Bowlin Travel Centers, Inc

BOWLIN TRAVEL CENTERS, INC. Financial Statements January 31, 2021 and 2020 150 Louisiana NE, Albuquerque, NM 87108 (505) 266-5985 Report of Independent Registered Public Accounting Firm Board of Directors and Stockholders Bowlin Travel Centers, Inc. Opinion on the Financial Statements We have audited the accompanying balance sheets of Bowlin Travel Centers, Inc. as of January 31, 2021 and 2020, and the related statements of income, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of Bowlin Travel Centers, Inc. as of January 31, 2021 and 2020, and the results of its operations and its cash flows for the years ended January 31, 2021 and 2020, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to Bowlin Travel Centers, Inc. in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Bowlin Travel Centers, Inc. is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. Semple, Marchal & Cooper, LLP We have served as Bowlin Travel Center Inc.'s auditor since 2019. Phoenix, Arizona April 21, 2021 BOWLIN TRAVEL CENTERS, INC. Balance Sheets January 31, 2021 and 2020 Assets 2021 2020 Current assets: Cash and cash equivalents $ 7,563,983 $ 4,744,351 Marketable securities 1,200,000 1,180,000 Accounts receivable 24,086 26,054 Current maturity of note receivable 8,331 5,743 Inventories 3,919,410 4,048,588 Interest receivable 1,035 11,288 Prepaid income taxes 70,001 46,201 Prepaid expenses 249,482 260,993 Total current assets 13,036,328 10,323,218 Property and equipment, net 12,310,574 12,490,351 Operating lease right of use assets 1,320,736 1,258,992 Finance lease assets, net 126,792 226,782 Intangible assets, net 36,861 18,172 Note receivable, less current maturities 15,532 21,450 Investment in real estate 729,229 821,196 Total assets $ 27,576,052 $ 25,160,161 Liabilities and Stockholders’ Equity Current liabilities: Current maturities of long-term debt $ 457,283 $ 419,475 Current maturities of finance lease obligation 93,766 99,989 Accounts payable 949,380 877,516 Current operating lease liabilities 166,808 172,068 Accrued salaries and benefits 1,480,487 843,797 Accrued liabilities 443,362 338,483 Deferred revenue 30,038 26,933 Total current liabilities 3,621,124 2,778,261 Net deferred income tax liabilities 984,852 788,806 Operating lease liabilities 1,115,213 1,086,924 Finance lease obligation, less current maturities 33,026 126,793 Long-term debt, less current maturities 8,011,508 7,336,094 Total liabilities 13,765,723 12,116,878 Commitments and contingencies — — Stockholders’ equity: Preferred stock, $0.001 par value; 1,000,000 shares authorized, none issued or outstanding at January 31, 2021 and 2020 — — Common stock, $0.001 par value; 10,000,000 shares authorized, 4,583,348 shares issued at January 31, 2021 and 2020 4,583 4,583 Less: Treasury stock, 610,884 shares at January 31, 2021 and 602,829 at January 31, 2020 611 603 Common stock, 3,972,464 and 3,980,519 shares outstanding at January 31, 2021 and 2020, respectively 3,972 3,980 Additional paid-in capital 8,953,913 8,977,729 Retained earnings 4,852,444 4,061,574 Total stockholders’ equity 13,810,329 13,043,283 Total liabilities and stockholders’ equity $ 27,576,052 $ 25,160,161 See accompanying notes to financial statements. 