# Canterbury Park Holding Corp: Form 10-Q for the period ended Mar 31, 2021

- Company: [Canterbury Park Holding Corp](/companies/cphc.md) (CIK 1672909)
- Form: 10-Q
- Filed: 2021-05-11
- Accepted by EDGAR: May 11, 2021, 16:05 ET
- Period: 2021-03-31
- Accession: 0001437749-21-011628
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1672909/000143774921011628/cphc20210331_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1672909/000143774921011628/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2021-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2021-01-01 to 2021-03-31 | $9.2m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Operating income | 3 months, 2021-01-01 to 2021-03-31 | $1.3m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2021-01-01 to 2021-03-31 | $252.2k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2021-01-01 to 2021-03-31 | $551.5k | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2021-01-01 to 2021-03-31 | $0.12 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2021-01-01 to 2021-03-31 | $0.12 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2021-01-01 to 2021-03-31 | 4,754,504 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2021-01-01 to 2021-03-31 | $1.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2021-01-01 to 2021-03-31 | $129.3k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2021-01-01 to 2021-03-31 | $494 | us-gaap:PaymentsOfDividends |
| Cash and equivalents | at 2021-03-31 | $2.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2021-03-31 | $10.9m | us-gaap:AssetsCurrent |
| Total assets | at 2021-03-31 | $69.3m | us-gaap:Assets |
| Current liabilities | at 2021-03-31 | $9.8m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2021-03-31 | $17.3m | us-gaap:Liabilities |
| Long-term debt | at 2021-03-31 | $0 | us-gaap:LongTermDebt |
| Shareholders' equity | at 2021-03-31 | $52.1m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 33,707 characters.

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

### Overview:

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

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

### COVID-19 Pandemic:

In January 2020, an outbreak of a respiratory illness caused by a new strain of coronavirus was identified. The disease has since spread rapidly across the world, causing the World Health Organization to declare the outbreak a pandemic (the “COVID-19 Pandemic”) on March 12, 2020. Since that time, governments and businesses have taken measures to limit the impact of the COVID-19 Pandemic, including the issuance of shelter-in-place orders, social distancing measures, travel bans and restrictions and business shutdowns.

On March 16, 2020, the Company announced that, based on the advice of Minnesota state and regulatory bodies, it was temporarily suspending all card casino, simulcast, and special events operations at Canterbury Park in response to concerns about the COVID-19 Pandemic. Canterbury Park determined this voluntary suspension of activities was in the best interest of the health and safety of its guests and team members and would provide the Company an opportunity to review and update operational best practices and strategies based on what was currently known about this public health situation and future developments. On June 10, 2020, the Company reopened and resumed simulcast, live racing, and food and beverage operations. The Company also resumed table games and poker operations in the Company’s Card Casino on June 15, 2020 and July 9, 2020, respectively. These reopenings were done in compliance with Minnesota state guidelines on capacity limitations.

On November 18, 2020, Minnesota state and regulatory bodies issued an executive order requiring closure of places of public accommodation as a measure to slow the spread of COVID-19. As a result, the Company temporarily suspended all card casino, simulcast, and food and beverage operations from November 21, 2020 through January 10, 2021.

In connection with reopening our pari-mutuel, food and beverage, and Card Casino operations, we are adhering to social distancing requirements, which include reduced seating at table games and poker and capacity limitations to follow Minnesota state guidelines. Additionally, there is uncertainty around the impact the COVID-19 Pandemic will have on operations in the months that follow reopening, including the impact to changes in attendance driven by concerns about COVID-19.

The disruptions arising from the COVID-19 Pandemic had a significant impact on the Company's financial condition and operations during the three months ended March 31, 2021 and 2020. The duration and intensity of this global health emergency and related disruptions is uncertain. Given the dynamic nature of these circumstances, the impact on the Company’s consolidated results of operations, cash flows and financial condition in 2021 will be material, but cannot be reasonably estimated at this time as it is unknown when the COVID-19 Pandemic will end, when or how quickly the current restrictions will be modified or cease to be necessary and the resulting impact on the Company’s business and the willingness of customers to spend on entertainment in venues such as ours.

