UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM ~~10-Q~~ 10‑Q

(Mark One)

~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2017.~~

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2019.

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

☐ 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~~ 001‑37858

CANTERBURY PARK HOLDING CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

~~Minnesota~~

~~47-5349765~~

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~~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)~~12b‑2).

~~YES~~¨
	YES	☐		NOx	☒

Securities registered pursuant Section 12(b) of the Act:


Title of Each Class	Trading Symbol	Name of each exchange on which registered
Common Stock Common stock, $.01 par value	CPHC	Nasdaq

The Company had ~~4,410,492~~4,587,402 shares of common stock, $.01 par value, outstanding as of ~~November~~May 1, ~~2017.~~2019.

Table of Contents

Canterbury Park Holding Corporation

INDEX

~~INDEX~~

			Page
			~~Page~~
PART I.	FINANCIAL INFORMATION

	Item 1.	Financial Statements (unaudited)

		Condensed Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016~~2018	3 2

		Condensed Consolidated Statements of Operations for the Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018	4 3

		Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2019	4

		Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018	5

		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 23

	Item 4.	Controls and Procedures	20 23

PART II.	OTHER INFORMATION

	Item 1.	Legal Proceedings	21 25

	Item 1A.	Risk Factors	21 25

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21 25

	Item 3.	Defaults Upon Senior Securities	21 25

	Item 4.	Mine Safety Disclosures	21 25

	Item 5.	Other Information	21 25

	Item 6.	Exhibits	21 26

	Signatures		22

	~~Certifications~~		26

Table of Contents

PART 1 – FINANCIAL INFORMATION

CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


	(Unaudited)
	March 31,		December 31,
	2019		2018
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	370,592	$	4,895,359
Restricted cash		6,011,710		5,058,639
Short-term investments		206,545		206,545
Accounts receivable, net of allowance of $19,250 for both periods		311,128		241,743
Current portion of notes receivable		1,063,650		1,063,650
Inventory		315,783		297,209
Prepaid expenses		646,908		625,024
Income taxes receivable		59,845		417,004
Total current assets		8,986,161		12,805,173

LONG-TERM ASSETS
Deposits		49,500		49,500
Restricted cash - long-term portion		1,253,201		1,250,000
TIF receivable		3,608,103		1,908,065
Notes receivable - long-term portion		1,078,861		1,078,861
Related party receivable		3,208,400		3,208,400
Operating lease right-of-use assets		13,074		—
Equity investment		2,992,633		2,995,010
Land, buildings and equipment, net		40,720,542		38,131,052
TOTAL ASSETS	$	61,910,475	$	61,426,061

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Accounts payable		4,117,171		3,587,328
Card Casino accruals		2,158,248		1,740,926
Accrued wages and payroll taxes		1,379,436		2,268,351
Cash dividend payable		320,226		316,938
Accrued property taxes		1,223,643		1,001,200
Deferred revenue		917,604		979,358
Payable to horsepersons		828,576		706,122
Current portion of finance lease obligations		23,506		23,216
Current portion of operating lease obligations		7,735		—
Total current liabilities		10,976,145		10,623,439

LONG-TERM LIABILITIES
Deferred income taxes		4,064,800		3,970,000
Finance lease obligations, net of current portion		92,244		98,272
Operating lease obligations, net of current portion		5,339		—
Total long-term liabilities		4,162,383		4,068,272
TOTAL LIABILITIES		15,138,528		14,691,711

STOCKHOLDERS’ EQUITY
Common stock, $.01 par value, 10,000,000 shares authorized, 4,574,658 and 4,527,685 respectively, shares issued and outstanding		45,747		45,277
Additional paid-in capital		21,783,690		21,420,886
Retained earnings		24,942,510		25,268,187
Total stockholders’ equity		46,771,947		46,734,350
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	61,910,475	$	61,426,061

(Unaudited)
September 30, December 31,
2017 2016
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 7,685,291 $ 6,298,807
Restricted cash 2,758,635 1,990,013
Short-term investments 205,944 205,649
Accounts receivable, net of allowance of $28,000 for both periods 1,508,532 1,309,453
Current portion of notes receivable 1,048,654 1,048,654
Inventory 280,744 247,786
Prepaid expenses 439,960 466,993
Income taxes receivable - 511,170
Due from Minnesota horsemen associations 463,081 -
Total current assets 14,390,841 12,078,525

LONG-TERM ASSETS
Deposits 25,000 25,000
Notes receivable - long term portion 2,142,512 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
$ 53,325,686 $ 49,624,954

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable 2,719,813 2,518,791
Card Casino accruals 3,101,959 2,231,907
Accrued wages and payroll taxes 1,505,297 2,034,550
Cash dividend payable 263,898 216,411
Due to MHBPA - 38,145
Accrued property taxes 1,052,558 932,030
Deferred revenue 1,031,685 568,921
Income taxes payable 355,583 -
Payable to horsepersons 185,215 176,652
Total current liabilities 10,216,008 8,717,407

LONG-TERM LIABILITIES
Deferred income taxes 4,310,000 4,357,000
Total long-term liabilities 4,310,000 4,357,000
TOTAL LIABILITIES 14,526,008 13,074,407

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
Additional paid-in capital 19,591,467 18,780,070
Retained earnings 19,164,228 17,727,225
Total stockholders’ equity 38,799,678 36,550,547
$ 53,325,686 $ 49,624,954

See notes to condensed consolidated financial ~~statements~~statements.

