured on March 15, 2020.
On April 18, 2019, the Company entered into a note payable with a vendor for the construction of improvements on land owned by the Company. This note bears interest at 6.0% and has an outstanding balance of $129,657 at March 31, 2020 and December 31, 2019, respectively. Payments are due in twelve equal monthly installments beginning July 1, 2019. As of March 31, 2020, no payments had been applied to this note.
NOTE D – RELATED PARTY TRANSACTIONS
Aggieland Safari LLC leases land used for its safari park operations from Ferrill Creek Ranch LLC. Total rent under this related party leasing arrangement totaled $64,100 and $0 during the three months ended March 31, 2020 and March 31, 2019, respectively. Amounts payable from AGS to FCR under this arrangement totaled $175,860 and $123,960 at March 31, 2020 and December 31, 2019, respectively. These transactions are eliminated in the combined financial statements.
The Company entered into a related party line of credit with its sole member during 2018. The line of credit bears interest at 10% annually, is due on demand, and is subordinate to the third-party notes payable. Balances on the related party line of credit were $2,937,622 as of March 31, 2020 and $2,788,523 as of December 31, 2019, respectively.
A direct family member of the sole member of the Company provided services to operate the on-site restaurant during 2019. Accounts payable for these services owed to this related party totaled $21,756 at March 31, 2020 and December 31, 2019, respectively.
NOTE E – GOING CONCERN
The Company incurred a net loss for the year ended December 31, 2019 and for the three months ended March 31, 2020, all outstanding debt at March 31, 2020 is classified as current, and total current liabilities are in excess of current assets at March 31, 2020. These matters raise substantial doubt about the Company’s ability to continue as a going concern within one year after issuance date of the combined financial statements.
The accompanying combined financial statements have been prepared assuming that the Company will continue as a going concern; however, the above conditions raise substantial doubt about the Company’s ability to do so. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.
As discussed in NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, during 2019, the Company adopted a plan to sell substantially all assets of the Company. As discussed in NOTE F – SUBSEQUENT EVENTS, on April 27, 2020, the Company sold substantially all the assets of AGS and FCR, primarily consisting of real property, animal inventory and mineral rights. The Company plans to use the proceeds of the sale to liquidate its remaining liabilities and subsequently wind-down its operations.
7
AGGIELAND SAFARI LLC AND FERRILL CREEK RANCH LLC
Notes to Combined Financial Statements (Unaudited)
March 31, 2020
NOTE F – SUBSEQUENT EVENTS
COVID-19 Impact on Operations
The rapid acceleration of the COVID-19 pandemic in the United States occurred at the beginning of the March 2020 and the Company began to see a significant reduction in paid attendance beginning in mid-March 2020. As a result of Brazos County and State of Texas mandates, beginning March 18, 2020, AGS closed the walking through of its park and effective April 1, 2020 the park was entirely closed to the public.
Sale of AGS and FCR
On April 27, 2020, the Company sold substantially all the assets of AGS and FCR, primarily consisting of real property, animal inventory and mineral rights, for $7,125,000.
8
AGGIELAND SAFARI LLC
AND
FERRILL CREEK RANCH LLC
Supplemental Information (Unaudited)
March 31, 2020
9
AGGIELAND SAFARI LLC AND FERRILL CREEK RANCH LLC
Combining Balance Sheet (Unaudited)
March 31, 2020
| Aggieland Safari LLC |
| Ferrill Creek Ranch LLC |
| Eliminations |
| Combined | ||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
|
|
|
Cash | $ | 20,447 |
| $ | 284 |
| $ | - |
| $ | 20,731 |
Accounts receivable |
| 6,118 |
|
| 175,860 |
|
| (175,860) |
|
| 6,118 |
Inventory |
| 18,572 |
|
| - |
|
| - |
|
| 18,572 |
Prepaid expenses |
| 5,677 |
|
| - |
|
| - |
|
| 5,677 |
Total current assets |
| 50,814 |
|
| 176,144 |
|
| (175,860) |
|
| 51,098 |
|
|
|
|
|
|
|
|
|
|
|
|
Property and Equipment: |
|
|
|
|
|
