Commitments And Contingencies

9 Months Ended

Sep. 30, 2013

Commitments And Contingencies [Abstract]

Commitments And Contingencies

6.   COMMITMENTS AND CONTINGENCIES

In accordance with an Earn Out Note, given to the prior owner of the Racetrack as part of the consideration paid by the Company to acquire the Racetrack in 1994, if (i) off-track betting becomes legally permissible in the State of Minnesota and (ii) the Company begins to conduct off-track betting with respect to or in connection with its operations, the Company will be required to pay to the IMR Fund, L.P. the greater of $700,000 per operating year, as defined, or 20% of the net pretax profit, as defined for each of five operating years.  At this time, management believes that the likelihood that these two conditions will be met and that the Company will be required to pay these amounts is remote.  At the date (if any) that these two conditions are met, the five minimum payments will be discounted back to their present value and the sum of those discounted payments will be capitalized as part of the purchase price in accordance with generally accepted accounting principles.  The purchase price will be further increased if payments become due under the “20% of Net Pretax Profit” calculation.  The first payment is to be made 90 days after the end of the third operating year in which off-track betting is conducted by the Company.  Remaining payments would be made within 90 days of the end of each of the next four operating years.

Additionally, the Company entered into a Cooperative Marketing Agreement (the “CMA”) with the Shakopee Mdewakanton Sioux Communitywhich became effective on June 15, 2012.  The CMA contains certain covenants which, if breached, would trigger an obligation to repay a specified amount related to such covenant.At this time, management believes that the likelihood that the breach of a covenant will occur and that the Company will be required to pay the specified amount related to such covenant is remote. 

The Company entered into multiple agreements with various vendors to both construct and put into service improved digital signage and customer relationship management software at the Racetrack in 2013.  The cost of these enhancements was approximately $2,225,000.  The Company anticipates that some of these expenses will be paid for using a portion of the marketing payments received from the SMSC (these payments are described in greater detail in Note 7 “Cooperative Marketing Agreement”).  The Company has an agreement in principle that a portion of the marketing payments received annually will be applied to capital expenditures supporting the purposes of the CMA.  The Company believes that unrestricted funds available in its cash accounts, funds generated from operations, and portions of marketing payments received from the SMSC will be sufficient to satisfy these obligations.

The Company periodically is subject to claims or involved in legal proceedings arising in the normal course of business.  At September 30, 2013, management believes that the resolution of any pending claims or legal proceedings will not have a material impact on the consolidated financial statements.