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 JUNE 30, 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

 ​

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 company	☒	Emerging growth company	☐

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

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

Yes ☐ No ☒

The Company had 5,007,921 shares of common stock, $.01 par value, outstanding as of August 8, 2024.

Canterbury Park Holding Corporation

INDEX

			Page
PART I.	FINANCIAL INFORMATION
	Item 1.	Financial Statements (unaudited)
		Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023	2
		Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2024 and 2023	3
		Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2024 and 2023	4
		Condensed Consolidated Statements of Cash Flows for the Three and Six Months Ended June 30, 2024 and 2023	5
		Notes to Condensed Consolidated Financial Statements	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	20
	Item 4.	Controls and Procedures	20
PART II.	OTHER INFORMATION
	Item 1.	Legal Proceedings	21
	Item 1A.	Risk Factors	21
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
	Item 3.	Defaults Upon Senior Securities	21
	Item 4.	Mine Safety Disclosures	21
	Item 5.	Other Information	21
	Item 6.	Exhibits	22
	Signatures		22

1

PART 1 – FINANCIAL INFORMATION

CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	(Unaudited)
	June 30,		December 31,
	2024		2023
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	18,768,132	$	21,936,210
Restricted cash		6,698,340		3,905,544
Short-term investments		5,000,000		5,000,000
Accounts receivable, net of allowance of $7,670 for both periods		1,278,840		484,092
Inventory		348,898		249,370
Prepaid expenses		654,304		645,422
Income taxes receivable and prepaid income taxes		3,491,364		4,083,364
Total Current Assets		36,239,878		36,304,002
LONG-TERM ASSETS
Other prepaid expenses		26,103		10,978
TIF receivable		14,720,899		13,972,875
Related party receivable		4,371,737		3,526,071
Operating lease right-of-use asset		42,986		53,026
Equity investment		6,185,617		6,612,712
Land held for development		1,229,475		1,229,475
Land, buildings, and equipment, net		48,591,363		42,969,529
Total Long-term Assets		75,168,180		68,374,666
TOTAL ASSETS	$	111,408,058	$	104,678,668
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	4,723,626	$	4,599,391
Casino accruals		2,364,518		2,667,499
Accrued wages and payroll taxes		1,893,011		1,662,927
Cash dividend payable		353,108		346,125
Accrued property taxes		743,861		741,215
Deferred revenue		934,779		274,898
Payable to horsepersons		3,650,596		763,383
Current portion of finance lease obligations		31,583		1,604
Current portion of operating lease obligations		26,255		25,352
Total Current Liabilities		14,721,337		11,082,394
LONG-TERM LIABILITIES
Deferred income taxes		10,300,015		10,300,015
Investee losses in excess of equity investment		3,076,641		1,464,218
Finance lease obligations, net of current portion		134,005		7,770
Operating lease obligations, net of current portion		16,731		27,674
Total Long-term Liabilities		13,527,392		11,799,677
TOTAL LIABILITIES		28,248,729		22,882,071
STOCKHOLDERS’ EQUITY
Common stock, $.01 par value, 10,000,000 shares authorized, 5,007,921 and 4,962,573 respectively, shares issued and outstanding		50,079		49,626
Additional paid-in capital		28,086,304		27,351,509
Retained earnings		55,022,946		54,395,462
Total Stockholders’ Equity		83,159,329		81,796,597
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	111,408,058	$	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 June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
OPERATING REVENUES:
Casino	$	9,845,371		$	10,383,578		$	19,901,399		$	20,097,933
Pari-mutuel		2,598,716			2,471,366			3,772,984			3,604,700
Food and beverage		2,100,231			2,027,652			3,827,380			3,497,483
Other		1,658,077			1,459,092			2,798,621			2,441,130
Total Net Revenues		16,202,395			16,341,688			30,300,384			29,641,246
OPERATING EXPENSES:
Purse expense		2,304,648			2,105,265			3,677,405			3,440,238
Minnesota Breeders’ Fund		301,017			303,854			517,401			514,759
Other pari-mutuel expenses		323,777			291,698			522,166			481,307
Salaries and benefits		6,838,335			6,802,273			12,990,175			12,677,078
Cost of food and beverage and other sales		857,607			820,844			1,494,711			1,405,896
Depreciation and amortization		889,073			741,632			1,740,059			1,476,893
Utilities		386,843			409,871			729,678			798,720
Advertising and marketing		403,758			631,476			546,216			929,983
Professional and contracted services		1,445,486			1,568,821			2,697,928			2,573,046
Other operating expenses		1,329,636			1,603,499			2,500,556			2,727,048
Total Operating Expenses		15,080,180			15,279,233			27,416,295			27,024,968
Gain on sale of land		-			6,489,976			-			6,489,976
INCOME FROM OPERATIONS		1,122,215			7,552,431			2,884,089			9,106,254
OTHER INCOME (LOSS)
(Loss) gain from equity investment		(1,174,499	)		(622,180	)		(2,026,746	)		1,236,332
Interest income, net		532,570			497,274			1,071,097			896,449
Net Other (Loss) Income		(641,929	)		(124,906	)		(955,649	)		2,132,781
INCOME BEFORE INCOME TAXES		480,286			7,427,525			1,928,440			11,239,035
INCOME TAX EXPENSE		(142,000	)		(2,135,000	)		(592,000	)		(3,176,000	)
NET INCOME	$	338,286		$	5,292,525		$	1,336,440		$	8,063,035
Basic earnings per share	$	0.07		$	1.08		$	0.27		$	1.64
Diluted earnings per share	$	0.07		$	1.07		$	0.27		$	1.64
Weighted average basic shares outstanding		4,984,953			4,913,396			4,975,889			4,903,360
Weighted average diluted shares		5,011,548			4,930,713			5,009,221			4,929,531
Cash dividends declared per share	$	0.07		$	0.07		$	0.14		$	0.14