|
|
|
|
|
|
Land |
| - |
|
| 5,277,566 |
|
| - |
|
| 5,277,566 |
Buildings and improvements |
| 1,555,236 |
|
| - |
|
| - |
|
| 1,555,236 |
Furniture and equipment |
| 72,191 |
|
| - |
|
| - |
|
| 72,191 |
Vehicles |
| 10,757 |
|
| - |
|
| - |
|
| 10,757 |
Construction in process |
| 115,587 |
|
| - |
|
| - |
|
| 115,587 |
Safari animals |
| 252,217 |
|
| - |
|
| - |
|
| 252,217 |
Total property and equipment |
| 2,005,988 |
|
| 5,277,566 |
|
| - |
|
| 7,283,554 |
Less accumulated depreciation |
| (212,078) |
|
| - |
|
| - |
|
| (212,078) |
Net property and equipment |
| 1,793,910 |
|
| 5,277,566 |
|
| - |
|
| 7,071,476 |
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets | $ | 1,844,724 |
| $ | 5,453,710 |
| $ | (175,860) |
| $ | 7,122,574 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND MEMBERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Accounts payable | $ | 708,807 |
| $ | - |
| $ | (175,860) |
| $ | 532,947 |
Accrued expenses |
| 18,686 |
|
| 118,692 |
|
| - |
|
| 137,378 |
Accounts payable, related party |
| 21,756 |
|
| - |
|
| - |
|
| 21,756 |
Deferred revenues |
| 54,244 |
|
| - |
|
| - |
|
| 54,244 |
Advance on sale of assets |
| 100,000 |
|
| - |
|
| - |
|
| 100,000 |
Line of credit, related party |
| 2,554,564 |
|
| 383,058 |
|
| - |
|
| 2,937,622 |
Notes payable |
| 129,657 |
|
| 5,206,129 |
|
| - |
|
| 5,335,786 |
Total current liabilities |
| 3,587,714 |
|
| 5,707,879 |
|
| (175,860) |
|
| 9,119,733 |
|
|
|
|
|
|
|
|
|
|
|
|
Members’ Equity |
| (1,742,990) |
|
| (254,169) |
|
| - |
|
| (1,997,159) |
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Members' Equity | $ | 1,844,724 |
| $ | 5,453,710 |
| $ | (175,860) |
| $ | 7,122,574 |
10
AGGIELAND SAFARI LLC AND FERRILL CREEK RANCH LLC
Combining Balance Sheet (Unaudited)
December 31, 2019
| Aggieland Safari LLC |
| Ferrill Creek Ranch LLC |
| Eliminations |
| Combined | ||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
|
|
|
Cash | $ | 14,462 |
| $ | 6 |
| $ | - |
| $ | 14,468 |
Accounts receivable |
| 19,157 |
|
| 123,960 |
|
| (123,960) |
|
| 19,157 |
Inventory |
| 38,270 |
|
| - |
|
| - |
|
| 38,270 |
Prepaid expenses |
| 6,877 |
|
| - |
|
| - |
|
| 6,877 |
Total current assets |
| 78,766 |
|
| 123,966 |
|
| (123,960) |
|
| 78,772 |
|
|
|
|
|
|
|
|
|
|
|
|
Property and Equipment: |
|
|
|
|
|
|
|
|
|
|
|
Land |
| - |
|
| 5,742,113 |
|
| - |
|
| 5,742,113 |
Buildings and improvements |
| 1,825,075 |
|
| - |
|
| - |
|
| 1,825,075 |
Furniture and equipment |
| 85,899 |
|
| - |
|
| - |
|
| 85,899 |
Vehicles |
| 12,309 |
|
| - |
|
| - |
|
| 12,309 |
Construction in process |
| 137,967 |
|
| - |
|
| - |
|
| 137,967 |
Safari animals |
| 292,070 |
|
| - |
|
| - |
|
| 292,070 |
Total property and equipment |
| 2,353,320 |
|
| 5,742,113 |
|
| - |
|
| 8,095,433 |
Less accumulated depreciation |
| (212,078) |
|
| - |
|
| - |
|
| (212,078) |
Net property and equipment |
| 2,141,242 |
|
| 5,742,113 |
|
| - |
|
| 7,883,355 |
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets | $ | 2,220,008 |
| $ | 5,866,079 |
| $ | (123,960) |
| $ | 7,962,127 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND MEMBERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Accounts payable | $ | 787,556 |
| $ | - |
| $ | (123,960) |
| $ | 663,596 |
Accrued expenses |
| 29,696 |
|
| 120,000 |
|
| - |
|
| 149,696 |
Accounts payable, related party |
| 21,756 |
|
| - |
|
| - |
|
| 21,756 |
Deferred revenues |
| 86,602 |
|
| - |
|
| - |
|
| 86,602 |
Line of credit, related party |
| 2,575,064 |
|
| 213,459 |
|
| - |
|
| 2,788,523 |
Notes payable |
| 129,657 |
|
| 5,766,263 |
|
| - |
|
| 5,895,920 |
Total current liabilities |
| 3,630,331 |
|
| 6,099,722 |
|
| (123,960) |
|
| 9,606,093 |
|
|
|
|
|
|
|
|
|
|
|
|
Members’ Equity |
| (1,410,323) |
|
| (233,643) |
|
| - |
|
| (1,643,966) |
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Members' Equity | $ | 2,220,008 |
| $ | 5,866,079 |
| $ | (123,960) |
| $ | 7,962,127 |
11
AGGIELAND SAFARI LLC AND FERRILL CREEK RANCH LLC
Combining Statement of Operations (Unaudited)
Three Months Ended March 31, 2020
| Aggieland Safari LLC |
| Ferrill Creek Ranch LLC |
| Eliminations |
| Combined | ||||
Safari park revenue | $ | 269,682 |
| $ | - |
| $ | - |
| $ | 269,682 |
Annual membership revenue |