Table of Contents

CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED 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

~~See notes to condensed consolidated financial statements.~~


	Three Months Ended March 31,
	2019		2018
OPERATING REVENUES:
Pari-mutuel	$	1,490,809	$	1,540,944
Card Casino		7,899,964		8,276,981
Food and beverage		1,352,801		1,303,638
Other		847,224		1,098,383
Total Net Revenues		11,590,798		12,219,946

OPERATING EXPENSES:
Purse expense		1,395,538		1,244,886
Minnesota Breeders’ Fund		217,695		203,152
Other pari-mutuel expenses		268,366		278,522
Salaries and benefits		5,745,287		5,430,004
Cost of food and beverage and other sales		625,757		592,907
Depreciation and amortization		625,520		635,145
Utilities		322,115		317,861
Advertising and marketing		190,329		226,975
Professional and Contracted Services		966,386		860,293
Loss on disposal of assets		113,437		—
Gain on insurance recoveries		—		(21,064)
Other operating expenses		1,143,129		1,094,512
Total Operating Expenses		11,613,559		10,863,193
(LOSS) INCOME FROM OPERATIONS		(22,761)		1,356,753
OTHER INCOME
Interest income, net		63,240		12,407
Net Other Income		63,240		12,407
INCOME BEFORE INCOME TAXES		40,479		1,369,160
INCOME TAX BENEFIT (EXPENSE)		16,093		(379,470)
NET INCOME	$	56,572	$	989,690

Basic earnings per share	$	0.01	$	0.22
Diluted earnings per share	$	0.01	$	0.22
Weighted Average Basic Shares Outstanding		4,559,477		4,439,652
Weighted Average Diluted Shares		4,613,245		4,490,863
Cash dividends declared per share		0.07		0.07

~~CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED 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

See notes to condensed consolidated financial statements.

Table of Contents

CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

Number of

Common

Additional

Retained


Shares

Stock

Paid-in Capital

Earnings

Total
Balance at December 31, 2017

4,414,492

$
44,145

$
19,865,273

$
20,807,679

$
40,717,097

Exercise of stock options

22,000

220

225,290

—

225,510
Stock-based compensation

—

—

103,221

—

103,221
Dividend distribution

—

—

—

(311,499)

(311,499)
401(K) stock match

6,653

67

116,326

—

116,393
Issuance of deferred stock awards

2,788

28

28

—

56
Shares issued under Employee Stock Purchase Plan

4,054

41

55,945

—

55,986
Net income

—

—

—

989,690

989,690

Balance at March 31, 2018

4,449,987

$
44,500

$
20,366,083

$
21,485,870

$
41,896,453

Balance at December 31, 2018

4,527,685

$
45,277

$
21,420,886

$
25,268,187

$
46,734,350

Exercise of stock options

28,060

281

172,111

—

172,392
Other share retirements

(5,863)

(59)

(27,915)

(62,023)

(89,997)
Stock-based compensation

—

—

90,058

—

90,058
Dividend distribution

—

—

—

(320,226)

(320,226)
401(K) stock match

8,111

81

116,312

—

116,393
Issuance of deferred stock awards

10,968

110

(55,044)

—

(54,934)
Shares issued under Employee Stock Purchase Plan

5,697

57

67,282

—

67,339
Net Income

—

—

—

56,572

56,572

Balance at March 31, 2019

4,574,658

$
45,747

$
21,783,690

$
24,942,510

$
46,771,947

Table of Contents

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


	Three Months Ended March 31,
	2019		2018
Operating Activities:
Net income	$	56,572	$	989,690
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		625,520		635,145
Stock-based compensation expense		90,058		103,221
Stock-based employee match contribution		116,312		116,326
Deferred income taxes		94,800		142,000
Loss from equity investment		2,377		—
Loss on disposal of assets		113,437		—
Gain on insurance recoveries		—		(21,064)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable		(69,385)		665,007
Increase in other current assets		(40,457)		(36,494)
Decrease in income taxes receivable/payable		357,158		237,469
Decrease in operating lease right-of-use assets		1,939		—
Decrease in operating lease liabilities		(1,939)		—
Increase in accounts payable		302,777		79,734
Decrease in deferred revenue		(61,754)		(13,295)
Increase in Card Casino accruals		417,322		285,197
Decrease in accrued wages and payroll taxes		(888,915)		(1,140,208)
Increase in accrued property taxes		222,443		242,501
Increase in payable to horsepersons		122,454		136,767
Net cash provided by operating activities		1,460,719		2,421,996

Investing Activities:
Additions to land, buildings, and equipment		(4,801,419)		(1,225,960)
Net cash used in investing activities		(4,801,419)		(1,225,960)

Financing Activities
Proceeds from issuance of common stock		149,815		282,117
Cash dividend paid to shareholders		(316,938)		(265,113)
Payments for taxes related to net share settlement of equity awards		(54,934)		—
Principal payments on finance lease		(5,738)		—
Net cash (used in) provided by financing activities		(227,795)		17,004

Net (decrease) increase in cash, cash equivalents, and restricted cash		(3,568,495)		1,213,040

Cash, cash equivalents, and restricted cash at beginning of year		11,203,998		12,025,553

Cash, cash equivalents, and restricted cash at end of year	$	7,635,503	$	13,238,593

Schedule of non-cash investing and financing activities
Additions to buildings and equipment funded through accounts payable	$	227,000	$	613,000
Transfer of future TIF reimbursed costs from PP&E		1,700,000		—
ROU assets obtained in exchange for operating lease obligations		15,000		—
Dividend declared		320,000		311,000

Supplemental disclosure of cash flow information:
Income taxes paid	$	—	$	326,000
Interest paid		2,000		—

See notes to condensed consolidated financial statements.

Table of Contents

CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. OVERVIEW AND BASIS OF PRESENTATION

~~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:

●

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,~~2018, included in its Annual Report on Form ~~10-K~~10‑K (the ~~“2016~~“2018 Form ~~10-K”~~10‑K”).

The condensed consolidated balance sheets and the related condensed consolidated statements of operations, stockholders’ equity, and the cash flows for the periods ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018 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, statement of stockholders’ equity, and cash flows at ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018 and for the periods then ended have been made.

Effective January 1, 2019, we adopted the requirements of Accounting Standards Update (“ASU”) No 2016‑02, Leases as discussed in Note 2. All amounts and disclosures set forth in this Form 10‑Q have been updated to comply with the new standards.

