Leases, Codification Topic 840

12 Months Ended

Sep. 30, 2024

LEASES

The Company leases railcar and plant equipment. Operating lease right of use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company uses its estimated incremental borrowing rate, unless an implicit rate is readily determinable, as the discount rate for each lease in determining the present value of lease payments. For the twelve months ended September 30, 2024, the Company's estimated discount rate was 7.75%. Operating lease expense is recognized on a straight-line basis over the lease term.

The Company determines if an arrangement is a lease or contains a lease at inception. The Company's leases have remaining lease terms of approximately 1 year to 7 years, which may include options to extend the lease when it is reasonably certain the Company will exercise those options. At September 30, 2024, the weighted average remaining lease term is 5 years. The Company does not have lease arrangements with residual value guarantees, sale leaseback terms, or material restrictive covenants. The Company does not have any sublease agreements.

The Company is generally responsible for maintenance, taxes, and utilities for leased equipment. Rent expense for operating leases was approximately $793,868 for the year ended September 30, 2024, $867,000 for the year ended September 30, 2023, and $948,000 for the year ended September 30, 2022.

Equipment under financing leases consists of office equipment and plant equipment. Equipment under financing leases is as follows at:


As of	September 30, 2024		September 30, 2023
Equipment	$	493,414	$	493,414
Less accumulated amortization	(246,032)		(243,277)
Net equipment under finance lease	$	247,382	$	250,137

At September 30, 2024, the Company had the following minimum commitments, which at inception had non-cancelable terms of more than one year. Amounts shown below are for the years ending September 30:


	Operating Leases		Financing Leases
2025	$	381,258	$	680
2026	409,434		—
2027	404,817		—
2028	328,777		—
2029	222,242		—

Total minimum lease commitments	$	1,746,528	$	680
Less amount representing interest			—
Present value of minimum lease commitments included in notes payable on the balance sheet			$	680

Lessee, Finance Leases

LEASES

Equipment under financing leases consists of office equipment and plant equipment. Equipment under financing leases is as follows at:


As of	September 30, 2024		September 30, 2023
Equipment	$	493,414	$	493,414
Less accumulated amortization	(246,032)		(243,277)
Net equipment under finance lease	$	247,382	$	250,137

At September 30, 2024, the Company had the following minimum commitments, which at inception had non-cancelable terms of more than one year. Amounts shown below are for the years ending September 30:


	Operating Leases		Financing Leases
2025	$	381,258	$	680
2026	409,434		—
2027	404,817		—
2028	328,777		—
2029	222,242		—

Total minimum lease commitments	$	1,746,528	$	680
Less amount representing interest			—
Present value of minimum lease commitments included in notes payable on the balance sheet			$	680

RED TRAIL ENERGY, LLC 10-K