UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

TERLY PERIOD ENDED SEPTEMBER 30, 2012.

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, ~~2017.~~2018.


☐	o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO _____.

Commission File Number: 001-37858

CANTERBURY PARK HOLDING CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Minnesota

~~Minnesota~~

47-5349765

(State or Other Jurisdiction

of Incorporation or Organization)

(I.R.S. Employer Identification No.)

	1100 Canterbury Road
	Shakopee, MN 55379
	~~(Address of principal executive offices and zip code)~~

(Address of principal executive offices and zip code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


~~YES~~x	YES	☒		NO¨	☐

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).

~~YES~~x
	YES	☒		NO¨	☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	¨ ☐		Accelerated filer	¨ ☐
	Non-accelerated filer	¨ ☐		Smaller reporting company	x ☒
	Emerging growth company	¨ ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨☐

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).

YES☐NO☒

~~YES~~¨

NO x

The Company had ~~4,410,492~~4,524,127 shares of common stock, $.01 par value, outstanding as of November 1, ~~2017.~~2018.

Canterbury Park Holding Corporation

INDEX


			Page
PART I.	FINANCIAL INFORMATION

	Item 1.	Financial Statements (unaudited)

		Condensed Consolidated Balance Sheets as of
		September 30, ~~2017~~2018 and December 31, ~~2016~~2017	3 2

		Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, ~~2017~~2018 and ~~2016~~2017	4 3

		Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2017~~2018 and ~~2016~~2017	5 4

		Notes to Condensed Consolidated Financial Statements	7 6

	Item 2.	Management’s Discussion and Analysis of Financial Condition and
		Results of Operations	14 17

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	20 24

	Item 4.	Controls and Procedures	20 24

~~PART II.~~	~~OTHER INFORMATION~~
PART II.	OTHER INFORMATION

	Item 1.	Legal Proceedings	21 26

	Item 1A.	Risk Factors	21 26

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21 26

	Item 3.	Defaults Upon Senior Securities	21 26

	Item 4.	Mine Safety Disclosures	21 26

	Item 5.	Other Information	21 26

	Item 6.	Exhibits	21 26

	Signatures		22 28

	~~Certifications~~

PART 1 – FINANCIAL INFORMATION

CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES

C~~CONDENSED~~ ONDENSED CONSOLIDATED BALANCE SHEETS



	(Unaudited)				(Unaudited)
	September 30,		December 31,		September 30,		December 31,
	2017		2016		2018		2017
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	7,685,291	$	6,298,807	$	11,953,483	$	8,888,162
Restricted cash		2,758,635		1,990,013		1,550,742		3,137,391
Short-term investments		205,944		205,649		205,944		206,005
Accounts receivable, net of allowance of $28,000 for both periods		1,508,532		1,309,453
Accounts receivable, net of allowance of $19,250 for both periods						972,383		1,278,289
Current portion of notes receivable		1,048,654		1,048,654		1,063,650		1,048,654
Inventory		280,744		247,786		317,521		262,989
Prepaid expenses		439,960		466,993		489,133		588,634
Income taxes receivable		-		511,170		238,366		-
Due from Minnesota horsemen associations		463,081		-		387,964		-
Total current assets		14,390,841		12,078,525		17,179,186		15,410,124

LONG-TERM ASSETS
Deposits		25,000		25,000		22,500		22,500
Notes receivable - long term portion		2,142,512		2,142,512		1,089,073		2,142,512
Land, buildings and equipment, net of accumulated depreciation of $29,112,870 and $27,642,027, respectively		36,767,333		35,378,917
Land, buildings and equipment, net of accumulated depreciation of $30,707,959 and $29,670,916, respectively						38,819,737		36,962,188
	$	53,325,686	$	49,624,954	$	57,110,496	$	54,537,324

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable		2,719,813		2,518,791		3,265,671		2,854,305
Card Casino accruals		3,101,959		2,231,907		1,830,011		2,931,205
Accrued wages and payroll taxes		1,505,297		2,034,550		1,347,681		2,291,261
Cash dividend payable		263,898		216,411		315,445		265,113
Due to MHBPA		-		38,145
Accrued property taxes		1,052,558		932,030		912,958		936,562
Deferred revenue		1,031,685		568,921		1,284,968		905,030
Payable to horsepersons						109,308		630,921
Current portion of capital lease obligations						22,929		-
Income taxes payable		355,583		-		-		3,830
Payable to horsepersons		185,215		176,652
Total current liabilities		10,216,008		8,717,407		9,088,971		10,818,227

LONG-TERM LIABILITIES
Deferred income taxes		4,310,000		4,357,000		3,520,170		3,002,000
Capital lease obligations, net of current portion						104,051		-
Total long-term liabilities		4,310,000		4,357,000		3,624,221		3,002,000
TOTAL LIABILITIES		14,526,008		13,074,407		12,713,192		13,820,227

STOCKHOLDERS’ EQUITY
Common stock, $.01 par value, 10,000,000 shares authorized, 4,398,303 and 4,325,154, respectively, shares issued and outstanding		43,983		43,252
Common stock, $.01 par value, 10,000,000 shares authorized, 4,506,354 and 4,414,492, respectively, shares issued and outstanding						45,064		44,145
Additional paid-in capital		19,591,467		18,780,070		21,137,677		19,865,273
Retained earnings		19,164,228		17,727,225		23,214,563		20,807,679
Total stockholders’ equity		38,799,678		36,550,547		44,397,304		40,717,097
	$	53,325,686	$	49,624,954	$	57,110,496	$	54,537,324

See notes to condensed consolidated financial statements

CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES

C~~CONDENSED~~ONDENSED CONSOLIDATED ~~STATEMENTS~~STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
OPERATING REVENUES:
Pari-mutuel $ 3,866,158 $ 3,554,975 $ 8,901,920 $ 7,971,295
Card Casino 7,979,614 7,324,936 23,796,820 21,445,127
Food and beverage 3,184,125 3,446,063 6,894,686 6,751,260
Other 2,682,434 2,347,464 5,483,541 4,801,471
Total Revenues 17,712,331 16,673,438 45,076,967 40,969,153
Less: Promotional allowances (45,490 ) (43,030 ) (120,577 ) (106,451 )
Net Revenues 17,666,841 16,630,408 44,956,390 40,862,702

OPERATING EXPENSES:
Purse expense 2,252,618 2,155,361 5,430,102 5,003,159
Minnesota Breeders’ Fund 285,577 252,465 805,748 636,268
Other pari-mutuel expenses 310,334 300,635 1,034,805 1,061,019
Salaries and benefits 6,549,250 6,218,896 17,806,828 17,068,272
Cost of food and beverage and other sales 1,420,725 1,537,438 3,130,105 3,180,245
Depreciation 646,050 672,465 1,869,048 1,866,975
Utilities 539,018 540,468 1,157,783 1,134,365
Advertising and marketing 1,298,818 1,012,905 2,191,197 1,950,611
Professional and contracted services 1,537,311 1,517,417 3,551,738 3,314,792
Gain on sale of land - - - (3,990,519 )
Gain on insurance recoveries - (592,276 ) - (592,276 )
Other operating expenses 1,290,327 1,455,729 4,389,243 4,250,366
Total Operating Expenses 16,130,028 15,071,503 41,366,597 34,883,277
INCOME FROM OPERATIONS 1,536,813 1,558,905 3,589,793 5,979,425
OTHER INCOME (EXPENSE):
Interest income (expense), net 13,575 538 37,178 (48,488 )
Net Other Income (Expense) 13,575 538 37,178 (48,488 )
INCOME BEFORE INCOME TAXES 1,550,388 1,559,443 3,626,971 5,930,937
INCOME TAX EXPENSE (597,753 ) (633,606 ) (1,444,753 ) (2,419,447 )
NET INCOME $ 952,635 $ 925,837 $ 2,182,218 $ 3,511,490

Basic earnings per share $ .22 $ .22 $ .50 $ .82
Diluted earnings per share $ .22 $ .21 $ .50 $ .82
Weighted Average Basic Shares Outstanding 4,393,523 4,296,581 4,369,489 4,276,387
Weighted Average Diluted Shares Outstanding 4,419,436 4,322,801 4,395,534 4,294,153
Cash dividends declared per share $ .06 $ .05 $ .17 $ .30



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
OPERATING REVENUES:
Pari-mutuel	$	3,955,613	$	3,820,668	$	9,001,324	$	8,781,343
Card Casino		8,639,310		7,979,614		25,396,780		23,796,820
Food and beverage		3,256,566		3,184,125		6,960,917		6,894,686
Other		2,519,022		2,682,434		5,744,162		5,483,541
Total Net Revenues		18,370,511		17,666,841		47,103,183		44,956,390

OPERATING EXPENSES:
Purse expense		2,339,588		2,252,617		5,687,347		5,430,102
Minnesota Breeders’ Fund		301,713		285,577		806,274		805,748
Other pari-mutuel expenses		325,680		310,334		1,088,956		1,034,805
Salaries and benefits		6,605,051		6,634,149		18,801,475		18,051,593
Cost of food and beverage and other sales		1,320,792		1,420,725		3,010,323		3,130,105
Depreciation		659,498		646,050		1,895,723		1,869,048
Utilities		575,912		539,019		1,276,138		1,157,783
Advertising and marketing		1,034,612		1,298,818		2,273,831		2,191,197
Professional and contracted services		1,674,958		1,537,311		3,695,176		3,551,738
Loss on disposal of assets		-		-		99,934		-
Gain on insurance recoveries		-		-		(21,064)		-
Other operating expenses		1,501,062		1,205,428		4,101,203		4,144,478
Total Operating Expenses		16,338,866		16,130,028		42,715,316		41,366,597
INCOME FROM OPERATIONS		2,031,645		1,536,813		4,387,867		3,589,793
OTHER INCOME
Interest income, net		8,567		13,575		26,023		37,178
Net Other Income		8,567		13,575		26,023		37,178
INCOME BEFORE INCOME TAXES		2,040,212		1,550,388		4,413,890		3,626,971
INCOME TAX EXPENSE		(407,367)		(597,753)		(1,066,000)		(1,444,753)
NET INCOME	$	1,632,845	$	952,635	$	3,347,890	$	2,182,218

Basic earnings per share	$	.36	$	.22	$	.75	$	.50
Diluted earnings per share	$	.36	$	.22	$	.74	$	.50
Weighted Average Basic Shares Outstanding		4,497,072		4,393,523		4,467,897		4,369,489
Weighted Average Diluted Shares Outstanding		4,533,514		4,419,436		4,514,015		4,395,534
Cash dividends declared per share	$	.07	$	.06	$	.21	$	.17

See notes to condensed consolidated financial statements.

CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED ~~STATEMENTS~~STATEMENTS OF CASH FLOWS

(Unaudited)

Nine Months Ended September 30,
2017 2016
Operating Activities:
Net income $ 2,182,218 $ 3,511,490
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 1,869,048 1,866,975
Stock-based compensation expense 264,357 179,141
Stock-based employee match contribution 349,244 -
Deferred income taxes (47,000 ) 1,215,433
Loss (gain) on sale of land and equipment 2,000 (3,990,519 )
Gain on insurance proceeds - (592,276 )
Tax benefit from exercise of stock-based awards - 1,050
Changes in operating assets and liabilities:
Increase in restricted cash (768,622 ) (574,208 )
Increase in accounts receivable (199,079 ) (260,259 )
Increase in inventory (32,958 ) (21,479 )
Decrease in prepaid expenses 27,033 88,662
Increase in other long term assets - (5,000 )
Decrease in income taxes receivable 511,170 355,060
Increase in due from Minnesota horsemen associations (463,081 ) (1,101,444 )
Increase in accounts payable 159,933 1,119,777
Increase in deferred revenue 462,764 513,905
Increase in Card Casino accruals 467,806 620,524
Decrease in accrued wages and payroll taxes (127,007 ) (250,147 )
Increase (decrease) in accrued property taxes 120,528 (181,060 )
Decrease in due to MHBPA (38,145 ) -
Increase in income taxes payable 355,583 204,969
Increase (decrease) in payable to horsepersons 8,563 (158,032 )
Net cash provided by operating activities 5,104,355 2,542,562

Investing Activities:
Additions to buildings and equipment (3,218,375 ) (3,777,239 )
Purchase of investments (295 ) (213 )
Net cash used in investing activities (3,218,670 ) (3,777,452 )

Financing Activities
Proceeds from issuance of common stock 198,528 371,564
Principal payments on capital lease obligations - (1,887,349 )
Cash dividends to shareholders (697,729 ) (1,072,470 )
Tax benefit from exercise of stock-based awards - (1,015 )
Net cash used in financing activities (499,201 ) (2,589,270 )

Net increase (decrease) in cash and cash equivalents 1,386,484 (3,824,160 )

Cash and cash equivalents at beginning of period 6,298,807 8,274,112

Cash and cash equivalents at end of period $ 7,685,291 $ 4,449,952


	Nine Months Ended September 30,
	2018		2017
Operating Activities:
Net income	$	3,347,890	$	2,182,218
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		1,895,723		1,869,048
Stock-based compensation expense		268,816		264,357
Stock-based employee match contribution		401,850		349,244
Deferred income taxes		518,170		(47,000)
Loss on disposal of assets		99,934		2,000
Gain on insurance proceeds		(21,064)		-
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable		326,970		(199,079)
Increase in inventory		(54,532)		(32,958)
Decrease in prepaid expenses		99,501		27,033
(Increase) decrease in income taxes receivable		(238,366)		511,170
Increase in due from Minnesota horsemen associations		(387,964)		(463,081)
Increase in accounts payable		233,265		159,933
Increase in deferred revenue		379,938		462,764
(Decrease) increase in Card Casino accruals		(1,101,194)		467,806
Decrease in accrued wages and payroll taxes		(943,580)		(127,007)
(Decrease) increase in accrued property taxes		(23,604)		120,528
(Decrease) increase in income taxes payable		(3,830)		355,583
Decrease in payable to horsepersons		(521,613)		(29,582)
Net cash provided by operating activities		4,276,310		5,872,977

Investing Activities:
Additions to buildings and equipment		(3,548,124)		(3,218,375)
Proceeds from notes receivable		1,038,443		-
(Sale) purchase of investments		61		(295)
Net cash used in investing activities		(2,509,620)		(3,218,670)

Financing Activities
Proceeds from issuance of common stock		602,649		198,528
Cash dividends to shareholders		(890,666)		(697,729)
Net cash used in financing activities		(288,017)		(499,201)

Net increase in cash, cash equivalents, and restricted cash		1,478,672		2,155,106

Cash, cash equivalents, and restricted cash at beginning of period		12,025,553		8,288,820

Cash, cash equivalents, and restricted cash at end of period	$	13,504,225	$	10,443,926

See notes to condensed consolidated financial statements.

CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(continued)

(Unaudited)

2017 2016
Schedule of non-cash investing and financing activities
Additions to buildings and equipment funded through accounts payable $ 41,000 $ 65,000
Dividend declared 264,000 215,000
Issuance of promissory notes receivable - 3,191,000
Insurance recoveries proceeds receivable - 592,000

Proceeds from land sale remitted to qualified intermediary $ - $ 1,051,000
Principal payments of capital lease obligation remitted from qualified intermediary - 1,051,000

Supplemental disclosure of cash flow information:
Income taxes paid, net of refunds $ 1,141,000 $ 2,121,000


	2018		2017
Schedule of non-cash investing and financing activities
Additions to buildings and equipment funded through accounts payable	$	178,000	$	41,000
Dividend declared		315,000		264,000
Equipment acquired through capital lease agreements		126,980		-

Supplemental disclosure of cash flow information:
Income taxes paid	$	575,000	$	1,141,000

CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~OVERVIEW AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~

~~Overview; Reorganization~~ - Canterbury Park Holding Corporation (the “Company”) was incorporated as a Minnesota corporation in October 2015. The Company is a successor corporation to another corporation, also named Canterbury Park Holding Corporation, that was incorporated in 1994 (“CPHC”). Effective as of the close of business on June 30, 2016 CPHC’s business and operations were reorganized into a holding company structure (the “Reorganization”) pursuant to an Agreement and Plan of Merger dated as of March 1, 2016 that was approved by CPHC’s shareholders on June 28, 2016. Pursuant to the Reorganization:1.OVERVIEW AND BASIS OF PRESENTATION

●

The Company replaced CPHC as the public company owned by CPHC’s shareholders, with each shareholder at June 30, 2016 owning the same number of shares and having the same percentage ownership in the Company (and, indirectly, in all property and other assets then owned by CPHC) immediately after the Reorganization as that shareholder had in CPHC immediately before the Reorganization.

●

~~The Company became the holding company for and parent company of two subsidiaries, Canterbury Park Entertainment LLC (“EntertainmentCo”) and Canterbury Development LLC (“DevelopmentCo”).~~

●

EntertainmentCo is the surviving business entity in a merger with CPHC pursuant to the Reorganization and it became the direct owner of all land, facilities, and substantially all other assets related to the CPHC’s pari-mutuel wagering, Card Casino, concessions and other related businesses (“Racetrack Operations”), and EntertainmentCo continues to conduct these businesses consistent with CPHC’s past practices and will continue to be subject to direct regulation by the Minnesota Racing Commission (“MRC”).

●

DevelopmentCo will continue CPHC’s efforts to commercially develop approximately 140 acres of land currently owned or controlled that is not needed for our Racetrack Operations. DevelopmentCo is not subject to direct regulation by the MRC.

●

~~On July 1, 2016 the shares of the Company’s common stock began trading on the NASDAQ Global Market under the symbol “CPHC.”~~

For purposes of this Report on Form 10-Q, when the term “Company” is used with reference to information covering or related to periods up to and including June 30, 2016, such term refers to the operations of CPHC prior to the Reorganization.

Business– The Company’s Racetrack operations are conducted at facilities located in Shakopee, Minnesota, approximately 25 miles southwest of downtown Minneapolis. In May 1994, the Company commenced year-round horse racing simulcast operations and hosted the first annual live race meet during the summer of 1995. The Company’s live racing operations are a seasonal business as it hosts live race meets each year from May until September. The Company earns additional pari-mutuel revenue by televising its live racing to out-of-state racetracks around the country. Canterbury Park’s Card Casino operates 24 hours a day, seven days a week and is limited by Minnesota State law to conducting card play on a maximum of 80 tables. The Card Casino currently offers a variety of poker and table games. The Company’s three largest sources of revenues include: Card Casino operations, pari-mutuel operations and food and beverage sales. The Company also derives revenues from related services and activities, such as admissions, advertising signage, publication sales, and from other entertainment events and activities held at the Racetrack. Additionally, the Company is developing approximately 140 acres of underutilized land surrounding the Racetrack in a project known as Canterbury Commons. The Company is pursuing several mixed-use development opportunities for this land, directly and through joint ventures.

Basis of Presentation and Preparation – The accompanying condensed consolidated financial statements include the accounts of the Company (Canterbury Park Holding Corporation and its subsidiaries Canterbury Park Entertainment, ~~LLC,~~LLC; Canterbury Park Concession, Inc.; and Canterbury Development, LLC). Intercompany accounts and transactions have been eliminated. The preparation of these condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in these condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates.

These condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual consolidated financial statements and the notes thereto for the fiscal year ended December 31, ~~2016,~~2017, included in its Annual Report on Form 10-K (the ~~“2016~~“2017 Form 10-K”).

The condensed consolidated balance sheets and the related condensed consolidated statements of operations and the cash flows for the periods ended September 30, ~~2017~~2018 and ~~2016~~2017 have been prepared by Company management. In the opinion of management, all adjustments (which include only normal recurring adjustments, except where noted) necessary to present fairly the financial position, results of operations, and cash flows at September 30, ~~2017~~2018 and ~~2016~~2017 and for the periods then ended have been made.

~~Summary~~Effective January 1, 2018, we adopted the requirements of ~~Significant~~ Accounting ~~Policies –~~~~A detailed description~~Standards Update (“ASU”) No 2014-09, Revenue from Contracts with Customers and ASU No. 2016-18, Statement of ~~our significant accounting policies can be found~~Cash Flows, Restricted Cash as discussed in ~~our most recent Annual Report filed on~~Note 2. All amounts and disclosures set forth in this Form ~~10-K for~~10-Q have been updated to comply with the ~~fiscal year ended December 31, 2016. There were no material changes in significant accounting policies during the quarter ended September 30, 2017.~~new standards.

Deferred Revenue –Deferred revenue includes advance sales related to racing, events and corporate partnerships.Revenue from these advance billings ~~are~~is recognized when the related event occurs or services have been performed. Deferred revenue also includes advanced Cooperative Marketing Agreement (“CMA”) promotional funds, ~~and~~for which revenue is recognized when expenses are incurred.The Company maintains a deferred gain on sale of land of $240,000 due to aits repurchase right. On October 6, 2018, the Company’s repurchase right for this land expired.

~~Reclassifications –~~~~Prior period financial statement amounts have been reclassified~~Payable to ~~conform to current period presentations. Deferred revenue amounts have been reclassified on the December 31, 2016~~~~Consolidated Balance Sheets~~ to~~Deferred revenue~~ ~~from~~~~Accounts payable~~ in the amount of approximately $569,000. Also, certain amounts due to horsepersons have been reclassified from accounts payable to payable to horsepersons and certain amounts have been reclassified from card casino accruals to accrued wages and payroll taxes, which impacted the changes of these items on the~~Consolidated Statements of Cash Flows~~.

~~Due to Minnesota Horsemen’s Benevolent and Protective Association, Inc. (“MHBPA”)~~ – Horsepersons - The Minnesota Pari-mutuel Horse Racing Act ~~specifies that~~requires the Company ~~is required~~ to segregate a portion of funds (recorded as purse expense in the statements of operations), received from Card Casino operations and wagering on simulcast and live horse races, for future payment as purses for live horse races or other uses of the horsepersons’ association. Pursuant to an agreement with the MHBPA, the Company transferred into a trust account or paid directly to the MHBPA, ~~$5,313,888~~$5,861,000 and ~~$6,273,000~~$5,314,000 for the nine months ended September 30, ~~2017~~2018 and ~~2016,~~2017, respectively, related to thoroughbred races. Minnesota Statutes ~~specify~~provide that amounts transferred into the trust account are the property of the trust and not of the Company, and therefore these amounts are not recorded on the Company’s Consolidated Balance Sheet.

~~Recent~~

Reclassifications – Prior period financial statement amounts have been reclassified to conform to current period presentations. Certain amounts due to horsepersons have been reclassified on the December 31, 2017 Consolidated Balance Sheets to Payable to Horsepersons from Due to MHBPA. This reclassification has also been reflected on the Consolidated Statements of Cash Flows for the nine months ended September 30, 2017. Workers compensation amounts have been reclassified from other operating expenses to salaries and benefits on the Consolidated Statement of Operations for the three and nine months ended September 30, 2017.