We are mitigating negative impacts to our operating results by taking signification actions, as discussed below.

During the temporary closures and suspension of the Company’s operations described above, all Canterbury Park employees, except for a limited number of key personnel required for basic ongoing maintenance, security, and management needs, were placed on an unpaid furlough. The Company also implemented a salary reduction for all remaining non-furloughed employees based on a combination of the employee’s salary and the employee’s responsibilities during the temporary shutdown. The Company also implemented a salary reduction for the management team during the majority of 2020. Additionally, pandemic-related restrictions on our special events and group sales operations will impact our non-gaming business for at least the next several months. To address this near-term challenge, the Company made the very difficult decision to align staffing levels with the current level of our non-gaming business. These actions included leaving vacant positions unfilled, furloughing team members, pay reductions for senior leadership and some job eliminations.

On March 16, 2020, the Company announced that the Company’s Board of Directors had suspended the Company’s quarterly cash dividend until the Company’s business operations return to normal.

Other additional measures taken by the Company include postponing non-essential capital expenditures, reducing operating costs, and substantially reducing discretionary spending.

We expect these measures to partially mitigate the impacts of the COVID-19 Pandemic on our full year 2021 financial results. The Company has no long-term debt and a $10.0 million credit line that, when combined with the Company’s existing cash and any cash generated from operations, is anticipated to provide the Company with the necessary liquidity and financial flexibility to manage through this challenging operating environment. As the impact of the COVID-19 Pandemic on the economy and our operations evolves, we will continue to assess the impact on the Company and respond accordingly.

### Operations Review for the Three Months Ended March 31, 2021:

### Revenues:

Total net revenues for the three months ended March 31, 2021 were $9,226,000, a decrease of $1,723,000, or 15.7%, compared to total net revenues of $10,949,000 for the three months ended March 31, 2020. This decrease consists of decreases in pari-mutuel, Card Casino, food and beverage, and other revenues driven by the COVID-19 Pandemic. See below for a further discussion of our sources of revenues.

### Pari-Mutuel Revenue:

|  | Three Months Ended March 31, 2021 | 2020 |
| --- | ---: | ---: |
| Simulcast | $839,000 | $1,015,000 |
| Other Pari-Mutuel Revenue | 315,000 | 281,000 |
| **Total Pari-Mutuel Revenue** | $1,154,000 | $1,296,000 |

Total pari-mutuel revenue for the three months ended March 31, 2021 was $1,154,000, a decrease of $142,000, or 11%, from $1,296,000 for the three months ended March 31, 2020. Simulcast revenue decreased $176,000, or 17.3% in 2021 compared to 2020 primarily due to the COVID-19 Pandemic described above, including the fact that these operations were operating in a limited capacity in the first quarter of 2021. Other revenue increased $34,000, or 12.1% compared to 2020 primarily due to an increase in Advanced Deposit Wagering (ADW) revenue.

### Card Casino Revenue:

|  | Three Months Ended March 31, 2021 | 2020 |
| --- | ---: | ---: |
| Poker Games | $1,326,000 | $1,658,000 |
| Table Games | 4,903,000 | 5,076,000 |
| Total Collection Revenue | 6,229,000 | 6,734,000 |
| Other Poker Revenue | 314,000 | 484,000 |
| Other Table Games Revenue | 321,000 | 343,000 |
| Total Card Casino Revenue | $6,864,000 | $7,561,000 |

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

As indicated by the table above, total Card Casino revenue for the three months ended March 31, 2021 was $6,864,000, a decrease of $697,000, or 9.2%, from $7,561,000 for the three months ended March 31, 2020. The decrease is due to the COVID-19 Pandemic described above. When the Company reopened its Card Casino operations on January 11, 2021, this included reduced seating at tables and capacity limitations to follow Minnesota state guidelines.

