Note 9 - Leases

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Leases of Lessee and Commitments Disclosure [Text Block]

9.    LEASES

The Company determines if an arrangement is a lease or contains a lease at inception. The Company leases some office equipment under finance leases. We also lease equipment related to our horse racing operations under operating leases. For lease accounting purposes, we do not separate lease and nonlease components, nor do we record operating or finance lease assets and liabilities for short term leases.

As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date to determine the present value of lease payments. We recognize expense for operating leases on a straight-line basis over the lease term. The Company’s lease agreements do not contain any variable lease payments, material residual value guarantees or any restrictive covenants.

Lease costs related to operating leases were $22,855 and $22,339 for the nine months ended September 30, 2022 and 2021. The total lease expenses for leases with a term of twelve months or less for which the Company elected not to recognize a lease asset or liability was $411,354 and $350,960 for the nine months ended September 30, 2022 and 2021, respectively.

Lease costs included in depreciation and amortization related to our finance leases were $18,708 and $11,898 for the nine months ended September 30, 2022 and 2021, respectively. Interest expense related to our finance leases was immaterial.

The following table shows the classification of the right of use assets on our consolidated balance sheets:

		September 30,		December 31,
	Balance Sheet Location	2022		2021
Assets
Finance	Land, buildings and equipment, net (1)	$	25,865	$	46,035
Operating	Operating lease right-of-use assets		-		22,786
Total Leased Assets		$	25,865	$	68,821

1 – Finance lease assets are net of accumulated amortization of $99,694 and $79,524 as of September 30, 2022 and December 31, 2021, respectively. 

The following table shows the lease terms and discount rates related to our leases:

	September 30,			December 31,
	2022			2021
Weighted average remaining lease term (in years):
Finance		0.9			1.7
Operating		0.3			0.4
Weighted average discount rate (%):
Finance		5.0	%		5.0	%
Operating		5.5	%		5.5	%

The maturity of operating leases and finance leases as of September 30, 2022 are as follows:

Nine Months Ended September 30, 2022	Operating leases		Finance leases
2022 remaining	$	—	$	7,186
2023		—		19,332
Total minimum lease obligations		—		26,518
Less: amounts representing interest		—		(653	)
Present value of minimum lease payments		—		25,865
Less: current portion		—		(25,865	)
Lease obligations, net of current portion	$	—	$	—