2. ACCOUNTING STANDARDS AND SIGNIFICANT ACCOUNTING POLICIES

Recently Adopted Accounting ~~Pronouncement~~ –Pronouncements

In November 2016, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued ASU ~~No.~~ 2016-18, Statement of Cash ~~Flows:~~Flows (Topic 230) – Restricted ~~Cash. The new standard~~Cash. ASU 2016-18 requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally describedas restricted ~~cash. Entities will also be required to reconcile to~~cash or restricted cash equivalents when reconciling the ~~balance sheet~~beginning-of-period and ~~disclose~~end-of-period total amounts shown on the ~~nature~~statement of cash flows. As a result of the ~~restrictions. The guidance will become effective in 2018. While~~adoption of ASU 2016-18 on January 1, 2018, we ~~are continuing to assess all potential impacts~~began combining amounts generally described as restricted cash and restricted cash equivalents with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the condensed consolidated statement of cash flows. See the table at the end of this note for the effects of the ~~standard, we believe the most significant impact relates to the presentation~~adoption of ASU 2016-18 on our condensed consolidated statement of cash flows for the nine months ended September 30, 2017.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers ("Topic 606"). Topic 606 supersedes the revenue recognition requirements in Accounting Standards Codification ("ASC") Topic 605, Revenue Recognition ("Topic 605"), and requires the recognition of revenue when promised goods or services are transferred to customers in an amount that reflects the considerations to which the entity expects to be entitled to in exchange for those goods or services. Collectively, we refer to Topic 606 as the "new standard."

We adopted the requirements of the new standard as of January 1, 2018, using the full retrospective method. Adoption of the new standard resulted in changes to our accounting policies for revenue recognition and promotional allowances as detailed below. We applied the new standard using a practical expedient where the consideration allocated to the remaining performance obligations or an explanation of when we expect to recognize that amount as revenue for all reporting periods presented before the date of the initial application is not disclosed.

The impact of adopting the new standard on our fiscal 2018 and fiscal 2017 revenues is not material and resulted in no cumulative effect adjustment on net income or cash flows. The primary impact of adopting the new standard is the removal of the promotional allowance line item on the condensed consolidated statement of operations. The amounts previously included as promotional allowance are now presented on a net basis within Pari-mutuel revenues.

We adjusted our condensed consolidated financial statements from amounts previously reported due to the adoption of ASU No. 2014-09 and ASU No. 2016-18. Select unaudited condensed consolidated statement of operations line items, which reflect the adoption of ASU No. 2014-09 are as follows:


	Three months ended September 30, 2017
	As previously reported	Adjustments	As Adjusted
OPERATING REVENUES:
Pari-mutuel	$ 3,866,158	$ (45,490)	$ 3,820,668
Promotional allowances	(45,490)	(45,490)	-


	Nine months ended September 30, 2017
	As previously reported	Adjustments	As Adjusted
OPERATING REVENUES:
Pari-mutuel	$ 8,901,920	$ (120,577)	$ 8,781,343
Promotional allowances	(120,577)	(120,577)	-

Select unaudited condensed consolidated statement of cash flow line items, which reflects the adoption of ASU No. 2016-18 are as follows:


	Nine months ended September 30, 2017
	As previously reported	Adjustments	As Adjusted
Net cash provided by operating activities	5,104,355	768,622	5,872,977
Net increase in cash and cash equivalents	1,386,484	768,622	2,155,106
Cash, cash equivalents and restricted cash at beginning of period	6,298,807	1,990,013	8,288,820
Cash, cash equivalents and restricted cash at end of period	$ 7,685,291	$ 2,758,635	$ 10,443,926

Summary of Significant Accounting Policies

Except for the accounting policies for revenue recognition, promotional allowances, and restricted cash that were updated as a result of our recently adopted accounting pronouncements, there have been no changes to our significant accounting policies described in the Annual Report on Form 10-K for the year ended December 31, 2017 filed with the SEC on March 27, 2018, that have had a material impact on our condensed consolidated financial statements and related notes.

Revenue Recognition – The Company’s primary revenues with customers consist of Card Casino operations, pari-mutuel wagering on simulcast and live horse races, and food and beverage transactions. We determine revenue recognition through the following steps:

Identification of the contract, or contracts, with a customer

Identification of the performance obligations in the contract

Determination of the transaction price

Allocation of the transaction price to the performance obligation in the contract

Recognition of revenue when, or as, we satisfy a performance obligation

The transaction price for a Card Casino contract is a set percentage of wagers and is recognized at the time that the wagering process is complete. The transaction price for pari-mutuel wagering is the commission received on a wager, exclusive of any track fees and is recognized upon occurrence of the live race that is presented for wagering and after that live race is made official by the respective state’s racing regulatory body. The transaction price for food and beverage contracts is the net amount collected from the customer for these goods. Food and beverage services have been determined to be separate, stand-alone performance obligations and the transaction price is recorded as revenue as the good is transferred to the customer when delivery is made.

Contracts for Card Casino operations and pari-mutuel wagering involve two performance obligations for those customers earning points under the Company’s loyalty program and a single performance obligation for customers who do not participate in the program. The Company applies a practical expedient by accounting for its gaming contracts on a portfolio basis as these wagers have similar characteristics and the Company reasonably expects the effects on the financial statements of applying the revenue recognition guidance to the portfolio will not differ materially from that which would result if applying the guidance to an individual wagering contract. For purposes of allocating the transaction price in a wagering contract between the wagering performance obligation and the obligation associated with the loyalty points earned, the Company allocates an amount to the loyalty point contract liability based on the stand-alone redemption value of the points earned, which is determined by the value of a point that can be redeemed for a cash voucher, food and beverage voucher, racing admission, valet parking, or racing forms. Based on past experience, the majority of customers redeem their points for cash vouchers. Therefore, there are no further performance obligations by the Company.

We have two general types of liabilities related to contracts with customers: (1) our MVP Loyalty Program and (2) outstanding chip liability. These are included in the line item card casino accruals on the consolidated balance sheet. We defer the full retail value of these complimentary reward items until the future revenue transaction occurs.

The Company offers certain promotional allowances at no charge to patrons who participate in its player rewards program. The retail value of these promotional items is included as a deduction from pari-mutuel revenues and no longer shown as a separate line item on the Company’s condensed consolidated statements of operations.

We evaluate our on-track revenue, export revenue, and import revenue contracts to determine whether we are acting as the principal or as the agent when providing services, which we consider in determining if revenue should be reported gross or net. An entity is a principal if it controls the specified service before that service is transferred to a customer.

The revenue we recognize for on-track revenue and import revenue is the commission we are entitled to retain for providing a wagering service to our customers. For these arrangements, we are the principal as we control the wagering service; therefore, any charges, including simulcast fees, we incur for delivering the wagering service are presented as operating expenses.

For export revenue, our customer is the third party wagering site such as a race track, OTB, or advance deposit wagering provider. Therefore, the revenue we recognize for export revenue is the simulcast host fee we earn for exporting our racing signal to the third party wagering site.

Additionally, we adopted the clarified scope guidance of ASC 610-20, "Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets" in conjunction with ASU 2014-09, which applies to the sale, transfer and
derecognition of nonfinancial assets and in substance nonfinancial assets to noncustomers, including partial sales, and eliminates the guidance specific to real estate in ASC 360-20. Generally, the Company’s sales of its land would be considered a sale of a nonfinancial asset as defined by ASC 610-20. Under ASC 610-20, the Company will derecognize the asset and recognize a gain or loss on the sale of the land when control of the underlying asset transfers to the buyer. With respect to partial sales of real estate to joint ventures, the new guidance requires us to recognize a full gain where an equity investment is retained. These transactions could result in a basis difference as we will be required to ~~reconcile~~measure our retained equity interest at fair value, whereas the joint venture may continue to ~~total cash, cash equivalents, and restricted cash. Currently, our statement of cash flows reconciles to total cash and cash equivalents.~~measure the assets received at carryover basis.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments. The new guidance is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. The guidance will become effective in 2018. We are assessing the impact of the new accounting guidance and currently cannot estimate the financial statement impact of adoption.Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires ~~companies~~that lessees recognize assets and liabilities for leases with lease terms greater than 12 months in the statement of financial position and also requires improved disclosures to ~~generally recognize on~~help users of financial statements better understand the ~~balance sheet operating~~amount, timing and ~~financing lease liabilities and corresponding right-of-use assets. ASU 2016-02~~uncertainty of cash flows arising from leases. The update is effective ~~in our first quarter of~~for fiscal ~~2019 on a modified retrospective basis and earlier~~years beginning after December 15, 2018, including interim reporting periods within those fiscal years. Early adoption is permitted. We are currently ~~evaluating~~analyzing the impact of ~~our pending adoption of~~this ASU ~~2016-02~~and, at this time, we are unable to determine the impact on the new standard, if any, on our ~~Condensed Consolidated Financial Statements.~~consolidated financial statements.

3. STOCK-BASED COMPENSATION

~~In May 2014, the FASB issued ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers~~,which provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The revised guidance will become effective in 2018 and will be applied retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. During 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net); and ASU No. 2016-12, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients; which clarified the guidance on certain items such as reporting revenue gross versus net and presentation of sales tax, among other things.~~We are assessing the impact of the new accounting guidance and currently cannot estimate the financial statement impact of adoption.~~

~~STOCK-BASED COMPENSATION~~

Long Term Incentive Plan and Award of Deferred Stock

The Long Term Incentive Plan (the “LTI Plan”) authorizes the grant of Long Term Incentive Awards that provide an opportunity to Named Executive Officers (“NEOs”) and other Senior Executives to receive a payment in cash or shares of the Company’s common stock to the extent of achievement at the end of a period greater than one year (the “Performance Period”) as compared to Performance Goals established at the beginning of the Performance Period. Currently, there are three awards outstanding that are for three-year periods ending December 31, 2018, 2019, and 2020.

Board of Directors Stock Option, Deferred Stock Awards, and Restricted Stock Grants

The Company’s Stock Plan ~~authorizes~~was amended to authorize annual grants of restricted stock, deferred stock, ~~and~~ stock options, or any combination of the three, to non-employee members of the Board of Directors at the time of the Company’s annual ~~shareholders~~shareholders’ meeting as determined by the Board prior to each such meeting. Options granted under the Plan generally expire 10 years after the grant date. Restricted stock and deferred stock grants generally vest 100% one year after the date of the annual meeting at which they were granted, are subject to restrictions on resale for an additional year, and are subject to forfeiture if a board member terminates his or her board service prior to the shares vesting. The Board of Directors’ unvested ~~restricted~~deferred stock awards as of September 30, ~~2017 was 11,264~~2018 consisted of 7,456 shares with a weighted average fair value per share of ~~$10.65.~~$16.10. There were no unvested restricted stock or stock options outstanding at September 30, ~~2017 or December 31, 2016.~~2018.

Employee Deferred Stock Awards

Prior to January 1, 2016 the Company’s Board awarded deferred compensation to executive officers and key employees, that were not performance-based, in the form of ~~Deferred Stock~~deferred stock awards under the Company’s Stock Plan. ~~Such~~These deferred stock awards are subject to forfeiture if an employee terminates employment prior to the vesting. Generally, the awards vest ratably over a four-year period and compensation costs are recognized over the vesting period. Compensation costs are recorded in “Salaries and benefits” on the Condensed Consolidated Statements of Operations. ~~As of~~There were no unvested employee deferred stock awards outstanding at September 30, ~~2017, 4,500 shares were not vested with a weighted average fair value of $10.46 per share.~~2018.

Stock-based compensation expense related to the LTI Plan, deferred stock awards and restricted stock awards ~~are~~is included on theCondensed Consolidated Statements of Operations and totaled ~~$264,000~~$269,000 and ~~$179,000~~$264,000 for the nine months ended September 30, 2018 and 2017, ~~and 2016,~~ respectively.

Employee Stock Option Grants

The Company has granted incentive stock options to employees pursuant to the Company’s Stock Plan with an exercise price equal to the market price on the date of grant. The options vest over a 42-month period and expire in 10 years.

