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Section 1: 8-K/A (FORM 8-K/A)

 

 

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

 

Date of Report (date of earliest event reported): November 21, 2018

 

PEAK RESORTS, INC.

 

(Exact name of registrant as specified in its charter)

 

Missouri   001-35363   43-1793922
(State or other jurisdiction of   (Commission   (I.R.S. Employer
incorporation)   File Number)   Identification No.)

 

17409 Hidden Valley Drive    
Wildwood, Missouri   63025
(Address of principal executive offices)   (Zip Code)

 

(636) 938-7474

(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.

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act.

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act.

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act.

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). x Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

 

   

 

 

Item 8.01.Other Events

 

On November 21, 2018, Peak Resorts, Inc. (the “Company”), through its wholly owned subsidiary Snow Time Acquisition, Inc., completed the acquisition (the “Acquisition”) of 100% of the issued and outstanding common stock of Snow Time, Inc. (“Snow Time”). The Company reported, among other things, the completion of the Acquisition in its Current Report on Form 8-K filed with the Securities and Exchange Commission (the “Commission”) on November 23, 2018. This Current Report on Form 8-K/A is filed as an amendment to the Company’s Current Report filed on November 23, 2018 to provide the financial statements and pro forma financial information required pursuant to Item 9.01(a) and (b) of Form 8-K.

 

Item 9.01.Financial Statements and Exhibits.

 

(a)Financial Statements of Businesses Acquired

 

The audited consolidated financial statements of Snow Time for the fiscal years ended March 31, 2018 and 2017 and notes thereto were filed as part of the Company’s definitive proxy statement on Schedule 14A filed with the Commission on October 16, 2018 and are incorporated by reference into this Item 9.01(a) and made a part hereof.

 

Snow Time’s condensed consolidated balance sheets as of September 30, 2018 (unaudited) and March 31, 2018, condensed consolidated statements of income for the six months ended September 30, 2018 and 2017 (unaudited), condensed consolidated statements of changes in retained earnings for the six months ended September 30, 2018 and 2017 (unaudited), condensed consolidated statements of cash flows for the six months ended September 30, 2018 and 2017 (unaudited) and notes thereto are filed hereto as Exhibit 99.1 and incorporated by reference into this Item 9.01(a) and made a part hereof.

 

(b)Pro Forma Financial Information

 

The unaudited pro forma condensed combined balance sheet as of October 31, 2018, and the unaudited pro forma condensed combined statements of operations for the year ended April 30, 2018 and the six months ended October 31, 2018 and notes thereto are filed hereto as Exhibit 99.2 and incorporated by reference into this Item 9.01(b) and made a part hereof.

 

(d)Exhibits

 

Exhibit No.   Description of Exhibit
99.1   Snow Time, Inc. condensed consolidated balance sheets as of September 30, 2018 (unaudited) and March 31, 2018, condensed consolidated statements of income for the six months ended September 30, 2018 and 2017 (unaudited), condensed consolidated statements of changes in retained earnings for the six months ended September 30, 2018 and 2017 (unaudited), condensed consolidated statements of cash flows for the six months ended September 30, 2018 and 2017 (unaudited) and notes thereto.
99.2   Unaudited pro forma condensed combined balance sheet as of October 31, 2018, and unaudited pro forma condensed combined statements of operations for the year ended April 30, 2018 and the six months ended October 31, 2018 and notes thereto.
99.3   Consent of RKL LLP.

 

   

 

 

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.

 

Dated: February 7, 2019

 

 

PEAK RESORTS, INC.
(Registrant)

 

  By: /s/ Christopher J. Bub
  Name:    Christopher J. Bub
  Title: Chief Financial Officer

 

   

 

 

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Section 2: EX-99.1 (EXHIBIT 99.1)

 

Exhibit 99.1

 

Snow Time, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets

 

   September 30,
2018
   March 31, 2018 
  (unaudited)     
Assets        
Current Assets          
Cash and cash equivalents  $10,048,404   $15,128,362 
Accounts receivable   230,433    546,897 
Inventories   675,229    453,023 
Prepayments   1,492,426    1,030,111 
Total Current Assets   12,446,492    17,158,393 
           
Investments   38,791    5,019,624 
Property, Plant, and Equipment          
Land and land improvements   7,422,801    7,422,801 
Buildings   46,789,283    46,789,283 
Equipment and fixtures   57,037,644    57,702,007 
Leasehold  improvements   27,666,672    26,283,557 
    138,916,400    138,197,648 
Accumulated depreciation   (74,970,944)   (72,066,748)
    63,945,456    66,130,900 
Construction in progress   1,988,708    405,982 
Total Property, Plant, and Equipment, Net   65,934,164    66,536,882 
Other Assets          
Real estate available for development   2,827,318    2,827,318 
Goodwill and other intangibles   1,892,423    1,892,423 
Total Other Assets   4,719,741    4,719,741 
Total Assets  $83,139,188   $93,434,640 

 

 

 

 

Snow Time, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (continued)

 

   September 30,
2018
  March 31, 2018
  (unaudited)     
Liabilities and Stockholders' Equity        
Current Liabilities          
Accounts payable  $2,012,445   $2,028,738 
Sales and amusement tax collected   26,623    96,075 
Accrued liabilities   842,077    1,699,191 
Deferred income   3,151,344    3,209,805 
Total Current Liabilities   6,032,489    7,033,809 
Other Long-Term Liabilities   1,921,414    1,921,414 
Total Liabilities   7,953,903    8,955,223 
Stockholders' Equity          
Common stock   273,740    273,740 
Contributions in excess of par value   900    900 
Retained earnings   74,910,645    82,204,777 
Total Stockholders' Equity   75,185,285    84,479,417 
           
