BREEDERS’ CUP LIMITED

AUDITED FINANCIAL STATEMENTS

Year Ended January 31, 2016 and 2015

   

 

 

June 9, 2016   Dear Breeders’ Cup Nominators,  We are pleased to share with you the accompanying Audited Financial Statements of Breeders’ Cup Limited for the 2015 

fiscal  year.    The  year  finished  in  dramatic  fashion  at  historic  Keeneland  in  front  of  50,155  spectators when  American 

Pharaoh became  the  first horse  to win  racing’s “grand slam” comprising  the Kentucky Derby, Preakness Stakes, Belmont 

Stakes and Breeders’ Cup Classic.   

When Keeneland was announced as the 2015 host site, there were, perhaps, more questions than answers.  Doubts were 

vocalized about the size of the venue, parking and traffic control, food quality, and whether Lexington itself could live up to 

expectations.    In  the  end,  the doubts were  erased  and both Keeneland  and  Lexington offered up  first‐class  racing  and 

hospitality and ancillary experiences which set the standard for future Breeders’ Cups.  Our breeders were able to show to 

the world a  true “farm  to  table” experience by opening  their gates  for behind  the scene  tours of  the breeding  industry, 

while Lexington and the Commonwealth of Kentucky made our guests, both domestic and international, feel truly welcome.    

We would like to highlight several accomplishments among many achievements in 2015.  Ticket sales doubled from $8.47 

million  in 2014 to over $17 million  in 2015 while sponsorship revenue rose from $4.25 million  in 2014 to $6.18 million  in 

2015.   Average  field size once again  increased  from 12.2  in 2014  to 12.4  in 2015.   Among  those participants were 2015 

Triple Crown winner American Pharaoh and Sentient Jet Breeders’ Cup Juvenile Champion Nyquist who we now know as 

the  Kentucky Derby winner  of  2016.    International  participation  remained  strong  in  2015  featuring  such  champions  as 

Golden Horn, winner of  the 2015 Prix de  l’Arc de  Triomphe, 2015  English Derby,  and 2015  Irish Champion  Stakes,  and 

Gleneagles, a four‐time Group 1 winner in 2015.  While total handle was off slightly, this is attributed to a short field in the 

Classic, American Pharaoh’s  low morning  line odds of 3‐5, and an early start affecting bettors and wagering on the West 

Coast.  

Viewership exceeded expectations in all areas and continues to grow.  NBC posted the highest‐rated Breeders’ Cup World 

Championships telecast in 20 years.  Television ratings during the NBC Classic Hour increased by 44% from 1.8 in 2014 to 2.6 

in 2015.     An  average of 4.6 million  viewers  tuned  in  to watch  the Classic, which was up 39%  from  last  year’s Classic.  

Additionally, streaming of NBC Sports Live Extra on Saturday increased from 88,000 in 2014 to 275,000 in 2015.   

Success  in  2015 was  not  limited  to  the World  Championships,  as  Breeders’  Cup  continues  to  grow  the  Breeders’  Cup 

Challenge Series featuring great races from venues around the country, including Belmont Park, Del Mar, Monmouth Park, 

Saratoga and Santa Anita Park.   Viewership for the Challenge Series was up 136%  in 2015, averaging 900,000 viewers for 

broadcasts on NBC and NBC Sports.  Through our extended partnership with NBC, the Breeders’ Cup continues to expand 

the Breeders’ Cup brand and fan interest in the finest Thoroughbred racing has to offer.  

We would like to once again thank our nominators for their continued support.  The Breeders’ Cup would not be possible 

without your efforts as nomination fees totaled $15.2 million in 2015. 

In addition to positive revenue growth, Breeders’ Cup continues to judiciously manage expenses in order to maintain total 

purses,  nominator  and  Challenge  Series  awards  above  $28 million.    At  the  same  time, we  have  been  able  to  reduce 

outstanding lines of credit from $6.7 million to $3 million at year end (subsequently reduced to zero following the collection 

of  outstanding  accounts  receivables  after  year  end).    Additionally,  Breeders’  Cup  realized  a  positive  variance  in  net 

operating  income  in  the  amount  of  $4.6 million  from  2014,  largely  attributable  to  decreased  operating  expenses  and 

increased revenue from ticket sales and sponsorships.      

