What changed in this filing

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Item 7. Management’s Discussion and Analysis

2020-12-15 compared with 2019-12-12 · 102 added, 82 removed, 110 unchanged (63% of the section changed)

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in this Annual Report on Form 10-K.

Through our wholly owned subsidiaries, we own and operate two regional theme parks and are in the business of acquiring, developing and operating local and regional theme parks and attractions in the United States.

Our wholly owned subsidiaries are Wild Animal Safari, Inc., a Georgia corporation (“Wild Animal – Georgia”) and Wild Animal, Inc., a Missouri corporation (“Wild Animal – Missouri”).

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”).

On April 27, 2020, we acquired substantially all the assets of Aggieland Safari LLC and related entities (“Aggieland Safari”).

For additional information see “NOTE 3.

ACQUISITION” of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information on this matter.

Our Parks are open year round but experience increased seasonal attendance, typically beginning in the latter half of March through early September.

On a combined basis, net sales for the third and fourth quarter of our last two fiscal years represented approximately 67% to 68% of annual net sales.

The table below outlines our annual net sales, adjusted income before income taxes, and net cash provided by operating activities for the last five fiscal years.

As a result, our combined third and fourth quarter net sales have historically ranged from 68% to 72% of our annual net sales.

The table below outlines our annual net sales, reported and adjusted income before income taxes, and net cash provided by operating activities for the last five fiscal years.

During the past five fiscal years, our Georgia Park in particular has benefitted from several positive factors including strong and stable management, the addition of online ticket sales in June 2015, growth and positive economic conditions in the greater Atlanta area, as well as positive guest perceptions of this Park.

Our strong results through fiscal 2019 and the resulting improvements in our financial position provided us with the resources to pursue and ultimately close the Aggieland Safari acquisition.

Total net sales

Reported income before income taxes

% of total net sales

Adjusted income before income taxes (*)

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% of total net sales

* - Excludes $80,444 of tornado damage asset write-offs and costs in 2019, $130,532 of deferred financing costs write-offs in 2018, a $80,000 settlement gain in 2017, and judgment award charges of $68,088 in 2016.

* - Excludes $24,373 of tornado related insurance proceeds in 2020, $80,444 of tornado damage asset write-offs and costs in 2019, $130,532 of deferred financing costs write-offs in 2018, a $80,000 settlement gain in 2017, and judgment award charges of $68,088 in 2016.

The rapid acceleration of the COVID-19 pandemic in the United States occurred at the beginning of our 2020 fiscal year annual high season.

We began to see a significant reduction in paid attendance at our Georgia and Missouri Parks beginning the week of March 9, 2020.

Effective April 3, 2020, both Parks were closed to the public as a result of shelter-in-place mandates in Georgia and Missouri.

Prior to our acquisition of our Texas Park, its operations were also closed to the public for the majority of April 2020 due to a shelter-in-place mandate in Texas.

In compliance with respective state issued guidelines, our Georgia Park and our Texas Park each reopened on May 1, 2020, and our Missouri Park reopened on May 4, 2020.

Attendance levels have been strong at each of our three Parks from mid-May through the end of our 2020 fiscal year end, which has continued to the early part of our 2021 fiscal year.

We believe the strong year-over-year attendance growth each of our Parks experienced during the last five months of our 2020 fiscal year is a reflection of the principally outdoor nature of the family-friendly, wild animal education and entertainment experience provided at each of our Parks.

The experience offered at each of our Parks is particularly attractive during the COVID-19 pandemic as potential guests are seeking outdoor entertainment options.

While we have seen many repeat customers since reopening in May 2020, we have also experienced an increase in first time visitors seeking an outdoor entertainment alternative.

We believe this has increased the local and regional awareness for each of our Parks, which we believe will have longer-term, positive ramifications for our business.

However, there is also the possibility of longer-term negative impacts to our business, results of operations and cash flows, and financial condition as a result of the COVID-19 pandemic.

These negative impacts include changes in customer behavior and preferences causing significant volatility or reductions in attendance at one or more of our Parks, increases in operating expenses to comply with additional hygiene-related protocols, limitations in our ability to recruit and maintain staffing, limitations on our employees ability to work and travel, and significant changes in the economic or political conditions in the areas our Parks are located.