Total Liabilities and Stockholders' Equity  $83,139,188   $92,434,640 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

These financial statements omit substantially all disclosures required by generally accepted accounting principles. The financial statements have not been subjected to an audit or review or compilation engagement and no other assurance is provided on these financial statements Consolidated Statement of Income

 

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Snow Time, Inc. and Subsidiaries
Condensed Consolidated Statements of Income

(unaudited)

 

   For the six months ended
September 30,
 
   2018   2017 
         
Income  $6,534,547   $6,348,830 
Cost of Operations   4,465,093    4,698,748 
Gross Profit before Direct Operating Expenses   2,069,454    1,650,082 
Direct Operating Expenses   5,049,504    4,891,241 
Gross Profit   (2,980,050)   (3,241,159)
Other Operating Expenses          
Lodging and general maintenance   1,219,535    1,159,713 
Real estate taxes   91,646    91,930 
Insurance   354,160    453,926 
Total Other Operating Expenses   1,665,341    1,705,569 
General and Administrative Expenses          
Manager's, administrative, and office salaries   1,525,465    1,455,577 
Payroll taxes   290,893    286,571 
Other taxes   6,751    1,172 
Office supplies and expense   92,796    70,151 
Computer supplies and expense   354,127    267,146 
Information technology support   144,532    68,516 
Payroll processing   14,267    11,644 
Telephone   22,265    32,632 
Travel and entertainment   69,929    42,320 
Legal   44,017    23,331 
Accounting   70,310    77,160 
Consulting   58,606    23,238 
Credit card discount   130,997    93,499 
Dues and subscriptions   32,200    25,861 
Miscellaneous expense   33,394    28,393 
Group insurance   622,901    807,071 
Directors' fees   10,800    - 
Contributions   11,161    6,559 
Employment expenses   88,596    138,368 
Employee benefits   137,898    134,853 
Depreciation   1,176,515    1,200,578 
Total General and Administrative Expenses   4,938,420    4,794,640 
Total Other Operating, General and Administrative Expenses   6,603,761    6,500,209 
Operating Loss   (9,583,811)   (9,741,368)

 

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Snow Time, Inc. and Subsidiaries
Condensed Consolidated Statements of Income (continued)

(unaudited)

 

  

For the six months ended

September 30,

 
   2018   2017 
Other Income (Expenses)          
Games and vending machines income, net   1,909    (212)
Rental income - other, net   7,032    16,790 
Locker income, net   11,892    693 
Miscellaneous summer operations, net   36,099    41,502 
Real estate maintenance, net   24,418    3,831 
Spa, net   17,002    16,539 
Interest income   101,870    20,275 
Miscellaneous income   98,470    141,566 
Nursery, net   (1,036)   (2,242)
Ice skating, net   (6,113)   (2,036)
Bad debt expense   (1,864)   (690)
Total Other Income (Expenses), Net   289,679    236,016 
Net Loss  $(9,294,132)  $(9,505,352)

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

These financial statements omit substantially all disclosures required by generally accepted accounting principles. The financial statements have not been subjected to an audit or review or compilation engagement and no other assurance is provided on these financial statements.

 

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Snow Time, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Retained Earnings

(unaudited)

 

  

For six months ended

September 30,

 
   2018   2017 
Retained Earnings at Beginning of Year  $84,204,777   $82,386,383 
Net loss   (9,294,132)   (9,505,352)
Retained Earnings at September 30  $74,910,645   $72,881,031 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

These financial statements omit substantially all disclosures required by generally accepted accounting principles. The financial statements have not been subjected to an audit or review or compilation engagement and no other assurance is provided on these financial statements.

 

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Snow Time, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows

(unaudited)

 

   For the six months ended
September 30,
 
   2018   2017 
Cash Flows from Operating Activities          
Net loss  $(9,294,132)  $(9,505,352)
Adjustments to reconcile net loss to net cash provided by operating activities          
Depreciation   2,941,288    3,001,446 
Amortization - rental equipment   443,898    325,154 
(Increase) decrease in assets          
Accounts receivable   316,464    238,866 
Inventories   (222,206)   (247,221)
Prepayments   (906,213)   (78,958)
Increase (decrease) in liabilities          
Accounts payable   (16,293)   (258,756)
Sales and amusement tax collected   (69,452)   13,722 
Accrued liabilities   (857,114)   (270,789)
Deferred income   (58,461)   (8,465)
Net Cash Used in Operating Activities   (7,722,221)   (6,790,353)
Cash Flows from Investing Activities          
Sale of investments   4,980,833    - 
Purchase of property, plant, and equipment   (2,338,570)   (1,481,803)
Net Cash Provided (Used) in Investing Activities   2,642,263    (1,481,803)
Net Decrease in Cash and Cash Equivalents   (5,079,958)   (8,272,156)
Cash and Cash Equivalents at Beginning of Year   15,128,362    11,369,227 
Cash and Cash Equivalents at End of Year  $10,048,404   $3,097,071 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

These financial statements omit substantially all disclosures required by generally accepted accounting principles. The financial statements have not been subjected to an audit or review or compilation engagement and no other assurance is provided on these financial statements.

 

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SNOW TIME, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 1 - Nature of Business

 

Snow Time, Inc. and Subsidiaries (Company) is engaged in the ownership, operation, and management of three ski resorts in South Central Pennsylvania with its primary activities of skiing, snowboarding, and snow tubing (collectively, snowsports). The Company also operates business activities unrelated to snowsports including golf, lodging, outdoor adventures activities, conferences and events.

 

Note 2 - Summary of Significant Accounting Policies

 

A summary of the significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows:

 

Use of Estimates

 

The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities, if any, at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Ski Roundtop Operating Corp. d/b/a Roundtop Mountain Resort, Ski Liberty Operating Corp. d/b/a Liberty Mountain Resort, Whitetail Mountain Operating Corp. d/b/a Whitetail Resort, College Mountain Recreational Corp., and Transworld Agencies, Ltd. All material intercompany transactions and balances have been eliminated.

