PARKS AMERICA, INC 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management’s discussion and analysis of results of operations and financial condition (“MD&A”) is a supplement to the accompanying consolidated financial statements and provides additional information on our businesses, current developments, financial condition, cash flows and results of operations. The following discussion should be read in conjunction with our consolidated financial statements for the fiscal year ended October 2, 2022 provided in this Annual Report on Form 10-K. Certain statements contained herein may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, as discussed more fully herein. The forward-looking information set forth in this Annual Report on Form 10-K is based on management’s current views and assumptions regarding future events, and speak only as of the date of this report. We assume no obligation to update any of these forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting these forward-looking statements, except as required by applicable law, including the securities laws of the United States and the rules and regulations of the SEC. More information about potential factors that could affect our business and financial results is included in the section entitled “ Risk Factors ” in this Annual Report on Form 10-K. 11 Overview Through our wholly owned subsidiaries, we own and operate three regional theme parks and are in the business of acquiring, developing and operating local and regional theme parks and attractions in the United States. Our wholly owned subsidiaries are Wild Animal Safari, Inc., a Georgia corporation (“Wild Animal – Georgia”), Wild Animal, Inc., a Missouri corporation (“Wild Animal – Missouri”), and Aggieland-Parks, Inc., a Texas corporation (“Aggieland Wild Animal – Texas”). Wild Animal – Georgia owns and operates the Wild Animal Safari theme park in Pine Mountain, Georgia (the “Georgia Park”). Wild Animal – Missouri owns and operates the Wild Animal Safari theme park located in Strafford, Missouri (the “Missouri Park”). Aggieland Wild Animal – Texas owns and operates the Aggieland Wild Animal Safari theme park near Bryan/College Station, Texas (the “Texas Park”). On April 27, 2020, we acquired substantially all the assets of Aggieland Safari LLC and related entities (“Aggieland Safari”). Our parks are open year round, but experience increased seasonal attendance, typically beginning in the latter half of March through early September. Combined third and fourth quarter net sales were 62.1% and 60.3% of annual attendance based net sales for our 2022 and 2021 fiscal years, respectively. Since the acquisition of our Texas Park, the combined third and fourth quarter concentration of our sales has been reduced. The table below outlines our annual net sales, reported and adjusted income before income taxes, earnings before interest, taxes, depreciation and amortization (“EBITDA”), and net cash provided by operating activities for the last five fiscal years. For the past several years, our Georgia Park has benefitted from a number of 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 complete the Aggieland Safari acquisition. Fiscal Year 2022 2021 2020 2019 2018 Total net sales $ 10,741,417 $ 11,862,491 $ 9,507,264 $ 6,184,254 $ 6,046,758 % change -9.5 % 24.8 % 53.7 % 2.3 % -3.1 % Reported income before income taxes 1,030,291 3,680,546 3,693,869 1,495,438 1,422,592 % change -72.0 % -0.4 % 147.0 % 5.1 % -30.1 % % of total net sales 9.6 % 31.0 % 38.9 % 24.2 % 23.5 % Adjusted income before income taxes (*) 1,130,291 3,490,558 3,669,496 1,575,882 1,553,124 % change -67.6 % -4.9 % 132.9 % 1.5 % -20.6 % % of total net sales 10.5 % 29.4 % 38.6 % 25.5 % 25.7 % EBITDA 2,168,161 4,620,623 4,457,682 2,138,546 2,188,851 % change -53.1 % 3.7 % 108.4 % -2.3 % -17.1 % % of total net sales 20.2 % 39.0 % 46.9 % 34.6 % 36.2 % Net cash provided by operating activities 1,540,719 3,308,718 3,680,401 1,858,158 1,767,243 % change -53.4 % -10.1 % 98.1 % 5.1 % -3.3 % % of total net sales 14.3 % 27.9 % 38.7 % 30.0 % 29.2 % * - Excludes a $100,000 legal settlement charge in 2022, a $189,988 gain on extinguishment of debt in 2021, $24,373 of tornado related insurance proceeds in 2020, $80,444 of tornado damage asset write-offs and costs in 2019, and $130,532 of deferred financing costs write-offs in 2018. EBITDA is not a measurement of operating performance computed in accordance with generally accepted accounting principles (“GAAP”) and should not be considered as a substitute for operating income, net income or cash flows from operating activities computed in accordance with GAAP. We believe that EBITDA is a meaningful measure as it is widely used by analysts, investors and comparable companies in our industry to evaluate our operating performance on a consistent basis, as well as more easily compare our results with those of other companies in our industry. We also believe EBITDA is a