UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 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 March 31, 2023.2024.

OR

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

 

 ​logo.jpg

 

CANTERBURY PARK HOLDING CORPORATION
(Exact Name of Registrant as Specified in Its Charter)

 

 Minnesota 47-5349765 
 (State or Other Jurisdiction of Incorporation or (I.R.S. Employer 
 Organization) Identification No.) 

 

 1100 Canterbury Road  
 Shakopee, MN 55379 

(Address of principal executive offices and zip code) ​

Registrant’s telephone number, including area code: (952) 445-7223

 

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

 ​

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 No 

 

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). ​

 Yes No 

 

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

 Large accelerated filer Accelerated filer  
 Non-accelerated filer Smaller reporting companyEmerging growth company

 ​

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

 ​

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

 Yes No 

 

The Company had 4,910,4084,982,770 shares of common stock, $.01 par value, outstanding as of May 12, 2023.9, 2024.

 



 

 

 

 
 

Canterbury Park Holding Corporation

INDEX

 ​

   

Page

    

PART I.

FINANCIAL INFORMATION 

    

Item 1.

Financial Statements (unaudited) 

  

Condensed Consolidated Balance Sheets as of March 31, 20232024 and December 31, 20222023

2

 

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 20232024 and 20222023

3

 

Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 20232024 and 20222023

4

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 20232024 and 20222023

5

 

Notes to Condensed Consolidated Financial Statements

7

 
 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

1815
    
 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

2620
    
 

Item 4.

Controls and Procedures

2620
    

PART II.

OTHER INFORMATION

    
 

Item 1.

Legal Proceedings

2721
    
 

Item 1A.

Risk Factors

2721
    
 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

2721
    
 

Item 3.

Defaults Upon Senior Securities

2721
    
 

Item 4.

Mine Safety Disclosures

2721
    
 

Item 5.

Other Information

2721
    
 

Item 6.

Exhibits

2822
    
 

Signatures

 2822

 ​

1

 

PART 1 – FINANCIAL INFORMATION

CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

(Unaudited)

    

(Unaudited)

   
 

March 31,

 

December 31,

  

March 31,

 

December 31,

 
 

2023

  

2022

  

2024

  

2023

 

ASSETS

          
      

CURRENT ASSETS

      

Cash and cash equivalents

 $16,732,959  $12,989,087  $20,233,333  $21,936,210 

Restricted cash

 3,620,234  3,116,916  4,047,394  3,905,544 

Short-term investments

 5,000,000  5,000,000  5,000,000  5,000,000 

Accounts receivable, net of allowance of $19,250 for both periods

 963,371  618,365 

Employee retention credit receivable

 2,505,601  6,103,236 

Accounts receivable, net of allowance of $7,670 for both periods

 828,436  484,092 

Inventory

 268,350  262,073  265,147  249,370 

Prepaid expenses

 620,665  557,520  689,822  645,422 

Income taxes receivable and prepaid income taxes

  1,738,364   2,052,364   3,633,365   4,083,364 

Total current assets

  31,449,544   30,699,561 

Total Current Assets

  34,697,497   36,304,002 
      

LONG-TERM ASSETS

      

Deposits

 27,000  27,000 

Other prepaid expenses

 21,034 41,774  26,103 10,978 

TIF receivable

 13,499,248  13,294,337  14,187,776  13,972,875 

Related party receivable

 2,601,176  2,555,320  3,970,214  3,526,071 

Operating lease right-of-use asset

 53,026 53,026 

Equity investment

 6,840,285  6,863,517  6,524,870  6,612,712 

Land held for development

 2,303,010  2,303,010  1,229,475  1,229,475 

Land, buildings, and equipment, net

  37,011,180   36,491,660   44,893,156   42,969,529 

Total long-term assets

  62,302,933  61,576,618 

Total Long-term Assets

  70,884,620  68,374,666 

TOTAL ASSETS

 $93,752,477  $92,276,179  $105,582,117  $104,678,668 
      

LIABILITIES AND STOCKHOLDERS’ EQUITY

          
      

CURRENT LIABILITIES

      

Accounts payable

 $2,094,734 $3,368,683  $2,732,774 $4,599,391 

Casino accruals

 2,964,798  2,684,444  2,679,692  2,667,499 

Accrued wages and payroll taxes

 2,036,595  1,814,879  2,196,778  1,662,927 

Cash dividend payable

 346,052 341,602  348,097 346,125 

Accrued property taxes

 993,234  795,646  926,518  741,215 

Deferred revenue

 846,795  413,442  382,367  274,898 

Payable to horsepersons

 1,177,828  993,529  884,670  763,383 

Current portion of finance lease obligations

 11,994  18,973   30,922   1,604 

Total current liabilities

  10,472,031   10,431,198 

Current portion of operating lease obligations

  25,352  25,352 

Total Current Liabilities

  10,207,170   11,082,394 
      

LONG-TERM LIABILITIES

      

Deferred income taxes

 8,201,015  7,474,015  10,300,015  10,300,015 

Investee losses in excess of equity investment

 1,304,179 3,185,923   2,228,624  1,464,218 

Total long-term liabilities

  9,505,194   10,659,938 

Finance lease obligations, net of current portion

 142,153 7,770 

Operating lease obligations, net of current portion

 27,674 27,674 

Total Long-term Liabilities

  12,698,466   11,799,677 

TOTAL LIABILITIES

  19,977,225   21,091,136   22,905,636   22,882,071 
      

STOCKHOLDERS’ EQUITY

      

Common stock, $.01 par value, 10,000,000 shares authorized, 4,910,408 and 4,888,975 respectively, shares issued and outstanding

 49,104  48,890 

Common stock, $.01 par value, 10,000,000 shares authorized, 4,982,770 and 4,962,573 respectively, shares issued and outstanding

 49,828  49,626 

Additional paid-in capital

 26,084,008  25,914,644  27,588,885  27,351,509 

Retained earnings

  47,642,140   45,221,509   55,037,768   54,395,462 

Total stockholders’ equity

  73,775,252   71,185,043 

Total Stockholders’ Equity

  82,676,481   81,796,597 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 $93,752,477  $92,276,179  $105,582,117  $104,678,668 

 

See notes to condensed consolidated financial statements.

 

2

 
 

 

CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 ​

 

Three Months Ended March 31,

  

Three Months Ended March 31,

 
 

2023

  

2022

  

2024

  

2023

 

OPERATING REVENUES:

  

Casino

 $9,714,355  $10,360,427  $10,056,028  $9,714,355 

Pari-mutuel

 1,133,334  1,246,687  1,174,268  1,133,334 

Food and beverage

 1,469,831  1,088,722  1,727,149  1,469,831 

Other

  982,038   942,136   1,140,544   982,038 

Total Net Revenues

 13,299,558  13,637,972  14,097,989  13,299,558 
  

OPERATING EXPENSES:

  

Purse expense

 1,334,973  1,437,641  1,372,757  1,334,973 

Minnesota Breeders’ Fund

 210,905  229,057  216,384  210,905 

Other pari-mutuel expenses

 189,609  204,698  198,389  189,609 

Salaries and benefits

 5,874,805  5,507,957  6,151,840  5,874,805 

Cost of food and beverage and other sales

 585,052  497,053  637,104  585,052 

Depreciation and amortization

 735,261  745,949  850,986  735,261 

Utilities

 388,848  358,384  342,835  388,848 

Advertising and marketing

 298,507  301,432  142,458  298,507 

Professional and contracted services

 1,004,228  940,479  1,252,442  1,004,228 

Other operating expenses

  1,123,549   989,086   1,170,919   1,123,549 

Total Operating Expenses

  11,745,737   11,211,736   12,336,114   11,745,737 

INCOME FROM OPERATIONS

 1,553,821  2,426,236  1,761,875  1,553,821 

OTHER INCOME (LOSS)

  

Gain (Loss) from equity investment

 1,858,512  (239,522)

(Loss) gain from equity investment

 (852,248) 1,858,512 

Interest income, net

  399,175   192,840   538,527   399,175 

Net Other Income (Loss)

  2,257,687   (46,682)

Net Other (Loss) Income

  (313,721)  2,257,687 

INCOME BEFORE INCOME TAXES

 3,811,508  2,379,554  1,448,154  3,811,508 

INCOME TAX EXPENSE

  (1,041,000)  (605,641)  (450,000)  (1,041,000)

NET INCOME

 $2,770,508  $1,773,913  $998,154  $2,770,508 
  

Basic earnings per share

 $0.57  $0.37  $0.20  $0.57 

Diluted earnings per share

 $0.56  $0.36  $0.20  $0.56 

Weighted average basic shares outstanding

 4,893,324  4,818,339  4,966,825  4,893,324 

Weighted average diluted shares

 4,923,132  4,864,247  4,991,956  4,923,132 

Cash dividends declared per share

 $0.07  $0.14  $0.07  $0.07 

 ​

See notes to condensed consolidated financial statements.