Despite our efforts to manage these impacts, the ultimate impact may be material, and will depend on a number of factors beyond our control, including the duration and severity of the COVID-19 pandemic and actions by governmental authorities taken to contain its spread and mitigate its public health effects.

There is also the potential for our attendance levels to decline after other attractions have reopened to full capacity once the COVID-19 pandemic has run its course or vaccines are in use and made widely available.

We are committed to leveraging the strong operating model we have established at our Georgia Park, with a focus on increasing attendance, as well as increasing the average revenue generated per guest visit via concession and gift shop revenues.

One of our highest priorities continues to be the improvement of the operating performance and profit at our Missouri Park.

Since we acquired our Missouri Park in March 2008, we have worked to upgrade the Park’s physical facilities, upgrade and expand its animal population and dramatically improve its concessions.

During our 2018 fiscal year, we made a significant investment in acquiring a baby female giraffe for our Missouri Park.

We will continue to focus our efforts to promote our Missouri Park and make additional improvements as our capital budget allows.

We expect that over the course of several years these efforts will ultimately yield favorable results.

On July 11, 2018, we completed a refinancing transaction (the “2018 Refinancing”), which included a term loan in the original principal amount of $1.60 million (the “2018 Term Loan”).

The 2018 Term Loan bears interest at a rate of 5.0% per annum and is payable in monthly payments of approximately $22,672, based on a seven year amortization period.

Our improved financial position allowed us to lower our term loan interest rate by 200 basis points to 5.0% per annum.

We used the proceeds of the 2018 Term Loan and available cash of approximately $1.25 million to retire the then outstanding principal balance of our 2013 Refinancing Loan.

LONG TERM DEBT” of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information.

Among our highest priorities over the next several years is continuing the integration our Texas Park.

Because our Texas Park first opened to the public in May 2019, we believe there remains tremendous potential to increase attendance by increasing the local and regional awareness of this facility via advertising and promotion.

We are pleased with the expanded attendance at our Missouri Park during the latter half of our 2020 fiscal year.

We plan on leveraging the increased exposure of this facility to continue to build on this recent success.

Our business plan includes expansion via the acquisition of additional local or regional theme parks and attractions, if attractive opportunities arise.

However, we have not made an acquisition since 2008 and there can be no assurance that we will be successful in acquiring and operating additional local or regional theme parks and attractions.

We believe acquisitions, if any, should not unnecessarily encumber the Company with additional debt that cannot be justified by current operations.

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By using a combination of equity, debt and other financing options, we intend to carefully monitor stockholder value in conjunction with the pursuit of growth.

Strong growth in our operating cash flow and the lower annual debt service associated with the 2018 Refinancing Loan has provided us with incremental cash flow margin.

Strong growth in our annual operating cash flow over the past five to six years has provided us with incremental cash flow, and provided us with the financial strength to complete the Aggieland Safari acquisition.

However, our current size and operating model leave us little room for error.

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Corporate expenses

Other income (expense), net

Write-off of loan fees - prepayment

Other income, net

Interest expense

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Total Net Sales

The Company’s total net sales for the year ended September 29, 2019 increased by $137,496, or 2.3%, to $6.18 million versus the year ended September 30, 2018.

Our Parks’ combined attendance based net sales increased by $181,143 or 3.1%, while animal sales decreased by $43,647.

Our Georgia Park’s total net sales increased by $104,741 or 2.0%.

Our Georgia Park’s attendance based net sales increased by $140,097 or 2.8% and animal sales decreased by $35,356.

Our Missouri Park’s net sales increased by $32,755 or 3.5%.

Our Missouri Park’s attendance based net sales increased by $41,046 or 4.6% and animal sales decreased by $8,291.

For the year ended September 29, 2019, attendance at our Georgia Park and our Missouri Park increased by 1.8% and 3.6%, respectively.

The Company’s total net sales for the year ended September 27, 2020 increased by $3.32 million or 53.7%, to $9.51 million versus $6.18 million for the year ended September 29, 2019.