meaningful measure of park-level operating profitability. EBITDA is a supplemental measure of our operating results and is not intended to be a substitute for operating income, net income or cash flows from operating activities as defined under GAAP. 12 The following table provides a reconciliation of our reported income before income taxes to our EBITDA for our five most recent fiscal years: Fiscal Year 2022 2021 2020 2019 2018 Reported income before income taxes $ 1,030,291 $ 3,680,546 $ 3,693,869 $ 1,495,438 $ 1,422,592 Interest expense 261,621 335,944 182,926 76,003 177,828 Depreciation and amortization 782,987 704,016 576,139 453,968 425,647 (Gain) loss on disposal of operating assets, net (6,738 ) 90,105 29,121 32,693 32,252 Legal settlement 100,000 - - - - Gain on extinguishment of debt - (189,988 ) - - - Tornado damage and expenses, net - - (24,373 ) 80,444 - Write-off of loan fees - prepayment - - - - 130,532 EBITDA $ 2,168,161 $ 4,620,623 $ 4,457,682 $ 2,138,546 $ 2,188,851 In response to the outbreak of the COVID-19 pandemic, governmental authorities throughout the United States implemented 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. We implemented several measures to mitigate the impacts of the pandemic on our business and financial position. During the initial shutdown period, we reduced staffing, applied for and received Paycheck Protection Program (“PPP”) loans and reduced discretionary spending. In addition, we delayed closing the Texas Park acquisition to renegotiate various terms, primarily focused on reducing the cash requirements of the acquisition in the subsequent year. In early April 2020, our Georgia and Missouri Parks closed to the public due to shelter-in-place mandates. In addition, our Texas Park, was closed to the public for the month prior to its acquisition, due to a shelter-in-place mandate. In compliance with respective state issued guidelines, each of our parks reopened in early May 2020. After reopening, attendance levels increased significantly at each of our parks for the balance of our 2020 fiscal year, which continued throughout our 2021 fiscal year in comparison to comparable pre-COVID-19 periods. We experienced a decline in comparable year-over-year attendance based net sales and attendance for the last 22 weeks of our 2021 fiscal year and for our entire 2022 fiscal year, respectively. While we experienced a comparable 52-week attendance-based sales decline for our 2022 fiscal year compared to the elevated pandemic levels, our overall sales remain at significantly higher levels when compared to pre-COVID-19 periods. On a combined basis, attendance-based sales of our Georgia and Missouri Parks for our 2022 fiscal year were up approximately 43.0% compared to the comparable pre-COVID-19 2019 fiscal year, which we believe illustrates a significant increase in local and regional awareness of each park, a critical development with positive long-term ramifications for our business. (Note, our Texas Park, acquired on April 27, 2020, originally opened in May 2019; therefore, a full year of sales is not available for pre-COVID-19 periods). Although we have experienced attendance gains and strong cash flows subsequent to the reopening our of parks after the initial closures at the beginning of the pandemic, there may be longer-term negative impacts to the Company’s business, results of operations and cash flows, and financial condition as a result of the COVID-19 pandemic. These negative impacts may include changes in customer behavior and preferences, increases in operating expenses to meet consumer expectations and perceptions, limitations in our ability to recruit and maintain staffing, as well as increasing wages required retain and recruit staff. There is also the potential for attendance levels at our parks to moderate or decline as alternative entertainment venues are now open and consumers have broader travel and entertainment options. We are committed to leveraging the strong operating model we have established at our Georgia Park at all three of our properties, with a focus on increasing attendance through enhanced marketing efforts and focused capital investments, as well as continuing to prudently increase the average revenue generated per guest visit via concession and gift shop revenues. Among our highest priorities over the next several years is continuing the integration of our Texas Park, continual enhancement of the overall guest experience at each of our parks, as well as the introduction new programming and enhanced marketing efforts. As 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 since it reopened in May 2020 and plan on leveraging the increased exposure of this facility to continue to build on this recent success. 