~~Summary~~Restricted Cash – Restricted cash represents refundable deposits and amounts due to horsemen for purses, stakes and awards, and amounts accumulated in card game progressive jackpot pools, the player pool and poker promotional fund to be used to repay card players in the form of ~~Significant Accounting Policies –A detailed description~~promotions, giveaways, prizes, or by other means. Restricted cash also includes two deposits related to its development operations. One deposit is an escrow account with a bank to fund the road construction on Shenandoah Drive. This account is to ensure the Company completes the construction of ~~our significant accounting policies can~~the road that allows access to the first phase of the Doran Canterbury I apartment complex. Funds from the escrow account will be ~~found~~released to the Company as progress billings from the contractor are received. The Company also recorded a deposit with a bank to assist Doran Canterbury to complete financing for a construction loan. The bank will release the deposit back to the Company when the construction loan is repaid by Doran Canterbury I and converted into a term loan. Because the Company expects this to occur in ~~our most recent Annual Report filed~~2021 or 2022, the Company classified this as long term restricted cash on ~~Form 10-K for the fiscal year ended December 31, 2016. There were no material changes in significant accounting policies during the quarter ended September 30, 2017.~~its consolidated balance sheet.

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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~~

Payable to ~~a repurchase right.~~

~~Reclassifications –~~~~Prior period financial statement amounts have been reclassified 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,~~Minnesota Horsemen’s Benevolent and Protective Association (“MHBPA”), the Company transferred into a trust account or paid directly to the MHBPA, ~~$5,313,888~~$1,260,000 and ~~$6,273,000~~$1,090,000 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016,~~2018, 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.

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 would not differ materially from what would result if the guidance were applied on 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.

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

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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.

~~Recent~~2. ACCOUNTING STANDARDS AND SIGNIFICANT ACCOUNTING POLICIES

Recently Adopted Accounting ~~Pronouncement~~ –In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows: Restricted Cash. The new standard requires that the statement of cash flows explain the change during the period of cash, cash equivalents, and amounts generally describedas restricted cash. Entities will also be required to reconcile to the balance sheet and disclose the nature of the restrictions. The guidance will become effective in 2018. While we are continuing to assess all potential impacts of the standard, we believe the most significant impact relates to the presentation of our statement of cash flows where we will be required to reconcile to total cash, cash equivalents, and restricted cash. Currently, our statement of cash flows reconciles to total cash and cash equivalents.

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.

Pronouncements

In February 2016, the FASB issued ASU No. 2016-02 codified as Accounting Standards Codification (“ASC”) 842, Leases, (“ASC 842”) which addresses the recognition and measurement of leases. Under the new guidance, for all leases (with the exception of short-term leases), at the commencement date, lessees will be required to recognize a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and a right-of-use (“ROU”) asset, which is an asset that represents the lessee’s right to control the use of a specified asset for the lease term. The effective date for this update is for the annual and interim periods beginning after December 15, 2018 with early adoption permitted. ASC 842 requires ~~companies~~a transition adoption election using either (1) a modified retrospective approach with periods prior to ~~generally recognize~~the adoption date being recast or (2) a prospective adoption approach with a cumulative-effect adjustment recognized to the opening balance of retained earnings on the adoption date with prior periods continuing to be reported under previous lease accounting guidance.

The Company adopted ASC 842 on January 1, 2019 using the prospective adoption approach, and therefore, comparative periods will continue to be reported under previous lease accounting guidance consistent with previously issued financial statements. The Company also elected to adopt the package of practical expedients permitted under the transition guidance within ASC 842, which among other things, allows us to carry forward the historical lease identification, lease classification and treatment of initial direct costs for leases entered into prior to January 1, 2019. We have also made an accounting policy election to not record short-term leases with an initial term of 12 months or less on the balance sheet ~~operating and financing lease liabilities and corresponding right-of-use~~for all classes of underlying assets. ~~ASU 2016-02 is effective in~~The adoption of ASC 842 did not have a material impact on our ~~first quarter~~consolidated financial statements. Refer to Note 11 for further detail.

Summary of ~~fiscal 2019 on~~Significant Accounting Policies

Except for the accounting policies for leases that were updated as a ~~modified retrospective basis and earlier adoption is permitted. We are currently evaluating the impact~~result of our ~~pending adoption of ASU 2016-02~~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, 2018 filed with the SEC on March 29, 2019, that have had a material impact on our ~~Condensed Consolidated Financial Statements.~~condensed consolidated financial statements and related notes.

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.~~

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Period. Currently, there are three awards outstanding that are for three-year periods ending December 31, 2019, 2020, and 2021.

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

The Company’s Stock Plan currently authorizes 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~~March 31, 2019 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~~March 31, ~~2016.~~2019.

~~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 awards under the Company’s Stock Plan. Such 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 September 30, 2017, 4,500 shares were not vested with a weighted average fair value of $10.46 per share.

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~~$90,000 and ~~$179,000~~$103,000 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016,~~2018, 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~~42‑month period and expire in 10 years.

A summary of stock option activity as of ~~September 30, 2017~~March 31, 2019 and changes during the ~~nine~~three months then ended is presented below:


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

Outstanding at January 1, 2017		191,002		$	9.08
Outstanding at January 1, 2019										75,062	$	7.95
Granted		-			-					-		-
Exercised		(18,500	)		7.23					(28,060)		6.14
Expired/Forfeited		(15,000	)		13.76					-		-
Outstanding at September 30, 2017		157,502		$	8.17		2.0 Years	$	1,286,382
Outstanding at March 31, 2019										47,002	$	9.03		1.0 Years	$	424,392

Exercisable at September 30, 2017		157,502		$	8.17		2.0 Years	$	1,286,382
Exercisable at March 31, 2019										47,002	$	9.03		1.0 Years	$	424,392

~~NET INCOME PER SHARE COMPUTATIONS~~

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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~~March 31, 2019 and ~~2016:~~2018:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2017		2016		2017		2016		2019		2018
Net income (numerator) amounts used for basic and diluted per share computations:	$	952,635	$	925,837	$	2,182,218	$	3,511,490	$	56,572	$	989,690

Weighted average shares (denominator) of common stock outstanding:
Basic		4,393,523		4,296,581		4,369,489		4,276,387		4,559,477		4,439,652
Plus dilutive effect of stock options		25,913		26,220		26,045		17,766		53,768		51,211
Diluted		4,419,436		4,322,801		4,395,534		4,294,153		4,613,245		4,490,863

Net income per common share:
Basic	$	.22	$	.22	$	.50	$	.82	$	0.01	$	0.22
Diluted		.22		.21		.50		.82		0.01		0.22

~~Options~~There were no out-of-the money options at March 31, 2019 or 2018; thus, all outstanding 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.~~share.