| 34,074 |
|
| - |
|
| - |
|
| 34,074 |
Concessions and gift shop revenue |
| 15,124 |
|
| - |
|
| - |
|
| 15,124 |
Total revenues |
| 318,880 |
|
| - |
|
| - |
|
| 318,880 |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold, concessions and gift shop |
| 20,196 |
|
| - |
|
| - |
|
| 20,196 |
Selling, general and administrative |
| 291,319 |
|
| 15,330 |
|
| (64,100) |
|
| 242,549 |
Impairment of property and equipment |
| 347,332 |
|
| - |
|
| - |
|
| 347,332 |
Depreciation |
| - |
|
| - |
|
| - |
|
| - |
(Gain) loss on sale of operating assets, net |
| (8,000) |
|
| (35,305) |
|
| - |
|
| (43,305) |
Loss from operations |
| (331,967) |
|
| 19,975 |
|
| 64,100 |
|
| (247,892) |
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense), net |
| - |
|
| 64,100 |
|
| (64,100) |
|
| - |
Interest income (expense), net |
| (700) |
|
| (104,601) |
|
| - |
|
| (105,301) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss | $ | (332,667) |
| $ | (20,526) |
| $ | - |
| $ | (353,193) |
12
AGGIELAND SAFARI LLC AND FERRILL CREEK RANCH LLC
Combining Statement of Operations (Unaudited)
Three Months Ended March 31, 2019
| Aggieland Safari LLC |
| Ferrill Creek Ranch LLC |
| Eliminations |
| Combined | ||||
Safari park revenue | $ | - |
| $ | - |
| $ | - |
| $ | - |
Annual membership revenue |
| - |
|
| - |
|
| - |
|
| - |
Concessions and gift shop revenue |
| - |
|
| - |
|
| - |
|
| - |
Total revenues |
| - |
|
| - |
|
| - |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold, concessions and gift shop |
| - |
|
| - |
|
| - |
|
| - |
Selling, general and administrative |
| 169,180 |
|
| 1,041 |
|
| - |
|
| 170,221 |
Impairment of property and equipment |
| - |
|
| - |
|
| - |
|
| - |
Depreciation |
| 51,659 |
|
| - |
|
| - |
|
| 51,659 |
(Gain) loss on sale of operating assets, net |
| (1,500) |
|
| - |
|
| - |
|
| (1,500) |
Loss from operations |
| (219,339) |
|
| (1,041) |
|
| - |
|
| (220,380) |
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense), net |
| - |
|
| - |
|
| - |
|
| - |
Interest income (expense), net |
| (18,884) |
|
| (80,447) |
|
| - |
|
| (99,331) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss | $ | (238,223) |
| $ | (81,488) |
| $ | - |
| $ | (319,711) |
13
Exhibit 99.3
PARKS! AMERICA, INC. and SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On April 27, 2020, Parks! America, Inc. (“Parks” or the “Company”), through a newly formed subsidiary, Aggieland-Parks, Inc., a Texas corporation, simultaneously entered into and closed an Asset Purchase Agreement with Aggieland Safari LLC, a Texas limited liability company (“Aggieland”), Ferrill Creek Ranch LLC, a Texas limited liability (“FCR”), and Vernell Investments LLC, a Texas limited liability company (together with Aggieland and FCR the “Sellers”). Pursuant to the Asset Purchase Agreement Aggieland-Parks, Inc. acquired substantially all of Sellers’ assets related to Aggieland Safari Adventure Zoo and Safari Park located in Bryan, Texas (“Aggieland Safari”), including animal inventory, real estate, mineral rights, equipment, and other assets necessary to operate the Aggieland Safari. Aggieland Safari is situated on 250 acres of a 450-acre property, located in Bryan, Texas, approximately 25 miles northeast of College Station and 120 miles northwest of downtown Houston. The total purchase price for the Aggieland Assets was $7,125,000. The transaction was financed with a loan (the “2020 Term Loan”) from First Financial Bank, N.A. (“First Financial”), a seller note for $750,000 (the “Aggieland Seller Note”) and cash totaling $1,375,000. The 2020 Term Loan is evidenced by a promissory note in the original principal amount of $5,000,000 from First Financial (the “2020 Bank Note”), is secured by substantially all of the Aggieland Assets, as well as guarantees from the Company and its subsidiaries. The 2020 Bank Note bears interest at a rate of 5.0% per annum, has a maturity date of April 27, 2031, with interest only payable monthly through April 2021. The Aggieland Seller Note represents a deferred payment of the purchase price, bears no interest, has a maturity date of June 30, 2021 and is secured by a second priority subordinated lien and security interest in the acquired mineral rights and the animal inventory.