 

Revenue Recognition

 

Revenue is recognized primarily at point of sale transactions. Deferred revenue consists of prepaid season passes and events; deposits on summer activities, hotel reservations, and banquets; and gift cards outstanding. The revenues received are not recognized until the period in which the related services are rendered.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be a cash equivalent.

 

Accounts Receivable

 

Accounts receivable are stated at outstanding balances. The Company considers accounts receivable to be fully collectible. If collection becomes doubtful, an allowance for doubtful accounts will be established or the accounts will be charged to income when that determination is made by management. Unpaid balances remaining after the stated payment terms are considered past due. Recoveries of previously charged off accounts are recorded when received. 

 

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Inventories

 

Inventories consist of retail goods and are stated at the lower of cost or net realizable value with cost being determined by the average cost method.

 

Prepaid Rental Equipment

 

Rental equipment, including ski equipment, snowboard equipment, golf equipment, and OGO balls, is amortized over two or three years using the straight-line method.

 

Investments

 

Investments consist of marketable securities, investment in a captive insurance company, and industry-related investments. Marketable securities are considered available-for-sale and are reported at aggregate fair value, with realized and unrealized gains and losses included in earnings. The investment in the captive insurance company and industry-related investments are carried at cost since the companies are closely held with no market value readily available. The cost of these investments is deemed to approximate fair value.

 

Fair Value of Financial Instruments

 

The fair value hierarchy prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

 

Level 1:Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities.

 

Level 2:Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.

 

Level 3:Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity).

 

An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

 

Property, Plant, and Equipment

 

Property, plant, and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the respective assets. Costs of maintenance, repairs, and minor renewals are charged against income. Upon sale or retirement, the cost of the asset and related accumulated depreciation are removed from the accounts and gains or losses on dispositions are credited to or charged against operating income. Items held in construction in progress are not currently depreciated.

 

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Impairment of Long-Lived Assets

 

Long-lived assets are reviewed for impairment whenever events or circumstances indicate that the carrying amount of the assets may not be recoverable. An asset is considered to be impaired when the undiscounted estimated net cash flows to be generated by the asset are less than the carrying amount. The impairment recognized is the amount by which the carrying amount exceeds the fair value amount. Fair value estimates are based on assumptions concerning the amount and timing of estimated future cash flows and discount rates reflecting varying degrees of perceived risk. The management of the Company has concluded that no impairment adjustments were required during the periods ended September 30, 2018 and 2017.

 

Advertising Costs

 

Advertising costs are charged to expense when incurred.

 

Income Taxes

 

The Company has elected by unanimous consent of its stockholders to be taxed under the provisions of Subchapter S of the Internal Revenue Code. Under those provisions, the Company does not pay federal or Pennsylvania corporate income taxes on its taxable income. Instead, the stockholders of an S corporation are taxed on their proportionate share of the Company’s taxable income. The Company, at its discretion, will distribute money to its stockholders to cover those income taxes.

 

Accounting principles generally accepted in the United States of America require management to evaluate tax positions taken by the Company, including whether the entity is exempt from income taxes. Management evaluated the tax positions taken and concluded that the Company had taken no uncertain tax positions that require recognition or disclosure in the consolidated financial statements. With few exceptions, the Company is no longer subject to income tax examinations by the U.S. Federal, state, or local tax authorities for years before March 31, 2015.

 

Goodwill and Other Intangibles

 

The Company accounts for intangible assets as required by the Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) Topic 350, Goodwill and Other Intangibles. Goodwill and other intangibles acquired in a purchased business combination are tested annually for impairment, or sooner when circumstances indicate an impairment exist. This analysis is performed by comparing the respective carrying values of asset groups to the current and expected future cash flows, on an undiscounted basis, to be generated from such asset group. Goodwill of $1,500,000 was recorded upon the purchase of a conference and golf property at Liberty Mountain Resort. Other intangibles consist of liquor licenses at Roundtop Mountain Resort and Liberty Mountain Resort. Management has determined that no impairment of goodwill or long-lived assets exists at September 30, 2018 and 2017.

 

The Company accounts for intangible assets as required by the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 350, Goodwill and Other Intangibles. Intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead are tested for impairment at least annually. The guidance also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values, and be reviewed for impairment in accordance with ASC Topic 350. The Company has liquor licenses totaling $392,422 and trademarks totaling $1.

 

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Recent Accounting Pronouncements

 

In May 2014, FASB issued ASU 2014-09, Revenue from Contracts with Customers, and subsequently amended in ASU 2015-14, which provides a robust framework for addressing revenue recognition issues and, upon its effective date, replaces almost all existing revenue recognition guidance. This guidance is effective for annual reporting periods beginning after December 15, 2018.

 

In February 2016, FASB issued ASU 2016-02, Leases (Topic 842). The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the consolidated statement of income. The guidance is effective for fiscal years beginning after December 15, 2019.

 

In July 2015, FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. The amendments in the ASU require entities that measure inventory using the first-in, first-out or average cost methods to measure inventory at the lower of cost and net realizable value. Net realizable value is defined as estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation. ASU 2015-11 is effective for financial statements issued for fiscal years, and interim periods within those years, beginning after December 15, 2016 on a prospective basis. Early adoption of ASU 2015-11 is permitted. The Company adopted ASU 2015-11 during the year ended March 31, 2018, which did not have a material effect on its consolidated financial statements.

 

The Company is currently evaluating the impact of the pending adoption of the new standards on the consolidated financial statements.