Our Parks’ combined attendance based net sales increased by $3.34 million or 54.7%, while animal sales decreased by $13,701.

Excluding our Texas Park, acquired on April 27, 2020, our attendance based net sales increased by $2.17 million or 35.5%, while animal sales decreased by $23,640.

Each of our Parks was closed to the public during the majority of April 2020 as a result of COVID-19 pandemic related state level shelter-in-place mandates.

Subsequent to reopening in early May 2020, each Park experienced strong attendance level growth versus the prior year.

Our Georgia Park’s attendance based net sales increased by $1.68 million or 32.4%, to $6.84 million, while animal sales decreased by $24,652 to $36,856.

Our Missouri Park’s attendance based net sales increased by $492,806 or 52.6%, to $1.43 million, and animal sales increased by $1,012 to $19,483.

Subsequent to the acquisition of our Texas Park, it has generated attendance based sales of $1.17 million and animal sales of $9,939.

For the year ended September 27, 2020, attendance at our Georgia Park and our Missouri Park increased by approximately 33.5% and 47.6%, respectively.

Segment Operating Margin

Our consolidated segment operating margin increased by $92,244, resulting in segment income from operations of $2.39 million for the year ended September 29, 2019 compared to segment income from operations of $2.30 million for the year ended September 30, 2018.

Our Georgia Park’s segment income was $2.69 million, an increase of $243,520, principally as a result of higher attendance based net sales, lower cost of sales, and lower insurance and compensation costs, partially offset by lower animal sales and higher depreciation expense.

Our Missouri Park generated an operating loss of $295,634, an increase of $151,276, primarily as a result of tornado damage asset write-offs and repair expenses, higher cost of sales, and higher compensation expense, partially offset by higher attendance based net sales and lower advertising expense.

Our consolidated segment operating margin increased by $2.24 million, resulting in segment income from operations of $4.63 million for the year ended September 27, 2020 compared to segment income from operations of $2.39 million for the year ended September 29, 2019.

Excluding our recently acquired Texas Park, our segment income from operations increased by $1.81 million.

Our Georgia Park’s segment income was $4.11 million, an increase of $1.43 million, principally as a result of higher attendance based net sales, partially offset by higher cost of sales and higher compensation expense.

Our Missouri Park generated a segment operating income of $84,836, a net increase of $380,470.

Excluding an insurance recovery of $24,373 for tornado damage during our 2020 fiscal year, as well as the associated asset write-offs and expenses of $80,444 during our 2019 fiscal year, our Missouri Park’s segment operating income increased by $275,653, primarily as a result of higher attendance based net sales and lower other asset write-offs, partially offset by higher cost of sales, and higher compensation, insurance and depreciation expenses.

Subsequent to its acquisition on April 27, 2020, our Texas Park generated segment income of $433,916.

Corporate Expenses

Corporate spending totaled $846,398 during the year ended September 29, 2019, an increase of $258,655, primarily due to higher legal and related fees, and higher compensation expense.

Other Income (Expense), Net

Other income (expense), net, was $27,104 for the year ended September 29, 2019, an increase by $6,900, primarily as a result of higher interest income.

Write-off of loan fees – prepayment

During the year ended September 30, 2018, we wrote-off a total of $130,532 of deferred loan fees resulting from prepayment related to our 2013 Refinancing Loan.

Corporate spending decreased by $62,727 to $783,671 during the year ended September 27, 2020, primarily due to lower professional fees and compensation expenses, partially offset by higher insurance expense.

Professional fees for the year ended September 27, 2020 included approximately $93,200 associated with Aggieland Safari acquisition due diligence and related services, as well as approximately $38,700 in legal fees associated with the Marlton books and records matter.

Professional fees for the year ended September 29, 2019, included $75,000 in consulting fees and approximately $46,300 in legal fees associated with the Marlton books and records matter.

Compensation expense in our 2019 fiscal year included approximately $88,000 pursuant to the death benefit terms of the 2017 Meikle Employment Agreement.

Other Income, Net

Other income, net, was $27,788 for the year ended September 27, 2020, compared to $27,104 for the year ended September 29, 2019, an increase of $684, as oil and gas mineral rights income from our Texas property offset lower interest income.