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 June 30, 2024

	Number of		Common		Additional			Retained
	Shares		Stock		Paid-in Capital			Earnings			Total
Balance at March 31, 2024		4,982,770	$	49,828	$	27,588,885		$	55,037,768		$	82,676,481
Stock-based compensation		—		—		142,107			—			142,107
Dividend declared		—		—		—			(353,108	)		(353,108	)
401(k) stock match		10,384		104		226,683			—			226,787
Issuance of deferred stock awards		7,230		72		(72	)		—			—
Shares issued under Employee Stock Purchase Plan		7,537		75		128,702			—			128,777
Net income		—		—		—			338,286			338,286
Balance at June 30, 2024		5,007,921	$	50,079	$	28,086,304		$	55,022,946		$	83,159,329

For the six months ended June 30, 2023

	Number of		Common		Additional			Retained
	Shares		Stock		Paid-in Capital			Earnings			Total
Balance at December 31, 2023		4,962,573	$	49,626	$	27,351,509		$	54,395,462		$	81,796,597
Stock-based compensation		—		—		271,121			—			271,121
Dividend declared		—		—		—			(708,956	)		(708,956	)
401(K) stock match		20,336		203		444,035			—			444,238
Issuance of deferred stock awards		17,475		175		(109,062	)		—			(108,887	)
Shares issued under Employee Stock Purchase Plan		7,537		75		128,702			—			128,777
Net income		—		—		—			1,336,440			1,336,440
Balance at June 30, 2024		5,007,921	$	50,079	$	28,086,304		$	55,022,946		$	83,159,329

For the three months ended June 30, 2023

	Number of		Common		Additional			Retained
	Shares		Stock		Paid-in Capital			Earnings			Total
Balance at March 31, 2023		4,910,408	$	49,104	$	26,084,008		$	47,642,140		$	73,775,252
Stock-based compensation		—		—		136,356			—			136,356
Dividend declared		—		—		—			(347,923	)		(347,923	)
401(k) stock match		9,995		100		228,186			—			228,286
Issuance of deferred stock awards		8,568		85		(5,129	)		—			(5,044	)
Shares issued under Employee Stock Purchase Plan		4,873		49		94,584			—			94,633
Net income		—		—		—			5,292,525			5,292,525
Balance at June 30, 2023		4,933,844	$	49,338	$	26,538,005		$	52,586,742		$	79,174,085

For the six months ended June 30, 2023

	Number of		Common		Additional			Retained
	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
Stock-based compensation		—		—		265,833			—			265,833
Dividend distribution		—		—		—			(697,802	)		(697,802	)
401(K) stock match		17,799		178		434,914			—			435,092
Issuance of deferred stock awards		22,197		221		(171,970	)		—			(171,749	)
Shares issued under Employee Stock Purchase Plan		4,873		49		94,584			—			94,633
Net Income		—		—		—			8,063,035			8,063,035
Balance at June 30, 2023		4,933,844	$	49,338	$	26,538,005		$	52,586,742		$	79,174,085

See notes to condensed consolidated financial statements.

