Investment in Leasing Operations:

9 Months Ended

Sep. 25, 2021

Investment in Leasing Operations:

Investment in Leasing Operations:

5. Investment in Leasing Operations:

In May 2021, the Company made the decision to no longer solicit new leasing customers and will pursue an orderly run-off for its leasing portfolio.

Investment in leasing operations consists of the following:

	September 25, 2021		December 26, 2020
Direct financing and sales-type leases:
Minimum lease payments receivable	$	5,111,300	$	12,536,300
Estimated unguaranteed residual value of equipment		1,643,300		2,950,100
Unearned lease income, net of initial direct costs deferred		(611,100)		(1,439,500)
Security deposits		(1,494,500)		(2,169,000)
Equipment installed on leases not yet commenced		431,800		1,634,400
Total investment in direct financing and sales-type leases		5,080,800		13,512,300
Allowance for credit losses		(102,900)		(270,200)
Net investment in direct financing and sales-type leases		4,977,900		13,242,100
Operating leases:
Operating lease assets		469,800		599,100
Less accumulated depreciation and amortization		(406,100)		(580,100)
Net investment in operating leases		63,700		19,000
Total net investment in leasing operations	$	5,041,600	$	13,261,100

As of September 25, 2021, the $5.0 million total net investment in leases consists of $3.9 million classified as current and $1.1 million classified as long-term. As of December 26, 2020, the $13.3 million total net investment in leases consists of $8.7 million classified as current and $4.6 million classified as long-term.

As of September 25, 2021, there were no customers with leased assets greater than 10% of the Company’s total assets.

Future minimum lease payments receivable under lease contracts and the amortization of unearned lease income, net of initial direct costs deferred, is as follows for the remainder of fiscal 2021 and the full fiscal years thereafter as of September 25, 2021:

	Direct Financing and Sales-Type Leases
	Minimum Lease		Income
Fiscal Year	Payments Receivable		Amortization
2021	$	1,442,000	$	278,200
2022		3,538,900		321,600
2023		126,900		11,200
2024		3,500		100
	$	5,111,300	$	611,100

The activity in the allowance for credit losses for leasing operations during the first nine months of 2021 and 2020, respectively, is as follows:

	September 25, 2021		September 26, 2020
Balance at beginning of period	$	270,200	$	580,600
Provisions charged to expense		(167,300)		164,300
Recoveries		—		(12,400)
Deductions for amounts written-off		—		(148,900)
Balance at end of period	$	102,900	$	583,600

The Company’s investment in direct financing and sales-type leases (“Investment In Leases”) and allowance for credit losses by loss evaluation methodology are as follows:

	September 25, 2021				December 26, 2020
	Investment		Allowance for		Investment		Allowance for
	In Leases		Credit Losses		In Leases		Credit Losses
Collectively evaluated for loss potential	$	5,080,800	$	102,900	$	13,512,300	$	270,200
Individually evaluated for loss potential		—		—		—		—
Total	$	5,080,800	$	102,900	$	13,512,300	$	270,200

The Company’s key credit quality indicator for its investment in direct financing and sales-type leases is the status of the lease, defined as accruing or non-accrual. Leases that are accruing income are considered to have a lower risk of loss. Non-accrual leases are those that the Company believes have a higher risk of loss. The following table sets forth information regarding the Company’s accruing and non-accrual leases. Delinquent balances are determined based on the contractual terms of the lease.

	September 25, 2021
	0-60 Days		61-90 Days		Over 90 Days
	Delinquent		Delinquent		Delinquent and
	and Accruing		and Accruing		Accruing		Non-Accrual		Total
Total investment in leases	$	5,080,800	$	—	$	—	$	—	$	5,080,800

	December 26, 2020
	0-60 Days		61-90 Days		Over 90 Days
	Delinquent		Delinquent		Delinquent and
	and Accruing		and Accruing		Accruing		Non-Accrual		Total
Total investment in leases	$	13,512,300	$	—	$	—	$	—	$	13,512,300

The Company leases high-technology and other business-essential equipment to its leasing customers. Upon expiration of the initial term or extended lease term, depending on the structure of the lease, the customer may return the equipment, renew the lease for an additional term, or purchase the equipment. Due to the uncertainty of such outcome at the end of the lease term, the lease as recorded at commencement represents only the current terms of the agreement. As a lessor, the Company’s leases do not contain non-lease components. The residual values reflect the estimated amounts to be received at lease termination from sales or other dispositions of leased equipment to unrelated parties. The leased equipment residual values are based on the Company’s best estimate. The Company’s risk management strategy for its residual value includes the contractual obligations of customer to maintain, service, and insure the leased equipment, the use of third party remarketers as well as the analytical review of historical asset dispositions.

Leasing income as presented on the Consolidated Condensed Statements of Operations consists of the following:

	Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020
Interest income on direct financing and sales-type leases	$	362,200	$	839,600	$	1,464,700	$	2,947,900
Selling profit (loss) at commencement of sales-type leases		164,300		267,700		1,594,300		1,453,600
Operating lease income		436,700		668,600		1,397,500		1,758,500
Income on sales of equipment under lease		988,500		913,400		3,214,000		5,078,300
Other		314,500		6,500		681,300		802,500
Leasing income	$	2,266,200	$	2,695,800	$	8,351,800	$	12,040,800