Breeders’ Cup’s adoption of a strategy to plan future host sites at least three years in advance has brought positive results to  Breeders’  Cup  from  a  planning,  sponsorship  and marketing  perspective.   We  intend  to  continue  this  strategy  and leverage  the strong  results  from Keeneland,  including,  local participation and activation,  for  future host  track selections.  We  look  forward  to  continuing  success  at  Santa  Anita  in  2016, Del Mar  in  2017,  and  Churchill Downs  in  2018.   With continued growth and positive results in all areas, we continue to believe that the best is yet to come.      With Gratitude, 

Craig Fravel C.E.O 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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BREEDERS’ CUP LIMITED

CONSOLIDATED FINANCIAL STATEMENTS January 31, 2016 and January 31, 2015

CONTENTS INDEPENDENT AUDITORS’ REPORT….………………………………………………………4 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION………………………………..6 CONSOLIDATED STATEMENTS OF ACTIVITIES AND CHANGES IN NET ASSETS…………………………………………………………...7 CONSOLIDATED STATEMENTS OF CASH FLOWS…………………………………………..8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS………………………………..9-18

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BREEDERS’ CUP LIMITED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

January, 31 2016 and January 31, 2015 January 31, 2016 January 31, 2015 Assets Cash and cash equivalents $ 228,046 $ 208,720 Accounts receivable, net 3,092,786 1,577,529 Accrued interest receivable 35,996 35,730 Investments, at fair value 39,637,445 43,569,390 Other assets, net 454,478 262,166 Total assets $ 43,448,751 $ 45,653,535 Liabilities and Net Assets Accounts payable and accrued expenses $ 1,147,693 $ 560,883 Line of credit 3,076,840 6,711,159 Total liabilities 4,224,533 7,272,042 Capital contributions 65,000 65,000 Unrestricted net assets 39,159,218 38,316,493 Total net assets 39,224,218 38,381,493 Total liabilities and net assets $ 43,448,751 $ 45,653,535

See accompanying notes to 

Consolidated Financial Statements. 6.

BREEDERS’ CUP LIMITED CONSOLIDATED STATEMENTS OF ACTIVITIES AND CHANGES IN NET ASSETS

For the Years Ended January 31, 2016 and 2015 Year ended Year ended January 31, 2016 January 31, 2015 Revenues Nomination fees, net of stallion assessment reserve of $40,000 in January 2016 and $82,000 in January 2015 $ 15,265,536 $ 14,620,520 Breeders’ Cup Championships fees 23,838,750 22,219,179 Sponsorship and licensing revenue 6,381,135 4,130,634 Unrealized and realized gains (losses)

on investments (653,032) 3,843,338 Investment income, net 716,120 516,265 Total revenues 45,548,509 45,329,936 Expenses Purses, nominator and challenge awards 28,151,614 28,435,250 Television 3,794,762 3,944,780 Marketing and simulcast development 3,435,394 3,466,340 Personnel costs 4,136,117 3,843,227 General and administrative 1,926,741 2,145,784 Sponsorship 1,783,936 1,115,746 Direct event operations 354,879 835,407 Racing Integrity Coalition 449,120 - Nominations expenses 381,088 333,959 NTRA membership dues 200,000 200,000 Aftercare Alliance contribution 42,900 45,000 Interest expense 49,233 74,776 Total expenses 44,705,784 44,440,269 Change in net assets 842,725 889,667 Total net assets, beginning of year 38,381,493 37,491,826 Total net assets, end of year $ 39,224,218 $ 38,381,493

See accompanying notes to 

Consolidated Financial Statements.7.

