Note 8 - Leases

12 Months Ended

Dec. 31, 2024

Leases of Lessee and Commitments Disclosure [Text Block]

8. LEASES

The Company determines if an arrangement is a lease or contains a lease at inception. The Company leases certain 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 $26,785 and $26,784 for the years ended December 31, 2024 and 2023, respectively. 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 $457,454 and $488,937 for the years ended December 31, 2024 and 2023, respectively.

Lease costs included in depreciation and amortization related to our finance leases were $33,332 and $18,701 for the years ended December 31, 2024 and 2023, 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:

		*Year Ended December 31,*
Assets	*Balance Sheet Location*	*2024*		*2023*

Finance	Land, buildings and equipment, net (1)	$	150,132	$	9,374
Operating	Operating lease right-of-use assets		27,674		53,026
Total Leased Assets		$	177,806	$	62,400

1 – Finance lease assets are net of accumulated amortization of $30,779 and $118,424 for the years ended December 31, 2024 and 2023, respectively.

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

	*Year Ended December 31,*
	*2024*			*2023*
Weighted average remaining lease term (in years):
Finance		4.0			4.9
Operating		0.4			0.8
Weighted average discount rate (%):
Finance		8.5	%		4.8	%
Operating		8.0	%		8.0	%

The maturity of operating leases and finance leases for the year ended December 31, 2024 are as follows:

Year Ended December 31, 2024	*Operating Leases*			*Finance Leases*
2025	$	28,228		$	44,447
2026		—			44,447
2027		—			44,447
2028 and beyond		—			44,252
Total minimum lease obligations		28,228			177,593
Less: amounts representing interest		(554	)		(27,461	)
Present value of minimum lease payments		27,674			150,132
Less: current portion		(27,674	)		(32,950	)
Lease obligations, net of current portion	$	—		$	117,182

Purchase Obligations

In March 2022, the Company entered into a five-year agreement with a totalizator provider. Pursuant to the agreement, the vendor provides totalizator equipment and related software which records and processes all wagers and calculates odds and payoffs. The future minimum purchase obligations under the new agreement are $166,400 per year. The amounts charged to operations for totalizator expenses for the years ended December 31, 2024 and 2023 were $200,000 and $205,000, respectively.

Canterbury Park Holding Corp 10-K