A summary of stock option activity as of September 30, ~~2017~~2018 and changes during the nine months then ended is presented below:



						Weighted								Weighted
				Weighted		Average						Weighted		Average
				Average		Remaining		Aggregate				Average		Remaining		Aggregate
	Number of			Exercise		Contractual		Grant Date		Number of		Exercise		Contractual		Grant Date
Stock Options	Options			Price		Term		Fair Value		Options		Price		Term		Fair Value

Outstanding at January 1, 2017		191,002		$	9.08
Outstanding at January 1, 2018											142,502	$	8.19
Granted		-			-						-		-
Exercised		(18,500	)		7.23						(55,500)		8.43
Expired/Forfeited		(15,000	)		13.76						-		-
Outstanding at September 30, 2017		157,502		$	8.17		2.0 Years	$	1,286,382
Outstanding at September 30, 2018											87,002	$	8.03		1.2 Years	$	698,802

Exercisable at September 30, 2017		157,502		$	8.17		2.0 Years	$	1,286,382
Exercisable at September 30, 2018											87,002	$	8.03		1.2 Years	$	698,802

~~NET INCOME PER SHARE COMPUTATIONS~~

4. NET INCOME PER SHARE COMPUTATIONS

The following is a reconciliation of the numerator and denominator of the earnings per common share computations for the three and nine months ended September 30, ~~2017~~2018 and ~~2016:~~2017:

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Net income (numerator) amounts used for basic and diluted per share computations: $ 952,635 $ 925,837 $ 2,182,218 $ 3,511,490

Weighted average shares (denominator) of common stock outstanding:
Basic 4,393,523 4,296,581 4,369,489 4,276,387
Plus dilutive effect of stock options 25,913 26,220 26,045 17,766
Diluted 4,419,436 4,322,801 4,395,534 4,294,153

Net income per common share:
Basic $ .22 $ .22 $ .50 $ .82
Diluted .22 .21 .50 .82

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Net income (numerator) amounts used for basic and diluted per share computations:	$	1,632,845	$	952,635	$	3,347,890	$	2,182,218

Weighted average shares (denominator) of common stock outstanding:
Basic		4,497,072		4,393,523		4,467,897		4,369,489
Plus dilutive effect of stock options		36,442		25,913		46,118		26,045
Diluted		4,533,514		4,419,436		4,514,015		4,395,534

Net income per common share:
Basic	$	.36	$	.22	$	.75	$	.50
Diluted		.36		.22		.74		.50

There were no out of-the-money options at September 30, 2018; thus, all outstanding options to purchase shares of common stock were included in the computation of diluted net income per share.

Options to purchase 30,000 shares of common stock at an average price of $12.33 per share were outstanding but not included in the computation of diluted net income per share for the three and nine months ended September 30, 2017 because the exercise price of the options exceeded the market price of the Company’s common stock at September 30, 2017.

Options to purchase 45,000 shares of common stock at an average price of $12.80 per share were outstanding but not included in the computation of diluted net income per share for the three and nine months ended September 30, 2016 because the exercise price of the options exceeded the market price of the Company’s common stock at September 30, 2016.

~~PROMISSORY NOTES RECEIVABLE~~

5. PROMISSORY NOTES RECEIVABLE

In May 2016, the Company sold approximately 24 acres of land adjacent to the Racetrack for a total consideration of approximately $4.3 million. Promissory notes receivable ~~consist~~consists of two promissory notes totaling ~~$3,191,000~~$2,145,000 bearing interest at 1.43%. On May 31, 2017, the Company signed an amendment extending the maturity date of the notes to May 2020. Payments totaling $1,094,000 are due annually on May 13thuntil the notes mature. The promissory notes are secured by the mortgage on approximately 24 acres and management believes no allowance for ~~doubtful accounts~~collectability is necessary.

6. GENERAL CREDIT AGREEMENT

~~GENERAL CREDIT AGREEMENT~~

The Company has a general credit and security agreement with ~~Bremer Bank, which provides~~ a ~~revolving credit line of up to $6,000,000.~~financial institution. This agreement was amended onand restated effective as of September 30, ~~2017~~2018 to extend the maturity date to September 30, ~~2018.~~2019, increase the revolving credit line to $8,000,000, and allow for letters of credit in the aggregate amount of up to $2,000,000 to be issued under the credit agreement. The line of credit is collateralized by all receivables, inventory, equipment, and general intangibles of the Company. The Company had no borrowings under the credit line during the ~~nine~~three months ended September 30, ~~2017.~~2018.

~~OPERATING SEGMENTS~~

7. OPERATING SEGMENTS

The Company has ~~three~~four reportable operating segments: horse racing, Card Casino, ~~and~~ food and ~~beverage.~~beverage, and development. The horse racing segment primarily represents simulcast and live horse racing operations. The Card Casino segment represents operations of Canterbury Park’s Card Casino, ~~and~~ the food and beverage segment represents food and beverage operations provided during simulcast and live racing, in the Card Casino, and during special ~~and other catering and events~~events. The development segment represents our real estate development operations. The Company’s reportable operating segments are strategic business units that offer different products and services. They are managed separately because the segments differ in the nature of the products and services provided as well as process to produce those products and services. The Minnesota Racing Commission regulates the horse racing and Card Casino segments.

Depreciation, interest and income taxes are allocated to the segments, but no allocation is made to the food and beverage segment for shared facilities. However, the food and beverage segment pays approximately 25% of gross revenues earned on live racing and special event days to the horse racing segment for use of the facilities.

The following tables ~~provide information about~~represent a disaggregation of revenues from contracts with customers along with the Company’s operating segments (in 000’s):

Nine Months Ended September 30, 2017
Horse Racing Card Casino Food and Beverage Total

Net revenues from external customers $ 13,952 $ 23,797 $ 7,207 $ 44,956

Intersegment revenues 682 1,106 1,788

Net interest income (expense) 37 37

Depreciation 1,428 317 124 1,869

Segment (loss) income before income taxes (801 ) 4,828 1,407 5,434

At September 30, 2017
Segment Assets $ 52,421 $ 55 $ 20,968 $ 73,444

Nine Months Ended September 30, 2016
Horse Racing Card Casino Food and Beverage Total

Net revenues from external customers $ 12,389 $ 21,445 $ 7,029 $ 40,863

Intersegment revenues 653 - 1,015 1,668

Net interest income (48 ) - - (48 )

Depreciation 1,430 317 120 1,867

Segment (loss) income before income taxes (1) 1,229 5,317 890 7,436

At December 31, 2016
Segment Assets $ 48,302 $ 478 $ 19,039 $ 67,819



	Nine Months Ended September 30, 2018
	Horse Racing		Card Casino		Food and Beverage		Development		Total

Net revenues from external customers	$	14,333	$	25,397	$	7,373	$	-	$	47,103

Intersegment revenues		746		-		1,054		-		1,800

Net interest (expense) income		(3)		-		-		29		26

Depreciation		1,758		5		133		-		1,896

Segment (loss) income before income taxes		(766)		5,772		739		(8)		5,737

Segment income tax (benefit) expense		(504)		1,394		178		(2)		1,066

	At September 30, 2018
Segment Assets	$	43,297	$	628	$	23,924	$	10,787	$	78,636

~~1 – For the nine months ended September 30, 2016,~~~~Segment (loss) income before income taxes~~ ~~for Horse Racing includes the gain on sale of land and gain on insurance recoveries of approximately $3,990,000 and $592,000, respectively.~~



	Nine Months Ended September 30, 2017
	Horse Racing		Card Casino		Food and Beverage		Development		Total

Net revenues from external customers	$	13,952	$	23,797	$	7,207	$	-	$	44,956

Intersegment revenues		682		-		1,106		-		1,788

Net interest income		37		-		-		-		37

Depreciation		1,428		317		124		-		1,869

Segment (loss) income before income taxes		(801)		4,828		1,407		-		5,434

Segment income tax (benefit) expense		(1,039)		1,923		560		-		1,445

	At December 31, 2017
Segment Assets	$	41,077	$	642	$	21,583	$	11,436	$	74,738

The following are reconciliations of reportable segment revenues, income before income taxes, and assets, to the Company’s consolidated totals (in 000’s):

Nine Months Ended September 30,
2017 2016
Revenues
Total net revenues for reportable segments $ 46,745 $ 42,531
Elimination of intersegment revenues (1,789 ) (1,668 )
Total consolidated net revenues $ 44,956 $ 40,863



	Nine Months Ended September 30,
	2018		2017
Revenues
Total net revenues for reportable segments	$	48,903	$	46,745
Elimination of intersegment revenues		(1,800)		(1,789)
Total consolidated net revenues	$	47,103	$	44,956

Income before income taxes
Total segment income before income taxes $ 5,434 $ 7,436
Elimination of intersegment income before income taxes (1,807 ) (1,505 )
Total consolidated income before income taxes $ 3,627 $ 5,931



Income before income taxes
Total segment income before income taxes	$	5,737	$	5,434
Elimination of intersegment income before income taxes		(1,323)		(1,807)
Total consolidated income before income taxes	$	4,414	$	3,627

	September 30,		December 31,
	2018		2017
Assets
Total assets for reportable segments	$	78,636	$	74,738
Elimination of intercompany receivables		(21,526)		(20,201)
Total consolidated assets	$	57,110	$	54,537

September 30, December 31,
2017 2016
Assets
Total assets for reportable segments $ 73,444 $ 67,819
Elimination of intercompany receivables (20,118 ) (18,194 )
Total consolidated assets $ 53,326 $ 49,625

8. COMMITMENTS AND CONTINGENCIES

~~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 (a) $700,000 per ~~operating year,~~Operating Year, as defined, or (b) 20% of the ~~net pretax profit,~~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~~would be required to pay these amounts is remote. At the date (if any) that these two conditions are met, the five minimum payments ~~will~~would be discounted back to their present value and the sum of those discounted payments ~~will~~would 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~~would be ~~made~~due 90 days after the end of the third ~~operating year~~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.~~Operating Years.

The Company entered into a Cooperative Marketing Agreement (the “CMA”) with the Shakopee Mdewakanton Sioux Community (“SMSC”), which became effective June 4, 2012 and was amended in each of January 2015, 2016, 2017, and ~~2017,~~2018, and will expire on December 31, 2022. 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 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, ~~2017~~2018 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.

~~COOPERATIVE MARKETING AGREEMENT~~

9. COOPERATIVE MARKETING AGREEMENT

As discussed above in Note 7,8, on June 4, 2012, the Company entered into the CMA with the SMSC. The primary purpose of the CMA is to increase purses paid during live horse racing at Canterbury Park’s Racetrack in order to strengthen Minnesota’s thoroughbred and quarter horse industry. Under the CMA, as amended, this is achieved through “Purse Enhancement Payments to Horsemen” paid directly to the MHBPA. ~~Such~~These payments have no direct impact on the Company’s consolidated financial statements or operations.

Under the terms of the CMA, as amended, the SMSC paid the horsemen ~~$7.2~~$7.4 million and ~~$6.7~~$7.2 million in the first nine months of ~~2017~~2018 and ~~2016,~~2017, respectively, primarily for purse enhancements for the live race meets in the respective years.

Under the CMA, as amended, SMSC also agreed to make “Marketing Payments” to the Company relating to joint marketing efforts for the mutual benefit of the Company and SMSC, including signage, joint promotions, player benefits and events. Under the CMA, the SMSC paid the Company ~~$1,581,000~~$1,620,000 and ~~$1,197,000~~$1,581,000 for marketing purposes during the nine months ended September 30, ~~2017~~2018 and ~~2016,~~2017, respectively.