BREEDERS’ CUP LIMITED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended January 31, 2016 and 2015 Year ended Year ended January 31, 2016 January 31, 2015x Cash flows from operating activities Change in net assets $ 842,725 $ 889,667 Adjustments to reconcile change in net assets

from operations to net cash provided by operating activities

Realized gain on sale of investments (1,057,450) (247,842) Unrealized (gain)/loss on investments 1,710,483 (3,595,496) Depreciation and amortization 81,075 128,747 Changes in Accounts receivable, net (1,515,257) 4,056,046 Accrued interest receivable (266) 19,455 Other assets, net (273,387) 201,384 Accounts payable and accrued expenses 586,810 (968,468) Net cash provided by operating activities 374,733 483,493 Cash flows from investing activities Purchases of investments (3,619,301) (3,200,426) Proceeds from sales of investments 6,898,213 9,688,363 Net cash provided by investing activities 3,278,912 6,487,937 Cash flow from financing activities

Payments under line of credit, net (3,634,319) (7,086,224) Net cash used in financing activities (3,634,319) (7,086,224) Net change in cash and cash equivalents 19,326 (114,794) Cash and cash equivalents at beginning of year 208,720 323,514 Cash and cash equivalents at end of year $ 228,046 $ 208,720 Supplemental disclosure of cash flow information Cash paid during the year for: Interest $ 49,233 $ 74,776

See accompanying notes to 

Consolidated Financial Statements. 8. 

BREEDERS’ CUP LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2016 and 2015 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation: The consolidated financial statements include the financial information of Breeders’ Cup Limited (the “Company”) and its wholly owned, for-profit subsidiary, Breeders’ Cup Properties, LLC and Breeders’ Cup Charities, Inc., a 501 (c)(3) non-profit corporation. All intercompany balances and transactions have been eliminated in consolidation. Purpose of Organization and Nature of Operations: Breeders’ Cup Limited was incorporated in 1980 as a non-profit organization whose purpose is to stimulate public interest in the sport of Thoroughbred horse racing. The primary goal of Breeders’ Cup Limited is to build broad-based positive public awareness of Thoroughbred racing, thereby increasing fan participation in the sport and expanding opportunities for development of the Thoroughbred industry. This objective is achieved through a multimillion dollar year-round racing and promotional program. Breeders’ Cup Properties, LLC was established to own and operate commercial business ventures and investments that are profit motivated. Breeders’ Cup Charities, Inc. was established as a means to raise funds from the public and Thor-oughbred industry participants to be donated to other charitable organizations focusing on equine and human health issues. Revenue Recognition: Stallion nomination fees are recognized during the calendar year that corresponds to the related breeding season. Foal nomination fees are recognized during the year in which the foal is nominated. Championships fees include entry fees for horses and contributions from the host track. Fees associated with the Championships are recognized during the year in which the event is held. Cash and Cash Equivalents: The Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. At times, the Company maintains checking account balances in a financial institution in excess of the insurance limits provided by the Federal Deposit Insurance Corporation.

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BREEDERS’ CUP LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2016 and 2015 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Accounts Receivable: Accounts receivable consist primarily of nomination fees and amounts associated with the Championships. Interest is generally not charged on past due accounts. An allowance for doubtful accounts is provided based on historical collection experience and a review of the current status of existing receivables. Losses are charged off to the allowance when Breeders’ Cup Limited deems further collection efforts will not produce additional recoveries. The allowance balances were $55,000 and $127,000 as of January 31, 2016 and 2015, respectively. Breeders’ Cup Limited requires additional stallion nomination fees, known as Live Foal Assessment Fees, for stallions producing 50 or more live foals in a breeding season. Refunds related to these Live Foal Assessments could be payable by Breeders’ Cup Limited if the number of actual live foals differs from the number on which the assessment was based. Live Foal Assessment Fee refunds for the year ended January 31, 2016 and 2015 were estimated at $40,000 and $82,000, respectively, and are recorded as an allowance against accounts receivable on the consolidated statements of financial position. If actual results vary from the estimate, changes in net assets in future years will be decreased or increased as appropriate. Investment Valuation and Income Recognition: The Company’s investments are reported at fair value. For purpose of calculating realized gain and losses, the specific identification method is used to determine the carrying value of the investment securities sold. Interest income is recorded on the accrual basis. Dividends are recorded on the ex dividend date. Financial Accounting Standard Board guidance defines fair value as the price that would be received by the Company for an asset or paid by the Company to transfer a liability (an exit price) in an orderly transaction between market participants. This guidance establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the Company has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect the Company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