13 Our 2023 fiscal year capital investment plan remains elevated versus historical levels, however, is lower than the $1.84 million record level of capital spending during our 2022 fiscal year. Our 2023 capital plan targets substantial guest-facing enhancements at all three of our parks, delivering a marketable attraction at each property and setting the stage for longer-term master planning and optimization at every park. Our plan to open a significant new giraffe exhibit at our Georgia Park during our 2022 fiscal year experienced delays due to a highly inflationary period for building materials and a challenging labor market. We remain committed to this showcase attraction and expect to make progress on this project during our 2023 fiscal year, however the opening date is still unknown. Our 2023 projected capital investment spending will again be fully funded from our existing cash and continues to demonstrate our commitment to building for long-term, sustainable growth. Our long-term business plan also includes expansion via the acquisition of 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. We may also pursue contract management opportunities for themed attractions owned by third parties. 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 annual operating cash flow over the past several fiscal years has provided us with incremental cash flow, provided us with the financial strength to complete the Aggieland Safari acquisition and has funded a significant increase in capital investment. However, our current size and operating model leave us little room for error. Any future capital raised by us is likely to result in dilution to existing stockholders. It is possible that cash generated by, or available to, us may not be sufficient to fund our capital and liquidity needs for the near-term. Consolidated and Segment Results of Operations for the Year Ended October 2, 2022 as Compared to the Year Ended October 3, 2021 We manage our operations on an individual location basis. Discrete financial information is maintained for each park and provided to our corporate management for review and as a basis for decision-making. The primary performance measures used to allocate resources are Park earnings before interest and tax expense, and free cash flow. We use this measure of operating profit to gauge segment performance because we believe this measure is the most indicative of performance trends and the overall earnings potential of each segment. Our 2022 fiscal year was comprised of 52-weeks, compared to our 2021 fiscal year which was comprised of 53-weeks. Therefore, in addition to full year reported attendance based sales comparisons, attendance based sales analyses will include comparable 52-week sales comparisons. The following table shows our consolidated and segment operating results for the years ended October 2, 2022 and October 3, 2021: Georgia Park Missouri Park Texas Park Consolidated Fiscal 2022 Fiscal 2021 Fiscal 2022 Fiscal 2021 Fiscal 2022 Fiscal 2021 Fiscal 2022 Fiscal 2021 Total net sales $ 7,086,232 $ 8,067,808 $ 1,691,602 $ 1,792,112 $ 1,963,583 $ 2,002,571 $ 10,741,417 $ 11,862,491 Segment income (loss) from operations 2,895,820 4,517,649 (344,404 ) 202,597 (254,834 ) (62,922 ) 2,296,582 4,657,324 Segment operating margin % 40.9 % 56.0 % -20.4 % 11.3 % -13.0 % -3.1 % 21.4 % 39.3 % Corporate expenses (995,946 ) (896,136 ) Other income, net 91,276 65,314 Legal settlement (100,000 ) - Gain on extinguishment of debt - 189,988 Interest expense (261,621 ) (335,944 ) Income before income taxes $ 1,030,291 $ 3,680,54 6 Total Net Sales The Company’s total net sales for the year ended October 2, 2022 decreased by $1.12 million, to $10.74 million compared to $11.86 million for the year ended October 3, 2021. Our Parks’ combined attendance based net sales decreased by $1.05 million or 9.0%, and animal sales decreased by $75,607. On a comparable 52-week basis, our attendance based net sales decreased by $848,862 or 7.4%. On a reported basis, our Georgia Park’s attendance based net sales decreased by $881,252 or 11.1%, to $7.07 million, our Missouri Park’s attendance based net sales decreased by $101,592 or 5.7%, to $1.67 million, and our Texas Park’s attendance based sales decreased by $62,623 or 3.2%, to $1.88 million. 14 On a comparable 52-week basis, our Georgia Park’s attendance based net sales decreased by $748,701 or 9.6%, our Missouri Park’s attendance based net sales decreased by $76,473 or 4.4%, and our Texas Park’s attendance based sales decreased by $23,688 or 1.2%. On comparable 52-week basis, paid attendance at our Georgia Park decreased by approximately 17.9%, paid attendance our Missouri Park decreased by approximately 15.7%, while paid attendance at our Texas Park increased by approximately 2.2%. Segment Operating Margin Our consolidated segment operating margin decreased $2.36 million, resulting in segment income from operations of $2.30 million for the year ended October 2, 2022 compared to segment income from operations of $4.66 million for the year ended October 3, 2021. Our Georgia Park’s segment income was $2.90 million, a decrease of $1.62 