4

CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended June 30,
	2024			2023
Operating Activities:
Net income	$	1,336,440		$	8,063,035
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,740,059			1,476,893
Stock-based compensation expense		271,121			265,833
Stock-based employee match contribution		444,238			435,092
Gain on sale of land		—			(6,489,976	)
Deferred income taxes		—			727,000
Loss (gain) from equity investment		2,026,746			(1,236,332	)
Changes in operating assets and liabilities:
Accounts receivable		(794,748	)		(1,150,784	)
Employee retention credit		—			6,103,236
Increase in TIF receivable		(702,219	)		(336,530	)
Inventory, prepaid expenses and deposits		(123,535	)		(167,281	)
Income taxes receivable and prepaid income taxes		592,000			872,000
Operating lease right-of-use asset		10,040			9,712
Operating lease liabilities		(10,040	)		(9,712	)
Accounts payable		(1,256,481	)		(146,824	)
Deferred revenue		659,881			562,410
Casino accruals		(302,981	)		(443,421	)
Accrued wages and payroll taxes		230,084			(224,026	)
Accrued property taxes		2,646			(420,737	)
Payable to horsepersons		2,887,213			2,910,785
Net cash provided by operating activities		7,010,463			10,800,373
Investing Activities:
Additions to land, buildings, and equipment		(5,810,147	)		(4,591,936	)
Proceeds from sale of land		—			8,336,359
Additions for TIF eligible improvements		(45,805	)		—
Increase in related party receivable		(845,666	)		(198,342	)
Proceeds from sale of short-term investments		5,000,000			—
Purchase of short-term investments		(5,000,000	)		—
Cash dividends received from investments		12,772			—
Net cash (used in) provided by investing activities		(6,688,846	)		3,546,081
Financing Activities:
Proceeds from issuance of common stock		128,777			94,633
Cash dividend paid to shareholders		(701,973	)		(695,075	)
Payments for taxes related to net share settlement of equity awards		(108,887	)		(171,749	)
Principal payments on finance leases		(14,816	)		(14,044	)
Net cash used in financing activities		(696,899	)		(786,235	)
Net (decrease) increase in cash, cash equivalents, and restricted cash		(375,282	)		13,560,219
Cash, cash equivalents, and restricted cash at beginning of period		25,841,754			16,106,003
Cash, cash equivalents, and restricted cash at end of period	$	25,466,472		$	29,666,222

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	$	1,381,000	$	164,000
Dividend declared but not yet paid		353,000		344,000
Change in investee losses in excess of equity investments		1,612,000		(1,286,000	)
ROU assets obtained in exchange for lease obligations		171,000		77,550
Supplemental disclosure of cash flow information:
Income taxes paid, net of refunds	$	—	$	1,577,000
Interest paid		7,000		—

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 20 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, 2023, included in its Annual Report on Form 10-K (the “2023 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 June 30, 2024 and 2023 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 June 30, 2024 and 2023 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 the 2023 Form 10-K. There were no material changes in significant accounting policies during the three and six months ended June 30, 2024.

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. 

Accounts 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 is granted in the normal course of business without collateral. Accounts receivable are stated net of allowances for credit losses, 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 does not have accounts receivable with original maturities greater than one year. The allowance for credit losses and activity as of June 30, 2024 and December 31, 2023 was not material. 

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, $2,909,000 and $2,974,000 for the six months ended June 30, 2024 and 2023, 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.

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. Beginning in 2020, 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 executives in lieu of LTI Plan awards from 2020 through 2024. In February 2022, the Compensation Committee made determinations regarding the achievement of 2021 performance goals and payouts under the 2019-2021 LTI Plan, which completed the performance period and awards under the 2019-2021 LTI Plan, and the last outstanding awards under the LTI Plan. Accordingly, there are no awards outstanding under the LTI Plan.