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, 2016.5. PROMISSORY NOTES RECEIVABLE

~~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 of land and management believes no allowance for ~~doubtful accounts~~collectability is necessary.

~~GENERAL CREDIT AGREEMENT~~

6. GENERAL CREDIT AGREEMENT

The Company has a general credit and security agreement with ~~Bremer Bank,~~a financial institution, which provides a revolving credit line up to $8,000,000 and allows for letters of credit in the aggregate amount of up to ~~$6,000,000. This agreement was amended on September 30, 2017~~$2,000,000 to ~~extend~~be issued under the ~~maturity date to September 30, 2018.~~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.~~March 31, 2019.

~~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.

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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


	Three Months Ended March 31, 2019
	Horse Racing		Card Casino		Food and Beverage		Development		Total
Net revenues from external customers	$	2,292	$	7,900	$	1,399	$	—	$	11,591
Intersegment revenues		116		—		303		—		419
Net interest income		8		—		—		55		63
Depreciation		578		4		44		—		626
Segment (loss) income before income taxes		(1,176)		1,110		(88)		(22)		(176)
Segment tax expense (benefit)		(414)		441		(35)		(8)		(16)

	March 31, 2019
Segment Assets	$	34,688	$	441	$	23,667	$	26,414	$	85,210


	Three Months Ended March 31, 2018
	Horse Racing		Card Casino		Food and Beverage		Development		Total
Net revenues from external customers	$	2,597	$	8,277	$	1,346	$	—	$	12,220
Intersegment revenues		109		—		319		—		428
Net interest income		1		—		—		11		12
Depreciation		589		5		41		—		635
Segment (loss) income before income taxes		(129)		1,531		(39)		(6)		1,357
Segment tax expense (benefit)		(32)		424		(11)		(2)		379

	December 31, 2018
Segment Assets	$	35,992	$	623	$	23,680	$	24,647	$	84,942

~~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.~~

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,						Three Months Ended March 31, 2019
	2017			2016			2019		2018
Revenues
Total net revenues for reportable segments	$	46,745		$	42,531
Total net revenue for reportable segments							$	12,010	$	12,648
Elimination of intersegment revenues		(1,789	)		(1,668	)		(419)		(428)
Total consolidated net revenues	$	44,956		$	40,863		$	11,591	$	12,220


(Loss) income before income taxes
Total segment (loss) income before income taxes	$	(176)	$	1,357
Elimination of intersegment income before income taxes		216		12
Total consolidated income before income taxes	$	40	$	1,369

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

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	March 31,		December 31,
	2019		2018
Assets
Total assets for reportable segments	$	85,210	$	84,942
Elimination of intercompany balances		(23,300)		(23,516)
Total consolidated assets	$	61,910	$	61,426

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

~~COMMITMENTS AND CONTINGENCIES~~

8. 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 the first quarter of 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 it unlikely that ~~the likelihood that the~~any breach of a covenant will occur, and that therefore the possibility that the Company will be required to pay the specified amount related to ~~such~~any covenant breach 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~~March 31, 2019 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~~

In August 2018, the Company entered into a Contract for Private Redevelopment with the City of Shakopee in connection with a Tax Increment Financing District (“TIF District”). The Company is obligated to construct certain infrastructure improvements within the TIF District, and will be reimbursed by the City of Shakopee by future tax increment revenue generated from the developed property. The total amount of funding that Canterbury will be paid as reimbursement under the TIF program for these improvements is not guaranteed and will depend on future tax revenues generated from the developed property.

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~~three months of ~~2017~~2019 and ~~2016,~~2018, respectively, primarily for purse enhancements for the live race meets in the respective years.

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In the ~~CMA, the SMSC paid the Company $1,581,000 and $1,197,000 for marketing purposes during the nine months ended September 30,~~first quarter of 2015, 2016, 2017, and ~~2016, respectively.~~

~~In each of January 2015, 2016, 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~~2020 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~~


	Purse Enhancement Payments to		Marketing Payments to
Year	Horsemen (1)		Canterbury Park
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, 2017,~~March 31, 2019, the Company recorded ~~$672,000 and $1,298,000~~$75,000 in other revenue and incurred ~~$569,000 and $1,128,000~~$18,000 in advertising and marketing expense and $57,000 ~~and $170,000~~ in depreciation related to the SMSC marketing ~~payment.~~ funds. For the three ~~and nine~~ months ended ~~September 30, 2016,~~March 31, 2018, the Company recorded ~~$366,000 and $610,000~~$106,000 in other revenue and incurred ~~$312,000 and $440,000~~$49,000 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.~~

funds.

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.

10. REAL ESTATE DEVELOPMENT

Equity Investment

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 is developing Phase I of the Project, which will include approximately 300 units, a heated parking ramp, and a clubhouse.

In connection with the 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 begin upon rental stabilization of Phase I. Phase II will include an additional 300 apartment units. Canterbury Development’s equity contribution to Doran Canterbury for Phase II will be approximately 10 acres of land. In connection with its contribution, Canterbury Development became a 27.4% equity member in Doran Canterbury II with Doran owning the remaining 72.6%.

On September 27, 2018, Canterbury Development LLC contributed approximately 13 acres of land as its equity contribution in the Doran Canterbury I joint venture and became a 27.4% equity member. On December 20, 2018, financing for Doran Canterbury I was secured. As the Company is able to assert significant influence, but not

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control, over Doran Canterbury I’s operational and financial policies, the Company accounts for the joint venture as an equity method investment.

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 connection with a Tax Increment Financing District (“TIF District”) that 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 development of 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 be substantially complete on or before December 31, 2019 and December 31, 2020, respectively.

The Redevelopment Agreement provides that 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. As of December 2018, the Company was proceeding with the improvements to Shenandoah Drive.

Under the Redevelopment Agreement, the City of Shakopee has agreed that a portion of the tax 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 cost of TIF eligible improvements to be borne by the Company is $23,336,500. A detailed Schedule of 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. As of March 31, 2019, the Company recorded a TIF receivable of $3,608,000.