Interest Expense

Interest expense, including the scheduled amortization of loan fees, was $76,003 for the year ended September 29, 2019, a decrease of $101,825, as a result of our 2018 Refinancing, which lowered our term loan borrowing level as well as the associated interest rate.

Our effective term loan interest rate was 5.00% for the year ended September 29, 2019, compared to approximately 6.20% for the year ended September 30, 2018, while average term loan borrowing levels decreased by approximately $1.19 million during our 2019 fiscal year as compared to the prior fiscal year.

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted into federal law, which includes significant changes to the U.S.

corporate federal tax code.

Among other changes, the Tax Act lowered the U.S.

statutory corporate federal income tax rate from 35.0% to 21.0% effective January 1, 2018.

As our 2018 fiscal year end fell on September 30, the U.S.

statutory federal income tax rate for our 2018 fiscal year was a blended rate of 24.5%, with the statutory rate of 21.0% applicable for our fiscal years beginning with 2019.

Based on current statutory tax rates, beginning in our 2019 fiscal year, we expect a blended federal and state income tax rate in the range of 26.0% to 27.0%

Interest expense, including the amortization of loan fees, was $182,926 for the year ended September 27, 2020, an increase of $106,923, primarily as a result of debt incurred related to the acquisition of our Texas Park on April 27, 2020.

For the year ended September 27, 2020, we generated income before income taxes of $3.69 million and recorded a tax provision of $926,400, for an effective tax rate of approximately 25.1%.

For the year ended September 29, 2019, we generated income before income taxes of $1.50 million and recorded a tax provision of $398,900, for an effective tax rate of approximately 26.7%.

Our 2018 fiscal year income tax provision includes the utilization of approximately $93,500 of deferred tax assets, comprising the remaining balance of our Federal income tax net operating loss carry-forwards.

We also recognized approximately $48,000 of credits associated with Federal alternative minimum taxes paid in previous years.

In addition, during our 2018 fiscal year, we recognized a one-time net deferred tax charge of $66,855, of which $36,595 was associated with the revaluation of our net deferred tax liability at the 2018 fiscal year blended tax rate.

The remaining net deferred tax charge of $30,260 was associated with a reassessment of our remaining cumulative Federal net operating loss carry-forward.

As of September 30, 2018, we fully utilized our cumulative Federal net operating loss carry-forwards.

For additional information, see “NOTE 8.

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Net Income and Income Per Share

Our net income for the year ended September 29, 2019 was $1.10 million or $0.01 per basic share and per fully diluted share, an increase of $85,346 as compared with a net income of $1.01 million or $0.01 per basic share and per fully diluted share, for the year ended September 30, 2018.

Our net income for the year ended September 27, 2020 was $2.77 million or $0.04 per basic share and per fully diluted share, an increase of $1.67 million as compared with a net income of $1.10 million or $0.01 per basic share and per fully diluted share, for the year ended September 29, 2019.

For the year ended

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Tax impact - tornado damage and expenses

Write-off of loan fees - prepayment

Tax impact - write-off of loan fees-prepayment

Adjusted net income

As shown in the table above, several significant one-time items impacted our year-over-year net income comparison.

Our 2019 fiscal year included $80,444 of asset write-offs and clean up expenses associated with tornado related damages at our Missouri Park that occurred on May 21, 2019.

Our 2018 fiscal year included $130,532 for the write-off of deferred loan fees associated with term loan prepayments.

Excluding the after-tax effect of these items, our 2019 and 2018 fiscal year adjusted net income would have been $1.16 million and $1.10 million, respectively, resulting in an increase in adjusted net income of $56,261.

The primary drivers for this improvement are a $243,520 increase in segment income for our Georgia Park, a 101,825 reduction in interest expense, a $6,900 increase in other income (expense) and a $33,503 decrease in our adjusted income tax provision, partially offset by a $258,655 increase in Corporate spending and a $70,832 increase in the adjusted segment loss for our Missouri Park.

As shown in the table above, several one-time items impacted our year-over-year net income comparison.