Parks and Aggieland Safari have different fiscal year ends. Parks fiscal year ends on the Sunday closest to September 30 (most recently September 29, 2019), whereas Aggieland Safari’s fiscal year ends on December 31. As this difference is less than 93 days, as permitted by Regulation S-X Article 11, the unaudited pro forma condensed combined statement of operations for the year ended September 29, 2019 combines the Parks audited consolidated statement of operations for the year ended September 29, 2019 and the Aggieland Safari audited combined statement of operations for the year ended December 31, 2019.
The unaudited pro forma condensed combined statement of operations for the six months ended March 29, 2020 combines the Parks unaudited consolidated statement of operations for the six months ended March 29, 2020 and the Aggieland Safari unaudited combined statement of operations for the six months ended March 31, 2020. The Aggieland Safari unaudited combined statement of operations for the six months ended March 31, 2020 has been calculated by subtracting its unaudited combined statement of operations for the nine months ended September 30, 2019 from its audited financial statements for the year ended December 31, 2019, then adding its unaudited combined statement of operations for the three months ended March 31, 2020.
Both the full-year and six month unaudited pro forma condensed combined statements of operations give effect to the Aggieland Safari acquisition as if it had been consummated on October 1, 2018 and include adjustments which are directly attributable to the acquisition, are expected to have continuing impact on the combined results of operations, and are factually supportable.
The unaudited pro forma condensed combined balance sheet combines the Parks unaudited consolidated balance sheet as of March 29, 2020 and the Aggieland Safari unaudited combined balance sheet as of March 31, 2020, giving effect to the Aggieland Safari acquisition as if it had been consummated on March 29, 2020.
1
The unaudited pro forma condensed combined balance sheet and the unaudited pro forma condensed combined statements of operations are also referred to herein as the unaudited pro forma financial statements.
The unaudited pro forma financial statements are presented for information purposes only and should be read in conjunction with the accompanying notes to the unaudited pro forma financial statements. In addition, the unaudited pro forma financial statements are based on and should be read in conjunction with the following historical consolidated financial statements and accompanying notes for Parks, and historical combined financial statements and accompanying notes of Aggieland Safari:
·Separate unaudited historical financial statements and the related notes of Parks as of and for the six months ended March 29, 2020 included in Parks’ Quarterly Report on Form 10-Q for the fiscal quarter ended March 29, 2020, as well as the audited historical financial statements and the related notes of Parks as of and for the fiscal year ended September 29, 2020 included in its Annual Report on Form 10-K for the fiscal year ended September 29, 2019;
·Separate audited historical financial statements of Aggieland Safari as of December 31, 2019 and for the year then ended, which are included as Exhibit 99.1 to this Current Report on Form 8-K/A; and
·Separate unaudited historical financial statements of Aggieland Safari as of March 31, 2020 and for the three months then ended, which are included as Exhibit 99.2 to this Current Report on Form 8-K/A.
The unaudited pro forma financial statements have been prepared by management in accordance with SEC Regulation S-X Article 11, Pro Forma Financial Information. The unaudited pro forma financial statements are not necessarily indicative of what Parks’ financial position or results of operations actually would have been had the Company completed the acquisition of Aggieland Safari on the dates indicated, nor do they purport to project the future financial position or operating results of the combined businesses.