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BREEDERS’ CUP LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2016 and 2015 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The following describes the valuation methods and assumptions used by the Company to estimate the fair values of investments. Level 1 inputs: The fair values of common stock and mutual fund investments are determined by obtaining quoted prices on nationally recognized securities exchanges. Fair values of corporate bonds reflect the closing price reported in the active market in which the security or bond is traded. The fair values of the U.S. Treasury and Agency securities are calculated based on market prices of similar investments. Level 2 or 3 inputs: The Company’s level 2 equity funds have observable inputs and market activity that allow for pricing based on the underlying market prices of the items in the investments, utilizing the market approach and income approach valuation techniques. The fair values of level 3 funds are based on the net asset values of such funds provided by the fund managers. In addition level 3 Funds have a significant restriction on redemption of funds (see note 3). The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. Advertising: The Company expenses advertising costs as incurred. Advertising expense was approximately $800,000 and $910,000 for the years ended January 31, 2016 and 2015, respectively. Estimates in the Financial Statements: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. To the extent actual results differ from those estimates, future revenues and expenses could be affected. Income Taxes: In respect to accounting for uncertainty in income taxes, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.

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BREEDERS’ CUP LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2016 and 2015 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The Company recognizes interest/or penalties related to income tax matters in income tax expense. The Company did not have any amounts accrued for interest and penalties at January 31, 2016 and January 31, 2015. The Company is no longer subject to examination by taxing authorities for years before 2012. The Company does not expect the total amount of unrecognized tax benefits to significantly change over the next 12 months. The Company’s for-profit subsidiary is subject to U.S. federal income tax as well as state income taxes. Furniture, Fixtures, and Equipment: Furniture, fixtures, and equipment are recorded at cost. Furniture, fixtures, and equipment are depreciated using the straight-line method over their estimated useful lives. Major additions and improvements exceeding $2,000 with a useful life of greater than one year are capitalized, while maintenance and repairs are expensed as incurred. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is credited or charged to operations. Accumulated depreciation was $849,107 and $768,208 for the year ending January 31, 2016, and 2015, respectively. The net value of property and equipment included in other assets at January 31, 2016 and 2015 is $175,096 and $108,580, respectively. Impairment of Long-Lived Assets: The Company reviews for the impairment of long-lived assets subject to depreciation and amortization including, furniture, fixtures, and equipment, whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. No such impairment losses were recognized for the periods ended January 31, 2016 or 2015. Subsequent Event Analysis: Management has performed an analysis of activities and transactions subsequent to January 31, 2016 to determine the need for any adjustments to or disclosures within the financial statements for the year ended January 31, 2016. Management has performed its analysis through June 9, 2016, the date the financial statements were available to be issued. NOTE 2 – NTRA The National Thoroughbred Racing Association, Inc. (“NTRA”) is a 501(c)(6) non-profit membership association organized to increase the public awareness of Thoroughbred racing and to improve economic conditions for industry participants. Breeders’ Cup Limited is a founding member of the NTRA. Breeders’ Cup Limited paid annual membership dues to NTRA in the amount of $200,000 for the year ended January 31, 2016 and $200,000 for the year ended January 31, 2015.

 

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BREEDERS’ CUP LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2016 and 2015  

NOTE 3 – INVESTMENTS The Company diversifies its invested holdings in a range of asset classes including equity mutual funds, government and corporate bonds and various types of alternative asset funds. The table below lists the fair value of each asset type as of January 31, 2016 and 2015. The Level 2 funds are (i) a domestic long-only equity fund focused on holding positions in companies with substantial U.S. operations and (ii) a long-term capital appreciation fund investing in a diversified portfolio of 50-110 global equities. The Level 3 funds include (i) a hedge fund of funds which seeks attractive risk‐adjusted returns while targeting low volatility and low correlation to traditional asset classes and (ii) a global private equity fund focused on making investments in growing companies that may be attractive IPO candidates or strategic acquisition targets within three to five years. Investments measured at fair value on a recurring basis are summarized below:  