### Food and Beverage Revenue:

Food and beverage revenue for the three months ended March 31, 2021 was $374,000, a decrease of $745,000, or 66.5%, from $1,119,000 for the three months ended March 31, 2020. The decrease is primarily due to decreased attendance and special events, primarily due to capacity limitations mandated across the Company’s operations as a result of the COVID-19 Pandemic described above.

### Other Revenue:

Other revenue for the three months ended March 31, 2021 was $833,000, a decrease of $140,000, or 14.4%, from $973,000 for the three months ended March 31, 2020. The decrease is primarily related to limited special event operations due to capacity limitations mandated across the Company’s operations as a result of the COVID-19 Pandemic described above. Offsetting this decrease is the receipt of $515,000 of COVID-19 relief grants that the Company recorded as other revenue in the 2021 first quarter.

### Operating Expenses:

Total operating expenses for the three months ended March 31, 2021 were $7,953,000, a decrease of $2,854,000, or 26.4%, compared to total operating expenses of $10,807,000 for the three months ended March 31, 2020. The decrease in operating expenses reflect reductions in all of the Company’s operating expense line items, primarily as a result of the Company’s limited operations and efforts to manage expenses in light of revenue declines due to the COVID-19 Pandemic. The following paragraphs provide further detail regarding certain operating expenses.

Purse expense for the three months ended March 31, 2021 was $976,000, a decrease of $127,000, or 11.5%, from $1,103,000 for the three months ended March 31, 2020. The decrease is due to a reduction in pari-mutuel and Card Casino revenues.

Salaries and benefits for the three months ended March 31, 2021 was $3,967,000, a decrease of $1,611,000, or 28.9%, from $5,578,000 for the three months ended March 31, 2020. The decrease is due to the COVID-19 Pandemic, which resulted in the majority of Company employees being placed on an unpaid furlough during the temporary suspension of operations through January 10, 2021. Labor costs have also significantly declined upon reopening in January due to the Company’s limited operations requiring significantly reduced number of personnel.

Cost of food and beverage sales for the three months ended March 31, 2021 was $206,000, a decrease of $359,000, or 63.5%, from $564,000 for the three months ended March 31, 2020. The decrease is due to lower food and beverage revenues due to decreased attendance and special events, primarily due to capacity limitations mandated across the Company’s operations as a result of the COVID-19 Pandemic.

Advertising and marketing for the three months ended March 31, 2021 was $56,000, a decrease of $128,000, or 69.3%, from $184,000 for the three months ended March 31, 2020. The decrease is due to a reduction in advertising and marketing spend due to capacity limitations mandated across the Company’s operations as a result of the COVID-19 Pandemic.

The Company recorded a provision for income taxes of $252,000 and $50,000 for the three months ended March 31, 2021 and 2020, respectively. We record our quarterly provision for income taxes based on our estimated annual effective tax rate for the year. The increase in our tax expense of $202,000 during the quarter ended March 31, 2021 over the quarter ended March 31, 2020 is primarily due to an increase in income before taxes from operations. The increase in the effective tax rate to 31.4% for the quarter ended March 31, 2021 from 16.4% for the quarter ended March 31, 2020 is primarily due to the discrete benefit realized from the estimated NOL carryback calculated in the 2020 tax provision, which resulted in a lower effective tax rate for the quarter ended March 31, 2020.

Net income for the three months ended March 31, 2021 and 2020 was $551,000 and $255,000, respectively.

### 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 (loss), a GAAP measure. We define EBITDA as earnings before interest, income tax (benefit) 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. For the three months ended March 31, 2021, Adjusted EBITDA excluded depreciation, amortization, and interest expense related to equity investments, as well as $515,000 of COVID-19 relief grants included in other revenue. 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 it is a widely used measure of performance and a basis for valuation of companies in our industry. Moreover, other companies that provide EBITDA information may calculate EBITDA differently than we do.