In each of January 2015, 2016, 2017, and ~~2017~~2018 the CMA was amended to adjust the payment amounts between the “Purse Enhancement Payments to Horsemen” and “Marketing Payments to Canterbury Park.” SMSC is currently obligated to make the following purse enhancement and marketing payments for ~~2018~~2019 through 2022:

Year Purse Enhancement Payments to Horsemen 1 Marketing Payments to Canterbury Park
2018 $ 7,380,000 $ 1,620,000
2019 7,380,000 1,620,000
2020 7,380,000 1,620,000
2021 7,380,000 1,620,000
2022 7,380,000 1,620,000


1 ~~Includes $100,000 each year payable to various horsemen associations~~

Year	Purse Enhancement Payments to Horsemen		1	Marketing Payments to Canterbury Park
2019		$ 7,380,000			$ 1,620,000
2020		7,380,000			1,620,000
2021		7,380,000			1,620,000
2022		7,380,000			1,620,000

1 Includes $100,000 each year payable to various horsemen associations

The amounts earned from the marketing payments are recorded as a component of other revenue and the related expenses are recorded as a component of advertising and marketing expense and depreciation in the Company’s condensed consolidated statements of operations. For the three and nine months ended September 30, 2018, the Company recorded $491,000 and $1,169,000 in other revenue and incurred $434,000 and $999,000 in advertising and marketing expense and $57,000 and $170,000 in depreciation related to the SMSC marketing funds. For the three and nine months ended September 30, 2017, the Company recorded $672,000 and $1,298,000 in other revenue and incurred $569,000 and $1,128,000 in advertising and marketing expense and $57,000 and $170,000 in depreciation related to the SMSC marketing payment. For the three and nine months ended September 30, 2016, the Company recorded $366,000 and $610,000 in other revenue and incurred $312,000 and $440,000 in advertising and marketing expense and $57,000 and $170,000 in depreciation related to the SMSC marketing payment. The excess of amounts received over revenue is reflected as deferred revenue which is included on the consolidated balance sheets.

Under the CMA, the Company agreed for the term of the CMA, which is currently scheduled to terminate on December 31, 2022, that it would not promote or lobby the Minnesota legislature for expanded gambling authority and will support the SMSC’s lobbying efforts against expanding gambling authority.

~~INCOME TAXES~~

10. REAL ESTATE DEVELOPMENT

Joint Venture

On April 2, 2018, the Company’s subsidiary Canterbury Development LLC, entered into an Operating Agreement (“Operating Agreement”) with an affiliate of Doran Companies (“Doran”), a national commercial and residential real estate developer, as the two members of a Minnesota limited liability company named Doran Canterbury I, LLC (“Doran Canterbury I”). Doran Canterbury I was formed as part of a joint venture between Doran and Canterbury Development LLC to construct an upscale apartment complex on land adjacent to the Company’s Racetrack (the “Project”). Doran Canterbury I will pursue development of Phase I of the Project, which will include approximately 300 units, a heated parking ramp, and a clubhouse. The Operating Agreement was amended and restated on August 17, 2018 to expand the definition of allowable mortgage financing for the development and construction of the Project. The amended and restated agreement did not have a material effect on Canterbury’s contribution to, or obligations in connection with, the Project.

In ~~March 2016,~~connection with the ~~FASB issued ASU 2016-09, “Improvements~~execution of the Amended Doran Canterbury I Agreement, on August 18, 2018, Canterbury Development LLC entered into an Operating Agreement with Doran Shakopee, LLC as the two members of a Minnesota limited liability company entitled Doran Canterbury II, LLC (“ Doran Canterbury II”). Under the Doran Canterbury II Operating Agreement, Doran Canterbury II will pursue development of Phase II of the Project, which is expected to ~~Employee Share-Based Payment Accounting”, which requires companies~~begin after the completion of Phase I. Phase II will include approximately 300 apartment units and a heated parking ramp. Canterbury Development’s equity contribution to ~~recognize additional tax benefits or expenses related~~Doran Canterbury for Phase II will be approximately 10 acres of land. In connection with its contribution, Canterbury Development will become a 27.4% equity member in Doran Canterbury II with Doran owning the remaining 72.6%.

On September 27, 2018, the Company’s subsidiary Canterbury Development LLC contributed approximately 13 acres of land to Doran Canterbury I as its equity contribution to the ~~vesting or settlement of employee share based awards as income tax provision or benefit~~joint venture. As stated in the ~~income statement~~Operating Agreement, Doran is responsible for securing financing for Doran Canterbury I. As of November 14, 2018, financing for Doran Canterbury I has not been secured and if it is not secured, the land contributed to the joint venture will be returned to the Company. Therefore, the Company did not record an investment in the ~~reporting period~~joint venture and a gain on transfer of land as of September 30, 2018.

Tax Increment Financing

On August 8, 2018, the City Council of the City of Shakopee, Minnesota approved a Contract for Private Redevelopment (“Redevelopment Agreement”) between the City of Shakopee Economic Development Authority (“Shakopee EDA”) and Canterbury Park Holding Corporation and its subsidiary Canterbury Development LLC in ~~which they occur. In addition, ASU 2016-09 requires~~connection with a Tax Increment Financing District (“TIF District”) that ~~all tax related cash flows resulting from share-based payments,~~the City had approved in April 2018. The City of Shakopee, the Shakopee EDA and the Company entered into the Redevelopment Agreement on August 10, 2018.

Under the Redevelopment Agreement, the Company has agreed to undertake a number of specific infrastructure improvements within the TIF District, including the ~~excess tax benefits related to settlement~~development of stock-based awards, be classified as cash flows from operating activities in the statement of cash flows. The Company adopted this ASU at March 31, 2017. The adoption of ASU 2016-09 required no retrospective adjustments to the financial statements. In addition there was no material cumulative-effect adjustment to retained earnings. Upon adoption,public streets, utilities, sidewalks, and other public infrastructure. More specifically, the Company is obligated to construct improvements on Shenandoah Drive and Barenscheer Boulevard with these improvements required to ~~recognize all excess~~be substantially complete on or before December 31, 2019 and December 31, 2020, respectively.

If the Company does not proceed with the improvements to Shenandoah Drive on or before December 15, 2018 or the improvements to Barenscheer Boulevard on or before December 15, 2019, the City of Shakopee has the right to construct the improvements itself and assess the Company for the costs of these improvements.

Under the Redevelopment Agreement, the City of Shakopee has agreed that a portion of the tax ~~benefits~~increment revenue generated from the developed property will be paid to the Company to reimburse it for its expense in constructing infrastructure improvements. The total estimated costs of TIF eligible improvements to be borne by the ~~statement~~Company is $23,336,500. A detailed Schedule of ~~earnings.~~the Public Improvements under the Redevelopment Agreement, the timeline for their construction and the source and amount of funding is set forth on Exhibit C of the Redevelopment Agreement, which was filed as Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended June 30, 2018. The total amount of funding that Canterbury will be paid as reimbursement under the TIF program for these improvements is not guaranteed, however, and will depend on future tax revenues generated from the developed property.

The Company expects to finance its improvements under the Redevelopment Agreement with funds from its current operating resources and existing credit facility and, potentially, third-party financing sources.

11. SUBSEQUENT EVENTS

As part of its development efforts, the Company has recently entered into several real estate purchase and sale agreements.

On October 22, 2018, the Company entered into an agreement to sell approximately 1.7 acres of land on the West side of the Racetrack to a third party for total consideration of approximately $564,000. Closing is subject to the satisfaction of certain customary conditions. The Company expects the transaction to close in 2019.

On October 30, 2018, the Company entered into an agreement to purchase approximately 2.6 acres of land on the East side of the Racetrack for total consideration of approximately $1.0 million. Closing is subject to the satisfaction of certain customary conditions. The Company expects the transaction to close in 2019.

On November 1, 2018, the Company entered into an agreement to sell between 19 and 21 acres of land on the East side of the Racetrack to a third party for total consideration of approximately $3.7 million to $4.1 million, depending upon completion of a survey and determination of the final acreage. Closing is subject to the satisfaction of certain customary conditions. The Company expects the transaction to close in 2019.

~~ITEM 2:~~	~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL~~
	~~CONDITION AND RESULTS OF OPERATIONS~~

ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand Canterbury Park Holding Corporation, our operations, our financial results and financial condition and our present business environment. This MD&A is provided as a supplement to, and should be read in conjunction with, our condensed consolidated financial statements and the accompanying notes to the financial statements (the “Notes”).

Overview:

Canterbury Park Holding Corporation (the “Company,” “we,” “our,” or “us”) conducts pari-mutuel wagering operations and hosts “unbanked” card games at its Canterbury Park Racetrack and Card Casino facility (the “Racetrack”) in Shakopee, Minnesota, which is approximately 25 miles southwest of downtown Minneapolis. The Racetrack is the only facility in the State of Minnesota that offers live pari-mutuel thoroughbred and quarter horse racing.

The Company’s pari-mutuel wagering operations include both wagering on thoroughbred and quarter horse races during live meets at the Racetrack each year from May through September, and year-round wagering on races held at out-of-state racetracks that are televised simultaneously at the Racetrack (“simulcasting”). Unbanked card games, in which patrons compete against each other, are hosted in the Card Casino at the Racetrack. The Card Casino operates 24 hours a day, seven days a week. The Card Casino offers both poker and table games at up to 80 tables. The Company also derives revenues from related services and activities, such as concessions, parking, advertising signage, publication sales, and from other entertainment events and activities held at the Racetrack.

~~Recent Reorganization~~. The Company was incorporated as a Minnesota corporation in October 2015. The Company is a successor corporation to another corporation, also named Canterbury Park Holding Corporation, that was incorporated in 1994 (“CPHC”). Effective as of the close of business on June 30, 2016, CPHC’s business and operations were reorganized into a holding company structure (the “Reorganization”) pursuant to an Agreement and Plan of Merger dated as of March 1, 2016 that was approved by CPHC’s shareholders on June 28, 2016.

Further information regarding the Reorganization is set forth at Note 1 in the Notes to Condensed Consolidated Financial Statements under Part I above and in the Company’s Registration Statement on Form S-4 (File No. 333-210877) filed with the SEC on April 22, 2016, which information is incorporated herein by reference.

Operations Review for theThree and Nine Months Ended September 30, ~~2017:~~2018:

EBITDA

EBITDA represents earnings before interest, income tax expense, and depreciation and amortization. EBITDA is not a measure of performance or liquidity calculated in accordance with generally accepted accounting principles in the United States of America (“GAAP”), and should not be considered an alternative to, or more meaningful than, net income as an indicator of our operating performance or cash flows from operating activities as a measure of liquidity. EBITDA is presented as a supplemental disclosure because it is a widely used measure of performance and a basis for valuation of companies in our industry. Moreover, other companies that provide EBITDA information may calculate EBITDA differently than we do. Adjusted EBITDA reflects additional adjustments to net income to eliminate unusual items. For the ~~three months ended September 30, 2016, adjusted EBITDA excluded the gain on insurance recoveries. For the~~ nine months ended September 30, ~~2016,~~2018, adjusted EBITDA excluded the ~~gain~~loss on ~~sale~~disposal of ~~land~~assets and gain on insurance recoveries.

The following table sets forth a reconciliation of net income, a GAAP financial measure, to EBITDA and to adjusted EBITDA (defined above) which are non-GAAP financial measures, for the three and nine months ended September 30, ~~2017~~2018 and ~~2016:~~2017:

Summary of EBITDA Data
Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
NET INCOME $ 952,635 $ 925,837 $ 2,182,218 $ 3,511,490
  Interest (income) expense, net (13,575 ) (538 ) (37,178 ) 48,488
  Income tax expense 597,753 633,606 1,444,753 2,419,447
  Depreciation 646,050 672,465 1,869,048 1,866,975
EBITDA 2,182,863 2,231,370 5,458,841 7,846,400
  Gain on insurance recoveries 0 (592,276 ) 0 (592,276 )
  Gain on sale of land 0 0 0 (3,990,519 )
ADJUSTED EBITDA $ 2,182,863 $ 1,639,094 $ 5,458,841 $ 3,263,605


Summary of EBITDA Data
	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
NET INCOME	$	1,632,845	$	952,635	$	3,347,890	$	2,182,218
Interest income, net		(8,567)		(13,575)		(26,023)		(37,178)
Income tax expense		407,367		597,753		1,066,000		1,444,753
Depreciation		659,498		646,050		1,895,723		1,869,048
EBITDA		2,691,143		2,182,863		6,283,590		5,458,841
Gain on insurance recoveries		-		-		(21,064)		-
Loss on disposal of assets		-		-		99,934		-
Adjusted EBITDA	$	2,691,143	$	2,182,863	$	6,362,460	$	5,458,841

Adjusted EBITDA increased ~~$544,000~~$508,000 or ~~33.2%,~~23.3% and increased as a percentage of net revenues to ~~12.4%~~14.6% from ~~9.9%~~12.4% for the three months ended September 30, ~~2017~~2018 as compared to the same period in ~~2016.~~2017. Adjusted EBITDA increased ~~$2,195,000,~~$904,000 or ~~67.3%,~~16.6% and increased as a percentage of net revenues to ~~12.2%~~13.5% from ~~8.0%~~12.1% for the nine months ended September 30, ~~2017 as~~2018 compared to the same period in ~~2016.~~2017. The increase for the three and nine months ended September 30, ~~2017~~2018 is primarily due to the increase in revenues compared to the same periods in ~~2016.~~2017.