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. LEASES

The Company determines if an arrangement is a lease or contains a lease at inception. The Company leases certain office equipment under finance leases. We also lease equipment related to our horse racing operations under operating leases. For lease accounting purposes, we do not separate lease and nonlease components, nor do we record operating or finance lease assets and liabilities for short term leases.

As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date to determine the present value of lease payments. We recognize expense for

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operating leases on a straight-line basis over the lease term. The Company’s lease agreements do not contain any variable lease payments, material residual value guarantees or any restrictive covenants.

Lease costs related to operating leases were $2,127 for the three months ended March 31, 2019. The total lease expenses for leases with a term of twelve months or less for which the Company elected not to recognize a lease asset or liability was $116,691 for the three months ended March 31, 2019.

Lease costs included in depreciation and amortization related to our finance leases were $6,234 for the three months ended March 31, 2019. Interest expense related to our finance leases were immaterial.

The following table shows the classification of the right of use assets on our consolidated balance sheets:

	9.	~~INCOME TAXES~~
		Balance Sheet Location	March 31, 2019
Assets
Finance		Land, buildings and equipment, net (1)	115,254
Operating		Operating lease right-of-use assets	13,074
Total Leased Assets			$ 128,328

1 – Finance lease assets are net of accumulated amortization of $6,234 as of March 31, 2019

The following table shows the lease terms and discount rates related to our leases:


	March 31, 2019
Weighted average remaining lease term (in years):
Finance	4.5
Operating	1.8
Weighted average discount rate (%):
Finance	5.0%
Operating	5.0%

The maturity of operating leases and finance leases as of March 31, 2019 are as follows:



Three months ended December 31,	Operating leases		Finance leases
2019 remaining	$	6,215	$	21,557
2020		7,500		28,743
2021		—		28,743
2022		—		28,743
2023		—		21,685
Total minimum lease obligations		13,715		129,471
Less: amounts representing interest		(641)		(13,721)
Present value of minimum lease payments		13,074		115,750
Less: current portion		(7,735)		(23,506)
Lease obligations, net of current portion	$	5,339	$	92,244

12. RELATED PARTY RECEIVABLES

On December 20, 2018, the Company entered into a loan agreement with Doran Family Holdings, which is the controlling partner in the Doran Canterbury I joint venture. The Company loaned Doran Family Holdings $2,910,000 net of loan origination fees, and received a promissory note totaling $2,940,000 bearing interest at 5%. The note will mature at the earliest of (i) the date of closing by Doran Canterbury II, LLC on Phase II Project Financing; (ii) the closing on any purchase of the Phase II Land by Doran Shakopee, LLC pursuant to its option under Section 3.9(a) of the Doran Canterbury II Operating Agreement; (iii) the date of final determination that the Phase II Project will not

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be developed by either Doran Canterbury II, LLC; or (iv) three (3) years following the date of the note. Management believes no allowance for doubtful accounts is necessary.

In ~~March 2016,~~2018, the ~~FASB issued ASU 2016-09, “Improvements~~Company incurred $268,000 of costs for preliminary grading work on parcels of land the Company has designated for Doran Canterbury II. The Company will be fully reimbursed for these costs upon the commencement of the Doran Canterbury II project and thus, recorded the amount as a receivable. Although there is a possibility Doran Canterbury II will not materialize, the Company currently believes the likelihood of that is remote.

13. SUBSEQUENT EVENTS

On April 25, 2019, the Company completed the purchase of 2.5 acres of land and buildings located adjacent to ~~Employee Share-Based Payment Accounting”, which requires companies to recognize additional tax benefits or expenses~~the Northeast corner of the Racetrack for a total purchase price of approximately $1.0 million. The acquisition of the property was related to the vesting or settlement of employee share based awards as income tax provision or benefit in the income statement in the reporting period in which they occur. In addition, ASU 2016-09 requires that all tax related cash flows resulting from share-based payments, including the excess tax benefits relatedCompany’s obligation to settlement 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 adjustmentsconstruct improvements on Barenscheer Boulevard and provide new and wider access to the ~~financial statements. In addition there was no material cumulative-effect adjustment to retained earnings. Upon adoption,~~Racetrack at the ~~Company is required to recognize all excess tax benefits in the statement~~intersection of ~~earnings.~~Barenscheer Boulevard and Canterbury Road (County Highway 83).

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~~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 the Three ~~and Nine~~ Months Ended ~~September 30, 2017:~~March 31, 2019:

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,~~March 31, 2019, adjusted EBITDA excluded the ~~gain~~loss on ~~insurance recoveries. For the nine months ended September 30, 2016, adjusted EBITDA excluded the gain on sale~~disposal of ~~land and gain on insurance recoveries.~~

assets.

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~~March 31, 2019 and ~~2016:~~2018:

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 March 31,
	2019		2018
NET INCOME	$	56,572	$	989,690
Interest income, net		(63,240)		(12,407)
Income tax (benefit) expense		(16,093)		379,470
Depreciation		625,520		635,145
EBITDA		602,759		1,991,898
Gain on insurance recoveries		—		(21,064)
Loss on disposal of assets		113,437		—
ADJUSTED EBITDA	$	716,196	$	1,970,834

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Adjusted EBITDA ~~increased $544,000~~decreased $1,255,000 or ~~33.2%,~~63.7% and ~~increased~~decreased as a percentage of net revenues to ~~12.4%~~6.2% from ~~9.9%~~16.1% for the three months ended ~~September 30, 2017~~March 31, 2019 as compared to the same period in ~~2016. Adjusted EBITDA increased $2,195,000, or 67.3%,~~2018. The decrease is due to the decrease in revenues and ~~increased as a percentage of net revenues to 12.2% from 8.0% for the nine months ended September 30, 2017 as~~increase in operating expenses compared to the same period in ~~2016. The increase for the three and nine months ended September 30, 2017 is primarily due to the increase in revenues compared to the same periods in 2016.~~2018.