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, 2021 and 2020:

### Summary of EBITDA Data

|  | Three Months Ended March 31, 2021 | 2020 |
| --- | ---: | ---: |
| NET INCOME | $551,493 | $255,221 |
| Interest income, net | (169,310) | (163,690) |
| Income tax expense | 252,224 | 50,164 |
| Depreciation | 689,585 | 716,853 |
| EBITDA | 1,323,992 | 858,548 |
| Depreciation and amortization related to equity investments | 393,673 | — |
| Interest expense related to equity investments | 219,195 | — |
| Other revenue, COVID-19 relief grants | (515,000) | — |
| ADJUSTED EBITDA | $1,421,860 | $858,548 |

Adjusted EBITDA increased $563,000, or 65.6%, for the three months ended March 31, 2021 as compared to the same period in 2020. The increase is a result of increased labor efficiencies and overall reduction in operating expenses to help mitigate the effects of the COVID-19 Pandemic. For the three months ended March 31, 2021, Adjusted EBITDA as a percentage of net revenue, excluding $515,000 other revenue from COVID-19 relief grants, was 16.3%. This compares to Adjusted EBITDA as a percentage of net revenue calculated on a GAAP basis for the three months ended March 31, 2020 of 7.8%.

### Contingencies:

The Company entered into a Cooperative Marketing Agreement (the “CMA”) with the Shakopee Mdewakanton Sioux Community, which became effective on March 4, 2012, and was amended in the respective first quarters of 2015, 2016, 2017, 2018, and June 2020 and will expire December 31, 2022. The CMA contains specific covenants that, if breached, would trigger an obligation to repay a specified amount related to these covenants. At this time, management believes that the likelihood that the breach of a covenant would occur and that the Company would be required to pay the specified amount related to a covenant is remote.

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

### Liquidity and Capital Resources:

The Company has a general credit and security agreement with a financial institution, which provides a 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. As of March 31, 2021, the bank issued a $1,250,000 letter of credit on behalf of the Company and therefore, the Company has an available credit line up to $8,750,000. The line of credit is collateralized by all receivables, inventory, equipment, and general intangibles of the Company. The line of credit also includes collateral in the form of a Mortgage, Security Agreement, Fixture Financing Statement and Assignment of Leases and Rents. As of March 31, 2021, the outstanding balance on the line of credit was $0. As of March 31, 2021, 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, 2021 was $6,127,000 compared to $4,472,000 as of December 31, 2020. 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 liquidity and capital resource requirements for regular operations, as well as its planned development expenses during 2021. However, if the Company engages in any additional significant real estate development, 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

Net cash provided by operating activities for the three months ended March 31, 2021 was $1,844,000 primarily as a result of the following: The Company reported net income of $551,000, depreciation of $690,000, loss from equity investment of $638,000, and stock-based compensation and 401(k) match totaling $194,000. The Company also experienced an increase in accrued wages and payroll taxes of $996,000 for the three months ended March 31, 2021 due to the timing of our payroll dates as well as the fact the Company's operations were temporarily suspended as of December 31, 2020 resulting in a reduction in payroll costs. This was partially offset by a decrease in payables to horsemen of $1,035,000.

Net cash provided by operating activities for the three months ended March 31, 2020 was $351,000 primarily as a result of the following: The Company reported net income of $255,000, depreciation of $717,000, and stock-based compensation and 401(k) match totaling $219,000. The Company also experienced an increase in accounts payable of $961,000 for the three months ended March 31, 2020. This was partially offset by a decrease in accrued wages and payroll taxes of $1,400,000 and Card Casino accruals of $512,000.

#### Investing Activities

Net cash used in investing activities for the first three months of 2021 and 2020 was $205,000 and $871,000, respectively, primarily for additions to property, plant, and equipment and additions for TIF eligible improvements. This is partially offset by a decrease in related party receivables in the first quarter of 2021 of $77,000 and proceeds from sale of investments in the first quarter of 2020 of $104,000.