Fair Value Measurements at January 31, 2016 Using Significant Quoted Prices in Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs Investments (Level 1) (Level 2) (Level 3) Total Mutual Funds Large Cap $ 2,938,137 $ - $ - $ 2,938,137 Mid Cap 3,382,125 - - 3,382,125 Equity Funds Domestic - 8,150,038 - 8,150,038 International - 7,074,244 - 7,074,244 U.S. Treasury and Agency 4,208,797 - - 4,208,797 Corporate Bonds 2,626,194 - - 2,626,194 Venture Capital - - 3,219,560 3,219,560 Hedge Funds - - 8,038,350 8,038,350 Total Investments $ 13,155,253 $ 15,224,282 $11,257,910 $ 39,637,445

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BREEDERS’ CUP LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2016 and 2015 NOTE 3 – INVESTMENTS (Continued) Fair Value Measurements at January 31, 2015 Using Significant Quoted Prices in Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs Investments (Level 1) (Level 2) (Level 3) Total Mutual Funds Large Cap $ 3,905,308 $ - $ - $ 3,905,308 Mid Cap 4,336,800 - - 4,336,800 Equity Funds Domestic - 10,220,911 - 10,220,911 International - 7,032,866 - 7,032,866 U.S. Treasury and Agency 4,076,022 - - 4,076,022 Corporate Bonds 2,690,813 - - 2,690,813 Venture Capital - - 3,470,940 3,470,940 Hedge Funds - - 7,835,730 7,835,730 Total Investments $ 15,008,943 $ 17,253,777 $11,306,670 $ 43,569,390 Reconciliations of beginning and ending balances for the Company’s fair value measurements of its Hedge Fund investment using Level 3 inputs for the year ended January 31, 2016 and 2015 are as follows: 2016 2015 Assets at beginning of period $ 7,835,730 $ 7,451,419 Investment return 202,620 384,311 Assets at end of year $ 8,038,350 $ 7,835,730

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BREEDERS’ CUP LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2016 and 2015 NOTE 3 – INVESTMENTS (Continued) Reconciliations of beginning and ending balances for the Company’s fair value measurements of its Venture Capital investment using Level 3 inputs for the year ended January 31, 2016 and 2015 are as follows: 2016 2015 Assets at beginning of year $ 3,470,940 $ 2,062,041 Investment return (109,804) 1,181,199 Redemptions 141,576 - Purchases - 227,700 Assets at end of year $ 3,219,560 $ 3,470,940 Investment income for the year ended January 31, 2016 and 2015 consists of the following: 2016 2015 Investment income $ 934,865 $ 752,483 Investment management fees (218,745) (236,218) Net investment income $ 716,120 $ 516,265 Fair Value Based on Calculated Net Asset Values (“NAV”) The table below presents liquidity information pertaining to investments for which fair values are determined on the basis of NAV and other valuation techniques at January 31, 2016: Fair Value Redemption Frequency Redemption Notice Equity Funds (Domestic) – Level 2 $ 8,150,038 Weekly 6 Days Equity Funds (International) – Level 2 7,074,244 Quarterly 30 Days Total-Level 2 $15,224,282 Hedge Funds – Level 3 $ 8,038,350 Biannual 95 Days Venture Capital – Level 3 3,219,560 Restricted N/A Total-Level 3 $11,257,910 Venture Capital Redemption Period: The term of the Tiger Global Private Investment Partnership VI, L.P. (“Tiger Partnership VI”) commenced on June 15, 2010 and shall continue until December 31, 2020 unless dissolution occurs prior to this date due to circumstances provided for in the partnership agreement. The term of the Tiger Global Private Investment Partnership VII, L.P. (“Tiger Partnership VII”) commenced on February 1, 2012 and shall continue until December 31, 2022 unless dissolution occurs prior to this date due to circumstances provided for in the partnership agreement.