Revenues:

Total net revenues for the three months ended September 30, ~~2017~~2018 were ~~$17,667,000,~~$18,371,000, an increase of ~~$1,036,000,~~$704,000, or ~~6.2%~~4.0%, compared to total net revenues of ~~$16,630,000~~$17,667,000 for the three months ended September 30, ~~2016.~~2017. This increase primarily consists of increases in pari-mutuel and card casino revenue of ~~8.8%~~3.5% and ~~8.9%~~8.3%, ~~respectively, partially offset by a decrease in food and beverage revenue of 7.6%.~~respectively. Total net revenues for the nine months ended September 30, ~~2017~~2018 were ~~$44,956,000,~~$47,103,000, an increase of ~~$4,094,000,~~$2,147,000, or ~~10.0%~~4.8%, compared to total net revenues of ~~$40,863,000~~$44,956,000 for the nine months ended September 30, ~~2016.~~2017. This increase results primarily ~~consists of~~from increases in ~~pari-mutuel, food and beverage~~other and card casino revenue of ~~11.7%, 2.1%~~4.8% and ~~11.0%~~6.7%, respectively. See below for a further discussion of our sources of revenues.

Pari-Mutuel Data Revenue:
Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016

    Simulcast $ 1,407,000 $ 1,315,000 $ 4,386,000 $ 4,422,000
    Live Racing 1,392,000 1,349,000 2,335,000 2,086,000
    Guest Fees 783,000 772,000 1,279,000 1,210,000
    Other Revenue (1) 284,000 119,000 902,000 253,000
   Total Pari-Mutuel Revenue $ 3,866,000 $ 3,555,000 $ 8,902,000 $ 7,971,000

Racing Days
     Simulcast only racing days 52 46 206 205
     Live and simulcast racing days 40 46 67 69
Total Number of Racing Days 92 92 273 274


Pari-Mutuel Data Revenue:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017

Simulcast	$	1,420,000	$	1,407,000	$	4,473,000	$	4,386,000
Live Racing		1,353,000		1,392,000		2,295,000		2,335,000
Guest Fees		926,000		783,000		1,483,000		1,279,000
Other Revenue		257,000		239,000		750,000		781,000
Total Pari-Mutuel Revenue	$	3,956,000	$	3,821,000	$	9,001,000	$	8,781,000

Racing Days
Simulcast only racing days		51		52		204		206
Live and simulcast racing days		41		40		69		67
Total Number of Racing Days		92		92		273		273

~~1 – Includes source market fees received pursuant to Advanced Deposit Wagering (ADW) legislation effective November 1, 2016.~~

Total pari-mutuel revenue increased ~~$311,000,~~$135,000, or ~~8.8%~~3.5%, and $220,000, or 2.5% for the three and nine months, respectively, ended September 30, ~~2017,~~2018 compared to the same ~~period~~periods in ~~2016.~~2017. The ~~increase in other pari-mutuel revenue is due~~increases are related to receipt of $155,000 in source market fees received under Advanced Deposit Wagering (ADW) legislation that took effect on November 1, 2016. The ADW legislation allows Minnesota residents to engage in pari-mutuel wagering on out-of-state horse races online with a prefunded account through an ADW provider. The Company receives a percentage of monies wagered (generally 3.25% to 5.0%) by Minnesota residents through the ADW provider as a source market fee. The Company receives 72% of the gross source market fees less the amount of at least 50% for purses and breeders’ awards. The percentage of source marketing fee retained by the Company is recorded as operating revenue and the percentage to the purses and breeders’ awards are recorded as operating expenses. Simulcast revenue increased $92,000Guest Fees primarily due to increased out of state handle as a ~~small group~~result of ~~individual players who placed a significantly high volume of bets~~racing Wednesdays in ~~the quarter. Total pari-mutuel revenue increased $931,000, or 11.7%, for the nine months ended September 30, 2017~~August 2018 compared to Sundays in August 2017. Other factors contributing to the ~~same period~~increase are two additional live race days in 2016 primarily due to $655,000 received in ADW source market fees in the first nine months of 2017. Additionally, on-track live racing revenue increased $249,000 primarily due to an increase in statutory take-out levels as2018 compared to ~~2016 when~~2017, as well as the ~~Company reduced the take-out on its live races as~~possibility of a ~~promotion to increase wagering dollars (“handle”), but also resulted~~Triple Crown winner in ~~substantially reduced revenue.~~2018.

Card Casino Revenue:

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Poker Games $ 2,172,000 $ 2,238,000 $ 6,719,000 $ 6,953,000
Table Games 5,121,000 4,475,000 15,022,000 12,557,000
Total Collection Revenue 7,293,000 6,713,000 21,741,000 19,510,000
Other Revenue 687,000 612,000 2,056,000 1,935,000
Total Card Casino Revenue $ 7,980,000 $ 7,325,000 $ 23,797,000 $ 21,445,000


	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Poker Games	$	1,955,000	$	2,172,000	$	6,187,000	$	6,719,000
Table Games		5,990,000		5,121,000		16,996,000		15,022,000
Total Collection Revenue		7,945,000		7,293,000		23,183,000		21,741,000
Other Revenue		694,000		687,000		2,214,000		2,056,000
Total Card Casino Revenue	$	8,639,000	$	7,980,000	$	25,397,000	$	23,797,000

The primary source of Card Casino revenue is a percentage of the wagers received from ~~the~~ players as compensation for providing the Card Casino facility and services, which is referred to as “collection revenue.” Other Revenue presented above includes fees collected for the administration of tournaments, ~~and~~ amounts earned as reimbursement of the administrative costs of maintaining jackpot ~~funds.~~funds, and amounts related to the outstanding chip liability that we expect will not be redeemed in the future.

As indicated in the table above, total Card Casino revenue increased ~~$655,000,~~$890,000, or ~~8.9%~~17%, and ~~$2,352,000~~$1,975,000, or ~~11.0%~~13.1%, for the three and nine months, respectively, ended September 30, ~~2017~~2018 compared to the same periods in ~~2016.~~2017. Effective March 2018, the Minnesota Racing Commission approved an amendment to the Canterbury Park Operating Plan that allowed the Company to increase the maximum percentage of table games buy-in that it can record as revenue from 18% to 20%. This amendment, combined with a higher than normal table games hold percentage during 2018, resulted in revenue percentages of 18.5% for March and April, 20% for May-August, and 18.5% in September. The ~~increases are a result~~comparable rate for 2017 during that period was 18%. The impact of this increase in revenue percentage was approximately $469,000 and $963,000 for the three and nine months ended September 30, 2018, respectively, which accounts for the majority of the increase in table games revenue for the periods. The remainder of the increase was due to increased table games play ~~on table games. In management’s judgement, increased play is attributable~~that the Company attributes to expanded promotional efforts, players ~~spending~~wagering more ~~money~~ due to a ~~stronger~~strong economy, ~~as well as an overall increase~~and change in ~~card casino marketing initiatives.~~game mix. Also, higher jackpots on ~~certain~~specific games ~~drove~~contributed to increased play.

Food and Beverage Revenue:

Food and beverage revenue ~~decreased $262,000,~~increased $72,000, or ~~7.6%~~2.3%, and $66,000, or 1.0% for the three and nine months ended September 30, ~~2017~~2018 compared to the same ~~period~~periods in ~~2016.~~2017. The ~~decrease~~increase is attributable to ~~six less~~price increases on select menu items and two additional live racing days compared to the 2016 third quarter. Additionally, there was a decline in attendance for a concert conducted in the 2017 third quarter compared to the 2016 third quarter. Food and beverage revenue increased $143,000, or 2.1%, for the nine months ended September 30, 2017 compared to the same period in 2016 due to hosting more special events in the nine months ended September 30, 2017 compared to the same period in 2016.2017.

Other Revenue:

~~Compared to the same periods in 2016, other~~Other revenue ~~increased $335,000,~~decreased $163,000, or ~~14.3%~~6.1%, and ~~$682,000,~~increased $261,000, or ~~14.2%~~4.8% for the three and nine months, respectively, ended September 30, ~~2017~~2018 compared to the same periods in ~~2016. The increases are~~2017. For the three months ended September 30, 2018, the decrease is due to ~~increased~~lower admission and publications revenue resulting from a ~~greater number of premium priced~~decline in paid attendance on live racing days ~~during 2017 and event admission revenue from a greater number of special events hosted. Also,~~compared to the Company received higher payments under the CMA for joint marketing efforts with the SMSC. See “Cooperative Marketing Agreement” below. The amounts earned from the marketing payments are offset by an increasesame period in ~~other expenses related to RiverSouth, which is an area wide marketing association that promotes Shakopee entertainment venues.~~

~~Operating Expenses:~~

The Company’s operating expenses during the 2017 third quarter were $16,130,000, an increase of $1,058,000, or 7.0%, from the third quarter 2016 expenses of $15,072,000, and the Company’s operating expenses during2017. For the nine months ended September ~~30, 2017 were $41,367,000, an~~2018, the increase ~~of $6,483,000, or 18.6%, from $34,883,000~~is primarily due to a short-term customer rental agreement in the first quarter of 2018, related to the Super Bowl held in Minneapolis. A portion of the revenues are reimbursed costs based on the terms of the contract. These costs are included as an expense in our Consolidated Statement of Operations.

Operating Expenses:

Total operating expenses increased $209,000, or 1.3%, and $1,348,000, or 3.3%, for the three and nine months, respectively, ended September 30, ~~2016. Operating expenses~~2018 compared to the same periods in the 2016 third quarter included an insurance recovery of $592,276 related to storm damage in 2014 that was accounted for as a reduction in operating expense. The 2016 year-to-date operating expenses reflect the previously reported $3,990,519 pretax gain on sale of land in the 2016 second quarter that was also accounted for as a reduction in operating expense. Excluding insurance recoveries from 2016, operating expenses for the third quarter 2017 increased $396,000 or 2.5%. Excluding insurance recoveries and gain on sale of land from 2016, operating expenses for the nine month period ended September 30, 2017 increased $1,781,000 or 4.5%.2017. The following paragraphs provide further detail regarding certain operating expenses.

Purse expense increased ~~$97,000,~~$87,000, or ~~4.5%~~3.9%, and ~~$427,000,~~$257,000, or ~~8.5%~~4.7% for the three and nine months, respectively ended September 30, ~~2017~~2018 compared to the same periods in ~~2016. Also,~~2017. The increases are primarily due to increased Card Casino and Pari-Mutuel revenues.

Salaries and benefits increased $750,000, or 4.2% for the nine months ended September 30, 2018. The increase is partially due to the State of Minnesota ~~Breeders’ Fund~~mandated increase of $0.15 in the minimum wage effective January 1, 2018. Additionally, two executive positions were open and unfilled during the majority of the 2017 first quarter and one executive position was open and unfilled for the majority of the 2017 second quarter. Furthermore, several new positions were added in 2018 due to the continued growth of the Company.