million, principally attributable to lower attendance based net sales and lower animal sales, as well as higher compensation and benefits, advertising, insurance and general operating expenses, partially offset by higher margins on gift shop and food service sales. Our Missouri Park generated a segment operating loss of $344,404, a net decrease of $547,001, primarily attributable to lower attendance based net sales, as well as higher special event, advertising, compensation, depreciation and general operating expenses, partially offset by gains on asset dispositions. Our Texas Park generated a segment loss of $254,834, an increase of $191,912, primarily attributable lower attendance based net sales, as well as higher advertising, benefits, insurance, depreciation and general operating expenses, partially offset by higher animal sales, higher margins on gift shop and food service sales, and lower losses on asset dispositions. Corporate Expenses Corporate spending increased by $99,810 to $995,946 during the year ended October 2, 2022, primarily due to higher professional fees, compensation and benefits, travel and insurance expenses. Legal Settlement Charge Effective August 5, 2022, we agreed to pay $100,000 to two children of a former officer of the Company to settle a complaint alleging we were obligated to purchase life insurance of at least $540,000 for said officer. The release was obtained, and the full payment was made prior to October 2, 2022. For additional information, see “N ote 8. COMMITMENTS AND CONTINGENCIES ” of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K. Other Income, Net Other income, net, was $91,276 for the year ended October 2, 2022, an increase of $25,962, primarily attributable to higher mineral rights royalty income for our Texas Park. Gain on Extinguishment of Debt During the year ended October 3, 2021, we received notification the SBA approved both of our PPP loan forgiveness applications, resulting in a gain on extinguishment of debt totaling $189,988. Interest Expense Interest expense for the year ended October 2, 2022 was $261,621, a decrease of $74,323, primarily as a result of the lower interest rate associated with the June 2021 refinancing of our Synovus term loan and scheduled principal payments on our term loans over the trailing 12 month period, as well as the retirement of the Aggieland Seller Note in June 2021. Income Taxes For the year ended October 2, 2022, we generated income before income taxes of $1.03 million and recorded a tax provision of $302,800, for an effective tax rate of approximately 29.4%, which was unfavorably impacted by state income taxes due to operating losses for our Missouri and Texas Parks. For the year ended October 3, 2021, we generated income before income taxes of $3.68 million and recorded a tax provision of $882,000, for an effective tax rate of approximately 24.0%, which was favorably impacted by the non-taxable PPP loan forgiveness. For additional information, see “N ote 7. Income Taxes ” of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K. 15 Net Income and Income Per Share Our reported net income for the year ended October 2, 2022 was $727,491 or $0.01 per basic share and per fully diluted share, a decrease of $2.07 million or $0.03 per basic and fully diluted share, as compared with reported net income of $2.80 million or $0.04 per basic share and per fully diluted share, for the year ended October 3, 2021. For the year ended October 2, 2022 October 3, 2021 Net income $ 727,491 $ 2,798,546 Legal settlement 100,000 - Tax impact - legal settlement (27,000 ) - Gain on extinguishment of debt - (189,988 ) Adjusted net income $ 800,491 $ 2,608,558 As shown in the table above, several one-time items impacted our year-over-year reported net income comparison. Our 2022 fiscal year included a legal settlement charge of $100,000. Our 2021 fiscal year included a gain on extinguishment of debt totaling $189,988. Management believes that adjusted net income, excluding one-time items, should be considered in evaluating the ongoing operating performance of our business. Excluding the after-tax effect of these items, our 2022 and 2021 fiscal year adjusted net income would have been $800,491 and $2.61 million, respectively, resulting in a decrease in adjusted net income of $1.81 million. The decrease in our adjusted net income is attributable to a $1.62 million decrease in the segment income for our Georgia Park, a $547,001 net decline in the segment income for our Missouri Park, a $191,912 increase in the segment loss for our Texas Park, a $99,810 increase in Corporate expenses, partially offset by a $74,323 decrease in interest expense, a $25,962 increase in other income and a $552,200 decrease in our adjusted income tax provision. Financial Condition, Liquidity and Capital Resources Financial Condition and Liquidity Our primary sources of liquidity are cash generated by operations and borrowings under our loan