The unaudited pro forma financial statements have been prepared using the acquisition method of accounting under accounting principles generally accepted in the United States of America (“U.S. GAAP”) with Parks being the acquirer. The pro forma adjustments are preliminary, based upon available information and made solely for the purpose of providing these unaudited pro forma financial statements. Differences between these preliminary adjustments and the final acquisition accounting may occur and these differences could have a material impact on the future results of operations and financial position of the combined company.
2
PARKS! AMERICA, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of March 29, 2020
| Parks! America, Inc. |
| Aggieland Safari |
| Pro Forma Adjustments |
| Notes |
| Combined | ||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash | $ | 2,942,037 |
| $ | 20,731 |
| $ | (1,361,608) |
| 5A |
| $ | 1,601,160 |
Accounts receivable |
| 24,373 |
|
| 6,118 |
|
| (6,118) |
| 5B |
|
| 24,373 |
Inventory |
| 238,801 |
|
| 18,572 |
|
| - |
|
|
|
| 257,373 |
Prepaid expenses |
| 280,183 |
|
| 5,677 |
|
| (675) |
| 5C |
|
| 285,185 |
Total current assets |
| 3,485,394 |
|
| 51,098 |
|
| (1,368,401) |
|
|
|
| 2,168,091 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
| 6,698,734 |
|
| 7,071,476 |
|
| 87,696 |
| 5D |
|
| 13,857,906 |
Intangible assets, net |
| 200 |
|
| - |
|
| - |
|
|
|
| 200 |
Other assets |
| 115,021 |
|
| - |
|
| (100,000) |
| 5E |
|
| 15,021 |
Total assets | $ | 10,299,349 |
| $ | 7,122,574 |
| $ | (1,380,705) |
|
|
| $ | 16,041,218 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable | $ | 36,324 |
| $ | 532,947 |
| $ | (532,947) |
| 5F |
| $ | 36,324 |
Accounts payable - related party |
| - |
|
| 21,756 |
|
| (21,756) |
| 5F |
|
| - |
Other current liabilities |
| 326,729 |
|
| 191,622 |
|
| (137,378) |
| 5G |
|
| 380,973 |
Line of credit - related party |
| - |
|
| 2,937,622 |
|
| (2,937,622) |
| 5H |
|
| - |
Current portion of long-term debt, net |
| 209,673 |
|
| 5,435,786 |
|
| (5,435,786) |
| 5H |
|
| 209,673 |
Total current liabilities |
| 572,726 |
|
| 9,119,733 |
|
| (9,065,489) |
|
|
|
| 626,970 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, net |
| 1,047,388 |
|
| - |
|
| 5,687,625 |
| 5I |
|
| 6,735,013 |
Total liabilities |
| 1,620,114 |
|
| 9,119,733 |
|
| (3,377,864) |
|
|
|
| 7,361,983 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock; 300,000,000 shares authorized, at $.001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
par value; 75,021,537 shares issued and outstanding |
| 75,021 |
|
| - |
|
| - |
|
|
|
| 75,021 |
Capital in excess of par |
| 4,889,316 |
|
| - |
|
| - |
|
|
|
| 4,889,316 |
Treasury stock |
| (3,250) |
|
| - |
|
| - |
|
|
|
| (3,250) |
Retained earnings |
| 3,718,148 |
|
| (1,997,159) |
|
| 1,997,159 |
| 5J |
|
| 3,718,148 |
Total stockholders’ equity |
| 8,679,235 |
|
| (1,997,159) |
|
| 1,997,159 |
|
|
|
| 8,679,235 |
Total liabilities and stockholders’ equity | $ | 10,299,349 |
| $ | 7,122,574 |
| $ | (1,380,705) |
|
|
| $ | 16,041,218 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to the Unaudited Pro Forma Condensed Combined Financial Statements
3
PARKS! AMERICA, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Six Months Ended March 29, 2020
See Notes to the Unaudited Pro Forma Condensed Combined Financial Statements
4
PARKS! AMERICA, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Year Ended September 29, 2019
See Notes to the Unaudited Pro Forma Condensed Combined Financial Statements
5
PARKS! AMERICA, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
1. Description of the Acquisition
On April 27, 2020, Parks! America, Inc. (“Parks” or the “Company”), through a newly formed subsidiary, Aggieland-Parks, Inc., a Texas corporation, simultaneously entered into and closed an Asset Purchase Agreement with Aggieland Safari LLC, a Texas limited liability company (“Aggieland”), Ferrill Creek Ranch LLC, a Texas limited liability (“FCR”), and Vernell Investments LLC, a Texas limited liability company (together with Aggieland and FCR the “Sellers”). Pursuant to the Asset Purchase Agreement Aggieland-Parks, Inc. acquired substantially all of Sellers’ assets related to Aggieland Safari Adventure Zoo and Safari Park located in Bryan, Texas (“Aggieland Safari”), including animal inventory, real estate, mineral rights, equipment, and other assets necessary to operate the Aggieland Safari. Aggieland Safari is situated on 250 acres of a 450-acre property, located in Bryan, Texas, approximately 25 miles northeast of College Station and 120 miles northwest of downtown Houston. The total purchase price for the Aggieland Assets was $7,125,000. The transaction was financed with a loan (the “2020 Term Loan”) from First Financial Bank, N.A. (“First Financial”), a seller note for $750,000 (the “Aggieland Seller Note”) and cash totaling $1,375,000. The 2020 Term Loan is evidenced by a promissory note in the original principal amount of $5,000,000 from First Financial (the “2020 Bank Note”), is secured by substantially all of the Aggieland Assets, as well as guarantees from the Company and its subsidiaries. The 2020 Bank Note bears interest at a rate of 5.0% per annum, has a maturity date of April 27, 2031, with interest only payable monthly through April 2021. The Aggieland Seller Note represents a deferred payment of the purchase price, bears no interest, has a maturity date of June 30, 2021 and is secured by a second priority subordinated lien and security interest in the acquired mineral rights and the animal inventory.