 

3

 
 

 

CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

(Unaudited)

 

For the three months ended March 31, 20232024

 

 

Number of

 

Common

 

Additional

 

Retained

    

Number of

 

Common

 

Additional

 

Retained

   
 

Shares

  

Stock

  

Paid-in Capital

  

Earnings

  

Total

  

Shares

  

Stock

  

Paid-in Capital

  

Earnings

  

Total

 

Balance at December 31, 2022

  4,888,975  $48,890  $25,914,644  $45,221,509  $71,185,043 

Balance at December 31, 2023

  4,962,573  $49,626  $27,351,509  $54,395,462  $81,796,597 
  

Stock-based compensation

   129,477  129,477    129,014  129,014 

Dividend declared

    (349,877) (349,877)    (355,848) (355,848)

401(k) stock match

 7,804  78  206,728    206,806  9,952  100  217,352    217,452 

Issuance of deferred stock awards

 13,629 136 (166,841)  (166,705) 10,245 102 (108,990)  (108,888)

Net income

           2,770,508   2,770,508            998,154   998,154 
  

Balance at March 31, 2023

  4,910,408  $49,104  $26,084,008  $47,642,140  $73,775,252 

Balance at March 31, 2024

  4,982,770  $49,828  $27,588,885  $55,037,768  $82,676,481 

 

For the three months ended March 31, 20222023

 

 

Number of

 

Common

 

Additional

 

Retained

    

Number of

 

Common

 

Additional

 

Retained

   
 

Shares

  

Stock

  

Paid-in Capital

  

Earnings

  

Total

  

Shares

  

Stock

  

Paid-in Capital

  

Earnings

  

Total

 

Balance at December 31, 2021

 4,812,085  $48,121  $24,894,571  $39,410,534  $64,353,226 

Balance at December 31, 2022

 4,888,975  $48,890  $25,914,644  $45,221,509  $71,185,043 
  

Stock-based compensation

   104,927  104,927    129,477  129,477 

Dividend distribution

       (675,872) (675,872)

Dividend declared

       (349,877) (349,877)

401(k) stock match

 7,611  76  156,634    156,710  7,804  78  206,728    206,806 

Issuance of deferred stock awards

 19,601  196  (212,055)   (211,859) 13,629 136 (166,841)  (166,705)

Shares issued under Employee Stock Purchase Plan

      

Net income

           1,773,913   1,773,913            2,770,508   2,770,508 
  

Balance at March 31, 2022

  4,839,297  $48,393  $24,944,077  $40,508,575  $65,501,045 

Balance at March 31, 2023

  4,910,408  $49,104  $26,084,008  $47,642,140  $73,775,252 

 

See notes to condensed consolidated financial statements.

 

4

 
 

 

CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

Three Months Ended March 31,

  

Three Months Ended March 31,

 
 

2023

  

2022

  

2024

  

2023

 

Operating Activities:

          

Net income

 $2,770,508  $1,773,913  $998,154  $2,770,508 

Adjustments to reconcile net income to net cash provided by operating activities:

          

Depreciation

 735,261  745,949  850,986  735,261 

Stock-based compensation expense

 129,477  104,927  129,014  129,477 

Stock-based employee match contribution

 206,806  156,710  217,452  206,806 

Deferred income taxes

 727,000    727,000 

(Gain) Loss from equity investment

 (1,858,512) 239,522 

Loss (gain) from equity investment

 852,248  (1,858,512)

Changes in operating assets and liabilities:

          

Accounts receivable

 (345,006) (237,486) (344,344) (345,006)

Employee retention credit receivable

 3,597,635  

Employee retention credit

  3,597,635 

Increase in TIF receivable

 (204,911) (165,266) (169,096) (204,911)

Inventory, prepaid expenses and deposits

 (48,682) (70,963) (75,302) (48,682)

Income taxes receivable/payable and prepaid income taxes

 314,000  (212,228)

Income taxes receivable and prepaid income taxes

 449,999  314,000 

Accounts payable

 (1,518,416) 237,324  (2,252,801) (1,518,416)

Deferred revenue

 433,353  212,386  107,469  433,353 

Casino accruals

 280,355  (201,651) 12,193  280,355 

Accrued wages and payroll taxes

 221,716  5,249  533,851  221,716 

Accrued property taxes

 197,588  202,168  185,303  197,588 

Payable to horsepersons

  184,299   146,264   121,287   184,299 

Net cash provided by operating activities

  5,822,471   2,936,818   1,616,413   5,822,471 
          

Investing Activities:

          

Additions to land, buildings, and equipment

 (1,010,314) (778,041) (2,217,399) (1,010,314)

Equity investment contributions

  (340,026)

Additions for TIF eligible improvements

 (45,805)  

Increase in related party receivable

  (45,856)  (5,554)  (444,143)  (45,856)

Proceeds from sale of short-term investments

 500,000  

Purchase of investments

 (500,000)  

Net cash used in investing activities

  (1,056,170)  (1,123,621)  (2,707,347)  (1,056,170)
          

Financing Activities:

          

Cash dividend paid to shareholders

 (345,427) (336,198) (353,876) (345,427)

Payments for taxes related to net share settlement of equity awards

 (166,705) (211,859) (108,888) (166,705)

Principal payments on finance lease

  (6,979)  (6,641)

Principal payments on finance leases

  (7,329)  (6,979)

Net cash used in financing activities

  (519,111)  (554,698)  (470,093)  (519,111)
          

Net increase in cash, cash equivalents, and restricted cash

 4,247,190  1,258,499 

Net (decrease) increase in cash, cash equivalents, and restricted cash

 (1,561,027) 4,247,190 
          

Cash, cash equivalents, and restricted cash at beginning of period

  16,106,003   15,598,753   25,841,754   16,106,003 
          

Cash, cash equivalents, and restricted cash at end of period

 $20,353,193  $16,857,252  $24,280,727  $20,353,193 

 

5

 

 

CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(Unaudited)

 ​

Schedule of non-cash investing and financing activities

          

Additions to land, buildings, and equipment funded through accounts payable

 $244,000  $119,000  $386,000  $244,000 

Dividend declared but not yet paid

 346,000 340,000  348,000 346,000 

Change in investee losses in excess of equity investments

 (1,882,000) 515,000  764,000 (1,882,000)
     

Supplemental disclosure of cash flow information:

     

Income taxes paid, net of refunds

 $  $818,000 

Interest paid

   1,000 

ROU assets obtained in exchange for operating lease obligations

 171,000  

 ​

See notes to condensed consolidated financial statements.

 

6

 

 

CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

1.    OVERVIEW AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Business – Canterbury Park Holding Corporation’s (the “Company,” “we,” “our,” or “us”) Racetrack operations are conducted at facilities located in Shakopee, Minnesota, approximately 2520 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 typically 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 Casino typically 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 Casino currently offers a variety of poker and table games. The Company’s three largest sources of revenues are from 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 underutilized land surrounding the Racetrack in a project known as Canterbury Commons™, with approximately 140 acres originally designated as underutilized. The Company has obtained and 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 direct and indirect subsidiaries Canterbury Park Entertainment, LLC; Canterbury Park Concessions, 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, 2022,2023, included in its Annual Report on Form 10-K (the “20222023 Form 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 March 31, 20232024 and 20222023 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 March 31, 20232024 and 20222023 and for the periods then ended have been made.

Summary of Significant Accounting Policies A detailed description of our significant accounting policies can be found in our most recent Annual Report on the 20222023 Form 10-K. There were no material changes in significant accounting policies during the three months ended March 31, 20232024.

 

Reclassifications – Certain amounts in prior period financial statements have been reclassified to conform to current period presentations.

Restricted Cash – Restricted cash represents refundable deposits and amounts due to horsemen for purses, stakes and awards, collateral needed for joint venture operations, 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 promotions, giveaways, prizes, or by other means. 

 

Employee RetentionAccounts Receivable - Accounts receivable are initially recorded for amounts due from other tracks for simulcast revenue, net of amounts due to other tracks, and for amounts due from customers related to catering and events. Credit ("ERC") –is granted in the normal course of business without collateral. Accounts receivable are stated net of allowances for doubtful accounts, which represent estimated losses resulting from the inability of customers to make the required payments. Accounts that are outstanding longer than the contractual terms are considered past due. We evaluate our allowance for credit losses and estimate collectability of current and non-current accounts receivable based on historical bad debt experience, our assessment of the financial condition of individual companies with which we do business, current market conditions, and reasonable and supportable forecasts of future economic conditions. In times of economic turmoil, our estimates and judgments with respect to the collectability of our receivables are subject to greater uncertainty than in more stable periods. The Company qualified for federal government assistance through ERC provisions of the CARES Act passed in 2020, for the 2020 second, third, and fourth quarters, as well as the 2021first and second quarters. The purpose of the ERC is to encourage employers to keep employees on the payroll, even if they aredoes not working during the covered period because of the coronavirus outbreak. We recognize amounts to be refundablehave accounts receivable with original maturities greater than one year. The allowance for credit losses and activity as tax credits if there is a reasonable assurance of compliance with grant conditions and receipt of credits. As of March 31, 20232024 and December 31, 2022,2023 the Company's expectedwas one-time refunds totaling $2,505,601 and $6,103,236, respectively, are included on the Condensed Consolidated Balance Sheets as an employee retention credit receivable. The Company recorded $6,103,236 on the Consolidated Statements of Operations as a credit to salaries and benefits expense in the 2021not fourth quarter.material. 