Revenues:

Total net revenues for the three months ended ~~September 30, 2017~~March 31, 2019 were ~~$17,667,000, an increase~~$11,591,000, a decrease of ~~$1,036,000,~~$629,000, or ~~6.2%~~5.1%, compared to total net revenues of ~~$16,630,000~~$12,220,000 for the three months ended ~~September 30, 2016.~~March 31, 2018. This ~~increase~~decrease primarily consists of ~~increases~~decreases in ~~pari-mutuel and~~ card casino and other revenue of ~~8.8%~~4.6% and 8.9%, respectively, partially offset by a decrease in food and beverage revenue of 7.6%. Total net revenues for the nine months ended September 30, 2017 were $44,956,000, an increase of $4,094,000, or 10.0%, compared to total net revenues of $40,863,000 for the nine months ended September 30, 2016. This increase primarily consists of increases in pari-mutuel, food and beverage and card casino revenue of 11.7%, 2.1% and 11.0%22.9%, 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

~~1 – Includes source market fees received pursuant to Advanced Deposit Wagering (ADW) legislation effective November 1, 2016.~~Pari-Mutuel Data Revenue:


	Three Months Ended March 31,
	2019		2018
Simulcast	$	1,217,000	$	1,272,000
Other revenue		274,000		269,000
Total Pari-Mutuel Revenue	$	1,491,000	$	1,541,000

Total pari-mutuel revenue ~~increased $311,000,~~decreased $50,000, or ~~8.8%~~3.2%, for the three months ended ~~September 30, 2017,~~March 31, 2019 compared to the same period in ~~2016.~~2018. The ~~increase~~decrease is related to a reduction in ~~other pari-mutuel revenue is~~simulcast wagering, which was partially due to ~~receipt~~the temporary shutdown during the quarter 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%Santa Anita, one 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 $92,000 primarily due to a small group of individual players who placed a significantly high volume of betsmost popular horse tracks in the ~~quarter. Total pari-mutuel revenue increased $931,000, or 11.7%, for the nine months ended September 30, 2017 compared to the same period~~country in ~~2016 primarily due to $655,000 received in ADW source market fees in the first nine months~~terms of 2017. Additionally, on-track live racing revenue increased $249,000 primarily due to an increase in statutory take-out levels as compared to 2016 when the Company reduced the take-out on its live races as a promotion to increase wagering dollars (“handle”), but also resulted in substantially reduced revenue.simulcast wagering.

Card Casino Revenue:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2017		2016		2017		2016		2019		2018
Poker Games	$	2,172,000	$	2,238,000	$	6,719,000	$	6,953,000	$	1,930,000	$	2,178,000
Table Games		5,121,000		4,475,000		15,022,000		12,557,000		5,197,000		5,356,000
Total Collection Revenue		7,293,000		6,713,000		21,741,000		19,510,000		7,127,000		7,534,000
Other Revenue		687,000		612,000		2,056,000		1,935,000		773,000		743,000
Total Card Casino Revenue	$	7,980,000	$	7,325,000	$	23,797,000	$	21,445,000	$	7,900,000	$	8,277,000

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.~~

~~As indicated~~funds, and amounts related to the outstanding chip liability that we expect will not be redeemed in the ~~table above, total~~future.

Total Card Casino revenue ~~increased $655,000,~~decreased $377,000, or 8.9%, and $2,352,000 or 11.0%, for the three and nine months, respectively, ended September 30, 2017 compared to the same periods in 2016. The increases are a result of increased play on table games. In management’s judgement, increased play is attributable to players spending more money due to a stronger economy, as well as an overall increase in card casino marketing initiatives. Also, higher jackpots on certain games drove increased play.

~~Food and Beverage Revenue:~~

~~Food and beverage revenue decreased $262,000, or 7.6%~~4.6%, for the three months ended ~~September 30, 2017~~March 31, 2019 compared to the same period in ~~2016.~~2018. The decrease in the 2019 first quarter is ~~attributable~~primarily due to ~~six less live racing days compared~~unusually inclement weather as well as business disruption caused by construction projects. During January and February, the Company had a major remodeling and expansion of the Card Casino which included reductions in the number of gaming tables as well as food and beverage services. In addition, road construction related to the ~~2016 third quarter. Additionally,~~development of our property was underway during the quarter and impacted patron access and parking. As a result of these factors, there was ~~a decline~~decreased play in ~~attendance for a concert conducted in the 2017 third quarter compared to the 2016 third quarter. Food~~table games and ~~beverage revenue increased $143,000, or 2.1%,~~poker for the ~~nine months ended September 30, 2017~~2019 first quarter compared to the same period in ~~2016 due~~2018.

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Food and Beverage Revenue:

Food and beverage revenue increased $49,000, or 3.8%, to ~~hosting more special events in~~$1,353,000 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 compared to the same period in ~~2016.~~2018. The increase is attributable to increased food and beverage revenues from special events and the opening of the Trifecta Café and remodeled card room in March 2019.

Other Revenue:

~~Compared to the same periods in 2016, other~~Other revenue ~~increased $335,000,~~decreased $251,000, or ~~14.3%~~22.9%, ~~and $682,000, or 14.2%~~ for the three ~~and nine~~ months ~~respectively,~~ ended ~~September 30, 2017~~March 31, 2019 compared to the same ~~periods~~period in ~~2016.~~2018. The ~~increases are~~decrease is due to ~~increased admission revenue from~~ a ~~greater number~~short-term customer rental agreement in the first quarter of premium priced live racing days during 2017 and event admission revenue from a greater number of special events hosted. Also, 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 increase in other expenses2018, related to ~~RiverSouth, which is~~the Super Bowl held in Minneapolis. A portion of the revenues were reimbursed costs based on the terms of the contract. These costs are included as an ~~area wide marketing association that promotes Shakopee entertainment venues.~~expense in our Consolidated Statement of Operations.

Operating Expenses:

~~The Company’s~~Total operating expenses ~~during~~increased $750,000, or 6.9%, for 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 during the nine~~three months ended ~~September 30, 2017 were $41,367,000, an increase of $6,483,000, or 18.6%, from $34,883,000~~March 31, 2019 compared to the same period in the nine months ended September 30, 2016. Operating expenses 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%.2018. The following paragraphs provide further detail regarding certain operating expenses.