 

Note 3 - Concentration of Credit Risk

 

The Company maintains its cash balances with local financial institutions. The balances held in these accounts are subject to federally insured limits. At times during the periods ended September 30, 2018 and 2017, the Company’s cash balances have exceeded the federally insured limit of $250,000.

 

Note 4 - Credit Facility

 

The Company has an available revolving credit agreement of $20,000,000 with interest at LIBOR plus 1.8%. At September 30, 2018 and 2017, there were no outstanding borrowings; however, the Company has outstanding letters of credit totaling $395,080, against this agreement. Certain covenants of the loan agreement provide, among other matters, limitations on corporate activities, and various ratio tests and reporting requirements. The Company and its subsidiaries are in compliance with all material aspects of their loan agreements as of September 30, 2018.

 

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Note 5 - Investments

 

Investments consist of the following as of September 30:

 

   2018   2017 
         
Captive Insurance and Industry-Related Investments   38,791    39,104 
           
   $38,791   $39,104 

 

Investments in marketable securities, with readily determinable fair values, are stated at the fair value on a recurring basis. The fair value is determined based on quoted prices for identical investments in their respective active markets, which is a Level 1 valuation input, as described in Note 1.

 

The method described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

 

The availability of observable market data is monitored to assess the appropriate classification of financial instruments within the fair value hierarchy. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. In such instances, the transfer is reported at the beginning of the reporting period.

 

We evaluated the significance of transfers between levels based upon the nature of the financial instrument and size of the transfer relative to total assets. For the periods ended September 30, 2018 and 2017, there were no transfers in or out of Level 3.

 

Note 6 - Commitments and Contingencies

 

The Company participates in certain insurance programs in the alternative insurance markets for its workers’ compensation, general liability, auto, and health insurance coverage. Within these programs, the Company is self-insured at certain levels and has insurance coverage provided by commercial insurance companies after certain claim levels have been met. In accordance with the terms of those insurance programs, the Company faces potential exposure, which could require additional premium payments if the programs experience significant adverse claims development; however, management is not aware of any need to fund additional amounts as of September 30, 2018. The maximum exposure under these programs as of September 30, 2018 is approximately $1,212,000.

 

At March 31, 2018 and 2017, the Company has recorded reserves totaling $300,000, to cover potential costs for incurred general liability costs. No claims payments were made for the periods ended September 30, 2018 and 2017, respectively.

 

The Company is subject to claims, both actual and potential, arising in the normal course of business. Management believes that these matters will be resolved without material effect on the Company’s business.

 

Roundtop Mountain Resort, Liberty Mountain Resort, and Whitetail Resort jointly promote certain products such as season passes, frequency products, and other offers that are valid at any of the three resorts. As a result of these joint promotions, certain revenues or expenses may not be recorded at the resort where the product is redeemed.

 

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During the year ended March 31, 2018, the Company entered into retention incentive agreements with key members of management. The amount of benefits to be paid are based on the profitability of the Company. The agreements provide for additional benefits to be paid to these individuals upon separation from the Company or a change in control of the Company. The benefit amounts to be paid will vest over a period of time, as defined in the agreements. As of September 30, 2018, $1,621,414 was accrued to allow for the benefits.

 

Note 7 - Retirement Plan

 

The Company maintains a 401(k) retirement plan for the benefit of its employees. The Plan covers all employees who meet certain age and hours of service requirements.

 

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Section 3: EX-99.2 (EXHIBIT 99.2)

 

Exhibit 99.2

 

Unaudited Pro Forma Condensed Combined Financial Data

 

The following unaudited pro forma condensed combined balance sheet as of October 31, 2018, and the unaudited pro forma condensed combined statements of operations for the year ended April 30, 2018 and the six months ended October 31, 2018 (together, the “Pro Forma Financial Data”), are based upon the historical consolidated financial statements of Peak Resorts, Inc. (“Peak”) and Snow Time, Inc. (“Snow Time”) after giving effect to the acquisition of Snow Time by Peak and related financing transactions (the “Snow Time Acquisition”), and after applying the assumptions, reclassifications and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial data.

 

Peak and Snow Time have different fiscal year ends. Accordingly, the unaudited pro forma condensed combined balance sheet as of October 31, 2018, combines Peak’s historical unaudited condensed consolidated balance sheet as of October 31, 2018, and Snow Time’s historical unaudited consolidated balance sheet as of September 30, 2018, and is presented as if the Snow Time Acquisition had occurred on October 31, 2018. The unaudited pro forma condensed combined statements of operations for the year ended April 30, 2018, combines the historical audited results of Peak for the year ended April 30, 2018, and the historical audited results of Snow Time for the twelve months ended March 31, 2018. The unaudited pro forma condensed combined statements of operations for the six months ended October 31, 2018, combines the historical unaudited results of Peak for the six months ended October 31, 2018, and the historical unaudited results of Snow Time for the six months ended September 30, 2018. The unaudited pro forma condensed combined statements of operations are presented as if the Snow Time Acquisition occurred on May 1, 2017.

 

The Pro Forma Financial Data is presented for informational purposes only, and does not purport to represent what Peak and Snow Time’s actual consolidated results of operations or consolidated financial condition would have been had the Snow Time Acquisition actually occurred on the date indicated, nor are they necessarily indicative of future consolidated results of operations or consolidated financial condition. The Pro Forma Financial Data should be reviewed in conjunction with (i) Peak’s audited consolidated financial statements and notes thereto included in Peak’s annual report on Form 10-K for the fiscal year ended April 30, 2018, filed with the Securities and Exchange Commission (the “SEC”) on July 17, 2018; (ii) Peak’s unaudited interim condensed consolidated financial statements and notes thereto included in Peak’s quarterly report on Form 10-Q for the period ended October 31, 2018, filed with the SEC on December 12, 2018; (iii) Snow Time’s audited consolidated financial statements and notes thereto included in Peak’s definitive proxy statement filed with the SEC on October 16, 2018; and (iv) Snow Time’s unaudited interim condensed consolidated financial statements and notes thereto filed as Exhibit 99.1 to Peak’s current report on Form 8-K of which this Exhibit 99.2 is a part, filed with the SEC on February 7, 2019.  

