Commitments And Contingencies

9 Months Ended

Sep. 30, 2015

Commitments And Contingencies [Abstract]

Commitments And Contingencies

6.   COMMITMENTS AND CONTINGENCIES 

In accordance with an Earn Out Promissory 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 GAAP.  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 Community (“SMSC”) which became effective on June 15, 2012 and was amended in January 2015.  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.

On April 15, 2015, the Company entered into a purchase agreement, and amended the agreement in June 2015, to acquire approximately 32 acres of land adjacent to the Racetrack.  Under the amended agreement, the Company will purchase the land for $4.9 million with a closing date of December 15, 2015.

The Company is periodically involved in various claims and legal actions arising in the normal course of business.  Management believes that the resolution of any pending claims and legal actions at September 30, 2015 and as of the date of this report will not have a material impact on the Company’s consolidated financial positions or results of operations.