#### Financing Activities

Net cash provided by financing activities during the first three months of 2021 was $16,000, primarily due proceeds from the issuance of common stock, partially offset by payments for taxes of equity awards. Net cash used in financing activities during the first three months of 2020 was $326,000, relating primarily to cash dividends paid to shareholders.

In March 2020, the Company’s Board of Directors suspended the Company’s quarterly cash dividend, beginning with the cash dividend that would normally have been paid in April 2020.

### Critical Accounting Policies and Estimates:

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

Our significant accounting policies are included in Note 2 to our consolidated financial statements in our 2020 Annual Report on Form 10-K. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

*Property and Equipment* - We have significant capital invested in our property and equipment, which represents 47.6% of our total assets at March 31, 2021. We use our judgment in various ways including: determining whether an expenditure is considered a maintenance expense or a capital asset; determining the estimated useful lives of assets; and determining if or when an asset has been impaired or has been disposed. Management periodically reviews the carrying value of property and equipment for potential impairment by comparing the carrying value of these assets with their related expected undiscounted future net cash flows. If the sum of the related expected future net cash flows is less than the carrying value, management would determine how much of an impairment loss would be measured by the amount by which the carrying value of the asset exceeds the fair value of the asset. We have determined that no impairment of these assets exists at March 31, 2021.

*Stock-Based Compensation –* Accounting guidance requires measurement of services provided in exchange for a share-based payment based on the grant date fair market value. We use our judgment in determining the assumptions used to determine the fair value of equity instruments granted using a Black-Scholes model. The Company also has historically granted Long Term Incentive Awards under the Long Term Incentive Plan (the “LTI Plan”) under which Company executive officers and other senior executives have had the opportunity to receive a payout of shares of the Company’s common stock at the end of a three-year period. Management must make a number of assumptions to estimate future results to determine the compensation expense of the LTI Plan. As a result of the COVID-19 Pandemic, the Company has temporarily suspended its LTI Plan until there is more certainty about the Company’s future operations. Currently, awards are outstanding under the LTI Plan only for the three-year period ending December 31, 2021.

### Commitments and Contractual Obligations:

The Company entered into the CMA with the SMSC on June 4, 2012, that was amended in January 2015, 2016, 2017, March 2018, and June 2020 and expires December 31, 2022. See “Cooperative Marketing Agreement” below.

### Cooperative Marketing Agreement:

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

Because the Company conducted a more limited 2020 live race meet due to the COVID-19 Pandemic, the Company and SMSC entered into the Fifth Amendment Agreement (“Fifth Amendment”) to the CMA effective June 8, 2020. Under the Fifth Amendment, the SMSC agreed to provide up to $5,620,000 for the annual purse enhancement for the year 2021. The annual purse enhancement that the SMSC is obligated to pay under the CMA for 2021 and 2022 was not changed and remains at $7,380,000 per year.

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 is obligated to make an annual purse enhancement of $7,380,000 and annual marketing payment of $1,620,000 for 2022.

The amounts earned from the marketing payments are recorded as a component of other revenue and the related expenses are recorded as a component of advertising and marketing expense and depreciation in the Company’s condensed consolidated statements of operations. For the three months ended March 31, 2021, the Company recorded $47,000 in other revenue, incurred $23,000 in advertising and marketing expense, and incurred $24,000 in depreciation related to the SMSC marketing funds. For the three months ended March 31, 2020, the Company recorded $68,000 in other revenue, incurred $30,000 in advertising and marketing expense, and incurred $38,000 in depreciation related to the SMSC marketing funds.

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

### Redevelopment Agreement:

As mentioned above in note 8 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.