 

The historical consolidated financial information has been adjusted in the Pro Forma Financial Data to give effect to pro forma events that are, based upon available information and certain assumptions, (i) directly attributable to the Snow Time Acquisition, (ii) factually supportable and reasonable under the circumstances, and (iii) with respect to the unaudited pro forma condensed combined statements of operations, expected to have a continuing impact on the combined results.

 

The Snow Time Acquisition will be accounted for using the acquisition method of accounting. Peak is the acquirer for accounting purposes, and thus Peak acquired, with the exception of certain excluded assets (see Note 5, Item G), all the assets, including identifiable intangible assets, and assumed all of the liabilities of Snow Time (the “Net Assets”). For purposes of the Pro Forma Financial Data, the Net Assets have been valued based on preliminary estimates of their fair values, which will be revised as additional information becomes available. The actual adjustments to Peak’s consolidated financial statements as of the closing of the Snow Time Acquisition will depend on a number of factors, including additional information available and the actual balance of the Net Assets. Therefore, the actual adjustments may differ from the pro forma adjustments, and the differences may be material.

 

The Pro Forma Financial Data does not reflect costs to integrate the operations of Peak and Snow Time or any cost savings, operating synergies or revenue enhancements that the combined companies may achieve as a result of the Snow Time Acquisition.

 

   

 

 

Unaudited Pro Forma Condensed Combined Balance Sheet

 

as of October 31, 2018

 

                      Pro Forma for 
           (See Note 1)   (See Notes 4 & 5)      the Snow Time 
   Historical   Reclassifications   Adjustments for the      Acquisition 
   October 31, 2018   September 30, 2018   for the Snow Time   the Snow Time      October 31, 2018 
   Peak Resorts   Snow Time   Acquisition   Acquisition     Combined 
   (In thousands) 
Assets                            
Current assets:                            
Cash and cash equivalents  $6,362   $10,048   $-   $(9,158)  A,B,F,G  $7,252 
Restricted cash   1,245    -    -    -       1,245 
Income tax receivable   8,857    -    -    -       8,857 
Accounts receivable   764    230    -    -       994 
Inventory   3,356    675    -    -       4,031 
Prepaid expenses and deposits   7,839    1,493    -    -       9,332 
Total current assets   28,423    12,446    -    (9,158)      31,711 
                             
Investments   -    39    -    -       39 
Property and equipment, net   217,266    65,934    -    4,066   G,H   287,266 
Land held for development   37,646    2,827    -    (1,827)  H   38,646 
Restricted cash, construction   3,006    -    -    -       3,006 
Goodwill and other intangible assets, net   -    1,893    (1,893)   -       - 
Goodwill   4,382    -    1,500    10,715   I   16,597 
Intangible assets, net   702    -    393    2,107   J   3,202 
Other assets   2,206    -    -    -       2,206 
Total assets  $293,631   $83,139   $-    5,903      $382,673 
                             
Liabilities and Stockholders' Equity                            
Current liabilities:                            
Revolving lines of credit  $12,415   $-   $-    -      $12,415 
Current maturities of long-term debt   2,151    -    -    -       2,151 
Accounts payable   -    2,012    (2,012)   -       - 
Accrued liabilities   -    842    (842)   -       - 
Sales and amusement tax collected   -    27    (27)   -       - 
Accounts payable and accrued expenses   17,508         2,881    -       20,389 
Accrued salaries, wages and related taxes and benefits   947    -    -    -       947 
Unearned revenue   22,108    3,151    -    -   K   25,259 
Current portion of deferred gain on sale/leaseback   333    -    -    -       333 
Total current liabilities   55,462    6,032    -    -       61,494 
                             
Long-term debt, less current maturities   165,777    -    -    47,908   A   213,685 
Deferred gain on sale/leaseback   2,346    -    -    -       2,346 
Deferred income taxes   7,809    -    -    6,597   L   14,406 
Other liabilities   486    1,921    -    -       2,407 
Total liabilities   231,880    7,953    -    54,505       294,338 
                             
Series A Preferred Stock   17,401    -    -    17,500   B   34,901 
                             
Stockholders' equity:                            
Common Stock   140    274    -    (262)  M,N   152 
Additional paid-in capital   86,738    1    -    9,694   A,B,M,N   96,433 
Accumulated deficit   (42,528)   74,911    -    (75,534)  F,M   (43,151)
Total stockholders' equity   44,350    75,186    -    (66,102)      53,434 
Total liabilities and stockholders' equity  $293,631   $83,139   $-    5,903      $382,673 

 

See accompanying notes to unaudited pro forma condensed combined financial data

 

   

 

 

Unaudited Pro Forma Combined Statements of Operations

 

for the Year Ended April 30, 2018

 

                      Pro Forma for the 
                      Snow Time 
   Historical   (See Note 1)   (See Notes 4 & 5)   Acquisition 
   Twelve months   Twelve months   Reclassifications   Adjustments for the   Twelve months 
   April 30, 2018   March 31, 2018   for the Snow Time   Snow Time   April 30, 2018 
   Peak Resorts   Snow Time   Acquisition   Acquisition   Combined 
   (dollars in thousands, except per share amounts) 
                            