Utilities expense increased ~~$33,000,~~$37,000, or ~~13.1%~~6.8%, and ~~$169,000,~~$118,000, or ~~26.6%,~~10.2% for the three and nine months, respectively, ended September 30, ~~2017~~2018, compared to the same periods in ~~2016. The increases are primarily~~2017. This is due to ~~increased Card Casino revenues and increased purse fund payments due to ADW source market arrangements.~~

Salaries and benefits increased $330,000, or 5.3%, and $739,000, or 4.3%, for the three and nine months, respectively, ended September 30, 2017 compared to the same periods in 2016. The increases are partially due to the State of Minnesota mandated increase of $0.50 in the minimum wage effective August 2016, as well as an increase in ~~employee incentive compensation resulting from an increase in performance from operations.~~

~~The gain on sale of land is due to the sale of approximately 24 acres of land adjacent to the Racetrack for a total consideration of $4.3 million.~~

During 2014, the Company incurred damage to buildings from multiple severe storms at the Racetrack. As of September 30, 2016, the Company recognized a $592,000 insurance recoveries gain in the Consolidated Statements of Operations as “Gain on insurance recoveries.”electricity, water and sewer rates.

Professional and contracted services increased ~~$20,000,~~$138,000, or ~~1.3%~~9.0%, and ~~$237,000,~~$143,000, or ~~7.1%,~~4.0% for the three and nine months ~~respectively,~~ ended September 30, ~~2017~~2018 compared to the same periods in ~~2016.~~2017. The ~~nine month increase is primarily~~increases are due to ~~increased live racing contracted services as a result of additional live racing weeks~~an increase in legal and ~~increased~~ consulting fees ~~primarily related~~due in part to the higher level of Company development ~~initiatives.~~activities in the 2018 periods.

~~Advertising and marketing~~Other operating expenses increased ~~$286,000,~~$296,000, or ~~28.2% and other expenses decreased $165,000, or 11.4%,~~24.5% for the three months ended September 30, ~~2017 compared to the same period in 2016. This is due to a reclassification of expenses associated with RiverSouth.~~

~~Income tax expense decreased $36,000, or 5.7%, and $975,000, or 40.3% for the three and nine months, respectively, ended September 30, 2017~~2018 compared to the same periods in ~~2016.~~2017. The ~~decreases~~increase is due to a reclassification in 2017 between other operating expenses and advertising and marketing related to tax expense associated with the gain on sale of land and gain on insurance recoveries in 2016 that did not recur in 2017. The effective rate was approximately 41% for both periods ended September 30, 2017 and 2016.RiverSouth expenses.

Net income for the three months ended September 30, 2018 and 2017 was $1,633,000 and ~~2016 was~~ $953,000, ~~and $926,000,~~ respectively. Net income for the nine months ended September 30, 2018 and 2017 was $3,348,000 and ~~2016 was $2,182,000 and $3,511,000, respectively.~~$2,182,000.

Contingencies:

The Company entered into a Cooperative Marketing Agreement (the “CMA”) with the Shakopee Mdewakanton Sioux Community which became effective on June 4, 2012, and was amended in January 2015, 2016, 2017 and ~~2017,~~2018, and will expire December 31, 2022. The CMA contains ~~certain~~specific covenants ~~which,~~that, if breached, would trigger an obligation to repay a specified amount related to ~~such covenant.~~these covenants. At this time, management believes that the likelihood that the breach of a covenant would occur and that the Company would be required to pay the specified amount related to ~~such~~a covenant is remote.

The Company continues to analyze the feasibility of various options related to the development of our underutilized land. The Company may incur substantial costs during the feasibility and predevelopment process, but the Company believes available funds are sufficient to cover the near-term costs. See Liquidity and Capital Resources for more information on liquidity and capital resource requirements.

Liquidity and Capital Resources:

Net cash provided by operating activities for the nine months ended September 30, 2018 was $4,276,000, due in part to net income of $3,348,000, depreciation of $1,895,723, and stock-based compensation and 401(k) match totaling $671,000. The Company also experienced an increase in accounts payable of $233,000 and deferred revenue of $380,000. This was partially offset by a decrease in card casino accruals of $1,100,000 and accrued wages and payroll taxes of $944,000.

Net cash provided by operating activities for the nine months ended September 30, 2017 was ~~$5,104,000~~$5,873,000 primarily from net income of $2,182,000, depreciation of $1,869,000, and stock-based compensation and 401(k) match totaling $614,000. The Company also experienced an increase in accounts payable and deferred revenue of $623,000 and a decrease in income taxes receivable of $511,000. ~~This was partially offset by an increase in restricted cash of $769,000.~~

Net cash provided by operating activities for the nine months ended September 30, 2016 was $2,543,000 primarily as a result of the following: The Company reported net income of $3,511,000, depreciation of $1,867,000, and deferred income taxes of $973,000. The Company also experienced an increase in accounts payable and deferred revenue of $1,634,000 and Card Casino accruals of $621,000. This was partially offset by an increase in restricted cash of $574,000 and due from Minnesota horsemen associations of $1,101,000, and partially offset by the gain on disposal of assets relating to the sale of land of $3,990,000 and gain on insurance recoveries of $592,000.

Net cash used in investing activities for the first nine months of 2018 and 2017 was $2,510,000 and $3,219,000, respectively, primarily for building remodel projects. ~~Net cash used~~The 2018 amount was partially offset by a decrease in ~~investing activities for the first nine months of 2016 was $3,777,000, primarily for building remodel projects and the purchase of land.~~notes receivable.

Net cash used in financing activities during the first nine months of 2018 and 2017 was $288,000 and $499,000, ~~primarily for~~respectively, relating to cash dividends paid to shareholders, partially offset by proceeds from purchases of stock through the Employee Stock Purchase Plan and ~~proceeds received upon~~ the exercise of stock options. ~~Net cash used in financing activities during the first nine months of 2016 was $2,589,000, primarily for principal payments of capital lease obligations and payment of cash dividends to shareholders.~~

The Company has a general credit and security agreement with ~~Bremer Bank, which provides~~ a ~~revolving credit line of up to $6,000,000.~~financial institution. This agreement was amended onand restated effective as of September 30, ~~2017~~2018 to extend the maturity date to September 30, ~~2018.~~2019, increase the revolving credit line to $8,000,000, and allow for letters of credit in the aggregate amount of up to $2,000,000 to be issued under the credit agreement. The line of credit is collateralized by all receivables, inventory, equipment, and general intangibles of the Company. ~~As of September 30, 2017, there were~~The Company had no borrowings under ~~this agreement~~the credit line during the three months ended September 30, 2018.

The Company’s cash and cash equivalent balance at September 30, ~~2017~~2018 was ~~$7,685,000~~$11,953,000 compared to ~~$6,299,000~~$8,888,000 at December 31, ~~2016.~~2017. The Company believes that unrestricted funds available in its cash accounts, amounts available under its revolving line of credit, along with funds generated from operations, will be sufficient to satisfy its liquidity and capital resource requirements for regular operations, as well as ~~predevelopment~~its planned development expenses during ~~2017.~~2018 and 2019. However, if the Company engages in any additional significant real estate development, additional financing would more than likely be required.

Critical Accounting Policies and Estimates:

The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure 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. We base our assumptions, estimates, and judgments on historical experience, current trends, and other factors that management believes to be relevant at the time the consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates, and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

Our significant accounting policies are included in Note 1 to our consolidated financial statements in our ~~2016~~2017 Annual Report on Form 10-K. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Property and Equipment - We have significant capital invested in our property and equipment, which represents ~~68.9%~~68% of our total assets at September 30, ~~2017.~~2018. We ~~utilize~~use our judgment in various ways including: determining whether an expenditure is considered a maintenance expense or a capital asset; determining the estimated useful lives of assets; and determining if or when an asset has been impaired or has been disposed. Management periodically reviews the carrying value of property and equipment for potential impairment by comparing the carrying value of these assets with their related expected undiscounted future net cash flows. If the sum of the related expected future net cash flows is less than the carrying value, management would determine how much of an impairment loss would be measured by the amount by which the carrying value of the asset exceeds the fair value of the asset. ~~To date, we~~We have determined that no impairment of these assets ~~exists.~~exists at September 30, 2018.

Stock-Based Compensation –Accounting guidance requires measurement of services provided in exchange for a share-based payment based on the grant date fair market value. We ~~utilize~~use our judgment in determining the assumptions used to determine the fair value of equity instruments granted using a Black-Scholes model. The Company also grants Long Term Incentive Awards under the Long Term Incentive Plan (the “LTI Plan”) under which Company executive officers and other senior executives have the opportunity to receive a payout of shares of the Company’s common stock at the end of a three-year period. Management must make a number of assumptions to estimate future results to determine the compensation expense of the LTI Plan.

Commitments and Contractual Obligations:

The Company entered into the CMA with the SMSC on June 4, 2012, that was amended in January 2015, 2016, 2017, and ~~2017~~2018 and expires December 31, 2022. See “Cooperative Marketing Agreement” below.

Legislation:

Minimum Wage Legislation

~~Legislation that was~~Minnesota legislation enacted into law in 2014 increased the minimum wage that must be paid to most company employees from $7.25 to $8.00 on August 1, 2014, ~~and~~ from $8.00 to $9.00 per hour on August 1, ~~2015. A further increase~~2015, and from $9.00 to $9.50 per hour ~~went into effect~~ on August 1, 2016. ~~In addition, starting~~Starting January 1, 2018, the minimum wage will increase at the beginning of each

year by the rate of inflation with a maximum increase of up to 2.5% per year. The minimum wage for 2018 is $9.65 per hour. Prior to August 1, 2014, the Company employed a large number of individuals who received an hourly wage equal to or slightly above $7.25 per hour. As a result, this legislation ~~has~~ had an adverse financial impact on us in ~~2016 and~~2014 through 2017 and will continue to have an adverse ~~impact.~~impact on us. We have implemented measures to partially mitigate the impact of this increase by raising our prices ~~and/or~~and reducing our employee count. ~~However, these~~These measures could themselves have an adverse effect because either higher prices ~~and~~or diminished service levels may discourage customers from visiting the Racetrack.

Cooperative Marketing Agreement:

On June 4, 2012, the Company entered into the CMA with the SMSC. The primary purpose of the CMA is to increase purses paid during live horse racing at Canterbury Park’s Racetrack in order to strengthen Minnesota’s thoroughbred and quarter horse industry. Under the CMA, as amended, this is achieved through “Purse Enhancement Payments to Horsemen” paid directly to the MHBPA. ~~Such~~These payments have no direct impact on the Company’s consolidated financial statements or operations.

Under the terms of the CMA, as amended, the SMSC paid the horsemen ~~$7.2~~$7.4 million and ~~$6.7~~$7.2 million in the first ~~nine~~three months of ~~2017~~2018 and ~~2016,~~2017, respectively, primarily for purse enhancements for the live race meets in the respective years.

Under the CMA, as amended, SMSC also agreed to make “Marketing Payments” to the Company relating to joint marketing efforts for the mutual benefit of the Company and SMSC, including signage, joint promotions, player benefits and events. Under the CMA, the SMSC paid the Company ~~$1,581,000~~$1,620,000 and ~~$1,197,000~~$1,581,000 for marketing purposes during the ~~three~~nine months ended September 30, ~~2017~~2018 and ~~2016, respectively.~~2017.