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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. 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  June 30, 2024 to our non-employee directors consists only of the grants of deferred stock on June 6, 2024 of an aggregate 10,734 shares with a weighted average fair value per share of $22.35. There were no unvested restricted stock or stock options outstanding to any non-employee director at June 30, 2024.

Board of Directors deferred stock transactions during the six months ended June 30, 2024 are summarized as follows: 

				Weighted
				Average
	Deferred			Fair Value
	Stock			Per Share
Non-Vested Balance, December 31, 2023		7,818		$	23.01
Granted		10,734			22.35
Vested		(7,818	)		23.01
Forfeited		—			—
Non-Vested Balance, June 30, 2024		10,734		$	22.35

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 six months ended June 30, 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 six months ended June 30, 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.

Employee deferred stock transactions during the six months ended June 30, 2024 are summarized as follows: 

				Weighted
				Average
	Deferred			Fair Value
	Stock			Per Share
Non-Vested Balance, December 31, 2023		36,920		$	22.00
Granted		22,100			21.08
Vested		(15,230	)		19.15
Forfeited		—			—
Non-Vested Balance, June 30, 2024		43,790		$	22.52

There were no stock options outstanding to any employee or other person at June 30, 2024. Stock-based compensation expense related to deferred stock awards and restricted stock awards is included on the Condensed Consolidated Statements of Operations and totaled approximately $271,000 and $266,000 for the six months ended June 30, 2024 and 2023. At June 30, 2024, there was approximately $1,040,000 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 3.8 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 and six months ended June 30, 2024 and 2023:

	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net income (numerator) amounts used for basic and diluted per share computations:	$	338,286	$	5,292,525	$	1,336,440	$	8,063,035
Weighted average shares (denominator) of common stock outstanding:
Basic		4,984,953		4,913,396		4,975,889		4,903,360
Plus dilutive effect of deferred stock awards		26,594		17,317		33,331		26,171
Diluted		5,011,548		4,930,713		5,009,221		4,929,531
Net income per common share:
Basic	$	0.07	$	1.08	$	0.27	$	1.64
Diluted		0.07		1.07		0.27		1.64

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4.    GENERAL CREDIT AGREEMENT

The Company has a general credit and security agreement with a financial institution. 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. The line of credit was collateralized by all receivables, inventory, equipment, and general intangibles of the 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 to $5,000,000. In connection with the amendment, the financial institution terminated a mortgage to release certain Company real property as collateral and the parties entered into a negative pledge agreement under which the Company agreed not to create any liens or encumbrances on certain Company real property. The outstanding balance on the line of credit was $0 at both June 30, 2024 and December 31, 2023.

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 special event days to the horse racing segment for use of the facilities.

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

	Six Months Ended June 30, 2024
	Horse Racing			Casino		Food and Beverage		Development			Total
Net revenues from external customers	$	6,211		$	19,901	$	4,188	$	—		$	30,300
Intersegment revenues		177			—		633		—			810
Net interest income		558			—		—		513			1,071
Depreciation		1,508			150		82		—			1,740
Segment income (loss) before income taxes		(120	)		3,967		920		(1,625	)		3,142
Segment tax expense (benefit)		(409	)		1,218		282		(499	)		592

	June 30, 2024
Segment Assets	$	102,649	$	1,974	$	34,675	$	34,574	$	173,872

	Six Months Ended June 30, 2023
	Horse Racing			Casino		Food and Beverage		Development		Total
Net revenues from external customers	$	5,789		$	20,098	$	3,754	$	—	$	29,641
Intersegment revenues		158			—		568		—		726
Net interest income		451			—		—		445		896
Depreciation		1,313			75		89		—		1,477
Segment income (loss) before income taxes		(676	)		4,088		916		8,052		12,380
Segment tax expense (benefit)		(513	)		1,155		259		2,275		3,176

	December 31, 2023
Segment Assets	$	92,970	$	2,125	$	33,175	$	34,892	$	163,162

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

	Six Months Ended June 30,
	2024			2023
Revenues
Total net revenue for reportable segments	$	31,110		$	30,367
Elimination of intersegment revenues		(810	)		(726	)
Total consolidated net revenues	$	30,300		$	29,641