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BREEDERS’ CUP LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2016 and 2015 NOTE 3 – INVESTMENTS (Continued) Venture Capital Future Commitments: The Company has a total investment commitment to the Tiger Partnership VI of $1,500,000, of which $45,000 was funded in the year ended January 31, 2014, $165,000 was funded in the year ended January 31, 2013 and $877,500 was funded in the thirteen month period ended January 31, 2012, and $412,500 was funded during in the year ended December 31, 2011. Breeders’ Cup Limited has a total investment commitment to the Tiger Partnership VII of $900,000, of which $227,700 was funded in the year ended January 31, 2015, $537,300 was funded in the year ended January 31, 2014 and $135,000 was funded in the year ended January 31, 2013. Venture Capital Valuation Period: The balance of the Tiger Partnership VI and Tiger Partnership VII is valued at the end of each calendar quarter based on a hypothetical liquidation of all portfolio investments. The last calculated balance, for each, was at December 31 and this value was used for January 31, 2016 and January 31, 2015 reporting purposes. NOTE 4 – RELATED PARTY TRANSACTIONS The Members and Directors of Breeders’ Cup Limited consist primarily of individuals involved in many facets of the Thoroughbred industry, including the breeding and racing of Thoroughbred horses. Breeders’ Cup Limited’s trustees, directors and employees may own horses directly or through partnerships that are eligible for Breeders’ Cup purses and awards. Certain trustees, directors or their farms are managers with respect to certain stallions and foals that collectively generate a majority of the stallion and foal nomination fees on behalf of Breeders’ Cup Limited. In addition, certain trustees or directors of Breeders’ Cup Limited also serve as directors of the NTRA. NOTE 5 – INCOME TAXES Breeders’ Cup Limited is exempt from federal income tax under section 501(c)(6) of the Internal Revenue Code. The for-profit subsidiary, Breeders’ Cup Properties, LLC is subject to tax on taxable in-come, if any. The tax effect of the activities of Breeders’ Cup Limited and Breeders’ Cup Properties, LLC does not materially impact the consolidated financial statements. The Company has generated net tax operating loss carry forwards of $7 million and $6.6 million (expiring from 2019 through 2033), for 2016 and 2015, respectively, available to offset future income, if any. This results in a deferred tax asset which is fully offset by an allowance since management cannot predict when, if ever, such an asset would be utilized.  

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BREEDERS’ CUP LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2016 and 2015 NOTE 6 – LINE OF CREDIT The Company has a revolving line of credit with PNC bank up to $16,000,000 in 2016 and up to $16,000,000 in 2015. The current line of credit matures on September 30, 2016 and bears interest at LIBOR rate plus 1%. The interest rate charged on the line of credit was 1.43% and 1.17% at January 31, 2016 and 2015, respectively. Advances outstanding under the line were $3,076,840 and $6,711,159 as of January 31, 2016 and 2015, respectively. In addition to containing various covenants, the line of credit is secured by the company’s outstanding accounts receivable and a pledge agreement in which the Company grants to the bank a security interest in certain investments of the Company. The fair value of the pledged securities was $13,155,254 and $15,008,942 as of January 31, 2016 and 2015, respectively. In addition to the note mentioned above, the Company maintains an unused letter of credit for $143,479 with PNC Bank, with respect to its New York office lease, since the beginning of the lease term on February 1, 2007 and will expire at lease end on January 30, 2019. NOTE 7 – COMMITMENTS AND CONTINGENCIES Rentals of office space under operating leases amounted to approximately $406,000 and $402,000 during the year ended January 31, 2016 and 2015 respectively. The Company has commitments related primarily to minimum lease payments. The approximate future minimum payments under the leases are as follows for the periods ending January 31: 2017 $ 419,000 2018 421,000 2019 252,000 $1,092,000 From time to time, the Company is involved in litigation arising in the normal course of business. After consultation with legal counsel, it is management’s opinion any current matters will be resolved without material adverse effect on the consolidated statement of financial position or statement of activities.

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BREEDERS’ CUP LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2016 and 2015 NOTE 8 – RETIREMENT PLANS The Company maintains a 401(k) retirement plan that covers all full-time employees over the age of 21 upon three months of service. Benefits vest over a period of two to five years. The Company contributes an amount equal to four percent of a covered employee’s compensation. In addition, the Company matches amounts contributed by covered employees. Matching contributions amount to 100% of the first three percent of employees contributions. The Company pays all administrative costs of the plan. For the year ended January 31, 2016 and 2015, the Company’s contributions to the plan totaled $188,103 and $181,155, respectively.

 

 

 

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