In each of January 2015, 2016, 2017, and ~~2017~~2018 the CMA was amended ~~three times~~ to adjust the payment amounts between the “Purse Enhancement Payments to Horsemen” and “Marketing Payments to Canterbury Park.” SMSC is currently obligated to make the following purse enhancement and marketing payments for ~~2018~~2019 through 2022:

Year Purse Enhancement Payments to Horsemen 1 Marketing Payments to Canterbury Park
2018 7,380,000 1,620,000
2019 7,380,000 1,620,000
2020 7,380,000 1,620,000
2021 7,380,000 1,620,000
2022 7,380,000 1,620,000


1 ~~Includes $100,000 each year payable to various horsemen associations~~



Year	Purse Enhancement Payments to Horsemen		1	Marketing Payments to Canterbury Park
2019		$ 7,380,000			$ 1,620,000
2020		7,380,000			1,620,000
2021		7,380,000			1,620,000
2022		7,380,000			1,620,000

1 Includes $100,000 each year payable to various horsemen associations

Under the CMA, the Company has agreed for the ~~10 ½ year~~10-year term of the CMA expiring December 31, 2022 that it will not promote or lobby the Minnesota legislature for expanded gambling authority and will support the SMSC’s lobbying efforts against expanding gambling authority.

Redevelopment Agreement:

As mentioned above in note 10 of Notes to Financial Statements, on August 10, 2018, the City of Shakopee, the City of Shakopee Economic Development Authority, and the Company entered into a Redevelopment Agreement in connection with a Tax Increment Financing District (“TIF District”) that the City had approved in April 2018. Under the Redevelopment Agreement, the Company has agreed to undertake a number of specific infrastructure improvements within the TIF District, including the development of public streets, utilities, sidewalks, and other public infrastructure and the City of Shakopee agreed that a portion of the tax revenue generated from the developed property will be paid to

the Company to reimburse it for its expense in constructing these improvements. The Company expects to finance its improvements under the Redevelopment Agreement with funds from its current operating resources and existing credit facility and, potentially, third-party financing sources.

Forward-Looking Statements:

From time-to-time, in reports filed with the Securities and Exchange Commission, in press releases, and in other communications to shareholders or the investing public, we may make forward-looking statements concerning possible or anticipated future financial performance, prospective business activities or plans ~~which~~that are typically preceded by words such as “believes,” “expects,” “anticipates,” “intends” or similar expressions. For ~~such~~these forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in federal securities laws. Shareholders and the investing public should understand that ~~such~~these forward-looking statements are subject to risks and uncertainties ~~which~~that could affect our actual results and cause actual results to differ materially from those indicated in the forward-looking statements. ~~Such~~These risks and uncertainties include, but are not limited to: material fluctuations in attendance at the Racetrack, decline in interest in wagering on horse races at the Racetrack, at other tracks, or on unbanked card games offered at the Card Casino, competition from other venues offering unbanked card games or other forms of wagering, greater than anticipated expenses or a lower than anticipated

material fluctuations in attendance at the Racetrack;

decline in interest in wagering on horse races at the Racetrack, at other tracks, or on unbanked card games offered at the Card Casino;

competition from other venues offering unbanked card games or other forms of wagering;

greater-than-anticipated expenses or a lower-than-anticipated return on the development of our underutilized land, including our joint venture to develop a luxury apartment complex;

competition from other sports and entertainment options, increases in compensation and employee benefit costs, increases in the percentage of revenues allocated for purse fund payments, higher than expected expenses related to new marketing initiatives, the impact of wagering products and technologies introduced by competitors, legislative and regulatory decisions and changes, the general health of the gaming sector, and entertainment options;

increases in compensation and employee benefit costs;

increases in the percentage of revenues allocated for purse fund payments;

higher-than-expected expenses related to new marketing initiatives;

the impact of wagering products and technologies introduced by competitors;

legislative and regulatory decisions and changes, including decision or actions related to sports betting that would adversely affect our betting environment;

any legal, judicial, legislative or regulatory action or event that would adversely affect our ten-year Cooperative Marketing Agreement with the Shakopee Mdewakanton Sioux Community, which enhances the purses for daily racing at Canterbury Park and supports cooperative marketing programs for the two organizations, benefiting the stability and quality of live horse racing;

the fact that under the Redevelopment Agreement with the City of Shakopee, the Company has agreed to undertake a number of specific infrastructure improvements within the TIF District, and the funding that Canterbury Park will be paid as reimbursement under the TIF program for these improvements is not guaranteed, but will depend in part on future tax revenues generated from the developed property;

the general health of the gaming sector; and

other factors that are beyond our ability to control or predict.

the success of the Company’s Canterbury Commons real estate development, including our reliance upon our joint venture partner Doran Companies to obtain financing for, construct, and profitably operate the upscale apartment complex.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Canterbury Park is not required to provide the information requested by this Item as it qualifies as a smaller reporting company.

ITEM 4: CONTROLS AND PROCEDURES


(a)	Evaluation of Disclosure Controls and Procedures:

The ~~Company’s President and Chief Executive Officer, Randall D. Sampson and Chief Financial Officer, Robert M. Wolf, have reviewed the Company’s~~Company maintains disclosure controls and procedures ~~pursuant to~~(as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act ~~Rule 13a-15(b) as~~ of ~~the end of the period covered by this report. Based upon this review, these officers have concluded~~1934) that ~~the Company’s disclosure controls and procedures~~ are ~~effective~~designed to ensure that information required to be disclosed by the Company in ~~the~~ reports that ~~the Company~~it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in ~~the~~SEC rules and forms ~~of the SEC~~ and ~~that the disclosure controls are also effective to ensure that information required to be disclosed in the Company’s Exchange Act reports is~~(ii) accumulated and communicated to the Company’s management, including ~~the chief~~its principal executive officer and ~~chief~~principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

~~(b)~~

~~Changes in Internal Control over~~ In connection with the filing of this Form 10-Q, management evaluated, under the supervision and with the participation of the Company’s Chief Executive Officer (CEO) Randall D. Sampson and Chief Financial ~~Reporting:~~

~~There have been no changes~~Officer (CFO), Robert M. Wolf, the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of September 30, 2018. Based on this assessment, management identified a material weakness in our internal control over financial reporting ~~(as~~as described below. As a result of this material weakness, management concluded that, as of September 30, 2018, our internal control over financial reporting was not effective.

Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as that term is defined in ~~Rules~~Rule 13a-15(f) ~~under~~and 15d-15(f) of the Securities Exchange ~~Act)~~Act. Under the supervision and with the participation of the Company’s management, including the CEO and CFO, the Company conducted an evaluation of the effectiveness of internal control over financial reporting based on the Framework. Based on management’s testing and evaluation, we concluded that our internal control over financial reporting was not effective, and as a result, resulted in a material weakness in internal controls.

The identified material weakness arose as a result of management’s incorrect initial determination of the effective date to recognize the gain associated with the Company’s transfer of land to the Doran Canterbury I joint venture described in Note10 of Notes to Financial Statements in this Form 10-Q. As noted, on September 27, 2018, the Company’s subsidiary Canterbury Development LLC contributed approximately 13 acres of land to Doran Canterbury I as its equity contribution to the joint venture and became a 27.4% equity member. As stated in the Doran Canterbury I Operating Agreement, Doran is responsible for securing financing for Doran Canterbury I. If financing is not secured for Doran Canterbury I, however, the Company has the ability to withdraw from Doran Canterbury I.

As long as the Company has the right to withdraw its land contribution, the Company is not able to recognize the gain. As of September 27, 2018, and as of November 14, 2018, financing for Doran Canterbury I has not been secured. Therefore, as of September 30, 2018, the Company is not recording (i) any gain associated with investment in this joint venture, or (ii) its interest in this joint venture

Because management initially determined the Company would recognize a gain associated the Company’s transfer of land to the Doran Canterbury I joint venture and corrected this determination later in connection with finalizing this Form 10-Q, the Company has concluded that a reasonable possibility existed that a material misstatement in the Company’s consolidated financial statements would not have been prevented or detected on a timely basis.

The Doran Canterbury I joint venture is the Company’s first significant venture into real estate development and the agreements associated with these transactions are complex. The Company initially erred in making and recording the gain for the contribution of land because management did not realize that its ability to reclaim the property if the financing is not secured prevented it from recognizing the income on a current basis.

Remediation Plan for Material Weaknesses in Internal Control over Financial Reporting

During our 2018 fiscal fourth quarter, we intend to begin implementing the following remediation plan to address the material weakness described above:

The Company believes that it needs to acquire additional technical expertise either within the Company or by engaging third party providers to understand the intricacies of some of the applicable revenue recognition rules in connection with the Doran joint venture and any future joint venture agreements or future Company development efforts. We have begun a process to acquire this expertise.


(b)	Changes in Internal Control over Financial Reporting:

	There have been no changes in internal control over financial reporting that occurred during ~~our~~the fiscal 2018 third quarter ~~ended September 30, 2017~~ that have materially affected, or are reasonably likely to materially affect, ~~our~~the Company’s internal control over financial ~~reporting.~~reporting, except as noted above. The Company is taking steps to ensure that it remediates the material weakness by implementing the measures described above.

PART II

OTHER INFORMATION

~~Item 1.~~			~~Legal Proceedings~~
Item 1.			Legal Proceedings

			Not Applicable.

Item 1A.			~~Item 1A.~~		Risk Factors

			There have been no material changes to the Risk Factors reported under Item 1A in the Form 10-K for the year ended December 31, 2016, and the risk factors presented therein are incorporated by reference herein.

Item 2.			Unregistered Sales of EquitySecurities and Use of Proceeds

	(a)		Not Applicable.
	(b)		Not Applicable.
	(c)		On December 17, 2007, the Company’s Board of Directors adopted a plan that authorized the repurchase of up to 250,000 shares of the Company’s common stock pursuant to Exchange Act Rule 12b-18 in open market transactions, block purchases of privately negotiated transactions (the “2008 Stock Repurchase Plan”). From its adoption until August 13, 2012, the Company repurchased 216,543 shares under the 2008 Stock Repurchase Plan and, on such date, authorized the repurchase of an additional 100,000 shares of the Company’s common stock. The Company did not repurchase any shares during the third quarter of ~~2017.~~2018. The maximum number of shares that may yet be purchased under the above authorizations is 128,781 as of September 30, ~~2017.~~2018.

Item 3.			~~Item 3.~~		Defaults upon Senior Securities

			Not Applicable.

Item 4.			Mine Safety Disclosures

			~~Not Applicable.~~

~~Item 5.~~			~~Other Information~~

			~~Not Applicable.~~

~~Item 6.~~			~~Exhibits~~

		11	~~Statement re computation of per share earnings – See Net Income Per Share under Note 3 of Notes to Consolidated Financial Statements under Part 1, Item 1, which is incorporated herein by reference.~~
			Not Applicable.
		~~31.1~~
Item 5.			Other Information

Item 6.			Exhibits

		10.1 31.1	Credit Amendment Agreement dated as of October 4, 2018, between and among Bremer Bank, National Association, Canterbury Park Holding Corporation, Canterbury Park Entertainment LLC and Canterbury Park Holding Corporation. Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (rules 13a-14 and 15d-14 of the Exchange Act).

		~~31.2~~	31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (rules 13a-14 and 15d-14 of the Exchange Act).

		32	Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
		~~101~~
		99.1	Press Release dated November 14, 2018 announcing 2018 Third Quarter Results.

101

The following financial information from Canterbury Park Holding Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, ~~2017,~~2018, formatted in eXtensible Business Reporting Language XBRL: (i) Condensed Consolidated Balance Sheets as of September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, (ii) Condensed Consolidated Statements of Operations for the Three and Nine Months ended September 30, ~~2017~~2018 and September 30, ~~2016,~~2017, (iii) Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, ~~2017~~2018 and September 30, ~~2016,~~2017, and (iv) Notes to Financial Statements.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	Canterbury Park Holding Corporation




Dated: November 14, ~~2017~~2018	/s/ Randall D. Sampson


	Randall D. Sampson,
	President and Chief Executive Officer




Dated: November 14, ~~2017~~2018	/s/ Robert M. Wolf


	Robert M. Wolf,
	Chief Financial Officer