2. Basis of Pro Forma Presentation
The accompanying unaudited pro forma condensed combined balance sheet presents Parks’ historical financial position combined with Aggieland Safari as if the acquisition had occurred on March 29, 2020. The unaudited pro forma condensed combined statements of operations present the combined results of Parks as if the Aggieland Safari acquisition occurred on October 1, 2018. The accompanying unaudited pro forma condensed combined financial statements include management’s assumptions and certain adjustments as described in greater detail herein.
Parks and Aggieland Safari have different fiscal year ends. The unaudited pro forma condensed combined balance sheet and statements of operations have been prepared utilizing period ends that differ by less than 93 days, as permitted by Regulation S-X Article 11.
The unaudited pro forma condensed combined balance sheet information is based on the following:
·With respect to Parks, the Parks unaudited consolidated balance sheet as of March 29, 2020; and
·With respect to Aggieland Safari, the Aggieland Safari unaudited combined balance sheet as of March 31, 2020.
The unaudited pro forma condensed combined statement of operations for the six months ended March 29, 2020 is based on the following:
·With respect to Parks, the Parks unaudited consolidated statement of operations for the six months ended March 29, 2020 included in Parks’ Quarterly Report on Form 10-Q for the fiscal quarter ended March 29, 2020; and
·With respect to Aggieland Safari, the Aggieland Safari unaudited combined statement of operations for the six months ended March 29, 2020, which has been calculated by subtracting the its unaudited combined statement of operations for the nine months ended September 30, 2019 from its audited combined statement of operations ended December 31, 2019, then adding its unaudited combined statement of operations for the three months ended March 31, 2020.
The unaudited pro forma condensed combined statement of operations for the year ended September 29, 2019 is based on the following:
·With respect to Parks, the Parks audited consolidated statement of operations for the fiscal year ended September 29, 2019 included in Parks’ Annual Report on Form 10-K for the year ended September 29, 2019; and
·With respect to Aggieland Safari, the Aggieland Safari audited combined statement of operations for the year ended December 31, 2019.
6
PARKS! AMERICA, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
2. Basis of Pro Forma Presentation (Continued)
As a result of the construction of the Aggieland Safari historical combined statement of operations for the six months ended March 29, 2020 noted above, the following Aggieland Safari combined statement of operations for the three month period ended December 31, 2019 is included in both the pro forma unaudited statement of operations for the six months ended March 29, 2020 and the fiscal year ended September 29, 2019.
| Aggieland Safari | |
Net sales | $ | 335,313 |
Sale of animals |
| 1,200 |
Total net sales |
| 336,513 |
|
|
|
Cost of sales |
| - |
Selling, general and administrative |
| 436,496 |
Depreciation and amortization |
| 66,829 |
Impairment of property and equipment |
| 770,164 |
(Gain) loss on disposal of operating assets, net |
| (7,995) |
Income (loss) from operations |
| (928,981) |
|
|
|
Other income, net |
| - |
Interest expense |
| (161,295) |
Income (loss) before income taxes |
| (1,090,276) |
|
|
|
Income tax provision |
| - |
Net income (loss) | $ | (1,090,276) |
The accompanying unaudited pro forma condensed combined financial statements were prepared using the acquisition method of accounting in accordance with Accounting Standards Codification 805, “Business Combinations” (“ASC 805”) and are based on the audited annual and unaudited interim historical financial statements of Parks and Aggieland Safari. The unaudited pro forma financial statements are presented for illustrative purposes only. The historical financial statements have been adjusted in the accompanying unaudited pro forma financial statements to give effect to the pro forma events that are (a) directly attributable to the acquisition, (2) factually supportable, and (3) with respect to the unaudited pro forma condensed combined statement of operations, expected to have a continuing impact on the consolidated results.