Income before income taxes
Total segment income (loss) before income taxes	$	3,142		$	12,380
Elimination of intersegment (income) loss before income taxes		(1,214	)		(1,141	)
Total consolidated income before income taxes	$	1,928		$	11,239

	June 30,			December 31,
	2024			2023
Assets
Total assets for reportable segments	$	173,872		$	163,162
Elimination of intercompany balances		(62,464	)		(58,483	)
Total consolidated assets	$	111,408		$	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. In addition, the Company agreed to allocate an additional $400,000 to be used as recruiting and participation incentives to attract thoroughbred trainers, owners, and stables for the 2024 live meet in an effort to generate additional pari-mutuel handle through improved field size. For the three and six months ended June 30, 2024, the Company has recognized expenses of $161,000 related to these incentives.

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 June 30, 2024 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. 

7.    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”).

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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 and six months ended June 30, 2024, the Company recorded a loss of $848,000 and $1,612,000, respectively, on equity method investment related to this joint venture. For the three and six months ended June 30, 2023, the Company recorded a loss of $596,000 and income of $1,286,000, respectively, on equity method investment related to this joint venture. The increased income for the first half of 2023 is due to a 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 $3,077,000 and $1,464,000 at June 30, 2024 and December 31, 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 June 30, 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”). The 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 joint venture and became a 27.4% equity member. Doran Canterbury II has completed developing Phase II of the project which includes an additional 300 apartment units. 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 and six months ended  June 30, 2024, the Company recorded a loss of $232,000 and $417,000 on equity method investment related to this joint venture. As of June 30, 2023, the proportionate share of Doran Canterbury II's earnings was immaterial as Doran Canterbury II was not placed into service until January 2024. Under the Operating 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 and six months ended June 30, 2024, the Company recorded a loss of $94,000 and income of $3,000, respectively, on equity method investments related to this joint venture. For the three and six months ended June 30, 2023, the Company recorded losses of $26,000 and $52,000, respectively, on equity method investments related to this joint venture. For the three and six months ended June 30, 2024, the Company also received dividend distributions of $13,000 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 six months ended June 30, 2024:

	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		(87,841	)		(764,406	)		(852,247	)
Q2 Equity investment loss		(326,482	)		(848,017	)		(1,174,499	)
Dividends received from investments		(12,772	)		—			(12,772	)
Net Equity Investment Balance at 6/30/24	$	6,185,617		$	(3,076,641	)	$	3,108,976

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.

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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 June 30, 2024, the Company recorded a TIF receivable of approximately $14,721,000, which represents $11,717,000 of principal and $3,004,000 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, 2023, the Company recorded a TIF receivable of approximately $13,973,000, which represented $11,307,000 of principal and $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.

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.

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 $10,714 for both the six months ended June 30, 2024 and 2023. 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 $227,886 and $249,793 for the six months ended June 30, 2024 and 2023, respectively.

Lease costs included in depreciation and amortization related to our finance leases were $10,666 and $11,945 for the six months ended June 30, 2024 and 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:

		June 30,		December 31,
	Balance Sheet Location	2024		2023
Assets
Finance	Land, buildings and equipment, net (1)	$	165,588	$	9,374
Operating	Operating lease right-of-use assets		42,986		53,026
Total Leased Assets		$	208,574	$	62,400

1 – Finance lease assets are net of accumulated amortization of $15,322 and $118,424 as of June 30, 2024 and December 31, 2023, respectively. 

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

	June 30,			December 31,
	2024			2023
Weighted average remaining lease term (in years):
Finance		4.5			4.9
Operating		0.7			0.8
Weighted average discount rate (%):
Finance		8.5	%		4.8	%
Operating		8.0	%		8.0	%

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The maturity of operating leases and finance leases as of June 30, 2024 are as follows:

Six Months Ended June 30, 2024	Operating leases			Finance leases
2024 remaining	$	16,071		$	22,223
2025		28,229			44,447
2026		—			44,447
2027		—			44,447
2028 and beyond		—			44,251
Total minimum lease obligations		44,300			199,815
Less: amounts representing interest		(1,314	)		(34,227	)
Present value of minimum lease payments		42,986			165,588
Less: current portion		(26,255	)		(31,583	)
Lease obligations, net of current portion	$	16,731		$	134,005

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 $3,667,000 and $2,957,000 as of June 30, 2024 and December 31, 2023, respectively. These member loans bear interest at the rate equal to the Prime Rate plus two percent per annum, and accrued interest totaled $697,000 and $522,000 as of June 30, 2024 and December 31, 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 $8,000 and $47,000 as of June 30, 2024 and December 31, 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 2024.