The City of Shakopee has authorized changes to the Redevelopment Agreement and the responsibilities of the Company, but the Company, the City of Shakopee and other parties have not formally entered into an agreement that memorializes these changes. The Company will provide updated disclosure when the parties enter into a new agreement. As part of the authorized changes regarding the responsibilities of the Company and the city of Shakopee, improvements on Unbridled Avenue will be primarily constructed by the City of Shakopee. As a result, should Canterbury enter into the agreement that memorializes these changes, the total estimated cost of TIF eligible improvements to be borne by the Company will be reduced by $7,670,000. These improvements were substantially complete as of the date of this filing.

### 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:

- any short-term or long-term effect that the COVID-19 Pandemic may have on us as an entertainment venue, including reluctance from customers to visit our Racetrack or Card Casino or social distancing measures that we may voluntarily take that would limit attendance at our facilities;
- the fact that due to the COVID-19 Pandemic, our non-real estate development operations were closed from March 16, 2020 through June 9, 2020 and from November 21, 2020 through January 10, 2021, when we resumed these operations on a more limited basis in light of restrictions imposed by Minnesota regulatory bodies;
- competition from other venues offering unbanked card games or other forms of wagering;
- competition from other sports and entertainment options;
- attracting a sufficient number of horses and trainers to achieve above average field sizes;
- decline in interest in wagering on horse races at the Racetrack, at other tracks, or on unbanked card games offered at the Card Casino;
- material fluctuations in attendance at the Racetrack;
- increases in the percentage of revenues allocated for purse fund payments;
- higher-than-expected expenses related to new marketing initiatives;
- the impact of wagering products and technologies introduced by competitors;
- inclement weather and other conditions that may affect our ability to conduct live racing;
- the fact that horse racing is an inherently dangerous sport and our racetrack is subject to personal injury litigation;
- any legal, judicial, legislative or regulatory action or event that would adversely affect our ten-year Cooperative Marketing Agreement with the Shakopee Mdewakanton Sioux Community, which enhances the purses for daily racing at Canterbury Park and supports cooperative marketing programs for the two organizations, benefiting the stability and quality of live horse racing;
- our ability to obtain, on acceptable terms, an extension to the ten-year Cooperative Marketing Agreement with the Shakopee Mdewakanton Sioux Community, which expires in 2022;
- legislative and regulatory decisions and changes, including decision or actions related to sports betting that would adversely affect our betting environment;
- the fact that under the Redevelopment Agreement with the City of Shakopee, the Company has agreed to undertake a number of specific public infrastructure improvements within the TIF District, and the funding that Canterbury Park will be paid as reimbursement under the TIF program for these improvements is not guaranteed, but will depend in part on future tax revenues generated from the developed property;
- the success of the Company’s Canterbury Commons real estate development, including our reliance upon our joint venture partners Doran Companies and Greystone Construction to construct, and profitably operate our development projects;
- greater-than-anticipated expenses or lower-than-anticipated return on the development of our underutilized land;
- the fact the public infrastructure improvements that we are making pursuant to the Redevelopment Agreement with the City of Shakopee together with improvements we are making to our parking facilities may disrupt traffic flow in a manner that discourages customers from visiting our facilities, thereby affecting our revenue and profitability;
- payments and amount of future dividends is subject to Board of Director discretion and to various risks and uncertainties;
- increases in compensation and employee benefit costs;
- the general health of the gaming sector; and
- other factors that are beyond our ability to control or predict.

## Controls and procedures

As filed, 871 characters.

(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.

(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, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

### PART II

### OTHER INFORMATION

## Risk factors

As filed, 194 characters.

There have been no changes to the Risk Factors listed in our Annual Report on Form 10-K for the year ended December 31, 2020, as updated by our subsequently filed Quarterly Reports on Form 10-Q.

Filed May 11, 2021.
Source: SEC EDGAR, the filing index for accession 0001437749-21-011628. Last ingested by Listed: Oct 24, 2026, 15:07 ET. No prices; not investment advice.