As the acquirer for accounting purposes, Parks has estimated the fair value of the Aggieland Safari assets acquired and liabilities assumed, and conformed the accounting policies of Aggieland Safari to its own accounting policies. The acquisition method of accounting uses the fair value concepts defined in ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”). Fair value is defined in ASC 820 as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” Fair value measurements can be highly subjective, and it is possible the application of reasonable judgment could result in different assumptions resulting in a range of alternative estimates using the same facts and circumstances. The allocation of the purchase price is preliminary, pending the finalization of various estimates and analyses. Since these unaudited pro forma condensed combined financial statements have been prepared based on preliminary estimates of fair values attributable to the acquisition, the actual amounts eventually recorded for the acquisition, may differ materially from the pro forma information presented.
The unaudited forma condensed combined financial statements do not necessarily reflect what the combined company’s financial condition or results of operations would have been had the acquisition occurred on the dates indicated. They may also not be useful in predicting the future financial condition or results of operations of the combined company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.
The unaudited pro forma condensed combined financial statements do not reflect any cost savings from operating efficiencies, synergies that could result from the acquisition, or additional expenses which could also result from the acquisition. Additionally, the unaudited pro forma condensed combined financial statements do not reflect additional revenue opportunities following the acquisition.
7
PARKS! AMERICA, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
3. Accounting Policies and Reclassifications
As a result of the continuing review of Aggieland Safari’s accounting policies, Parks may identify differences between the accounting policies of the two businesses that, when conformed, could have a material impact on the combined financial statements. The unaudited pro forma condensed combined financial statements do not assume any differences in accounting policies other than the assumptions regarding useful lives for certain elements of property and equipment impacting depreciation expense.
As described in further detail in Note 6, certain reclassifications have been made relative to Aggieland Safari’s historical financial statements to conform to the financial statement presentation of Parks.
4. Purchase Price and Allocation
The following table sets forth the purchase consideration paid to the members of Aggieland Safari as of April 27, 2020, the date of the acquisition. The preliminary purchase price allocation set forth below assumes the acquisition had closed on March 29, 2020:
Sources of consideration paid to Aggieland Safari Members: |
|
|
Advances | $ | 125,000 |
Cash at closing |
| 1,250,000 |
Bank debt |
| 5,000,000 |
Aggieland seller note |
| 750,000 |
Total cash consideration | $ | 7,125,000 |
|
|
|
Preliminary purchase price allocation: |
|
|
Cash and cash equivalents | $ | 1,500 |
Inventories |
| 18,572 |
Property and equipment |
| 7,159,172 |
Deferred revenue |
| (54,244) |
Total pro forma net assets acquired | $ | 7,125,000 |
For the purposes of this pro forma analysis, the purchase price has been preliminarily allocated based on an estimate of the fair value of assets acquired and liabilities assumed as of the acquisition date. The determination of estimated fair value requires management to make significant estimates and assumptions. The final valuation of assets acquired and liabilities assumed is expected to be completed as soon as possible but no later than one year from the acquisition date. The Company will adjust its estimates as needed upon the final valuation.