Our 2020 fiscal year included an insurance recovery of $24,373 associated with tornado damages at our Missouri Park, which resulted in $80,444 of asset write-offs and clean up expenses during our 2019 fiscal year.

Excluding the after-tax effect of these items, our 2020 and 2019 fiscal year adjusted net income would have been $2.75 million and $1.16 million, respectively, resulting in an increase in adjusted net income of $1.59 million.

Excluding these items, the increase in our adjusted net income is attributable to a $1.43 million increase in segment income for our Georgia Park, a $275,653 net increase in the segment income of our Missouri Park, $433,916 of segment income generated by our Texas Park, and a $62,727 decrease in Corporate expenses, partially offset by a $106,923 increase in interest expense, and a $505,490 increase in our income tax provision.

Financial Condition, Liquidity and Capital Resources

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Our primary sources of liquidity are cash generated by operations and borrowings under our loan agreements.

Our slow season starts after Labor Day in September and runs until Spring Break, which typically begins during the latter half of March.

The first and second quarters of our fiscal year have historically generated negative cash flow, requiring us to borrow on a seasonal basis to fund operations and prepare our Parks for the busy season during the third and fourth quarters of our fiscal year.

However, as a result of our improved cash position, during our 2019 and 2018 fiscal years we did not utilize any seasonal borrowing.

We believe that our performance has improved to the point that annual cash flow from operations will be sufficient to fund operations, make debt-service payments and spend modestly on capital improvements in the near-term.

During the next twelve months, our focus will continue on increasing Park attendance revenues.

Any slowdown in revenue or unusual capital outlays may require us to seek additional capital.

Historically our slow season starts after Labor Day in September and runs until Spring Break, which typically beginning in the latter of March.

The first and second quarters of our fiscal year have historically generated negative cash flow, requiring us 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.

As a result of our improved cash position, during our 2020 and 2019 fiscal years we did not utilize any seasonal borrowing.

As a result of the initial negative impacts of the COVID-19 pandemic on our attendance revenues, we took actions to reduce spending while our Parks were closed to the public during the majority of April 2020.

We also secured Paycheck Protection Program (“PPP”) loans primarily to support the payroll for our employees during the Park closures and uncertainties of when we would be able to reopen our Parks.

The PPP was established under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was signed into law on March 27, 2020, and is administered by the U.S.

Small Business Administration (the “SBA”).

During the next twelve to eighteen months our focus will be on running our Parks in a manner that supports the health and safety of our guests, employees and animals, at the same time prudently managing our cash flows.

Any significant slowdown in revenues or unusual capital outlays may require us reduce spending and potentially seek additional capital.

Our working capital was $3.86 million as of September 27, 2020, compared to $3.45 million as of September 29, 2019.

This increase in working capital primarily reflects cash flow provided by operating activities partially offset by a capital investment spending and scheduled term loan payments during our 2019 fiscal year.

This increase in working capital primarily reflects cash flow provided by operating activities, partially offset by net cash invested in the Aggieland Safari acquisition and other capital investment spending, as well as scheduled term loan payments during our 2020 fiscal year.

Total loan debt, including current maturities, as of September 27, 2020 was $7.02 million compared to $1.36 million as of September 29, 2019.

The decrease in total loan debt is a result of scheduled payments against our 2018 Term Loan during the year ended September 29, 2019.

There were no borrowings on our bank LOCs as of September 29, 2019 and September 30, 2018, respectively.

The increase in total loan debt is the result of the Texas Park acquisition on April 27, 2020 and PPP loans entered into during our 2020 fiscal year, partially offset by scheduled payments against our 2018 term loan during the year ended September 27, 2020.

There were no borrowings on our bank line of credit (“LOC”) as of September 27, 2020 and September 29, 2019, respectively.

As of September 27, 2020, we had equity of $11.73 million and total loan debt of $7.02 million, resulting in a debt to equity ratio of 0.60 to 1.0, compared to 0.15 to 1.0 as of September 29, 2019.

Operating Activities

Net cash provided by operating activities was $1.86 million and $1.77 million, for our 2019 and 2018 fiscal years, respectively, resulting in an increase of $90,915, primarily as a result of an increase in our net income and lower net working capital uses, partially offset by lower aggregate non-cash expenses.