Net revenue  $131,662   $48,499   $897   $-      $181,058 
Operating expenses:                  -       - 
Resort operating expenses   96,593    -    36,601    -       133,194 
Depreciation and amortization   13,231    -    6,621    642   H,J   20,494 
General and administrative expenses   5,797    11,135    (7,835)   (4)  O   9,093 
Land and building rent   1,401    -    -    -       1,401 
Real estate and other taxes   2,286    -    929    -       3,215 
Restructuring and impairment charges   2,135    -    -    -       2,135 
Cost of operations   -    16,520    (16,520)   -       - 
Direct operating expenses   -    13,491    (13,491)   -       - 
Other operating expenses   -    4,680    (4,680)   -       - 
    121,443    45,826    1,625    638       169,532 
Income from operations   10,219    2,673    (728)   (638)      11,526 
                             
Other (expense) income:                            
                             
Interest expense, net   (13,322)   -    46    (4,567)  D,E,G   (17,843)
Gain on sale/leaseback   333    -    -    -       333 
Other income (expense)   160    (755)   682    -       87 
    (12,829)   (755)   728    (4,567)      (17,423)
                             
(Loss) income before income taxes   (2,610)   1,918    -    (5,205)      (5,897)
Income tax benefit   (3,962)   -    -    (864)  P   (4,826)
Net income (loss)  $1,352   $1,918   $-   $(4,341)     $(1,071)
                             
Less declaration and accretion of Series A Preferred Stock dividends   (1,600)   -    -    (1,600)  C   (3,200)
Net (loss) income attributable to common shareholders  $(248)  $1,918   $-   $(5,941)     $(4,271)
                   -         
Basic and diluted shares outstanding   14,060,739              1,183,432   N   15,244,171 
                             
Basic and diluted loss per share  $(0.02)                    $(0.28)

 

See accompanying notes to unaudited pro forma condensed combined financial data

 

   

 

  

Unaudited Pro Forma Combined Statements of Operations

 

for the Six Months Ended October 31, 2018

 

                      Pro Forma for the 
                      Snow Time 
   Historical              Acquisition 
   Six months   Six months   (See Note 1)   (See Notes 4 & 5)   Six months 
   October 31,   September 30,   Reclassifications   Adjustments for the   October 31, 
   2018   2018   for the Snow Time   Snow Time   2018 
   Peak Resorts   Snow Time   Acquisition   Acquisition   Combined 
   (dollars in thousands, except per share amounts) 
                            
Net revenue  $14,991   $6,535   $165   $-      $21,691 
Operating expenses:                            
Resort operating expenses   27,989    -    11,984    -       39,973 
Depreciation and amortization   6,732    -    3,386    326   H,J   10,444 
General and administrative expenses   3,159    4,939    (4,304)   (361)  O   3,433 
Land and building rent   1,292    -    -    -       1,292 
Real estate and other taxes   672    -    92    -       764 
Restructuring and impairment charges   190    -    -    -       190 
Cost of operations   -    4,465    (4,465)   -       - 
Direct operating expenses   -    5,050    (5,050)   -       - 
Other operating expenses   -    1,665    (1,665)   -       - 
    40,034    16,119    (22)   (35)      56,096 
Income from operations   (25,043)   (9,584)   187    35       (34,405)
                             
Other (expense) income:                            
                             
Interest expense, net   (6,825)   -    102    (2,364)  D,E,G   (9,087)
Gain on sale/leaseback   166    -    -    -       166 
Other income (expense)   47    290    (289)   -       48 
    (6,612)   290    (187)   (2,364)      (8,873)
                             
(Loss) income before income taxes   (31,655)   (9,294)   -    (2,329)      (43,278)
Income tax benefit   (8,857)   -    -    (3,321)  P   (12,178)
Net income (loss)  $(22,798)  $(9,294)  $-   $992      $(31,100)
                             
Less declaration and accretion of Series A Preferred Stock dividends   (800)   -    -    (800)  C   (1,600)
Net (loss) income attributable to common shareholders  $(23,598)  $(9,294)  $-   $192      $(32,700)
                             
Basic and diluted shares outstanding   14,095,100              1,183,432   N   15,278,532 
                             
Basic and diluted loss per share  $(1.67)                    $(2.14)

 

See accompanying notes to unaudited pro forma condensed combined financial data

 

   

 

 

Notes to Unaudited Pro Forma Condensed Combined Financial Data

(dollars in thousands, except per share amounts)

 

1. Basis of Presentation

 

General

 

On November 21, 2018, Peaks Resorts, Inc. (“Peak”) acquired 100% of the outstanding capital stock of Snow Time, Inc. (“Snow Time”) for total consideration of $73,602, including $67,625 paid in cash and 1,183,432 shares of Peak’s common stock with a value of $5,977 based on the closing price of a share of Peak common stock on November 21, 2018. The purchase price is subject to adjustment based on the measurement of certain working capital items as of the closing date of the transaction. The cash portion of the Snow Time Acquisition purchase price was funded with the proceeds of debt and preferred stock issued by Peak. The acquisition of the Snow Time capital stock and related financing transactions are referred to in these notes as the “Snow Time Acquisition.” The unaudited pro forma condensed combined financial data was prepared using the acquisition method of accounting and was based on the historical financial statements of Peak and Snow Time (the “Pro Forma Financial Data”). The historical consolidated financial information has been adjusted in the Pro Forma Financial Data to give effect to pro forma events that are, based upon available information and certain assumptions, (i) directly attributable to the Snow Time Acquisition, (ii) factually supportable and reasonable under the circumstances, and (iii) with respect to the unaudited pro forma condensed combined statements of operations, expected to have a continuing impact on the combined results.