agreements. Historically, our slow season starts after Labor Day in September and runs until Spring Break, which typically begins toward the end of March. The first and second quarters of our fiscal year have historically generated negative cash flow, requiring us to use cash generated from prior fiscal years, as well as borrowing on a seasonal basis, to fund operations and prepare our Parks for the busy season during the third and fourth quarters of our fiscal year. As a result of our improved cash position, during our 2022 and 2021 fiscal years we did not utilize any seasonal borrowing. On June 18, 2021, we entered a new $1.95 million, seven-year term loan (the “2021 Term Loan”) with Synovus Bank (“Synovus”), at an annual interest rate of 3.75%. The 2021 Term Loan replaced our 2018 borrowing facility with Synovus Bank, which included a term loan in the original principal amount of $1.60 million at 5.00% per annum and a $350,000 line of credit at 4.75% per annum. After paying off the balance outstanding on the 2018 Term Loan, the net additional borrowings on the 2021 Term Loan were $930,222 and the line of credit was not renewed. Combined with available cash, we used the incremental proceeds from the 2021 Term Loan to paydown $1.0 million of the 2020 Term Loan used to finance our Texas Park acquisition, which has a 5.00% annual interest rate. Overall, we estimate this refinancing will generate approximately $24,375 in annual interest savings. Our working capital was $4.67 million as of October 2, 2022, compared to $5.70 million as of October 3, 2021. The year-over-year decrease in working capital primarily reflects cash used for capital investments and scheduled term loan payments, partially offset by cash generated by operating activities during our 2022 fiscal year. Total loan debt, including current maturities, as of October 2, 2022 was $4.96 million compared to $5.66 million as of October 3, 2021. The year-over-year decrease in total loan debt the result scheduled term loan payments during our 2022 fiscal year. As of October 2, 2022, we had equity of $15.35 million and total loan debt of $4.96 million, resulting in a debt to equity ratio of 0.32 to 1.0, compared to 0.39 to 1.0 as of October 3, 2021. Operating Activities Net cash provided by operating activities was $1.54 million for our 2022 fiscal year, compared to $3.31 million, for our 2021 fiscal year, resulting in a decrease of $1.77 million, principally due to lower net income. 16 Investing Activities Our 2022 fiscal year included $1.84 million of capital improvements, compared to $988,901 spent on capital improvements during our 2021 fiscal year, representing an increase of $850,490. During our 2022 fiscal year, property and equipment investing at our Georgia Park included various animal acquisitions, additions to animal shelters and exhibits, the addition of a guest party pavilion, enhancements to and expansion of our food service capabilities, improvements to our gift shop, annual improvements to our drive-through roads, and spending on annual requirements for our rental vehicle fleet. For our Missouri Park, 2022 fiscal year property and equipment investments included various animal acquisitions, the addition of a new otter exhibit scheduled to open in our 2023 fiscal year, renovations of various animal shelters and exhibits, ground and electrical improvements to support a new Christmas Lights display, enhancements to and expansion of our food service capabilities, the addition of playground equipment in the walkabout section, and the acquisition of various equipment. For our Texas Park, 2022 fiscal year property and equipment investments included various animal acquisitions, the addition of and enhancements to various animal shelters, the acquisition of several vehicles for customer rental and related service equipment, other equipment additions, and various improvements focused on introducing expanded food service operations, expected to fully launch in fiscal 2023. During our 2021 fiscal year, property and equipment investing at our Georgia Park included improvements to our drive-through road and other infrastructure improvements, various improvements to our concession and food service capabilities, improvements and additions to animal shelters and exhibits, spending on annual requirements for our rental vehicle fleet, and the acquisition of various animals. For our Missouri Park, 2021 fiscal year property and equipment investments included improvements and additions to animal shelters and exhibits, the acquisition of various animals, fencing improvements, improvements to our gift shop, and the acquisition of various equipment. For our Texas Park, 2021 fiscal year property and equipment investments included improvements to animal shelters and exhibits, the acquisition of various park equipment, drive through road improvements, and the acquisition of various animals. Financing Activities Net cash used in financing activities was $866,193 for the year ended October 2, 2022, compared to $1.20 million for the year ended October 3, 2021, resulting in a decrease of $333,969. During our 2022 fiscal year, cash used in financing activities was for scheduled payments on our term loans, as well as principal payments on a financing lease obligation prior to its termination in September 2022. In June 2021, we entered into the 2021 Term Loan for $1.95 million, using those proceeds to pay off the $1.02 million outstanding balance of our 2018 Term Loan. Combined with additional cash, we used the net remaining proceeds of the 2021 Term Loan to prepay $1.0 million against our 2020 Term Loan. In addition, on June 29, 2021, we paid off the $750,000 Aggieland Safari Seller Note. Excluding the $1.0 million prepayment of the 2020 Term Loan, net principal payments against our combined term loans totaled $448,648 for the year ended October 3, 2021. Borrowing Agreements On June 18, 2021, through our wholly owned subsidiary Wild Animal – Georgia, we completed a refinancing transaction (the “2021 Refinancing”) with Synovus Bank. The 2021 Refinancing included a term loan in the original principal amount of $1.95 million. The 2021 Term Loan bears interest at a rate of 3.75% per annum and is payable in monthly installments of approximately $26,480, based on a seven-year amortization period. The 2021 Term Loan has a maturity date of June 18, 2028. The 2021 Term Loan is secured by a security deed on the assets of Wild Animal – Georgia. We paid a total of approximately $1,514 in fees and expenses in connection with the 2021 Refinancing. The outstanding balance of the 2021 Term Loan was$1.64 million as of October 2, 2022. On April 27, 2020, through our wholly owned subsidiary Aggieland-Parks Inc., we acquired Aggieland Wild Animal – Texas. This acquisition was financed with the “2020 Term Loan” from First Financial Bank (“First Financial”) and the “Aggieland Seller Note ” (as defined below). The 2020 Term Loan in the original principal amount of $5.0 million from First Financial is secured by substantially all 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, and required interest only monthly payments through April 2021. The 2020 Term Loan requires monthly payments of approximately $53,213 beginning in May 2021. We paid a total of approximately $62,375 in fees and expenses in connection with the 2020 Term Loan. On June 30, 2021, the Company used the incremental proceeds of the 2021 Term Loan, combined with additional funds, to paydown $1.0 million against the 2020 Term Loan, which had an outstanding balance of $3.37 million as of October 2, 2022. 17 The Aggieland Seller Note represented a deferred portion of the purchase price, had a face value of $750,000, bore no interest, had a maturity date of June 30, 2021, and was 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 was amortized as interest expense over the 14 month period of the note. On June 29, 2021, the Company paid off the Aggieland Seller Note. On July 11, 2018, through our wholly owned subsidiary Wild Animal – Georgia, we completed a refinancing transaction (the “2018 Refinancing”) with Synovus. The 2018 Refinancing included a term loan in the original principal amount of $1.6 million (the “2018 Term Loan”). The 2018 Term Loan had an interest rate of 5.0% per annum and was payable in monthly payments of approximately $22,672, based on a seven-year amortization period. The 2018 Term Loan had a maturity date of June 11, 2021, with an option to renew at 5.0% per annum for an additional 49-month term. The 2018 Term Loan was secured by a security deed on the assets of Wild Animal – Georgia. We paid a total of approximately $15,680 in fees and expenses in connection with the 2018 Refinancing. The 2021 Term Loan replaced our 2018 Term Loan with Synovus, which had an outstanding balance of $1.02 million, and was paid off with the proceeds of the 2021 Term Loan. 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. 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 was two years, with an interest rate of 1.0% per annum. All payments were deferred for the first twelve months of these PPP loans, with accrued interest being added to the principal during the payment deferral period. Under the terms of the CARES Act, some or all the PPP loan proceeds were eligible to be forgiven, based on use for specified purposes, subject to limitations and ongoing rulemaking by the SBA. We applied for forgiveness of the full amount of both the Wild Animal – Georgia and Wild Animal – Missouri PPP loans in March 2021. Effective March 29, 2021 and May 25, 2021, the SBA approved the Forgiveness Applications for Wild Animal – Georgia and Wild Animal – Missouri, respectively, including forgiveness of accrued interest, resulting in a gain on extinguishment of debt totaling $189,988 during the year ended October 3, 2021. Subsequent Events Effective November 14, 2022, Lisa Brady was appointed as the