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

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand Canterbury Park Holding Corporation 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 20 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.

Operations Review for the Three and Six Months Ended June 30, 2024:

Revenues:

Total net revenues for the three months ended June 30, 2024 were $16,202,000, a decrease of $139,000, or 0.9%, compared to total net revenues of $16,342,000 for the three months ended June 30, 2023. Total net revenues for the six months ended June 30, 2024 were $30,300,000, an increase of $659,000, or 2.2%, compared to total net revenues of $29,641,000 for the six months ended June 30, 2023. See below for a further discussion of our sources of revenues.

Casino Revenue:

	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Poker Games Collection	$	1,934,000	$	1,842,000	$	3,810,000	$	3,821,000
Other Poker Revenue		740,000		743,000		1,451,000		1,513,000
Total Poker Revenue		2,674,000		2,585,000		5,261,000		5,334,000
Table Games Collection		6,320,000		7,150,000		13,216,000		13,531,000
Other Table Games Revenue		851,000		649,000		1,424,000		1,233,000
Total Table Games Revenue		7,171,000		7,799,000		14,640,000		14,764,000
Total Casino Revenue	$	9,845,000	$	10,384,000	$	19,901,000	$	20,098,000

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 $539,000, or 5.2%, and decreased $197,000, or 1.0%, for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023. The decreases can be attributed to higher end players spend through the first six months of 2023 compared to the same period in 2024, along with a decrease in consumer discretionary spending with our current inflationary environment.

Pari-Mutuel Revenue:

	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Simulcast	$	1,148,000	$	1,090,000	$	2,014,000	$	1,942,000
Live Racing		540,000		479,000		540,000		479,000
Guest Fees		537,000		451,000		537,000		451,000
Other revenue		374,000		451,000		682,000		733,000
Total Pari-Mutuel Revenue	$	2,599,000	$	2,471,000	$	3,773,000	$	3,605,000

Total pari-mutuel revenue increased $128,000, or 5.2%, and $168,000, or 4.7%, for the three and six months ended June 30, 2024 compared to the same periods in 2023. The increase in pari-mutuel revenues is primarily due to an increase in live race days year-over-year (17 race days in 2024 compared to 15 race days in 2023 for both the three and six months ended June 30) as well as increased out-of-state handle due to increased field sizes on a per race basis. 

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Food and Beverage Revenue:

Food and beverage revenue increased $73,000, or 3.6%, and increased $330,000, or 9.4%, for the three and six months ended June 30, 2024 compared to the same periods in 2023. The increase is primarily due to increased catering operations related to hosting large scale special events as well the additional race days year-over-year mentioned above. 

Other Revenue:

Other revenue increased $199,000, or 13.6%, and increased $357,000, or 14.6%, for the three and six months ended June 30, 2024 compared to the same periods in 2023. The increase is primarily due to space rental revenues related to catering as well as admission revenue increases related to the additional race days mentioned above.  

Operating Expenses:

Total operating expenses decreased $199,000, or 1.3%, and increased $391,000, or 1.4%, for the three and six months ended June 30, 2024 compared to the same periods in 2023. The following paragraphs provide further detail regarding certain operating expenses.

Purse expense increased $199,000, or 9.5%, and increased $237,000, or 6.9%, for the three and six months ended June 30, 2024 compared to the same periods in 2023. The increase is primarily due to the expenses incurred as part of our recruiting and participation incentives paid in 2024. See Note 6. for further details.

Salaries and benefits increased $36,000, or 0.5%, and increased $313,000, or 2.5%, for the three and six months ended June 30, 2024 compared to the same periods in 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 $147,000, or 19.9%, and increased $263,000, or 17.8%, for the three and six months ended June 30, 2024 compared to the same periods in 2023. The increase is primarily due to placing larger fixed assets into service towards the second half of 2023 as well as placing assets into service related to the first and second phases of our barn relocation and redevelopment plan in the second quarter of 2024.