 

Peak and Snow Time have different fiscal year ends. For ease of reference, all pro forma statements use Peak’s year end and no adjustments were made to Snow Time’s reported information for its different period end dates. Accordingly, the unaudited pro forma condensed combined balance sheet as of October 31, 2018, combines Peak’s historical unaudited condensed consolidated balance sheet as of October 31, 2018, and Snow Time’s historical unaudited consolidated balance sheet as of September 30, 2018, and is presented as if the Snow Time Acquisition had occurred on October 31, 2018. The unaudited pro forma condensed combined statements of operations for the year ended April 30, 2018, combines the historical audited results of Peak for the year ended April 30, 2018, and the historical audited results of Snow Time for the twelve months ended March 31, 2018. The unaudited pro forma condensed combined statements of operations for the six months ended October 31, 2018, combines the historical unaudited results of Peak for the six months ended October 31, 2018, and the historical unaudited results of Snow Time for the six months ended September 30, 2018. The unaudited pro forma condensed combined statements of operations are presented as if the Snow Time Acquisition occurred on May 1, 2017.

 

Acquisition Accounting

 

The Snow Time Acquisition will be accounted for using the acquisition method of accounting. For the purposes of the Pro Forma Financial Data, Peak has been treated as the acquirer and will account for the transaction by using its historical accounting information and accounting policies and adjusting for the fair value of the assets acquired, including identifiable intangible assets and liabilities assumed from Snow Time (the “Net Assets”) as of the date of the Snow Time Acquisition at their respective fair values. The process for estimating the fair values of the Net Assets requires the use of significant estimates and assumptions. The amount by which the acquisition date fair value of the purchase price (consideration transferred) exceeds the fair value of net identifiable assets acquired (see Note 3) will be recognized as goodwill. The purchase price allocation is subject to finalization of Peak’s analysis of the fair value of the Net Assets as of the date of the Snow Time Acquisition. Accordingly, the purchase price allocation reflected in this Pro Forma Financial Data is preliminary and will be adjusted upon the completion of the final valuation. Such adjustments could be material. The final valuation is expected to be completed as soon as practicable but no later than one year after the consummation of the Snow Time Acquisition.

 

Accounting Policies

 

The unaudited Pro Forma Financial Data does not assume any differences in accounting policies between Peak and Snow Time. Peak is in the process of reviewing Snow Time’s accounting policies, and as a result of that review, Peak may identify differences between the accounting policies of the two companies that, when conformed, could have a material impact on the Pro Forma Financial Data. At this time, Peak is not aware of any difference that would have a material impact Pro Forma Financial Data.

 

   

 

 

Reclassifications

 

Certain reclassifications have been made to the historical financial statements of Snow Time to conform to Peak’s presentation. These adjustments primarily relate to (i) reclassifying depreciation expense included in cost of goods sold and direct operating expenses to the depreciation caption, (ii) reclassifying ancillary revenue from the other income caption below operating income to the net revenue caption, (iii) reclassifying incentive compensation expense from the other expense caption to the general and administrative expenses caption, and (iv) reclassifying goodwill and intangible assets to show each component separately.

 

2. Transactions with Cap 1 LLC

 

In connection with the Snow Time Acquisition, Peak entered into a two-year 6.95% fixed rate senior secured term loan facility (the “Term Loan”) in the amount of $50,000 with Cap 1 LLC (“Cap 1”) to fund a portion of the cash consideration paid as part of the consideration transferred in the Snow Time Acquisition. Pursuant to the terms of the Term Loan, as consideration for issuing the Term Loan, Peak issued warrants (the “Term Loan Warrants”) to purchase common stock to Cap 1. For the purpose of the Pro Forma Financial Data, the amounts presented as pro forma for the Snow Time Acquisition assume the funding of $50,000 and the issuance of the warrants under the Term Loan on May 1, 2017.

 

In connection with the Snow Time Acquisition Peak exercised an existing option to issue Cap 1 an additional 20,000 shares of Peak’s Series A Cumulative Convertible Preferred Stock (the “Preferred Stock”), along with warrants (the “Preferred Warrants”) to purchase common stock, for an aggregate consideration of $20,000, which was used to fund the remainder of the cash portion of the Snow Time Acquisition purchase price. For the purpose of the unaudited pro forma condensed combined statements of operations, the amounts presented as pro forma for the Snow Time Acquisition assume the issuance of the Preferred Stock and Preferred Warrants for consideration received of $20,000 on May 1, 2017.

 

3. Preliminary Allocation of Consideration Transferred to Net Assets Acquired

 

The acquisition method of accounting requires that the purchase price (consideration transferred) in a business combination be allocated to the Net Assets acquired based on their estimated fair value. For the purpose of the Pro Forma Financial Data, Peak has made a preliminary allocation of the purchase price to the Net Assets acquired as follows:

 

Tangible assets and liabilities:     
Accounts receivable  $230 
Inventories   675 
Property and equipment   70,000 
Land held for development   1,000 
Other current and long-term assets   1,532 
Accounts payable and accrued liabilities   (2,881)
Unearned revenue   (3,151)
Deferred income taxes   (6,597)
Other long-term liabilities   (1,921)
Intangible assets:     
Identifiable intangible asset   2,500 
Goodwill   12,215 
Total preliminary purchase price allocation  $73,602 

 

   

 

 

The following table reconciles the historical value of the Net Assets as of October 31, 2018 to the fair value of the Net Assets:

 

Historical value of Net Assets at October 31, 2018  $75,186 
Net assets excluded from the Snow Time Acquisition   (10,250)
Elimination of the historical value of intangible assets   (1,893)
Recognition of intangible assets acquired:     
Identifiable intangible assets   2,500 
Goodwill   12,215 
Adjustments to the historical carrying value of assets and liabilities based on Peaks’ preliminary estimates of fair value:     
Property and equipment   4,268 
Land held for development   (1,827)
Deferred income taxes   (6,597)
Fair value of Net Assets  $73,602 

 

4. Pro Forma Adjustments for the Transactions with Cap 1 LLC

 

Adjustments included in the column under the heading “Adjustments for the Snow Time Acquisition” which relate to the transactions with Cap 1 reflect the following:

 

A.Reflects the receipt of the $50,000 proceeds from the Term Loan and the use of all or a portion of those proceeds to pay a portion of the $67,625 cash consideration for the Snow Time Acquisition and to pay $862 of financing costs associated with the Term Loan. On a preliminary basis, Peak has valued the Term Loan Warrants at $1,230 and have reflected them in the unaudited pro forma condensed combined balance sheet as a discount for the Term Loan.