Purse expense increased ~~$97,000,~~$151,000, or ~~4.5%~~12.1%, ~~and $427,000, or 8.5%~~ for the three ~~and nine~~ months ~~respectively,~~ ended ~~September 30, 2017~~March 31, 2019 compared to the same ~~periods~~period in ~~2016. Also, Minnesota Breeders’ Fund expense~~2018. Card Casino purses increased ~~$33,000, or 13.1%, and $169,000, or 26.6%, for the three and nine months, respectively, ended September 30, 2017 compared to the same periods in 2016. The increases are primarily~~$240,000 due to ~~increased~~a change in the purse payment structure related to changes in our horsemen contract effective January 1, 2019. This purse expense increase, which is primarily a timing difference that will result in lower purse expenses in the second and third quarters, was partially offset by purse reductions due to lower pari-mutuel and Card Casino ~~revenues and increased purse fund payments due to ADW source market arrangements.~~

revenues.

Salaries and benefits increased ~~$330,000,~~$315,000, or ~~5.3%, and $739,000, or 4.3%,~~5.9% for the three ~~and nine~~ months ~~respectively,~~ ended ~~September 30, 2017~~March 31, 2019 compared to the same ~~periods~~period in ~~2016.~~2018. The ~~increases are partially~~increase is primarily due to labor costs and inefficiencies caused by the Card Casino construction in January and February and re-opening in March. Another factor in the increased labor costs was the State of ~~Minnesota~~Minnesota’s mandated increase of ~~$0.50~~$0.21 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.”

January 1, 2019.

Professional and contracted services increased ~~$20,000,~~$106,000, or 1.3%, and $237,000, or 7.1%, for the three and nine months, respectively, ended September 30, 2017 compared to the same periods in 2016. The nine month increase is primarily due to increased live racing contracted services as a result of additional live racing weeks and increased consulting fees, primarily related to development initiatives.

~~Advertising and marketing increased $286,000, or 28.2% and other expenses decreased $165,000, or 11.4%~~12.3%, for the three months ended ~~September 30, 2017~~March 31, 2019 compared to the same period in ~~2016. This~~2018. The increase is partially due to professional fees for its development initiatives, as well as increased cost of table games license fees.

In the 2019 first quarter, the Company recorded a ~~reclassification~~loss on disposal 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 compared~~assets totaling $113,000. This primarily relates to ~~the same periods~~a write-off of assets disposed of in 2016. The decreases 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.

remodeling our Card Casino.

Net income for the three months ended ~~September 30, 2017 and 2016~~March 31, 2019 was ~~$953,000 and $926,000, respectively.~~$57,000. Net income for the ~~nine~~three months ended ~~September 30, 2017 and 2016~~March 31, 2018 was ~~$2,182,000 and $3,511,000, respectively.~~$990,000.

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.

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Liquidity and Capital Resources:

Net cash provided by operating activities for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 was $5,104,000 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~~$1,461,000 primarily as a result of the following: The Company reported net income of ~~$3,511,000,~~$57,000, which included a loss on disposal of assets of $113,000. Cash from operating activities was increased by noncash charges from depreciation of ~~$1,867,000,~~$626,000 and ~~deferred income taxes of $973,000.~~stock-based compensation and 401(k) match totaling $206,000. The Company also experienced an increase in accounts payable ~~and deferred revenue~~ of ~~$1,634,000 and Card Casino~~$303,000, card casino accruals of ~~$621,000.~~$417,000, and a decrease in income taxes receivable of $357,000. This was partially offset by a decrease in accrued wages and payroll taxes of $889,000.

Net cash provided by operating activities for the three months ended March 31, 2018 was $2,422,000 primarily from net income of $990,000, depreciation of $635,000, and stock-based compensation and 401(k) match totaling $220,000. The Company also experienced an increase in ~~restricted cash~~card casino accruals and accrued property taxes of ~~$574,000~~$285,000 and ~~due from Minnesota horsemen associations~~$243,000, respectively, as well as a decrease in accounts receivable of ~~$1,101,000, and~~$665,000. This was partially offset by ~~the gain on disposal~~a decrease in accrued wages and payroll taxes of ~~assets relating to the sale of land of $3,990,000 and gain on insurance recoveries of $592,000.~~$1,140,000.

Net cash used in investing activities for the first ~~nine~~three months of ~~2017~~2019 and 2018 was ~~$3,219,000,~~$4,801,000 and $1,226,000, respectively, primarily for ~~building remodel projects. Net cash used in investing activities for the first nine months of 2016 was $3,777,000, primarily for building remodel projects~~additions to land, buildings, and ~~the purchase of land.~~

equipment.

Net cash used in financing activities during the first ~~nine~~three months of ~~2017~~2019 was ~~$499,000,~~$228,000, relating primarily ~~for~~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~~provided by financing activities during the first ~~nine~~three months of ~~2016~~2018 was ~~$2,589,000, primarily for principal payments of capital lease obligations and payment of cash dividends to shareholders.~~

$17,000.

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 March 31, 2019.

The Company’s cash, cash equivalents, and restricted cash ~~equivalent~~ balance at ~~September 30, 2017~~March 31, 2019 was ~~$7,685,000~~$7,636,000 compared to ~~$6,299,000~~$11,204,000 at December 31, ~~2016.~~2018. 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.~~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 12 to our consolidated financial statements in our ~~2016~~2018 Annual Report on Form ~~10-K.~~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%~~66% of our total assets at ~~September 30, 2017.~~March 31, 2019. We ~~utilize~~use our judgment in various ways including: determining whether an expenditure

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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 March 31, 2019.

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:

~~Legislation:~~

Minimum Wage Legislation

~~Legislation that was~~In 2014, Minnesota legislation enacted into law an increase 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 from $9.00 to $9.50 per hour went into effect on August 1, 2016. In addition, startingCompany employees. Beginning January 1, 2018, the minimum wage ~~will~~was set to 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 2019 is $9.86 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 the Company in ~~2016 and 2017~~2014 through 2018, and will continue to have an adverse ~~impact.~~impact on the Company. 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 higher prices and 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 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 and $1,197,000 for marketing purposes during the three months ended September 30, 2017 and 2016, respectively.~~

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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~~2020 through 2022:


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

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

funds.