3 BOWLIN TRAVEL CENTERS, INC. Statements of Income Years ended January 31, 2021 2020 Gross sales $ 29,748,650 $ 31,017,811 Less discounts on sales (320,737) (364,011) Net sales 29,427,913 30,653,800 Cost of goods sold 14,413,230 16,947,055 Gross profit 15,014,683 13,706,745 General and administrative expense (8,656,381) (7,957,370) Salaries and wages (3,673,085) (3,620,589) Depreciation and amortization (1,145,355) (1,162,241) Impairment on investment in real estate (100,000) — Loss on sale of property and equipment (9,384) (112,027) Operating income 1,430,478 854,518 Other non-operating (expense) income: Interest income 11,530 26,567 Rental income 44,521 57,418 Miscellaneous income 25,000 — Interest expense (416,413) (425,388) Total other non-operating (expense) income (335,362) (341,403) Income before income tax expense 1,095,116 513,115 Income tax expense (304,246) (165,112) Net income $ 790,870 $ 348,003 Net income per share $ 0.20 $ 0.09 Weighted average common shares outstanding 3,984,290 3,994,924 See accompanying note to financial statements 4 BOWLIN TRAVEL CENTERS, INC. Statements of Stockholders’ Equity For the Years Ended January 31, 2021 and 2020 Number of shares of Common Common Additional stock stock, paid-in Retained outstanding at par capital earnings Total Balance at January 31, 2019 4,001,772 $ 4,002 $ 9,040,527 $ 3,713,571 $ 12,758,100 Net income — — — 348,003 348,003 Purchase of treasury stock (21,253) (22) (62,798) — (62,820) Balance at January 31, 2020 3,980,519 3,980 8,977,729 4,061,574 13,043,283 Net income — — — 790,870 790,870 Purchase of treasury stock (8,055) (8) (23,816) — (23,824) Balance at January 31, 2021 3,972,464 $ 3,972 $ 8,953,913 $ 4,852,444 $ 13,810,329 See accompanying notes to financial statements. 5 BOWLIN TRAVEL CENTERS, INC. Statements of Cash Flows Years ended January 31, 2021 2020 Cash flows from operating activities: Net income $ 790,870 $ 348,003 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,145,355 1,162,241 Impairment and loss on sale of property and equipment 109,384 112,027 Deferred income taxes (benefit) expense 196,046 169,212 Changes in operating assets and liabilities: Accounts receivable 1,968 (14,921) Accrued interest receivable — (5,935) Inventories 129,178 (238,996) Prepaid expenses 11,511 (18,164) Prepaid income taxes (23,800) 20,271 Accounts payable and accrued liabilities 813,433 313,913 Operating lease liability (38,715) — Deferred revenue 3,105 (15,503) Net cash provided by operating activities 3,138,335 1,832,148 Cash flows from investing activities: Proceeds from sale of property and equipment 3,500 40,244 Purchases of property and equipment (886,005) (1,077,029) Purchase of trademarks (19,189) (1,979) Accrued interest receivable 10,253 — Purchase of marketable securities (1,200,000) (1,180,000) Proceeds from sale of marketable securities 1,180,000 865,000 Proceeds from repayment of note receivable 3,330 2,807 Net cash used in investing activities (908,111) (1,350,957) Cash flows from financing activities: Payments on long-term debt (405,678) (336,791) Payments for finance lease obligation (99,990) (92,786) Purchase of treasury stock (23,824) (62,820) Proceeds from borrowing on long-term debt 1,118,900 310,733 Net cash (used in) provided by financing activities 589,408 (181,664) Net increase in cash and cash equivalents 2,819,632 299,527 Cash and cash equivalents at beginning of year 4,744,351 4,444,824 Cash and cash equivalents at end of year $ 7,563,983 $ 4,744,351 (continued) 6 BOWLIN TRAVEL CENTERS, INC. Statements of Cash Flows (continued) Years ended January 31, 2021 2020 Supplemental disclosure of cash flow information: Cash paid for interest $ 416,413 $ 425,388 Cash paid (received) for income taxes $ 132,000 $ (24,371) Supplemental disclosure of non-cash investing and financing activities: Operating lease right of use assets and liabilities $ 204,298 $ 1,570,913 Fixed asset sold in exchange for note receivable $ — $ 33,000 See accompanying notes to financial statements.

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