Company’s President and CEO, replacing Dale Van Voorhis, who had been serving as interim President and CEO since June 1, 2022. Among other duties, Ms. Brady is responsible for leading the day-to-day operations of the Company, evaluating and recommending strategic initiatives, as well as working with the management team to implement and execute approved strategic growth initiatives. Mr. Van Voorhis will continue as Chairman of the Company’s Board of Directors and as a special advisor to Ms. Brady. Off Balance Sheet Arrangements We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, results of operations, liquidity or capital expenditures. Critical Accounting Policies and Estimates Our discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. Our significant accounting policies are set forth in “NOTE 2. SIGNIFICANT ACCOUNTNG POLICIES” of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K, which should be reviewed as they are integral to understanding our results of operations and financial position. Our critical accounting policies are periodically reviewed with the Audit Committee of the Board of Directors of the Company. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of any contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to long-lived assets, revenue recognition, income taxes, and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Although actual results historically have not deviated significantly from those determined using our estimates, our results of operations or financial condition could differ, perhaps materially, from these estimates under different assumptions or conditions. 18 Long-lived Assets, including Property and Equipment Property and equipment are stated at cost. Improvements and replacements are capitalized when they extend the useful life, increase capacity or improve the efficiency of the assets. Repairs and maintenance are charged to expense as incurred. Depreciation of property and equipment is provided on the straight-line method and is based on the estimated useful economic lives of the respective assets. We make subjective assessments as to these useful lives for purposes of determining the amount of depreciation to record annually with respect to our investments in property and equipment. These assessments have a direct impact on our net income or loss, as a change in the estimated useful economic lives of our investments in property and equipment would increase or decrease depreciation expense, thereby decreasing or increasing net income or loss. 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 we have received or expect to receive in exchange for those services or products. Park admission revenues for annual passes and memberships are deferred and recognized as revenue on a pro-rata basis over the term of the pass or membership. Park admission fee revenues from advance online ticket purchases are deferred until the customers’ visit to the parks. Advance online tickets can generally be used anytime during the one year period from the date of purchase. Revenues from retail and concession sales are generally recognized upon the concurrent receipt of payment and delivery of goods to the customer. Sales taxes billed and collected are not included in revenue. Accounting for Income Taxes We account for income taxes under the asset and liability method, under which deferred tax assets and liabilities are recognized for the anticipated future tax consequences attributable to differences between financial statement amounts and their respective tax bases using enacted tax rates in effect for the year in which the differences are expected to reverse. We review our deferred tax assets to determine whether their value can be realized based upon available evidence. A valuation allowance is established when we believe that it is more likely than not that some portion of our deferred tax assets will not be realized. Significant judgment is required in determining our provision or benefit for income taxes, our deferred tax assets and liabilities, and any valuation allowance recorded against our net deferred tax assets. We record deferred tax assets, primarily resulting from net operating loss carry-forwards to the extent we believe these assets will more likely than not be realized. In making such determination, we consider all available evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent results of operations. In the event we determine it is more likely than not we will not realize our deferred tax assets we establish a valuation allowance. Contingencies We have various contingencies, as described in “NOTE 8. COMMITMENTS AND CONTINGENCIES” of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K. 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. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Our financial statements and related notes are set forth at pages F-1 through F-18. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None 19