Net cash provided by operating activities was $3.68 million and $1.86 million, for our 2020 and 2019 fiscal years, respectively, resulting in an increase of $1.82 million, primarily as a result of a higher net income, higher net non-cash expenses and lower net working capital uses, largely due to higher deferred revenues, as well as higher accrued income taxes and sales tax.

Investing Activities

During our 2019 fiscal year, we spent $554,039 on capital improvements at our Parks, compared to $612,273 spent on capital improvements during our 2018 fiscal year.

During our 2020 fiscal year we acquired Aggieland Safari, investing approximately $6.37 million of cash.

Our 2020 fiscal year also included $525,409 of capital improvements at our Parks, compared to $554,039 spent on capital improvements during our 2019 fiscal year.

During our 2020 fiscal year, property and equipment investing at our Georgia Park included improvements to our drive-through roads, improvements and additions to animal shelters and exhibits, spending on annual requirements for our rental vehicle fleet, and various animal acquisitions.

For our Missouri Park, 2020 fiscal year property and equipment investments included the completion of a new giraffe barn and primate night house, various animal acquisitions, fencing improvements and the acquisition of various equipment.

For our Texas Park, 2020 fiscal year property and equipment investments included various park maintenance equipment and animal acquisitions.

For our Georgia Park, 2019 fiscal year spending on property and equipment included improvements to our drive-through roads, new roofs for our ticket/concession and gift shop buildings, improvements and additions to animal shelters and exhibits, spending on annual requirements for our rental vehicle fleet, additions to our park maintenance equipment, and various animal acquisitions.

For our Missouri Park, 2019 fiscal year spending on property and equipment included new guest restrooms, various animal acquisitions, and improvements to several animal shelters and exhibits.

For our Georgia Park, 2018 fiscal year spending on property and equipment included improvements to the drive-through roads, additional guest parking, various animal acquisitions, improvements and additions to animal shelters and exhibits, spending on annual requirements for our rental vehicle fleet, and several additions to our guest entertainment offerings.

For our Missouri Park, 2018 fiscal year spending on property and equipment included the acquisition of a giraffe and various other animal purchases, improvements to several animal shelters and exhibits, as well as additions to our park maintenance equipment.

Financing Activities

During our 2019 fiscal year, we used of $197,097 of cash in financing activities, compared to $1.69 million of cash used in financing activities during our 2018 fiscal year.

On July 11, 2018 we paid down the balance of our 2013 Refinancing Loan, utilizing $1.25 million of cash on-hand, along with $1.6 million in proceeds from the 2018 Term Loan.

In addition, on December 13, 2017, we made a $300,000 prepayment against out 2013 Refinancing Loan.

The remaining $123,246 in loan payments during our 2018 fiscal year as well as the $197,097 in loan payments made during our 2019 fiscal year, were based on applicable term loan payment schedules.

We did not utilize seasonal borrowings during our 2019 or 2018 fiscal years.

During our 2020 fiscal year, net cash provided by financing activities related to our Aggieland acquisition totaled $4.94 million and $188,087 was provided by PPP loans.

Cash used in financing activities for scheduled payments against our 2018 Term Loan were $207,135 for our 2020 fiscal year, compared to $197,097 for our 2019 fiscal year.

Borrowing Agreements

On July 11, 2018, we, through our wholly owned subsidiary Wild Animal – Georgia, completed the 2018 Refinancing with Synovus.

The 2018 Refinancing included the 2018 Term Loan in the original principal amount of $1.6 million and a line of credit of up to $350,000 (the “2018 LOC”).

On April 27, 2020, we acquired Aggieland Wild Animal – Texas, financing the transaction with the 2020 Term Loan from First Financial Bank (“First Financial”) and the Aggieland Seller Note.

The 2020 Term Loan in the original principal amount of $5,000,000 from First Financial is secured by substantially all of the Aggieland Wild Animal – Texas assets, as well as guarantees from the Company and its subsidiaries.

The 2020 Term Loan bears interest at a rate of 5.0% per annum, has a maturity date of April 27, 2031, with interest only payable monthly through April 2021.