Under the CMA, the Company has agreed for the ~~10 ½~~ 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,~~ 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,~~ Casino;

competition from other venues offering unbanked card games or other forms of ~~wagering, greater than anticipated~~wagering;

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greater-than-anticipated expenses or a ~~lower than anticipated~~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,~~ options;

increases in compensation and employee benefit ~~costs,~~ costs;

increases in the percentage of revenues allocated for purse fund ~~payments, higher than expected~~payments;

higher-than-expected expenses related to new marketing ~~initiatives,~~ initiatives;

the impact of wagering products and technologies introduced by ~~competitors,~~ 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 success of the Company’s Canterbury Commons real estate development, including our reliance upon our joint venture partner Doran Companies to construct and profitably operate the upscale apartment complex;

the general health of the gaming ~~sector,~~sector; and

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

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 maintains disclosure controls and procedures (as defined in Rules 13a‑15(e) and 15d‑15(e) under the Securities Exchange Act of 1934) that are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. 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) and Chief Financial Officer (CFO) Randall D. Sampson, the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of March 31, 2019. Due to the

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material weakness in internal controls described below, management concluded that as of March 31, 2019, 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 Rule 13a‑15(f) and 15d‑15(f) of the Securities Exchange 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.

Based on management’s testing and evaluation, we concluded that our internal control over financial reporting was not effective in the quarter ended September 30, 2018, 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 Note 10 of Notes to Financial Statements in the Form 10-Q for the quarter ended September 30, 2018. 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. Under the Doran Canterbury I Operating Agreement, Doran was responsible for securing financing for Doran Canterbury I, and if financing were not secured for Doran Canterbury I, the Company had the ability to withdraw from Doran Canterbury I. As long as the Company has the right to withdraw its land contribution, the Company was not able to recognize the gain. As of November 14, 2018, financing for Doran Canterbury I had not been secured. Therefore, as of September 30, 2018, the Company could not record (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 the Form 10-Q, the Company 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.

On December 20, 2018, financing for Doran Canterbury I was secured and the Company included a $2.2 million gain on its transfer of land to the Doran Canterbury I joint venture

Remediation Plan for Material Weaknesses in Internal Control over Financial Reporting

During our 2018 fiscal fourth quarter and 2019 fiscal first quarter, we began implementing a remediation plan to address the material weakness described above. The Company believes that it must acquire additional technical expertise either within the Company or by engaging a third party to help it 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. The Company engaged a third party to assist in the process, but has determined that the remediation plan is not complete as the date of this Form 10-Q.

(b) Changes in Internal Control over Financial Reporting:

There have been no changes in internal control over financial reporting that occurred during the fiscal 2019 first quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting, except that as noted above, the Company is taking steps to remediate the material weakness in internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1. Legal Proceedings

Not Applicable.

~~(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 disclosure controls and procedures pursuant to 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 that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that the Company files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the 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 accumulated and communicated to management, including the chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.

Item 1A. Risk Factors

~~(b)~~	~~Changes in Internal Control over Financial Reporting:~~

	There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) under the Exchange Act) that occurred during our fiscal quarter ended September 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no changes to the Risk Factors listed in the Form 10-K for the year ended December 31, 2018.

Item 2. Unregistered Sales of Equity Securities 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 first quarter of 2019. The maximum number of shares that may yet be purchased under the above authorizations is 128,781 as of March 31, 2019.

Item 3. Defaults upon Senior Securities

Not Applicable.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

Doran Canterbury I, LLC Development

As previously reported, 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 is developing Phase I of the Project, which will include approximately 300 units, a heated parking ramp, and a clubhouse.

In connection with the execution of the Amended and restated 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 begin upon rental stabilization of Phase I. Phase II will include an additional 300 apartment units. Canterbury Development’s equity contribution to Doran Canterbury for Phase II will be approximately 10 acres of land. In connection with its contribution, Canterbury Development became a 27.4% equity member in Doran Canterbury II with Doran owning the remaining 72.6%.

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The Amended and restated Doran Canterbury I Agreement, dated August 18, 2018, was amended pursuant to amendments dated as of December 20, 2018 and March 15, 2019. Copies of the Amended and Restated Doran Canterbury I Agreement and the First and Second Amendments are filed as exhibits to this Form 10-Q.

Item 6. Exhibits

10.1

~~PART II~~

~~OTHER INFORMATION~~

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

			~~Not Applicable.~~

~~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 Equity Securities and Use of Proceeds~~

	~~(a)~~		~~Not Applicable.~~
	~~(b)~~		~~Not Applicable.~~
	~~(c)~~	Amended and Restated Operating Agreement of Doran Canterbury I, LLC dated August 17, 2018.
	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. The maximum number of shares that may yet be purchased under the above authorizations is 128,781
10.1.1		First Amendment dated as of ~~September 30, 2017.~~December 20, 2018 to the Amended and Restated Operating Agreement of Doran Canterbury I, LLC dated August 17, 2018.

~~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.~~
10.1.2			Second Amendment dated as of March 15, 2019 to the Amended and Restated Operating Agreement of Doran Canterbury I, LLC dated August 17, 2018.

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

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

32		32	Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
		~~101~~
99.1		Press Release dated May 14, 2019 announcing 2019 First Quarter Results.

101		The following financial information from Canterbury Park Holding Corporation’s Quarterly Report on Form ~~10-Q~~10‑Q for the quarterly period ended ~~September 30, 2017,~~March 31, 2019, formatted in eXtensible Business Reporting Language XBRL: (i) Condensed Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, (ii) Condensed Consolidated Statements of Operations for the Three ~~and Nine~~ Months ended ~~September 30, 2017~~March 31, 2019 and ~~September 30, 2016,~~March 31, 2018, (iii) Condensed Consolidated Statements of Stockholders’ Equity for the Three Months ended March 31, 2019 and March 31, 2018, (iv) Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months ended ~~September 30, 2017~~March 31, 2019 and ~~September 30, 2016,~~March 31, 2018, and ~~(iv)~~(v) Notes to Financial Statements.

~~SIGNATURES~~

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: May 14, 2019
~~Dated: November 14, 2017~~	~~/s/~~ /s/ Randall D. Sampson


	Randall D. Sampson,
	President, Chief Financial Officer, and Chief Executive Officer


~~Dated: November 14, 2017~~	~~/s/ Robert M. Wolf~~
	~~Robert M. Wolf,~~
	~~Chief Financial Officer~~