 

B.Reflects the receipt of the $20,000 proceeds from the sale of the Preferred Stock and Preferred Warrants and the use of all or a portion of those proceeds to pay the remaining portion of the $67,625 cash consideration for the Snow Time Acquisition. On a preliminary basis, Peak has valued the Preferred Warrants at $2,500 and have allocated that portion of the proceeds from the sale of Preferred Stock to additional paid-in capital.

 

C.Reflects the accretion or payment of Preferred Stock dividends of $800 and $1,600 for the six months ended October 31, 2018 and for the year ended April 30, 2018, respectively.

 

D.Reflects amortization of i) the Term Loan deferred financing costs and ii) the Term Loan discount totaling $524 and $1,036 for the six months ended October 31, 2018 and for the year ended April 30, 2018, respectively.

 

E.Reflects the Term Loan cash interest expense of $1,738 and $3,475 for the six months ended October 31, 2018 and for the year ended April 30, 2018, respectively.

 

5. Pro Forma Adjustments for the Snow Time Acquisition

 

Adjustments in the column under the heading “Adjustments for the Snow Time Acquisition” which are necessary to reflect the Snow Time Acquisition and related acquisition accounting include the following:

 

F.Reflects the impact on cash of Peak’s $623 of acquisition related fees and expenses paid subsequent to October 31, 2018, with a corresponding increase in accumulated deficit.

 

G.Reflects the elimination of cash of $10,048 and property and equipment of $202 which were excluded from Net Assets acquired. Reflects the elimination of interest income of $46 and $102 associated with the excluded Snow Time cash.

 

H.Reflects (i) the elimination of the historic carrying value of Snow Time’s property, equipment and land held for development, (ii) the recognition of the estimated fair value of Snow Time’s property, equipment and land held for development, and (iii) the adjustment to the related depreciation expense for the six months ended October 31, 2018 and the year ended April 30, 2018. For the purpose of the Pro Forma Financial Data, the fair value of property and equipment was estimated based on Peak’s preliminary estimates of fair value as of the transaction closing date.

 

   

 

 

I.Reflects (i) the elimination of Snow Time’s historical goodwill of $1,500 and (ii) recognition of $12,215 of goodwill resulting from the Snow Time Acquisition.

 

J.Reflects (i) the elimination of Snow Time’s historical intangible assets of $393, (ii) the recognition of intangible assets of $2,500 for Snow Time’s trade names, customer lists, favorable water agreements and liquor licenses, and (iii) the recognition of intangible asset amortization expense of $120 and $238 for the six months ended October 31, 2018 and the year ended April 30, 2018, respectively, related to the definite-lived intangible assets. For the purpose of the Pro Forma Financial Data, the fair value of identifiable intangible assets was estimated based on Peak’s preliminary estimates of fair value as of the transaction closing date.

 

K.Snow Time’s historic unearned revenue represents payments collected from customers for services to be provided during the 2018/2019 snow sports season. Peak is in the process of estimating the fair value of this liability and, for the purpose of the Pro Forma Financial Data, the fair value of the liability for unearned revenue acquired from Snow Time is assumed to equal its carrying value.

 

L.Reflects the recognition of $6,597 of deferred tax liabilities related to the difference between the book value and tax basis of the Net Assets acquired.

 

M.Reflects the elimination of the historical equity of Snow Time in accordance with acquisition accounting.

 

N.Reflects the payment of acquisition consideration in the form of 1,183,432 shares of Peak common stock valued, based on the closing price of a share of Peak common stock on the transaction closing date, at $5,977 with a total par value of $12.

 

O.Reflects the elimination of Snow Time’s acquisition related expenses of $29 and $4 for the six months ended October 31, 2018 and the year ended April 30, 2018, respectively, and the elimination of Peak’s historic acquisition costs of $332 for the six months ended October 31, 2018.

 

P.Snow Time provides for income taxes under Subchapter S of the Internal Revenue code and as such does not account for income taxes in its financial statements. Reflects (i) the provision for income taxes for the income (loss) before taxes of Snow Time at an effective rate of 28.9% under the tax rules applicable to Peak and (ii) the tax effect of the above adjustments to the unaudited pro forma condensed combined statements of operations.

 

   

 

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Section 4: EX-99.3 (EXHIBIT 99.3)

 

Exhibit 99.3

 

 

 

Consent of Independent Auditors

 

We consent to the incorporation by reference in this Form 8-K/A for Peak Resorts, Inc. of our report dated June 8, 2018, except for Notes 2 - Goodwill and Other Intangibles, 10, and 11, for which the date is October 3, 2018, relating to our audits of the consolidated financial statements as of and for the years ended March 31, 2018 and 2017 of Snow Time, Inc. and Subsidiaries which appear in the Definitive Proxy Statement on Schedule 14A of Peak Resorts, Inc. filed with the Securities and Exchange Commission on February 7, 2019.

 

 

 

Amy Gohn Anstine, CPA

 

York, Pennsylvania

February 7, 2019

 

3501 Concord Road, Suite 250, P.O. Box 21439, York, PA 17402 Main: 717.843.3804 Fax: 717.854.0533 RKLcpa.com

 

   

 

 

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