Advertising and marketing costs decreased $228,000, or 36.1%, and decreased $384,000, or 41.3%, for the three and six months ended June 30, 2024 compared to the same periods in 2023. The decrease is primarily due to intentionally reducing overall spend in an effort to cut costs. 

Other operating expenses decreased $274,000, or 17.1%, and $226,000, or 8.3%, for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023. The decrease is primarily due to a settlement of a claim that occurred in the second quarter of 2023 as well as decreased track maintenance costs through the first six months of 2024.

Other Income (Loss), Net:

Other loss, net, for the three months ended June 30, 2024 was $642,000, a decrease of $517,000, compared to other loss, net, of $125,000 for the three months ended June 30, 2023. Other loss, net, for the six months ended June 30, 2024 was $956,000, a decrease of $3,088,000, compared to other income of $2,133,000 for the six months ended June 30, 2023. The decrease for the six months ended June 30, 2024 compared to the same period last year is primarily due to our share of insurance proceeds received on a claim by Doran Canterbury I during the six months ended June 30, 2023. This decrease was partially offset by increased interest income due to the Company transferring available cash into certificates of deposit and money market funds as well as an increases to the principal balance and interest rates related to our member loans to Doran Canterbury I and Doran Canterbury II.

Income Taxes:

The Company recorded a provision for income taxes of $142,000 and $2,135,000 for the three months ended June 30, 2024 and 2023, respectively. The Company recorded a provision for income taxes of $592,000 and $3,176,000 for the six months ended June 30, 2024 and 2023, respectively. We record our quarterly provision for income taxes based on our estimated annual effective tax rate for the year. The decrease in our tax expense for 2024 compared to 2023 is primarily due to a decrease in income before taxes from operations. Our effective tax rate was 29.6% and 30.7%  for three and six months ended June 30, 2024. Our effective tax rate was 28.7% and 28.3% for the three and six months ended June 30, 2023. The increase in the effective tax rate is primarily the result of unfavorable discrete items that occurred during the six months ended primarily related to additional non-deductible lobbying expenses.

Net Income:

The Company recorded net income of $338,000, or $0.07 per basic and diluted share and $1,336,000, or $0.27 per basic and diluted share for the three and six months ended June 30, 2024, respectively. The Company recorded net income of $5,293,000, or $1.08 per basic or $1.07 diluted share and $8,063,000, or $1.64 per basic and diluted share for the three and six months ended June 30, 2023, respectively.  

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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 and six months ended June 30, 2024, 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 and months ended June 30, 2023, Adjusted EBITDA also excluded gain on insurance proceeds received by the Company's equity investment and a gain on sale of land. 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 and 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.

The following table sets forth a reconciliation of net income, a GAAP financial measure, to EBITDA and to adjusted EBITDA (defined above) which are non-GAAP financial measures, for the three and six months ended June 30, 2024 and 2023:

Summary of EBITDA Data

	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
NET INCOME	$	338,286		$	5,292,525		$	1,336,440		$	8,063,035
Interest income, net		(532,570	)		(497,274	)		(1,071,097	)		(896,449	)
Income tax expense		142,000			2,135,000			592,000			3,176,000
Depreciation		889,073			741,632			1,740,059			1,476,893
EBITDA		836,789			7,671,883			2,597,402			11,819,479
Stock-based compensation		368,789			364,542			715,155			700,747
Gain on sale of land		—			(6,489,976	)		—			(6,489,976	)
Gain on insurance proceeds related to equity investments		—			—			—			(2,528,901	)
Depreciation and amortization related to equity investments		535,164			435,211			1,062,789			875,975
Interest expense related to equity investments		666,507			402,795			1,244,822			825,056
ADJUSTED EBITDA	$	2,407,249		$	2,384,455			5,620,168			5,202,380

Adjusted EBITDA increased $23,000, or 1.0%, and $418,000, or 8.0%, for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023. The increase in Adjusted EBITDA is primarily due to increased Pari-mutuel, Food and beverage, and Other revenues noted above. Furthermore, for the six months ended June 30, 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, which was not present in other periods. For the three and six months ended June 30, 2024, Adjusted EBITDA as a percentage of net revenue was 14.9% and 18.5%, respectively. For the three and six months ended June 30, 2023, Adjusted EBITDA as a percentage of net revenue was 14.6% and 17.6%, respectively.