8
PARKS! AMERICA, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
5. Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet
Explanations of the adjustments to the unaudited pro forma balance sheet are as follows:
(A) | Represents adjustments to cash due to the following outflows as a result of the acquisition. |
|
|
|
|
|
|
| Record cash paid to Aggieland Safari Members at closing | $ | (1,250,000) |
| Record purchase price cash advance to Aggieland Safari on April 21, 2020 |
| (25,000) |
| Record prepaid property taxes deposited at closing |
| (5,002) |
| Record bank debt financing fees |
| (62,375) |
| Eliminate cash not transferred in acquisition |
| (19,231) |
| Total |
| (1,361,608) |
|
|
|
|
(B) | Eliminate Aggieland Safari accounts receivable not transferred to Parks. |
|
|
|
|
|
|
(C) | Represents adjustments to prepaid expenses as a result of the acquisition. |
|
|
|
|
|
|
| Record prepaid property taxes deposited at closing | $ | 5,002 |
| Eliminate Aggieland Safari prepaid expenses not transferred in acquisition |
| (5,677) |
| Total |
| (675) |
|
|
|
|
(D) | Represents adjustment to property and equipment based on the preliminary fair value assessment. |
|
|
|
|
|
|
| Preliminary fair value of acquired Property and Equipment | $ | 7,159,172 |
| Eliminate historical book value of Aggieland Safari Property and Equipment |
| (7,071,476) |
| Total |
| 87,696 |
|
|
|
|
(E) | Represents purchase price cash advances made by Parks to Aggieland Safari as of March 29, 2020. |
|
|
|
|
|
|
(F) | Eliminate Aggieland Safari accounts payable and accounts payable - related party not assumed by Parks. |
|
|
|
|
|
|
(G) | Represents adjustments to other current liabilities as a result of the acquisition. |
|
|
|
|
|
|
| Record deferred revenues assumed by Parks | $ | 54,244 |
| Eliminate Aggieland Safari other current liabilities |
| (191,622) |
| Total |
| (137,378) |
|
|
|
|
(H) | Eliminate Aggieland Safari debt not assumed by Parks. |
|
|
|
|
|
|
(I) | Record Aggieland Safari acquisition related debt and costs. |
|
|
|
|
|
|
| Bank debt | $ | 5,000,000 |
| Aggieland seller note |
| 750,000 |
| Deferred financing costs |
| (62,375) |
| Total |
| 5,687,625 |
|
|
|
|
(J) | Eliminate Aggieland Safari accumulated deficit. |
|
|
9
PARKS! AMERICA, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
6. Adjustments to Unaudited Pro Forma Condensed Combined Statements of Operations
Explanations of the adjustments to the unaudited pro forma statement of operations are as follows:
|
| Six months ended March 29, 2020 |
| Year ended September 29, 2019 | ||
(A) | Represents reclassification of animal food expenses to conform to Parks presentation. |
|
|
|
|
|
|
|
|
|
|
|
|
(B) | Represents adjustment to remove non-recurring transaction expenses in the historical statement of operations and |
|
|
|
|
|
| reclassifications to conform to Parks presentation of certain expenses, as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
| Non-recurring transaction expenses | $ | (61,250) |
| $ | - |
| Animal food expenses to cost of sales |
| (109,177) |
|
| (177,991) |
| Loss on animal disposals to loss on disposal of operating assets, net |
| (76,738) |
|
| (76,738) |
| Total |
| (247,165) |
|
| (254,729) |
|
|
|
|
|
|
|
(C) | Represents the estimated difference in depreciation expense resulting from the preliminary purchase price allocation. |
|
|
|
|
|
|
|
|
|
|
|
|
| Note that as of December 31, 2019, Aggieland Safari classified its property and equipment |
|
|
|
|
|
| as held for sale and suspended depreciation expense. |
|
|
|
|
|
|
|
|
|
|
|
|
| Depreciation based on preliminary purchase price allocation | $ | 92,848 |
| $ | 185,695 |
| Elimination of Aggieland Safari historical depreciation |
| (66,829) |
|
| (231,356) |
| Total |
| 26,019 |
|
| (45,661) |
|
|
|
|
|
|
|
(D) | Represents the elimination of Aggieland Safari impairment of property and equipment. |
|
|
|
|
|
|
|
|
|
|
|
|
(E) | Represents adjustment to remove gain on unrelated Aggieland Safari property sale and reclassifications to conform to Parks |
|
|
|
|
|
| presentation of certain expenses, as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
| Gain on unrelated Aggieland Safari property sale | $ | 35,305 |
| $ | - |
| Loss on animal disposals to loss on disposal of operating assets, net |
| 76,738 |
|
| 76,738 |
| Total |
| 112,043 |
|
| 76,738 |
|
|
|
|
|
|
|
(F) | Represents interest expense on new bank debt and amortization of associated fees, and the elimination of historical Aggieland |
|
|
|
|
|
| Safari interest expense. |
|
|
|
|
|
|
|
|
|
|
|
|
| Interest on new Parks' bank debt | $ | (125,000) |
| $ | (250,000) |
| Amortization of new bank debt associated fees |
| (2,835) |
|
| (5,670) |
| Elimination of historical Aggieland Safari interest expense |
| 266,596 |
|
| 536,724 |
| Total |
| 138,761 |
|
| 281,054 |
|
|
|
|
|
|
|
(G) | Represents adjustment to pro forma tax provision based on net impact of Aggieland Safari. |
|
|
|
|
|
10