 

7

Deferred Revenue – Deferred revenue includes advance sales related to racing, events and corporate partnerships. Revenue from these advance billings is recognized when the related event occurs or services have been performed. 

 

Payable to Horsepersons - The Minnesota Pari-mutuel Horse Racing Act requires the Company to segregate a portion of funds (recorded as purse expense in the statements of operations) received from 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 Minnesota Horsemen’s Benevolent and Protective Association (“MHBPA”), the Company transferred into a trust account or paid directly to the MHBPA, $1,234,0001,255,000 and $1,298,000$1,234,000 for the three months ended March 31, 20232024 and 20222023, respectively, related to thoroughbred races. Minnesota Statutes 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 Condensed Consolidated Balance Sheet.

7

Revenue Recognition – The Company’s primary revenues with customers consist of 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 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 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 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 (as described below), and import revenue (as described below) contracts to determine whether we are acting as the principal or as the agent when providing services, to determine if we should report revenue on a gross or net basis. An entity acts as a principal if it controls a specified service before that service is transferred to a customer.

 

8

For on-track revenue and “import revenue,” that is revenue we generate for racing held elsewhere that our patrons wager on, we are entitled to retain a commission for providing a wagering service to our customers. For these arrangements, we are the principal because 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,” when the wagering occurs outside our premises, our customer is the third-party wagering site such as a racetrack, Off Track Betting (“OTB”), or advance deposit wagering (“ADW”) 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.

 

2.    STOCK-BASED COMPENSATION

 

Long Term Incentive Plan and Award of Deferred Stock

 

The Long Term Incentive Plan (the “LTI Plan”) authorizes the grant of Long Term Incentive Awards that provide an opportunity to Named Executive Officers (“NEOs”) and other Senior Executives to receive a payment in cash or shares of the Company’s common stock to the extent of achievement at the end of a period greater than one year (the “Performance Period”) as compared to Performance Goals established at the beginning of the Performance Period. Currently, there are no awards outstanding as of March 31, 2023. Beginning in 2020, and as a result of the COVID-19 Pandemic, the Company temporarily suspended the granting of performance awards under its LTI Plan, and instead granted deferred stock awards designed to retain NEOs and other Senior Executivessenior executives in lieu of LTI Plan awards forfrom 2020 through 2024. In February 2022, the Compensation Committee made determinations regarding the achievement of 2021 performance goals and payouts under the 20222019-2021 LTI Plan, which completed the performance period and awards under the 2023.2019-2021 LTI Plan, and the last outstanding awards under the LTI Plan. Accordingly, there are no awards outstanding under the LTI Plan.

 

8

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

 

The Company’s Stock Plan currently authorizes annual grants of restricted stock, deferred stock, 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’ meeting as determined by the Board prior to each such meeting. Deferred stock awards represent the right to receive shares of the Company's common stock upon vesting. Options granted under the Plan generally expire 10 years after the grant date. Restricted stock and deferred stock grants to non-employee directors 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 unvested deferred stock awards outstanding as of March 31, 20232024 to our non-employee directors consistedconsists only of 7,230the grant of deferred stock on June 1, 2023 of 7,818 shares with a weighted average fair value per share of $22.12.$23.01. There were no unvested restricted stock or stock options outstanding to any non-employee director at March 31, 20232024.

Board of Directors deferred stock transactions during the three months ended March 31, 2024 are summarized as follows: 

      

Weighted

 
      

Average

 
  

Deferred

  

Fair Value

 
  

Stock

  

Per Share

 

Non-Vested Balance, December 31, 2023

  7,818  $23.01 

Granted

      

Vested

      

Forfeited

      

Non-Vested Balance, March 31, 2024

  7,818  $23.01 

 

Employee Deferred Stock Awards

 

The Company's Stock Plan permits its Compensation Committee to grant stock-based awards, including deferred stock awards, to key employees and non-employee directors. The Company has made deferred stock grants to key employees that vest over one to four years. Deferred stock awards represent the right to receive shares of the Company's common stock upon vesting.

 

During the three months ended March 31, 2024, the Company granted employees deferred stock awards totaling 22,100 shares of common stock, with a vesting term of approximately four years and a fair value of $21.08 per share. During the threemonths ended March 31, 2023, the Company granted employees deferred stock awards totaling 19,020 shares of common stock, with a vesting term of approximately four years and a fair value of $25.52 per share. During the three months ended March 31, 2022, the Company granted employees deferred stock awards totaling 18,600 shares of common stock, with a vesting term of approximately four years and a fair value of $21.62 per share.

 

9

Employee deferred stock transactions during the three months ended March 31, 20232024 are summarized as follows: 

 

    

Weighted

     

Weighted

 
    

Average

     

Average

 
 

Deferred

 

Fair Value

  

Deferred

 

Fair Value

 
 

Stock

  

Per Share

  

Stock

  

Per Share

 

Non-Vested Balance, December 31, 2022

 41,200  $16.62 

Non-Vested Balance, December 31, 2023

 36,920  $22.00 

Granted

 19,020  25.52  22,100  21.08 

Vested

 (20,050) 14.33  (15,230) 21.83 

Forfeited

  (1,950)  19.07       

Non-Vested Balance, March 31, 2023

  38,220  $22.13 

Non-Vested Balance, March 31, 2024

  43,790  $22.52 

 

There were no stock options outstanding to any employee or other person at March 31, 2024. Stock-based compensation expense related to the LTI Plan, deferred stock awards, and restricted stock awards is included on the Condensed Consolidated Statements of Operations and totaled approximately $118,000$111,000 and $105,000$118,000 for the three months ended March 31, 20232024 and 20222023. At March 31, 2023,2024, there was approximatel$801,000$925,000 of total unrecognized stock-based compensation expense related to unvested employee and board of director deferred stock awards that is expected to be recognized over a period of approximately 4.0 years. 

 

3.    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 months ended March 31, 20232024 and 20222023:

 ​

 

Three Months Ended March 31,

  

Three Months Ended March 31,

 
 

2023

  

2022

  

2024

  

2023

 

Net income (numerator) amounts used for basic and diluted per share computations:

 $2,770,508  $1,773,913  $998,154  $2,770,508 
  

Weighted average shares (denominator) of common stock outstanding:

  

Basic

 4,893,324  4,818,339  4,966,825  4,893,324 

Plus dilutive effect of stock options

  29,808   45,907 

Plus dilutive effect of deferred stock awards

  25,131   29,808 

Diluted

  4,923,132   4,864,247   4,991,956   4,923,132 
  

Net income per common share:

  

Basic

 $0.57  $0.37  $0.20  $0.57 

Diluted

 0.56  0.36  0.20  0.56 
9

 

4.    GENERAL CREDIT AGREEMENT

 

The Company has a general credit and security agreement with a financial institution, which provides ainstitution. The agreement was amended as of February 28, 2021 to extend the maturity date to January 31, 2024 and increase its revolving credit line up to $10,000,000 and allows for letters of credit in the aggregate amount of up to $2,000,000 to be issued under the credit agreement.$10,000,000. The line of credit is collateralized by all receivables, inventory, equipment, and general intangibles of the Company.Company, as well as a mortgage on certain real property. The credit agreement contains covenants requiring the Company to maintain certain financial ratios. The general credit and security agreement was further amended as of January 31, 2024 to extend the maturity date to January 31, 2027 and reduce the maximum borrowing under the line of credit also includesto $5,000,000. In connection with the amendment, the financial institution terminated a mortgage to release certain Company real property as collateral inand the form ofparties entered into a Mortgage, Security Agreement, Fixture Financing Statement and Assignment of Leases and Rents.negative pledge agreement under which the Company agreed not to create any liens or encumbrances on certain Company real property. The maturity date of the revolving line of credit is January 31, 2024. As of March 31, 2023, the outstanding balance on the line of credit was $0.$0 at both March 31, 2024 and December 31, 2023.

 

10

 

5.    OPERATING SEGMENTS

 

The Company has four reportable operating segments: horse racing, Casino, food and beverage, and development. The horse racing segment primarily represents simulcast and live horse racing operations. The Casino segment represents operations of Canterbury Park’s Casino. The food and beverage segment represents food and beverage operations provided during simulcast and live racing, in the Casino, and during special 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 Casino segments.

 

Depreciation, interest, and income taxes are allocated to the segments, but no allocation is made to the food and beverage segment for shared facilities. However, the food and beverage segment pays approximately 25% of gross revenues earned on live racing and special event days to the horse racing segment for use of the facilities. Starting in 2020, the food and beverage segment has not paid a commission related to live racing to the horse racing segment subsequent to the Company's first temporary shutdown of operations starting March 16, 2020. 

 

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

 ​

 

Three Months Ended March 31, 2023

  

Three Months Ended March 31, 2024

 
 

Horse Racing

  

Casino

  

Food and Beverage

  

Development

  

Total

  

Horse Racing

  

Casino

  

Food and Beverage

  

Development

  

Total

 

Net revenues from external customers

 $2,042  $9,714  $1,544  $  $13,300  $2,138  $10,056  $1,904  $  $14,098 

Intersegment revenues

 128    273    401  138    273    411 

Net interest income

 180      219  399  288      251  539 

Depreciation

 612  75  48    735  509  300  42    851 

Segment income (loss) before income taxes

 (105) 3,944  349  2,006  6,194  135  1,996  519  (673) 1,977 

Segment tax expense (benefit)

 (679) 1,077  95  548  1,041  (123) 620  162  (209) 450 

 

  

March 31, 2023

 

Segment Assets

 $74,802  $2,350  $30,705  $28,768  $136,625 
  

March 31, 2024

 

Segment Assets

 $95,913  $2,049  $33,738  $34,852  $166,552 

 ​

 

Three Months Ended March 31, 2022

  

Three Months Ended March 31, 2023

 
 

Horse Racing

  

Casino

  

Food and Beverage

  

Development

  

Total

  

Horse Racing

  

Casino

  

Food and Beverage

  

Development

  

Total

 

Net revenues from external customers

 $2,112  $10,360  $1,166  $  $13,638  $2,042  $9,714  $1,544  $  $13,300 

Intersegment revenues

 64    244    308  128    273    401 

Net interest income

 1      192  193  180      219  399 

Depreciation

 621  75  50    746  612  75  48    735 

Segment income (loss) before income taxes

 (14) 2,447  171  (119) 2,485  (1,287) 3,083  386  2,006  4,188 

Segment tax expense (benefit)

 (31) 624  43  (30) 606  (454) 842  105  548  1,041 

 

  

December 31, 2022

 

Segment Assets

 $71,338  $2,425  $30,341  $26,475  $130,579 
  

December 31, 2023

 

Segment Assets

 $92,970  $2,125  $33,175  $34,892  $163,162 

 ​

1110

 
 

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

 ​

 

Three Months Ended March 31,

  

Three Months Ended March 31,

 
 

2023

  

2022

  

2024

  

2023

 

Revenues

  

Total net revenue for reportable segments

 $13,700  $13,946  $14,508  $13,700 

Elimination of intersegment revenues

  (400)  (308)  (410)  (400)

Total consolidated net revenues

 $13,300  $13,638  $14,098  $13,300 

 ​

Income before income taxes

  

Total segment income (loss) before income taxes

 $6,194  $2,485  $1,977  $4,188 

Elimination of intersegment (income) loss before income taxes

  (2,382)  (105)  (529)  (376)

Total consolidated income before income taxes

 $3,812  $2,380  $1,448  $3,812 

 ​

 

March 31,

 

December 31,

  

March 31,

 

December 31,

 
 

2023

  

2022

  

2024

  

2023

 

Assets

  

Total assets for reportable segments

 $136,625  $130,579  $166,552  $163,162 

Elimination of intercompany balances

  (42,873)  (38,303)  (60,970)  (58,483)

Total consolidated assets

 $93,752  $92,276  $105,582  $104,679 

 ​ ​ 

 

6.    COMMITMENTS AND CONTINGENCIES

 

Effective on December 21, 2021, the Company entered into a Contribution and Indemnity Agreement ("Indemnity Agreement") with affiliates of Doran Companies ("Doran") in connection with the debt refinancing on the Doran Canterbury I, LLC joint venture. Under the Indemnity Agreement, the Company is obligated to indemnify Doran for loan payment amounts up to $5,000,000 only if the lender demands the loan guarantee by Doran. Effective on October 27, 2022, the Indemnity Agreement was amended to increase the maximum indemnification by an additional $700,000. Effective December 12, 2023, the Indemnity Agreement was amended to increase the maximum indemnification by an additional $1,300,000, bringing the total to a maximum of $7,000,000.

Effective December 21, 2023, the Company entered into its annual live race meet and purse fund contribution agreement with the Minnesota Horsemen’s Benevolent & Protective Association (“MHBPA”) and the Minnesota Quarter Horse Racing Association ("MQHRA") regarding the upcoming 2024 live race meet. In an effort to increase field size and improve the quality of racing for the 2024 season, the Company has guaranteed purses for overnight races at $23,000 per race. The parties recognize there is likely to be a significant financial cost to the Company in establishing a 2024 thoroughbred purse structure intended to average $23,000 per conducted overnight race and that to maintain that average purse structure, the Company will be making an overpayment that may be repaid to the Company through reimbursement in subsequent racing years. This anticipated overpayment of purses by the Company is intended to create a short-term bridge until additional purse supplements can be obtained from other sources. In the event that additional purse revenue is secured within the next five years through additional forms of gaming at the Company, new revenue streams, or legislative action, the Company will be eligible for reimbursement of the actual 2024 overpayment amount from those purse supplements.

 

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 March 31, 20232024 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.

 

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”). On January 25, 2022, the Company received the fully executed First Amendment to the Contract for Redevelopment among the Master Developer, the City and the Authority, which is effective as of September 7, 2021. Under this contract, the Company is obligated to construct certain infrastructure improvements within the TIF District, and will be reimbursed for the cost of TIF eligible improvements by the City of Shakopee by future tax increment revenue generated from the developed property, up to specified maximum amounts. 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. 

 ​

12

 

7.    COOPERATIVE MARKETING AGREEMENT

On March 4,2012, the Company entered into a Cooperative Marketing Agreement (the "CMA") with the Shakopee Mdewakanton Sioux Community ("SMSC"). The primary purpose of the CMA was 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 was achieved through “Purse Enhancement Payments to Horsemen” paid directly to the MHBPA. These payments had 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.

As noted above and affirmed in the Fifth Amendment, SMSC was obligated to make an annual purse enhancement of $7,380,000 and an annual marketing payment of $1,620,000 for 2022.

The amounts earned from the marketing payments were recorded as a component of other revenue and the related expenses were recorded as a component of advertising and marketing expense and depreciation in the Company’s condensed consolidated statements of operations. For the three months ended March 31, 2022, the Company recorded $112,000 in other revenue, incurred $65,000 in advertising and marketing expense, and incurred $47,000 in depreciation related to the SMSC marketing funds. The excess of amounts received over revenue is reflected as deferred revenue on the Company’s consolidated balance sheets.

Under the CMA, the Company agreed for the term of the CMA 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.

The CMA expired by its terms on December 31, 2022.

13

8.    REAL ESTATE DEVELOPMENT

 

Equity Investments

 

Doran Canterbury I, LLC 

 

On April 2, 2018, the Company’s subsidiary Canterbury Development LLC, entered into an Operating Agreement (“Operating Agreement”) with an affiliate of Doran Companies (“Doran”), a national commercial and residential real estate developer, as the two members of a Minnesota limited liability company named Doran Canterbury I, LLC (“Doran Canterbury I”). Doran Canterbury I was formed as part of a joint venture between Doran and Canterbury Development LLC to construct an upscale apartment complex on land adjacent to the Company’s Racetrack (the “Project”). Doran Canterbury I has completed developing Phase I of the Project, which includes 321 units, a heated parking ramp, and a clubhouse.

 

11

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. Doran Canterbury I has completed developing Phase I of the Project, which includes 321 units, a heated parking ramp, and a clubhouse. As the Company is able to assert significant influence, but not control, over Doran Canterbury I’s operational and financial policies, the Company accounts for the joint venture as an equity method investment. For the three months ended March 31, 20232024 and 2022,2023, the Company recorded income of $1,882,000 and a loss of $515,000,$764,000 and income of $1,882,000, respectively, on equity method investment related to this joint venture. The increased income for the first quarter of 2023 related to this joint venture is due to the receipt ofa gain recognized on insurance proceeds received by Doran Canterbury I related to an outstanding claim. In accordance with U.S. GAAP, since we are committed to provide future capital contributions to Doran Canterbury I, we also present as a liability in the accompanying Condensed Consolidated Balance Sheets the net balance recorded for our share of Doran Canterbury I's losses in excess of the amount funded into Doran Canterbury I, which was $1,304,000 $2,229,000 and $3,186,000$1,464,000 at March 31, 20232024 and December 31, 2022,2023, respectively. See Note 9 of Notes to Financial Statements for a summary of member loans to Doran Canterbury I.

We are a party to a contribution and indemnity agreement with affiliates of Doran relating to debt financing by Doran Canterbury I as borrower, which is guaranteed by Doran affiliates. Under the contribution and indemnity agreement, as amended, the Company is obligated to reimburse and indemnify each loan guarantor for any amounts paid by such loan guarantor to the lender on debt financing by Doran Canterbury I, up to a maximum of $7,000,000 as of March 31,2024. See Note 6. “Commitments and Contingencies.”

 

Doran Canterbury II, LLC 

 

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”). UnderThe Operating Agreement was amended and restated by the members effective July 30, 2020. On September 30, 2020, Canterbury Development LLC contributed approximately 10 acres of land as its equity contribution in the Doran Canterbury II Operating Agreement,joint venture and became a 27.4% equity member. Doran Canterbury II will pursue development ofhas completed developing Phase II of the Project. Phase II will includeproject which includes an additional 300 apartment units. Canterbury Development’s equity contribution to Doran Canterbury II for Phase II was approximately 10 acres of land, which were contributed to Doran Canterbury II on September 30,2020. In connection with its contribution, Canterbury Development became a 27.4% equity member in Doran Canterbury II with Doran owning the remaining 72.6%. As the Company is able to assert significant influence, but not control, over Doran Canterbury II’s operational and financial policies, the Company accounts for the joint venture as an equity method investment. For the three months ended March 31, 2024, the Company recorded a loss of $185,000 on equity method investment related to this joint venture. As of March 31, 2023, the proportionate share of Doran Canterbury II's earnings was immaterial. DuringUnder the three months ended March 31, 2023 and 2022, the Company contributed approximately $0 and $340,000, respectively, as an equity investment contribution inOperating Agreement, we are required to provide future member loans to Doran Canterbury II to cover the costs of construction or operating deficiencies. See Note 9 of Notes to Financial Statements for a summary of member loans to Doran Canterbury II.

 

Canterbury DBSV Development, LLC

 

On June 16, 2020, Canterbury Development LLC, entered into an Operating Agreement with an affiliate of Greystone Construction, as the two members of a Minnesota limited liability company named Canterbury DBSV Development, LLC ("Canterbury DBSV"). Canterbury DBSV was formed as part of a joint venture between Greystone and Canterbury Development LLC for a multi-use development on the 13-acre land parcel located on the southwest portion of the Company’s racetrack. Canterbury Development LLC's equity contribution to Canterbury DBSV was approximately 13 acres of land, which were contributed to Canterbury DBSV on July 1, 2020. In connection with its contribution, Canterbury Development became a 61.87% equity member in Canterbury DBSV. As the Company is able to assert significant influence, but not control, over Canterbury DBSV’s operational and financial policies, the Company accounts for the joint venture as an equity method investment. Canterbury DBSV has since entered into multiple other joint venture investments, all related to the multi-use development of the 13-acre parcel mentioned before. All such investments are accounted for under the equity method by Canterbury DBSV.For the three months ended March 31, 20232024 and 2022,2023, the Company recorded income of $97,000 and a loss of $25,000, and income of $276,000, respectively, on equity investmentmethod investments related to this joint venture.

The following table summarizes changes to the Equity investment and Investee losses in excess of equity investment lines on our consolidated balance sheets for the three months ended March 31, 2023:2024:

 

   

Equity Investment 

  

Investee losses in excess of equity investment

  

Net Equity Investment 

Net Equity Investment Balance at 12/31/22

 

$

6,863,517

 

$

 (3,185,923)

 

$

3,677,594

          

Equity investment income (loss)

  

 (23,232)

  

1,881,744

  

1,858,512

          

Net Equity Investment Balance at 3/31/23

 

$

6,840,285

 

$

 (1,304,179)

 

$

5,536,106

          
  

Equity investment

  

Investee losses in excess of equity investment

  

Equity investment, net

 

Net Equity Investment Balance at 12/31/23

 $6,612,712  $(1,464,218) $5,148,494 
             

Q1 Equity investment loss

  (87,842)  (764,406)  (852,248)
             

Net Equity Investment Balance at 3/31/24

 $6,524,870  $(2,228,624) $4,296,246 

 

14

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 Original Agreement, the Company agreed to undertake a number of specific infrastructure improvements within the TIF District, and the City 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. Under the Original Agreement, the total estimated cost of TIF eligible improvements to be borne by the Company was $23,336,500.

 

12

On January 25, 2022, the Company received the fully executed First Amendment to the Contract for Private Redevelopment (the “First Amendment”) among the Company, the City of Shakopee, and the Shakopee EDA, which is effective as of September 7, 2021. Under the First Amendment and as part of the authorized changes regarding the responsibilities of the Company and the City, improvements on Unbridled Avenue will be primarily constructed by the City of Shakopee. As a result, the total estimated cost of TIF eligible improvements to be borne by the Company was reduced by $5,744,000 to an amount not to exceed $17,592,881. In order to reimburse the Company for the qualified costs related to constructing the developer improvements, the Authority will issue and the Company will receive a TIF Note in the maximum principal amount of $17,592,881. The First Amendment also memorialized that the Company completed the Shenandoah Drive improvements as required prior to December 31, 2019. The City is obligated to issue bonds to finance the portion of the improvements required to be constructed by the City. 

 

A detailed Schedule of the Public Improvements under the First Amendment, the timeline for their construction and the source and amount of funding is set forth in the First Amendment, which is filed as Exhibit 10.1 of the Form 8-K filed on January 31, 2022. The Company expects to substantially complete the remaining developer improvements by July 17, 2027 and will be reimbursed for costs of the developer improvements incurred by no later than July 17, 2027. The total amount of funding that the Company will be paid as reimbursement under the TIF program for these improvements is not guaranteed, however, and will depend in part on future tax revenues generated from the developed property.

 

As of March 31, 2023,2024, the Company recorded a TIF receivable of approximately $13,499,000,$14,188,000, which represents $11,341,000$11,353,000 of principal and $2,158,000$2,835,000 of interest. Management believes future tax revenues generated from current development activity will exceed the Company's development costs and thus, management believes no allowance related to this receivable is necessary. As of December 31, 2022,2023, the Company recorded a TIF receivable of approximately $13,294,000,$13,973,000, which represented $11,301,000$11,307,000 of principal and $1,993,000$2,666,000 of interest. 

 

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.

 

9.8.    LEASES

 

The Company determines if an arrangement is a lease or contains a lease at inception. The Company leases some 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.

 

15

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 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 $0 for the three months ended March 31, 20232024 and 20222023 as the Company has no operating leases.. 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 $110,309$100,054 and $108,639$110,309 for the three months ended March 31, 20232024 and 20222023, respectively.

 

Lease costs included in depreciation and amortization related to our finance leases were $6,715$2,778 and $6,471$6,715 for the three months ended March 31, 20232024 and 2022,2023 respectively. Interest expense related to our finance leases was immaterial.

 

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

 

  March 31, December 31,   

March 31,

 

December 31,

 

Balance Sheet Location

 

2023

  

2022

 

Balance Sheet Location

 

2024

  

2023

 

Assets

        

Finance

Land, buildings and equipment, net (1)

 $11,994  $18,973 

Land, buildings and equipment, net (1)

 $173,075  $9,374 

Operating

Operating lease right-of-use assets

  53,026   53,026 

Total Leased Assets

Total Leased Assets

 $11,994  $18,973 

Total Leased Assets

 $226,101  $62,400 

 


1 – Finance lease assets are net of accumulated amortization of $113,565$7,835 and $106,586$118,424 as of March 31, 20232024 and December 31, 2022,2023, respectively. 

 

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

 

 March 31, December 31,  March 31, December 31, 
 

2023

  

2022

  

2024

  

2023

 

Weighted average remaining lease term (in years):

  

Finance

 0.4  0.7  4.7  4.9 

Operating

 0.8 0.8 

Weighted average discount rate (%):

  

Finance

 5.0% 5.0% 8.5% 4.8%

Operating

 0.0% 0.0% 8.0% 8.0%

 ​

13

The maturity of operating leases and finance leases as of March 31, 20232024 are as follows:

 

Three Months Ended March 31, 2023

 

Finance leases

 

2023 remaining

 $12,146 

2024

   

Three Months Ended March 31, 2024

 

Operating leases

  

Finance leases

 

2024 remaining

 $26,785  $33,335 

2025

 28,229  44,447 

2026

  44,447 

2027

   44,447 

2028 and beyond

    44,252 

Total minimum lease obligations

 12,146  55,014  210,927 

Less: amounts representing interest

  (152)  (1,988)  (37,852)

Present value of minimum lease payments

 11,994  53,026  173,075 

Less: current portion

  (11,994)  (25,352)  (30,922)

Lease obligations, net of current portion

 $  $27,674  $142,153 

 

16

 

10.9.  RELATED PARTY RECEIVABLES

 

Since 2019, the Company has made member loans to the Doran Canterbury I and the Doran Canterbury II joint ventures totaling approximately $2,271,000$3,365,000 and $2,269,000$2,957,000 as of March 31, 20232024 and December 31, 2022,2023, respectively. These member loans bear interest at the rate equal to the Prime Rate plus two percent per annum, and accrued interest totaled $329,000$603,000 and $275,000$522,000 as of March 31, 20232024 and December 31, 2022,2023, respectively. The Company expects to be fully reimbursed for these member loans as and when the joint ventures achieve positive cash flow. Under the Operating Agreements for Doran Canterbury I and Doran Canterbury II, the joint ventures must repay member loans before payments to members in accordance with their percentage interests.

 

The Company has also recorded related party receivables of approximately $2,000 and $11,000$47,000 as of March 31, 20232024 and December 31, 2022,2023, respectively, for various related costs incurred by the Company. The Company expects to be fully reimbursed for these costs by the related parties in 2023.2024.

11.  SUBSEQUENT EVENTS

On May 1, 2023, the Company announced that is has completed the sale of 37 acres of land to Bloomington Investments, LLC, an entity related to Swervo Development ("Swervo"), for total consideration of $8,800,000. The land sold is situated adjacent to County Road 83 and Unbridled Avenue in the northeast corner of the Company's campus. With the land sale and government approvals now complete, Swervo expects construction of its planned 19,000-capacity open air amphitheater to begin this Spring, with the venue opening anticipated to be Summer 2025. Following the land sale, Canterbury will continue the redevelopment of the horse stabling area, which serves its racing business, with new barns and a new dormitory complex.

 

1714

  
 

ITEM 2:    MANAGEMENTS 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 and its subsidiaries, 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 Casino facility (the “Racetrack”) in Shakopee, Minnesota, which is approximately 2520 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 Casino at the Racetrack. The Casino typically operates 24 hours a day, seven days a week. The 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.

 

18

Operations Review for the Three Months Ended March 31, 20232024:

 

Revenues:

 

Total net revenues for the three months ended March 31, 20232024 were $13,300,000, a decrease$14,098,000, an increase of $338,000,$798,000, or 2.5%6.0%, compared to total net revenues of $13,638,000$13,300,000 for the three months ended March 31, 20222023.See below for a further discussion of our sources of revenues.

 

Pari-Mutuel Revenue:

  

Three Months Ended March 31,

 
  

2023

  

2022

 

Simulcast

 $852,000  $915,000 

Other revenue

  281,000   332,000 

Total Pari-Mutuel Revenue

 $1,133,000  $1,247,000 

Total pari-mutuel revenue decreased $114,000, or 9.1%, for the three months ended March 31, 2023 compared to the same period in 2022. The decrease in pari-mutuel revenues is primarily due to decreased simulcast handle as well as lower source market fees paid by ADW companies for wagers made by Minnesota residents on out-of-state races. 

Casino Revenue:

 

 

Three Months Ended March 31,

  

Three Months Ended March 31,

 
 

2023

  

2022

  

2024

  

2023

 

Poker Games Collection

 $1,979,000  $1,909,000  $1,876,000  $1,979,000 

Other Poker Revenue

  774,000   645,000   737,000   774,000 

Total Poker Revenue

 2,753,000  2,554,000  2,613,000  2,753,000 
  

Table Games Collection

 6,381,000  7,189,000  6,896,000  6,381,000 

Other Table Games Revenue

  580,000   617,000   547,000   580,000 

Total Table Games Revenue

 6,961,000  7,806,000  7,443,000  6,961,000 
          

Total Casino Revenue

 $9,714,000  $10,360,000  $10,056,000  $9,714,000 

 

19

The primary source of Casino revenue is a percentage of the wagers received from players as compensation for providing the Casino facility and services, which is referred to as “collection revenue.” Other Poker Revenue and Other Table Games Revenue presented above includes fees collected for the administration of tournaments and the poker jackpot and amounts earned as reimbursement of the administrative costs of maintaining table games jackpot funds, respectively.

 

As indicated by the table above, total Casino revenue decreased $646,000,increased $342,000, or 6.2%3.5%, for the three  months ended March 31, 20232024 compared to the same period in 2022.2023. The decrease inincrease is Casino revenue for the three months ended March 31, 2023 2024 is primarily due to decreased attendance potentially related to inclement weather experienced in the first three months of 2023. 

Pari-Mutuel Revenue:

  

Three Months Ended March 31,

 
  

2024

  

2023

 

Simulcast

 $866,000  $852,000 

Other revenue

  308,000   281,000 

Total Pari-Mutuel Revenue

 $1,174,000  $1,133,000 

Total pari-mutuel revenue remained relatively flat, increasing $41,000, or 3.6%, for the three months ended March 31, 2024 compared to the same period in 2023. The slight increase is also related to the inclement weather experienced in the first three months of 2023 along with a decrease in consumer discretionary spending with our current inflationary environment.as noted above. 

15

 

Food and Beverage Revenue:

 

Food and beverage revenue increased $381,000,$257,000, or 35.0%17.5%, for the three months ended March 31, 20232024 compared to the same period in 2022.2023. The increase is primarily due to increased visitation forcatering operations related to hosting large scale special events including the Snocross National Championship Series, that took place in the first quarter. Furthermore, the Company also increased prices related to food and beverage sales to offset rising inflationary costs.quarter of 2024. 

 

Other Revenue:

 

Other revenue increased $40,000,$159,000, or 4.2%16.1%, for the three months ended March 31, 20232024 compared to the same period in 2022.2023. The increase is primarily due to increased admissionspace rental revenues for special events mentioned aboverelated to catering as well as an increase inincreased revenues from corporate sponsorship revenues.sponsorships.  

 

Operating Expenses:

 

Total operating expenses increased $534,000,$590,000, or 4.8%5.0%, for the three months ended March 31, 20232024 compared to the same period in 2022.2023. The following paragraphs provide further detail regarding certain operating expenses.

 

Purse expense decreased $103,000,Salaries and benefits increased $277,000, or 7.1%4.7%, for the three months ended March 31, 20232024 compared to the same period in 2022.2023. The increase is primarily due to annual wage increases along with the State of Minnesota annual mandated increase in the minimum wage.

Depreciation and amortization increased $116,000, or 15.7%, for the threemonths ended March 31, 2024 compared to the same period in 2023. The increase is primarily due to placing larger fixed assets into service towards the second half of 2023. 

Advertising and marketing costs decreased $156,000, or 52.3%, for the threemonths ended March 31, 2024 compared to the same period in 2023. The decrease is primarily due to theintentionally reducing overall decreasesspend in pari-mutuel and Casino revenues.an effort to cut costs. 

 

SalariesProfessional and benefits contracted services increased $367,000,$248,000, or 6.7%24.7%, for the threemonths ended March 31, 20232024 compared to the same period in 2022.2023. The overall increase is primarilypartially driven by increased contracted services due to an increaseutilizing a third-party for maintenance and cleaning services along with increased professional fees related to expanded lobbying efforts in our wage-rate structure for seasonal as well as year-round employees to attract and retain front-line workers. The Company also increased its 401(k) match percentage, effective January 1, 2023.the current legislative session. 

 

Cost of food and beverage sales increased $88,000, or 17.7%Other Income (Loss), Net:

Other loss, net, for the three months ended March 31, 2023 2024 was $314,000, a decrease of $2,572,000, compared to other income of $2,258,000 for the three months ended March 31, 2023. The decrease for the three months ended March 31, 2024 compared to the same period in 2022. The increaselast year is primarily due to the increased food and beverage revenue noted above as well as inflation related increases to our costshare of goods. 

20

Other operating expenses increased $134,000, or 13.6%, for the three months ended March 31, 2023 compared to the same period in 2022. The increase forinsurance proceeds received on a claim by Doran Canterbury I during the three months ended March 31, 2023 is primarily due to2023. This decrease was partially offset by increased recruiting expenses and Horseracing Integrity and Safety Authority ("HISA") related costs as well as the timing of miscellaneous repairs and maintenance year-over-year.  

Other Income (Loss):

Other income for the three months ended March 31, 2023 was $2,258,000, an increase of $2,304,000, compared to a net other loss of $47,000 for the three months ended March 31, 2022. The increase for the three months ended March 31, 2023 is primarily due to insurance proceeds received from an equity investment related to an outstanding claim by the Doran Canterbury I, LLC joint venture against a third party. Also contributing to the increase was an increase in interest income due to the Company transferring available cash into certificates of deposit and money market funds as well as increasing interest rates related to our member loans.loans to Doran Canterbury I and Doran Canterbury II.

Income Taxes:

 

The Company recorded a provision for incomeincome taxes of $450,000 and $1,041,000 and $606,000 for thethe three months ended March 31, 20232024 and 2022,2023, respectively. We record our quarterly provision for income taxes based on our estimated annual effective tax rate for the year. The increasedecrease in our tax expense for 2023 compared to 2022the three months ended March 31, 2024 is primarily due to an increasea decrease in income before taxes from operations.compared to the same period in 2023. Our effective tax rate was 31.1% and 27.3% for the three months ended March 31, 2024 and 25.5% for 2023, and 2022, respectively. The increase in the effective tax rate is primarily the result of favorableunfavorable discrete items including non-deductible lobbying expenses that occurred during the three months ended March 31, 2022.2024.

Net Income:

 

The Company recorded netCompany's net income of $2,771,000for the three months ended March 31, 2024 was $998,000, or $0.20 per basic and $1,774,000diluted share. The Company's net income for the three months ended March 31, 2023 and 2022, respectively.was $2,771,000, or $0.57 per basic share or $0.56 per diluted share.

16

 

EBITDA

 

To supplement our financial statements, we also provide investors with information about our EBITDA and Adjusted EBITDA, each of which is a non-GAAP measure, which excludes certain items from net income, a GAAP measure. See the table below, which presents reconciliations of these measures to the GAAP equivalent financial measures. We define EBITDA as earnings before interest, income tax expense, and depreciation and amortization. We also compute Adjusted EBITDA, which reflects additional adjustments to Net Income to eliminate unusual or non-recurring items, as well as items relating to our real estate development operations and we believe the exclusion of these items allows for better comparability of our performance between periods and is useful in allowing greater transparency related to a significant measure used by management in its financial and operational decision-making. Adjusted EBITDA has economic substance because it is used by management as a performance measure to analyze the performance of our business, excluding the impact of our real estate segment, and provides a perspective on the current effects of operating decisions relating to our core, non-real estate business. For the three months ended March 31, 20232024, Adjusted EBITDA excluded stock-based compensation, as well as depreciation and amortization relating to equity investments, and interest expense related to equity investments. For the three months ended March 31, 2023, Adjusted EBITDA also excluded gain on insurance proceeds received by the Company's equity investment. Neither EBITDA nor adjusted EBITDA is a measure of performance calculated in accordance with GAAP and should not be considered an alternative to, or more meaningful than, net income as an indicator of our operating performance. EBITDA is presented as a supplemental disclosure because we believe that, when considered with measures calculated in accordance with GAAP, EBITDA providesand Adjusted EBITDA provide a more complete understanding of our operating results before the impact of investing and financing transactions and income taxes, and it is a widely used measure of performance and a basis for valuation of companies in our industry. Moreover, other companies that provide EBITDA or Adjusted EBITDA information may calculate EBITDA or Adjusted EBITDA differently than we do.

21

 

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 months ended March 31, 20232024 and 20222023:

 

Summary of EBITDA Data

 ​

 

Three Months Ended March 31,

  

Three Months Ended March 31,

 
 

2023

  

2022

  

2024

  

2023

 

NET INCOME

 $2,770,508  $1,773,913  $998,154  $2,770,508 

Interest income, net

 (399,175) (192,840) (538,527) (399,175)

Income tax expense

 1,041,000  605,641  450,000  1,041,000 

Depreciation

  735,261   745,949   850,986   735,261 

EBITDA

 4,147,594  2,932,663  1,760,613  4,147,594 

Stock-based compensation

 346,366  336,205 

Gain on insurance proceeds related to equity investments

 (2,528,901)     (2,528,901)

Depreciation and amortization related to equity investments

 440,764  421,323  527,625  440,764 

Interest expense related to equity investments

 422,261  192,813   578,315   422,261 

ADJUSTED EBITDA

 $2,481,718  $3,546,799  $3,212,919  $2,817,923 

 ​

Adjusted EBITDA decreased $1,065,000increased $395,000, or 14.0%, for the three months ended March 31, 20232024 compared to the same period in 2022.2023. The decreaseincrease in Adjusted EBITDA is primarily due to a decreasean increase in the Company's income from operations related to decreased Pari-mutuelas well as increased operating income from the Company's equity investments when removing noncash expenses such as depreciation and Casino revenues noted above.interest. Furthermore, for the three months ended March 31, 2023, Adjusted EBITDA was reduced by insurance proceeds received by the Company's equity investment related to an insurance claim by the Doran Canterbury I, LLC joint venture, against a third party.which was not present in the current period. For the threemonths ended March 31, 2023,2024, Adjusted EBITDA as a percentage of net revenue was 18.7%22.8%. For the three months ended March 31, 2022,2023, Adjusted EBITDA as a percentage of net revenue was 26.0%21.2%.

 

Contingencies:

 

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.

 

2217

 

 

Liquidity and Capital Resources:

 

The Company's primary source of liquidity and capital resources have been and are expected to be cash flow from operations and cash available under our revolving line of credit. The Company has a general credit and security agreement with a financial institution, which provides ainstitution. The agreement was amended as of February 28, 2021 to extend the maturity date to January 31, 2024 and increase its revolving credit line up to $10,000,000 and allows for letters of credit in the aggregate amount of up to $2,000,000 to be issued under the credit agreement which matures January 31, 2024.$10,000,000. The line of credit is collateralized by all receivables, inventory, equipment, and general intangibles of the Company.Company, as well as a mortgage on certain real property. The credit agreement contains covenants requiring the Company to maintain certain financial ratios. The general credit and security agreement was further amended as of January 31, 2024 to extend the maturity date to January 31, 2027 and reduce the maximum borrowing under the line of credit also includesto $5,000,000. In connection with the amendment, the financial institution terminated a mortgage to release certain Company real property as collateral inand the form ofparties entered into a Mortgage, Security Agreement, Fixture Financing Statement and Assignment of Leases and Rents.negative pledge agreement under which the Company agreed not to create any liens or encumbrances on certain Company real property. As of March 31, 20232024, the outstanding balance on the line of credit was $0. The Company did not borrow on the revolving line of credit during the quarter ended March 31, 2024. As of March 31, 2023,2024, the Company was in compliance with the financial covenants of the general credit and security agreement.

 

The Company’s cash, cash equivalents, and restricted cash balance at March 31, 20232024 was $20,353,000$24,281,000 compared to $16,106,000$25,842,000 as of December 31, 20222023. 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 and future land sales, will be sufficient to satisfy its ongoing liquidity and capital resource requirements for regular operations, as well as its planned development expenses for at least the next twelve months. However,In August 2023, the Company received approval for the first phase of the barn relocation and redevelopment plan. We expect to invest approximately $15 million in the stable area improvement plan as currently designed, staged over the course of the next two years. Furthermore, if the Company engages in any additional significant real estate development, significant improvements to its facilities, the Racetrack or surrounding grounds, or strategic growth or diversification transactions, additional financing would more than likely be required and the Company may seek this additional financing through joint venture arrangements, through incurring debt, or through an equity financing, or a combination of any of these.

 

Operating Activities

 

Trends in our operating cash flows tend to follow trends in operating income but can be affected by changes in working capital, the timing of significant interest payments, and tax payments or refunds. Net cash provided by operating activities for the three months ended March 31, 2024 was $1,616,000, primarily as a result of the following: the Company reported net income of $998,000, depreciation of $851,000, a loss from equity investment of $852,000, and stock-based compensation and 401(k) match totaling $346,000. Primarily due to timing, the Company also experienced a decrease in accounts payable of $2,253,000, an increase in accounts receivable of $344,000, offset by an increase in accrued wages and payroll taxes of $534,000 for the three months ended March 31, 2024

Net cash provided by operating activities for the three months ended March 31, 2023 was $5,822,000, primarily as a result of the following: the Company reported net income of $2,771,000, depreciation of $735,000, deferred income taxes of $727,000, a gain from equity investment of $1,859,000, and stock-based compensation and 401(k) match totaling $336,000. Primarily due to timing of larger development related transactions, the Company also experienced a decrease in accounts payable of $1,518,000 as well as a decreaseincrease in accounts receivable of $345,000, offset by an increase due to cash received related to employee retention credit receivable of $3,598,000$3,598,000 and income taxes receivable and prepaid income taxes of $314,000 for the three months ended March 31, 2023

Net cash provided by operating activities for the three months ended March 31, 2022 was $2,937,000, primarily as a result of the following: the Company reported net income of $1,774,000, depreciation of $746,000, a loss from equity investment of $240,000, and stock-based compensation and 401(k) match totaling $262,000. Primarily due to timing, the Company also experienced an increase in accounts payable of $239,000 for the three months ended March 31, 2022, offset by a decrease in accounts receivable of $237,000 for the three months ended March 31, 2022.2023. 

 

Investing Activities

 ​

Net cash used in investing activities for the three months ended March 31, 20232024 was $1,056,000,$2,707,000, primarily due to additions to land, buildings, and equipment.equipment of $2,217,000 and an increase in related party receivables of $444,000. 

 

Net cash used in investing activities for the three months ended March 31, 20222023 was $1,124,000,$1,056,000, primarily due to additions to land, buildings, and equipment and an equity investment contribution.of $1,010,000. 

 

Financing Activities

 

Net cash used in financing activities for the three months ended March 31, 2024 was $470,000, primarily due to cash dividends paid to shareholders and payments for taxes of equity awards. The Company declared a cash dividend of $0.07 per share payable during the three months ended March 31, 2024.

Net cash used in financing activities for the three months ended March 31, 2023 was $519,000, primarily due to cash dividends paid to shareholders and payments for taxes of equity awards.

Net The Company declared a cash used in financing activities fordividend of $0.07 per share payable during the three months ended March 31, 2022 was $555,000, primarily due to cash dividends paid to shareholders and payments for taxes of equity awards. 2023.

 

Critical Accounting Policies Estimates:

 

The preparation of the Condensed Consolidated Financial Statements in accordance with GAAP requires us to make estimates and judgments that are subject to an inherent degree of uncertainty. The nature of the estimates and assumptions are material due to the levels of subjectivity and judgment necessary to account for highly uncertain factors or the susceptibility of such factors to change.

These accounting estimates are described in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Management made no changes to the Company’s critical accounting estimates during the quarter ended March 31, 2024. In applying its critical accounting estimates, management reassesses its estimates each reporting period based on available information. Changes in these estimates did not have a significant impact on earnings for the quarter ended March 31, 2024. 

The development and selection of critical accounting estimates, and the related disclosures, have been reviewed with the Audit Committee of our Board of Directors. We believe the current assumptions and other considerations used to estimate amounts reflected in our Condensed Consolidated Financial Statements are appropriate. However, if actual experience differs from the assumptions and other considerations used in estimating amounts reflected in our Condensed Consolidated Financial Statements, the resulting changes could have a material adverse effect on our financial condition, results of operations and cash flows.

 

2318

 

 

Estimate of the allowance for doubtful accounts - Property Tax Increment Financing "TIF" Receivable 

 

As of March 31, 20232024, the Company recorded a TIF receivable on its Consolidated Balance Sheet of approximately $13,499,000,$14,188,000, which represents $11,341,000$11,353,000 of principal and $2,159,000$2,835,000 of interest. The TIF receivable requires significant management estimates and judgement pertaining to whether an allowance for doubtful accounts is necessary. The TIF receivable was generated in connection with the Contract for Private Redevelopment, in which the City of Shakopee has agreed that a portion of the future tax increment revenue generated from the developed property around the Racetrack will be paid to the Company to reimburse it for expenses in constructing public infrastructure improvements.

 

The Company typically performs an annual collectability analysis of the TIF receivable in the fourth quarter of each year, or more frequently if indicators of potential uncollectability exist. The Company utilizes the assistance of a third party to assist with the projected tax increments. The quantitative analysis includes assumptions based on the market values of the completed development projects within Canterbury Commons, which derives the future projected tax increment revenue. The Company uses the analysis to determine if the future tax increment revenue will exceed the Company's development costs on infrastructure improvements. As a result of our analysis for the year ended December 31, 2022,2023, management believes the TIF receivable will be fully collectible and no allowance related to this receivable is necessary. There were no indicators of potential uncollectability infor the quarterthree months ended March 31, 20232024

Cooperative Marketing Agreement:

On June 4, 2012, the Company entered into a Cooperative Marketing Agreement (the "CMA") with the SMSC. The primary purpose of the CMA was 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 was achieved through “Purse Enhancement Payments to Horsemen” paid directly to the MHBPA. These payments had 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.

As noted above and affirmed in the Fifth Amendment, SMSC paid the required annual purse enhancement of $7,380,000 and annual marketing payment of $1,620,000 for 2022. 

The amounts earned from the marketing payments were recorded as a component of other revenue and the related expenses were recorded as a component of advertising and marketing expense and depreciation in the Company’s condensed consolidated statements of operations. For the three months ended March 31, 2022, the Company recorded $112,000 in other revenue, incurred $65,000 in advertising and marketing expense, and incurred $47,000 in depreciation related to the SMSC marketing funds. The excess of amounts received over revenue is reflected as deferred revenue on the Company’s consolidated balance sheets .

Under the CMA, the Company agreed for the term of the CMA 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.

The CMA expired by its terms on December 31, 2022.

24

 

Redevelopment Agreement:

 

As mentioned above in Note 87 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.

 

On January 25, 2022, the Company received the fully executed First Amendment to the Contract for Private Redevelopment among the Company, the City of Shakopee, and the Shakopee EDA, which is effective as of September 7, 2021. Under the First Amendment and as part of the authorized changes regarding the responsibilities of the Company and the City, improvements on Unbridled Avenue will be primarily constructed by the City of Shakopee. As a result, the total estimated cost of TIF eligible improvements to be borne by the Company was reduced by $5,744,000 to an amount not to exceed $17,592,881. 

 

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 that are typically preceded by words such as “believes,” “expects,” “anticipates,” “intends” or similar expressions. For 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 these forward-looking statements are subject to risks and uncertainties that could affect our actual results and cause actual results to differ materially from those indicated in the forward-looking statements. These risks and uncertainties include, but are not limited to:

 

 

We may not be successful at implementing our growth strategy.

Our business is sensitive to reductions in discretionary consumer spending as a result of downturns in the economy and other factors outside of our control.

 

 

Because purse enhancement payments and marketing payments under our CMA with SMSC will not continue after December 31, 2022, we are likely to experience decreased

We have experienced a decrease in revenue and profitability from live racing.

 

 

We may not be able to attract a sufficient number of horses and trainers to achieve above average field sizes.

 

 

We face significant competition, both directly from other racing and gaming operations and indirectly from other forms of entertainment and leisure time activities, which could have a material adverse effect on our operations.

 

 

Nationally, the popularity of horse racing has declineddeclined.

 

 

A lack of confidence in the integrity of our core businesses could affect our ability to retain our customers and engage with new customers.

 

 

Horse racing is an inherently dangerous sport and our racetrack is subject to personal injury litigation.

 

 

Our business depends on using totalizator services.

Inclement weather and other conditions may affect our ability to conduct live racing.

 

2519

 

 

 

Our business and operations have been, and may in the future, be adversely affected by epidemics, pandemics, outbreaks of disease,

Inclement weather and other adverse public health developments, including COVID-19.conditions may affect our ability to conduct live racing.

 

 

We are subject to changes in the laws that govern our business, including the possibility of an increase in gaming taxes, which would increase our costs, and changes in other laws may adversely affect our ability to compete.

 

 

We are subject to extensive regulation from gaming authorities that could adversely affect us.

 

 

We rely on the efforts of our partner Doran for the development and profitable operation of our Triple Crown Residences at Canterbury Park joint venture.

 

 

We rely on the efforts of our partner Greystone Construction for a new development project.

 

 

We may not be successful in executing our real estate development strategy.

 

 

We are obligated to make improvements in the TIF district and will be reimbursed only to the extent of future tax revenue.

 

 

We face competition from other real estate developers.

We may be adversely affected by the effects of inflation

An increase in the minimum wage mandated under Federal or Minnesota law could have a material adverse effect on our operations and financial results.

 

 

We

Our success may be adversely affected by the effects of inflationif we are not able to attract, develop and retain qualified personnel.

 

 

The payment and amount of future dividends is subject to Board of Director discretion and to various risks and uncertainties.

 

 

Our information technology and other systems are subject to cyber security risk including misappropriation of customer information or other breaches of information security.

 

 

We process, store, and use personal information and other data, which subjects us to governmental regulation and other legal obligations related to privacy, and our actual or perceived failure to comply with such obligations could harm our business.

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

 

ITEM 3:    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not Applicable.

 ​

ITEM 4:    CONTROLS AND PROCEDURES

 

 

(a)

Evaluation of Disclosure Controls and Procedures:

 

The Company’s President and Chief Executive Officer, Randall D. Sampson and Chief Financial Officer, Randy J. Dehmer, 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.

 

2620

 

 

 

(b)

Changes in Internal Control over Financial Reporting:

 

There have been no significant 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 March 31, 20232024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 ​

PART II

OTHER INFORMATION

 

Item 1.       Legal Proceedings

 

Not Applicable.

 ​

Item 1A.    Risk Factors

 ​

The most significant risk factors applicable to the Company are described in Part I, Item 1A "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2021.2023. There have been no material changes from the risk factors previously disclosed.

 ​

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

 

In the three months ending March 31, 2023,2024, the Company repurchased shares of stock in connection with payment of taxes upon issuance of deferred stock awards issued to employees as follows:

 

Period

 

Total Number of Shares Purchased

  

Average Price Paid Per Share

 

January 1-31, 2023

  

-

  

$

-

 

February 1-28, 2023

  

3,931

  

$

25.62

 

March 1-31, 2023

  

2,490

  

$

26.50

 

Total

  

6,421

  

$

25.96

 

Period

 

Total Number of Shares Purchased

  

Average Price Paid Per Share

 

January 1-31, 2024

  -  $- 

February 1-29, 2024

  3,555  $21.97 

March 1-31, 2024

  1,430  $21.50 

Total

  4,985  $21.84 

 

Item 3.      Defaults upon Senior Securities

 

Not Applicable.

 ​

Item 4.      Mine Safety Disclosures

 

Not Applicable.

 ​

Item 5.      Other Information

 ​

Not Applicable.During the three months ended March 31, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

 

2721

 

 

Item 6.      Exhibits

 ​

31.1

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

31.2

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

32

Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

99.1

Press Release dated May 11, 20239, 2024 announcing 20232024 First Quarter Results.

101

The following financial information from Canterbury Park Holding Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023,2024, formatted in Inline eXtensible Business Reporting Language XBRL: (i) Condensed Consolidated Balance Sheets as of March 31, 20232024 and December 31, 2022,2023, (ii) Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 20232024 and March 31, 2022,2023, (iii) Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 20232024 and March 31, 2022,2023, (iv) Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 20232024 and March 31, 2022,2023, and (v) Notes to Financial Statements.

  
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 ​

 

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 12, 202310, 2024

/s/ Randall D. Sampson

​Randall D. Sampson 

President and Chief Executive Officer (principal executive officer)

  

Dated: May 12, 202310, 2024

/s/ Randy J. Dehmer

 Randy J. Dehmer
 ​Chief Financial Officer (principal financial officer, principal accounting officer)

   ​

2822