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.

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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. 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. The line of credit was collateralized by all receivables, inventory, equipment, and general intangibles of the 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 to $5,000,000. In connection with the amendment, the financial institution terminated a mortgage to release certain Company real property as collateral and the parties entered into a negative pledge agreement under which the Company agreed not to create any liens or encumbrances on certain Company real property. As of June 30, 2024, 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 June 30, 2024. As of June 30, 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 June 30, 2024 was $25,466,000 compared to $25,842,000 as of December 31, 2023. 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. In August 2023, the Company received approval for a three-phase barn relocation and redevelopment plan totaling approximately $15 million over the course of two years. As of June 30, 2024, the Company has completed phases one and two of the project with phase three currently underway. Furthermore, if the Company engages in 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 six months ended June 30, 2024 was $7,010,000, primarily as a result of the following: the Company reported net income of $1,336,000, depreciation of $1,740,000, a loss from equity investment of $2,027,000, and stock-based compensation and 401(k) match totaling $715,000. Primarily due to the timing of our live racing season, the Company also experienced an increase in payable to horsepersons of $2,887,000, offset by an increase in accounts receivable of $795,000 and in TIF receivable of $702,000 for the six months ended June 30, 2024. 

Net cash provided by operating activities for the six months ended June 30, 2023 was $10,800,000, primarily as a result of the following: the Company reported net income of $8,063,000, depreciation of $1,477,000, deferred income taxes of $727,000, and stock-based compensation and 401(k) match totaling $701,000, offset by a gain from equity investment of $1,236,000 and a gain on land sale of $6,490,000. Primarily due to timing of larger development related transactions as well as the timing of our live racing season, the Company experienced an increase due to cash received related to an employee retention credit receivable of $6,103,000, a decrease to income taxes receivable and prepaid income taxes of $872,000, and an increase to payable to horsepersons of $2,911,000, offset by an increase in accounts receivable of $1,151,000 for the six months ended June 30, 2023. 

Investing Activities

Net cash used in investing activities for the six months ended June 30, 2024 was $6,689,000, primarily due to additions to land, buildings, and equipment of $5,810,000 and an increase in related party receivables of $846,000. 

Net cash provided by investing activities for the six months ended June 30, 2023 was $3,546,000, primarily due to proceeds received from the sale of land of $8,336,000, offset by additions to land, buildings, and equipment of $4,592,000. 

Financing Activities

Net cash used in financing activities for the six months ended June 30, 2024 was $697,000, 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 June 30, 2024.

Net cash used in financing activities for the six months ended June 30, 2023 was $786,000, 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 June 30, 2023.

Critical Accounting 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 June 30, 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 June 30, 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.

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

As of June 30, 2024, the Company recorded a TIF receivable on its Consolidated Balance Sheet of approximately $14,721,000, which represents $11,717,000 of principal and $3,004,000 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, 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 for the three months ended June 30, 2024. 

Redevelopment Agreement:

As mentioned above in Note 7 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.

● 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 declined.

● 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.

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● Inclement weather and other 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.

● Our success may be affected if 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.

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.

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(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 June 30, 2024 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, 2023. There have been no material changes from the risk factors previously disclosed.

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

Not Applicable:  

Item 3.      Defaults upon Senior Securities

Not Applicable.

Item 4.      Mine Safety Disclosures

Not Applicable.

Item 5.      Other Information

During the three months ended June 30, 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.

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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 August 9, 2024 announcing 2024 Second Quarter Results.
101	The following financial information from Canterbury Park Holding Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2024, formatted in Inline eXtensible Business Reporting Language XBRL: (i) Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023, (ii) Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2024 and June 30, 2023, (iii) Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2024 and June 30, 2023, (iv) Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and June 30, 2023, and (v) Notes to Financial Statements.
104	Cover 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: August 9, 2024	/s/ Randall D. Sampson
	​Randall D. Sampson
	President and Chief Executive Officer (principal executive officer)
Dated: August 9, 2024	/s/ Randy J. Dehmer
	Randy J. Dehmer
	​Chief Financial Officer (principal financial officer, principal accounting officer)

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