We paid a total of approximately $62,375 in fees and expenses in connection with the 2020 Term Loan.

The Aggieland Seller Note represents a deferred portion of the purchase price, has a face value of $750,000, bears no interest, has a maturity date of June 30, 2021, and is secured by a second priority subordinated lien and security interest in the acquired mineral rights and the animal inventory.

We applied a 2.5% discount rate to determine a fair value of $728,500 for the Aggieland Seller Note as of April 27, 2020 and the resulting $21,500 discount will be amortized as interest expense over the 14 month period until the note matures.

Including the remaining unamortized discount, the recorded value of the Aggieland Seller Note as of September 27, 2020 was $736,015.

On July 11, 2018, through our wholly owned subsidiary Wild Animal – Georgia, we completed the 2018 Refinancing with Synovus Banks (“Synovus”).

The 2018 Refinancing included the 2018 Term Loan in the original principal amount of $1.60 million and a LOC of up to $350,000 (the “2018 LOC”).

The 2018 Term Loan bears interest at a rate of 5.0% per annum and is payable in monthly payments of approximately $22,672, based on a seven year amortization period.

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We paid a total of approximately $15,680 in fees and expenses in connection with the 2018 Refinancing.

As a result of the 2018 Refinancing and $300,000 prepayment made earlier in fiscal 2018, we wrote-off $130,532 of 2013 Refinancing Loan deferred fees during the year ended September 30, 2018.

The outstanding balance of the 2018 Term Loan was $1,164,113 as of September 27, 2020.

As a result of the significant negative economic impacts and uncertainties caused by the COVID-19 pandemic, Wild Animal – Georgia and Wild Animal – Missouri each applied for PPP loans.

On April 14, 2020 and April 16, 2020, we received two unsecured PPP loans totaling $188,087.

Including accrued interest, the principal outstanding our PPP loans was $188,925 as of September 27, 2020.

The PPP was established under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was signed into law on March 27, 2020, and is administered by the U.S.

Small Business Administration (the “SBA”).

The term of the PPP loans is two years, with an interest rate of 1.0% per annum.

All payments are deferred for the first six months of these PPP loans, with accrued interest being added to the principal during the payment deferral period.

After the initial six-month deferral period, monthly principal and interest payments will be due until maturity for any portion of the PPP loans not forgiven.

Under the terms of the CARES Act, some or all of the PPP loan proceeds are eligible to be forgiven.

The amount of the PPP loans eligible to be forgiven are based on the use of the proceeds for payroll costs, mortgage interest, rent or utility costs, and the maintenance of employee and compensation levels, subject to limitations and ongoing rulemaking by the SBA.

While not assured, we anticipate a substantial portion of our PPP loan proceeds have been used for costs that are eligible for forgiveness, based on the current SBA guidelines and we intend to apply for such forgiveness in the first half of our 2021 fiscal year.

Subsequent Events

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We review long-lived assets whenever circumstances change such that the recorded value of an asset may not be recoverable and therefore impaired.

Revenue Recognition

We recognize revenues when a performance obligation has been satisfied by transferring control of promised services or products to our guests/customers in an amount that reflects the amount the Company has received or expects to receive in exchange for those services or products.

Accounting for Income Taxes

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In the event we determine it is more likely than not we will not realize our deferred tax assets we establish a valuation allowance.

During the year ended October 2, 2016, we determined that a valuation allowance was no longer appropriate for our Federal net operating loss carry-forwards as the uncertainties related to our ability to utilize these deferred tax assets before they expire have been substantially reduced, making it more likely than not we will fully realize the related future tax benefit.

During the year ended September 30, 2018, we utilized the remaining balance of our Federal net operating loss carry-forwards.

Contingencies

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We are not aware of any other legal matters involving the Company, however, there can be no assurance that all proceedings that may currently be brought against us are known by us at this time.

Other Significant Accounting Policies

Other significant accounting policies, primarily those with lower levels of uncertainty than those discussed above, are also critical to understanding our consolidated financial statements.

The Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K contain additional information related to our accounting policies and should be read in conjunction with this discussion.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis