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

 The amounts received 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 consolidated statements of operations. For the year ended December 31, 2017, the Company recorded $1,399,000 in other revenue and incurred $1,173,000 in advertising and marketing expense and $226,000 in depreciation related to the SMSC marketing payment. For the year ended December 31, 2016, the Company recorded $1,096,000 in other revenue and incurred $870,000 in advertising and marketing expense and $226,000 in depreciation related to the SMSC marketing payment. The excess of amounts received over revenue is reflected as deferred revenue on the company’s consolidated balance sheets.

Under the CMA, the Company agreed for the term of the CMA that it would not promote or lobby the Minnesota legislature for expanded gambling authority and will support the SMSC’s lobbying efforts against expanding gambling authority.

The Company’s primary market is the seven-county Minneapolis-Saint Paul metropolitan area (Hennepin, Ramsey, Anoka, Washington, Dakota, Scott, and Carver) plus the two counties to the south of the Racetrack and Card Casino (Le Sueur and Rice). The City of Shakopee, located in the southwestern portion of the metropolitan area, is one of the fastest growing communities in the region, and Scott County is one of the fastest growing counties in the country.

To support its pari-mutuel horse racing, Card Casino, and catering and events businesses, the Company conducts year-round marketing efforts to maintain the loyalty of existing customers and attract new players to the property. The Company uses radio, television, digital advertising, social media, print advertising, and direct marketing to communicate to its audiences. In addition to its regular advertising and communication program, the Company conducts numerous special promotions, handicapping contests, and poker tournaments to attract incremental visits. The Company also uses a robust player rewards and database marketing program to enhance the loyalty of its guests.

The Company continues to focus on creating a premier guest experience as the core element of its marketing efforts. This includes delivering great customer service, developing new food and beverage offerings, creating fan education programs, and providing entertainment opportunities that go beyond the traditional pari-mutuel wagering and card playing activities.

Talent Management 

At December 31, 2017,2020, the Company had 267227 full-time employeesteam members and 596383 part-time employees.team members. The Company adds approximately 350 employeesteam members on a seasonal basis for live racing operations from early May until early September. During 2020, in an effort to reduce current and future costs in response to the negative impact of the COVID-19 pandemic on our business, we made difficult decisions that impacted our team members. During the temporary closures and suspension of the Company’s operations described above, all Canterbury Park team members, 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 team members based on a combination of the team member’s salary and the team member’s responsibilities during the temporary shutdown. Upon the Company’s reopening of operations, the Company implemented a salary reduction for the management believes its employee relations are good.team, which was in effect through 2020. Additionally, pandemic-related restrictions on our special events and group sales operations impacted our non-gaming business for the remainder of 2020 and continues to impact us today. To address this 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.

Our success depends in large part upon our ability to attract, retain, train, lead, and motivate skilled team members. To facilitate the recruitment, development, and retention of our valuable team members, we strive to make Canterbury Park a diverse, inclusive, and safe workplace, with opportunities for our team to grow and develop.  The Company offers training and development opportunities for team members to enhance leadership and communication skills. The Company also has created various internal committees, including a specific rewards and recognition committee to support our team member recognition programs.  To help retain talent, we measure team member engagement, including conducting regular engagement surveys to all team members. The most recent survey was conducted in 2019 and reflected an engagement level among our team members that exceeded the average engagement levels of benchmarked companies. 

Health and Safety

During 2020, we focused significant attention on the effective handling of the COVID-19 Pandemic. We implemented new protocols and processes designed to limit the spread of the virus. These include the use of hand sanitizers and face masks, new cleaning and disinfecting regimes, the implementation of social distancing measures in restaurants, bars, gaming, recreation, and back of the house areas, and a detailed contact tracing protocol. We have made physical changes to our properties, such as the installation of thermal screening points at entrances and changes to our heating, ventilation and air conditioning (“HVAC”) systems. We have also enabled employees to work from home where possible. 

Our employee guidelines and policies are founded on our cornerstones of safety, service, courtesy, cleanliness, and integrity. We are committed to equal opportunity employment and prohibit harassment or discrimination of any kind. We have adopted an open door policy to encourage an honest employer-associate relationship which includes a confidential hotline available to all employees. 

Executive Officers

The executive officers of the Company, their ages and their positions with the Company at March 15, 20182021 are as follows:

Randall D. Sampson has been President and Chief Executive Officer since the formation of the Company in March 1994. Mr. Sampson was also named Executive Chairman of the Board on October 3, 2019. He has been active in horse industry associations, currently serving as Director of the Thoroughbred Racetracks of America and is a past Vice President of the Thoroughbred Racetracks of America and past President of the Minnesota Thoroughbred Association. Mr. Sampson also currently serves as a director of Communications Systems, Inc. (NASDAQ:JCS), a manufacturer of telecommunications and data communications products based in Minnetonka, Minnesota. Mr. Sampson is the son of Curtis A. Sampson, who is the Company’s non-executive Chairman of the Board and the beneficial owner of approximately 20% of the Company’s common stock.

DanielRandy J. Kennedy has been Senior Vice President of Operations at Canterbury since June 2017. Mr. Kennedy’s gaming experience began in 1993 in the finance department at Mystic Lake Casino. He has also been employed by Grand Casino Hinckley, Prairie Band Casino and Resort, and Penn National – Hollywood Casinos in Baton Rouge, La. and Charles Town, W.Va. Most recently, Mr. Kennedy served as assistant general manager at Penn National – Hollywood Casino Jamul in San Diego.

Robert M. WolfDehmer was hired as Vice President of Finance in March 2017 and was named Senior Vice President of Finance and Chief Financial Officer in September 2017.May 2019. Mr. Dehmer worked for the Company from December 2007 to August 2013, most recently serving as controller from March 2012 to August 2013. Prior to joining Canterbury,rejoining the Company, he served as CFOthe financial controller for twoClearfield, Inc., a public companiescompany located in the Twin Cities, Rimage Corporation and MGC Diagnostics Corporation. Cities.

Item 1A. RISK FACTORS

In addition to risks and uncertainties in the ordinary course of business that are common to all businesses, important factors that are specific to our industry and us could materially affect our future performance and results. Management believes the factors described below are the most significant risks that could have a material impact on our business.

Risk Factors Related to Horse Racing and Gaming Generally

We expect the impact of the disruptions resulting from the impact of the COVID-19 Pandemic, including the extent of their adverse impact on our financial and operational results, will be dictated by the length of time such disruptions continue. Although our property is currently open as of this report, we cannot predict whether future closures would be appropriate or could be mandated. Even once capacity restrictions are modified or cease to be necessary, demand for gaming may remain weak for a significant length of time and we cannot predict if or when the gaming and non-gaming activities at our property will return to pre-outbreak levels of volume or pricing. In particular, future demand for gaming may be negatively impacted by the adverse changes in the perceived or actual economic climate, including higher unemployment rates, declines in income levels, and loss of personal wealth or reduced spending resulting from the impact of the COVID-19 Pandemic. 

Our business would also be impacted should the disruptions from the COVID-19 Pandemic lead to prolonged changes in consumer behavior. There are certain limitations on our ability to mitigate the adverse financial impact of these matters, such as the fixed costs at our properties. The COVID-19 Pandemic also makes it more challenging for management to estimate the future performance of our business, particularly over the near to medium term. Any of these events may continue to disrupt our ability to staff our business adequately, could continue to generally disrupt our operations or development projects and, if the global response to contain the COVID-19 Pandemic escalates or is unsuccessful, would have a material adverse effect on our business, financial condition, results of operations and cash flows.

The COVID-19 Pandemic has had, and will continue to have, a material adverse effect on our results of operations and cash flows. Given the uncertainty around the extent and timing of the potential future spread or mitigation of the COVID-19 Pandemic and around the imposition or relaxation of protective measures, we cannot reasonably estimate the impact on our future results of operations, cash flows or financial condition.

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.

We face intense competition in our market, particularly competition from Running Aces in Columbus Township, Anoka County, Minnesota, a racetrack and card room that is located approximately 50 miles from Canterbury Park. 

We also compete with Native American owned casinos. These Native American facilities have the advantage of being exempt from some state and federal taxes and state regulation of indoor smoking, and have the ability to offer a wider variety of gaming products. 

Internet-based interactive gaming and wagering, both legal and illegal, is growing rapidly and we anticipate competition in this area will become more intense as new Internet-based ventures enter our industry and as state and federal regulations on Internet-based activities are clarified. Additionally, we compete with other forms of gambling, including betting on professional sports, spectator sports, other forms of entertainment, and other racetracks throughout the country. 

We expect competition for our existing and future operations to increase from Running Aces, existing tribal casinos, and racetracks that are able to subsidize their purses with alternative gaming revenues. Competition for simulcasting customers will be intense given the 2016 legalization of online internet wagering on horse racing in Minnesota, through ADW providers. In addition, several of our tribal gaming competitors in Minnesota have substantially larger marketing and financial resources than we do. 

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

We believe that patrons prefer to wager on races with a number of horses in the race (the “field”) at or above the national average. A failure to offer races with adequate fields results in less wagering on our horse races. Our ability to attract adequate fields depends on several factors. First, it depends on our ability to offer and fund competitive purses. Second, it depends on the overall horse population available for racing. Various factors have led to declines in the horse population in some areas of the country, including competition from racetracks in other areas, increased costs, and changing economic returns for owners and breeders, and the spread of various debilitating and contagious equine diseases. If our racetrack is faced with a sustained outbreak of a contagious equine disease, it could have a material impact on our profitability.

Finally, if we are unable to attract horse owners to stable and race their horses at our racetrack by offering a competitive environment, including high-quality facilities, a well-maintained racetrack, comfortable conditions for backstretch personnel involved in the care and training of horses stabled at our racetrack, and a competitive purse structure, our profitability could also decrease. We also face increased competition for horses and trainers from racetracks that are licensed to operate slot machines and other electronic gaming machines that provide these racetracks an advantage in generating new additional revenues for race purses and capital improvements. While our ability to offer adequate fields to patrons during our live meets has been substantially strengthened by the purse enhancement payments that are scheduled to be made under the CMA through 2022, our inability to attract adequate fields, for whatever reason, could have a material adverse impact on our business, financial condition, and results of operations.

Nationally, the popularity of horse racing has declined.

There has been a general decline in the number of people wagering on live horse races at North American racetracks, either in person or via simulcasting, due to a number of factors, including increased competition from other wagering and entertainment alternatives as discussed above. According to industry sources, pari-mutuel handle declined 27% from 2007 to 2011 and has been relatively stable since 2011, experiencing less than a 1% decline between 2011 and 2019. Pari-mutuel handle declined more than 1% in 2020 due the COVID-19 Pandemic, and we expect the effects of the pandemic to impact 2021 results as well. Declining interest in horse racing has had a negative impact on revenues and profitability in our racing business. However, as a result of the purse enhancement payments and marketing payments we receive under the CMA, we still expect to outperform the industry as it relates to field size, live handle, and simulcast handle in 2021 and beyond. Regardless, we recognize that a general decline in interest in horse racing and pari-mutuel wagering could have a material adverse impact on our business, financial condition and results of operations in future years.

Our horse racing and gaming businesses are sensitive to economic conditions that may affect consumer confidence, consumer discretionary spending, or our access to credit in a manner that adversely affects our operations.

Economic trends can affect consumer confidence and consumers’ discretionary spending:

spending. Lower consumer confidence or reductions in consumer discretionary spending could result in fewer patrons spending money at our racetrack. Our access to and cost of credit may be affected to the extent global and U.S. credit markets are affected by downward economic trends. Our ability to respond to periods of economic contraction may be limited, as some of our costs remain fixed or even increase when revenue declines.

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

The integrity of horseracing,horse racing, casino gaming, and pari-mutuel wagering industries must be perceived as fair to patrons and the public at large. To prevent cheating or erroneous payouts, oversight processes must be in place to ensure that these activities cannot be manipulated. A loss of confidence in the fairness of our industries could have a material adverse impact on our business.

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

Although we carry jockey accident insurance at our racetrack to cover personal jockey injuries that may occur during races or daily workouts, there are certain exclusions to our insurance coverage, and we are still subject to litigation from injured participants. We renew our insurance policies on an annual basis. The cost of coverage may become so high that we may need to further reduce our policy limits or agree to certain exclusions from our coverage. Our results may be affected by the outcome of litigation, as this litigation could be costly and time consuming and could divert our management and key personnel from our business operations.

Our business depends on using totalizator services.

Our customers use information provided by a third party vendor that accumulates wagers, records sales, calculates payoffs, and displays wagering data in a secure manner to patrons who wager on our horse races. Any failure to keep this technology current could limit our ability to serve patrons effectively or develop new forms of wagering or affect the security of the wagering process, thus affecting patron confidence in our product. A perceived lack of integrity in the wagering systems could result in a decline in bettor confidence and could lead to a decline in the amount wagered on horse racing. In addition, a totalizator system failure could cause a considerable loss of revenue if betting machines are unavailable for a significant period of time or during an event with high betting volume.

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

Since horse racing is conducted outdoors, unfavorable weather conditions, including extremely high and low temperatures, high winds, storms, tornadoes and hurricanes, could cause events to be postponed or canceled or attendance to be lower, resulting in reduced wagering. Our operations, as well as the racetracks from which we receive simulcast signals, are subject to reduced patronage, disruptions, or complete cessation of operations due to weather conditions, natural disasters, and other casualties. If a business interruption were to occur due to inclement weather and continue for a significant length of time at our racetrack, it could have a material adverse impact on our business, financial condition, and results of operations. The Company maintains insurance for incremental weather conditions that would help mitigate the financial impact on our business.

Risks Related to Our Relationship with SMSC

As discussed above, 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 through 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. Under the CMA, as amended, the SMSC paid the horsemen $7.3 million for purse enhancements for each of the years ended December 31, 2019 and 2018, with a lower amount in 2020 due to the more limited racing season and fewer races at Canterbury Park. 

If the Company breaches its obligations under the terms of the agreement, the Company is obligated to repay (1) all amounts paid by SMSC pursuant to the agreement; (2) pay to the SMSC an amount equal to all Horse Association Payments paid by SMSC; and (3) pay to SMSC any additional amounts for any other damages SMSC incurs. The Company has not violated and does not intend to violate its obligations with respect to the agreement. The Company believes the likelihood of a breach of obligations is remote.

Purse Enhancement Payments and Marketing Payments under our CMA with SMSC may not continue after 2022.

The term of the CMA with SMSC ends December 31, 2022, and there is no certainty the CMA can be extended or renegotiated on terms that are mutually acceptable to SMSC, the horsepersons’ associations, and the Company. In particular, there can be no assurance that, after December 31, 2022, SMSC’s purse enhancement payments to the horsepersons’ associations and marketing payments to the Company will continue at the levels currently being paid, if at all. If, by December 31, 2022, the CMA is not extended or renegotiated on economic terms substantially similar to those currently in effect or due to the parties being unable to mutually agree on other terms, the Company’s future revenue from live racing and its profitability could be materially adversely affected.

Risks Related to Government Regulation of our Horse Racing and Gaming Generally

We face significant competition, both directly fromare 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 gaminglaws may adversely affect our ability to compete.

Our operations and indirectly from other formsoversight by the MRC are ultimately subject to the laws of entertainmentMinnesota including, but not limited to, the Minnesota Racing Act, and leisurethere exists the risk that these laws may be amended in ways adverse to our operations. In particular, we are required to pay special racing-related and Card-Casino-related taxes and fees in addition to normal federal, state, and local income taxes. These taxes and fees are subject to increase at any time. From time activities, whichto time, state and local legislators and officials have proposed changes in tax laws, or in the administration of laws affecting our industry, such as the allocation of each wagering pool to winning bettors, the Racetrack, purses, and the MBF. In addition, poor economic conditions could intensify the efforts of state and local governments to raise revenues through increases in gaming taxes. It is not possible to predict with certainty the likelihood of changes in tax laws or in the administration of these laws. These changes, if adopted, could have a material adverse effect on our operations.

We face intense competition in our market, particularly competition from NMHI, which offers unbanked card games similar to those offered by the Company. We also compete with Native American owned casinos. These facilities have the advantage of being exempt from some state and federal taxes and state regulation of indoor smoking, and have the ability to offer a wider variety of gaming products. Internet-based interactive gaming and wagering, both legal and illegal, is growing rapidly and we anticipate competition in this area will become more intense as new Internet-based ventures enter our industry and as state and federal regulations on Internet-based activities are clarified. Additionally, we compete with other forms of gambling, spectator sports, other forms of entertainment, and other racetracks throughout the country as we discussed under “Competition” above.

We expect competition for our existing and future operations to increase from NMHI, existing tribal casinos, and racetracks that are able to subsidize their purses with alternative gaming revenues. Competition for simulcasting customers will be intense given the recent legalization of online internet wagering on horse racing in Minnesota, through ADW providers. In addition, several of our tribal gaming competitors in Minnesota have substantially larger marketing and financial resources than we do. We are unable to predict with any certainty the effects of existing and future competition on our operating results.

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

We are subject to significant regulation by the MRC under the Racing Act and the rules adopted by the MRC. The MRC has the authority to increase the Class A and Class B license fees. In addition, the Minnesota Racing Act requires that we reimburse the MRC for its actual costs of regulating the Card Casino, including personnel costs. Increases in these licensing and regulatory costs could adversely affect our results of operations.

Amendments to the Minnesota Racing Act or decisions by the MRC in regard to any one or more of the following matters could also adversely affect the Company’s operations: the granting of operating licenses to Canterbury Park and other racetracks after an application process and public hearings; the licensing of all track employees, jockeys, trainers, veterinarians, and other participants; regulating the transfer of ownership interests in licenses; allocating live race days and simulcast-only race days; approving race programs; regulating the conduct of races; setting specifications for the racing ovals, animal facilities, employee quarters, and public areas of racetracks; changes to the types of wagers on horse races; and approval of significant contractual agreements.

Risks Related to our Real Estate Development Efforts

We are subject to changes inrely on the laws that governefforts of our business, includingpartner Doran for the possibilitydevelopment and profitable operation of an increase in gaming taxes, which would increase our costs, and changes in other laws may adversely affect our ability to compete.Triple Crown Residences at Canterbury Park joint venture.

Our operationsOn April 2, 2018, Canterbury Development entered into an operating agreement with an affiliate of Doran Companies (“Doran”), a national commercial and oversight byresidential real estate developer, as the MRC are ultimately subjecttwo members of a Minnesota limited liability company named Doran Canterbury I, LLC (“Doran Canterbury I”) to construct an upscale apartment complex called the Triple Crown Residences. Construction of the 321-unit first phase began in late 2018 with initial occupancy on June 1, 2020. As of the end of December 2020, all 321 units were available for occupancy.

In August 2020, Doran exercised its option for Phase II of the project, which will include an additional 300 residential units, and Canterbury Development entered into a second joint venture agreement with Doran. Pursuant to this second agreement, in early August 2020, the Company transferred roughly 10 acres of land to the lawssecond joint venture with Doran. In addition to receiving 27.4% ownership in the Doran Phase II joint venture, the exchange resulted in the repayment of a $2.9 million note receivable which was on the Company’s balance sheet as a related party receivable as of June 30, 2020. Groundwork on the Doran Canterbury II site began in October 2020, paving the way for the ground-up construction of the second phase of apartments, which is anticipated to begin in the spring of 2021.

Canterbury Development will rely on Doran for the successful leasing and operation of the Triple Crown Residences as well as completion of the second phase of the project. 

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

On June 16, 2020, Canterbury Development 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’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. The Company will rely on the efforts of our partner Greystone Construction for the success of this new development project. 

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

Canterbury Development is currently pursuing other opportunities for the commercial development of its underutilized land. The development of residential and commercial real estate involves many risks, including, but not limited to, the Minnesota Racing Act,selection of development partners; building design and construction; obtaining government permits; financing; securing and retaining tenants; and the volatility of real estate market conditions. Accordingly, there exists the riskcan be no assurance that these laws mayour real estate development activities will be amended in ways adversesuccessful.

We are obligated to our operations. In particular, we are required to pay taxes and fees in addition to normal federal, state, and local income taxes, and such taxes and fees are subject to increase at any time. From time to time, state and local legislators and officials have proposed changes in tax laws, ormake improvements in the administrationTIF district and will be reimbursed only to the extent of laws affecting our industry, suchfuture tax revenue.

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. The funding that the Company will be paid as reimbursement under the allocation of each wagering pool to winning bettors, the Racetrack, purses, and the MBF. In addition, poor economic conditions could intensify the efforts of state and local governments to raise revenues through increases in gaming taxes. ItTIF program for these improvements is not possible to predict with certaintyguaranteed, but will depend on future tax revenues generated from the likelihood of changes in tax laws ordeveloped property.

General Risk Factors

An increase in the administration of these laws. These changes, if adopted,minimum wage mandated under Federal or Minnesota law could have a material adverse effect on our operations.operations and financial results.

We are also subjectThe Company employs a large number of individuals at an hourly wage equal to federal and Minnesota laws that affect businesses generally. Someor slightly above the current state mandated wage of $10.00 per hour for 2020. See “Recent Legislation” above for additional information regarding recently enacted minimum wage legislation. Most of these laws, such as laws pertainingemployees are either high school or college students employed on a seasonal basis or tipped employees, many of whom receive, on average, tip income that is significantly higher than the current minimum wage. From time to immigration,time, legislation is introduced in the U.S. Congress or the Minnesota legislature that would substantially increase the minimum wage. Passage of legislation that would substantially increase the minimum wage could have severe penalties for law violations. In addition, it is possible, as a result ofmaterial adverse impact on the legislative process, that legislation directly or indirectly adverse to the Company may be enacted into law.Company.

We depend on key personnel.

Our continued success and our ability to maintain our competitive position is largely dependent upon, among other things, the skills and efforts of our senior executives and management team including Randall D. Sampson, our Chief Executive Officer. We have no employment agreements with our senior executives and key personnel, and we cannot guarantee that these individuals will remain with us. Their retention is affected by the competitiveness of our terms of employment and our ability to compete effectively against other gaming companies. Our inability to retain key personnel could have a material adverse impact on our business, financial condition, and results of operations.

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

The payment and amount of future quarterly dividends is within the discretion of the Board of Directors and will depend on factors the Board deems relevant at each time it considers declaring a dividend. These factors include, but are not limited to: available cash; management’s expectations regarding future performance and free cash flow; alternative uses of cash to fund capital expenditures and real estate development; and the effect of various risks and uncertainties described in this “Risk Factors” section.

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

We rely on information technology and other systems to maintain and transmit customers’ personal and financial information, credit card information, mailing lists and other information. We have taken steps designed to safeguard our customers’ personal and financial information and have implemented systems designed to meet all requirements of the Payment Card Industry standards for data protection. However, our information and processes are subject to the ever-changing threat of compromised security, in the form of a risk of potential breach, system failure, computer virus, or unauthorized or fraudulent access or use by unauthorized individuals. The steps we take to deter and mitigate these risks may not be successful, and any resulting compromise or loss of data or systems could adversely impact operations or regulatory compliance and could result in remedial expenses, fines, litigation and loss of reputation, potentially impacting our financial results. Although we have invested in and deployed security systems and developed processes that are designed to protect all sensitive data, prevent data loss and reduce the impact of any security breach, such measures cannot provide absolute 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.

We receive, store, and process personal information and other customer data. There are numerous federal, state, and local laws regarding privacy and the storing, sharing, use, processing, disclosure and protection of personal information and other data. Any failure or perceived failure by us to comply with our privacy policies, our privacy-related obligations to customers or other third parties, or our privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable information or other player data, may result in governmental enforcement actions, litigation or public statements against us by consumer advocacy groups or others and could cause our customers to lose trust in us, which could have an adverse effect on our business.

While we maintain insurance coverage specific to cyber-insurance matters, any failure on our part to maintain adequate safeguards may subject us to significant liabilities.

Additionally, if third parties we work with, such as vendors, violate applicable laws or our policies, these violations may also put our customers’ information at risk and could in turn have an adverse effect on our business. The Company is also subject to payment card association rules and obligations under its contracts with payment card processors. Under these rules and obligations, if information is compromised, the Company could be liable to payment card issuers for the associated expense and penalties. In addition, if the Company fails to follow payment card industry security standards, even if no customer information is compromised, the Company could incur significant fines or experience a significant increase in payment card transaction costs.

We are also subject to federal and Minnesota laws that affect businesses generally. Some of these laws, such as laws pertaining to immigration, have severe penalties for law violations. In addition, it is possible, as a result of the legislative process, that legislation directly or indirectly adverse to the Company may be enacted into law. 

Energy and fuel price increases may adversely affect our costs of operations and our revenues.

Our facility uses significant amounts of electricity, natural gas, and other forms of energy. Increases in the cost of electricity or natural gas negatively affect our results of operations. In addition, energy and fuel price increases could negatively affect our operations by reducing disposable income of potential customers and decreasing visits to our facility.

Our CMA with the SMSC may be terminated by the SMSC prior to December 31, 2022 under certain circumstances.

The CMA grants to the SMSC the right to terminate the CMA without cause if the SMSC determines, in its sole discretion that a change of circumstance adverse to its interests with respect to gaming in the State of Minnesota has occurred. If the SMSC exercises this right, the Company would be entitled to substantial wind-down payments approximately equal to 2.5 times the average annual payment due under the CMA in the three years following the year it gives notice of termination. While any wind-down payments would cushion the impact of the SMSC’s exercise of this right to terminate the CMA, a termination of the CMA prior to the expiration of its term in 2022 could have a material adverse effect on the Company.

Purse Enhancement Payments and Marketing Payments under our CMA with SMSC may not continue after 2022.

The term of the CMA with SMSC ends December 31, 2022, and there is no certainty the CMA can be extended or renegotiated on terms that are mutually acceptable to SMSC, the horsepersons’ associations and the Company.  In particular, there can be no assurance that, after December 31, 2022, SMSC’s purse enhancement payments to the horsepersons’ associations and marketing payments to the Company will continue at the levels currently being paid, if at all. If, by December 31, 2022, the CMA is not extended or renegotiated on economic terms substantially similar to those currently in effect or due to the parties being unable to mutually agree on other terms, the Company could be materially adversely affected.

Nationally the popularity of horse racing has declined.

There has been a general decline in the number of people wagering on live horse races at North American racetracks, either in person or via simulcasting, due to a number of factors, including increased competition from other wagering and entertainment alternatives as discussed above.  According to industry sources, pari-mutuel handle declined 27% from 2007 to 2011 and has been relatively stable since 2011, experiencing less than a 1% decline between 2011 and 2017. Declining interest in horse racing has had a negative impact on revenues and profitability in our racing business.  Our business plan anticipates increased attendance and pari-mutuel wagering during our 2018 live meet and in future live meets because of purse enhancement payments and marketing payments we receive under the CMA.  However, we recognize that a general decline in interest in horse racing and pari-mutuel wagering could have a material adverse impact on our business, financial condition and results of operations in future years.

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

We believe that patrons prefer to wager on races with a number of horses in the race (the “field”) at or above the national average. A failure to offer races with adequate fields results in less wagering on our horse races. Our ability to attract adequate fields depends on several factors. First, it depends on our ability to offer and fund competitive purses. Second, it depends on the overall horse population available for racing. Various factors have led to declines in the horse population in certain areas of the country, including competition from racetracks in other areas, increased costs and changing economic returns for owners and breeders, and the spread of various debilitating and contagious equine diseases. If our racetrack is faced with a sustained outbreak of a contagious equine disease, it could have a material impact on our profitability. Finally, if we are unable to attract horse owners to stable and race their horses at our racetrack by offering a competitive environment, including improved facilities, a well-maintained racetrack, better conditions for backstretch personnel involved in the care and training of horses stabled at our racetrack and a competitive purse structure, our profitability could also decrease. We also face increased competition for horses and trainers from racetracks that are licensed to operate slot machines and other electronic gaming machines that provide these racetracks an advantage in generating new additional revenues for race purses and capital improvements. While our ability to offer adequate fields to patrons during our live meets has been substantially strengthened by the purse enhancement payments that will be made under the CMA through 2022, our inability to attract adequate fields, for whatever reason, could have a material adverse impact on our business, financial condition and results of operations.

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

Since horse racing is conducted outdoors, unfavorable weather conditions, including extremely high and low temperatures, high winds, storms, tornadoes and hurricanes, could cause events to be canceled or attendance to be lower, resulting in reduced wagering. Our operations, as well as the racetracks from which we receive simulcast signals, are subject to reduced patronage, disruptions or complete cessation of operations due to weather conditions, natural disasters and other casualties. If a business interruption were to occur due to inclement weather and continue for a significant length of time at our racetrack, it could have a material adverse impact on our business, financial condition and results of operations. The Company maintains insurance for incremental weather conditions that would help mitigate the financial impact on our business.

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

Although we carry jockey accident insurance at our racetrack to cover personal jockey injuries that may occur during races or daily workouts, there are certain exclusions to our insurance coverage, and we are still subject to litigation from injured participants. We renew our insurance policies on an annual basis. The cost of coverage may become so high that we may need to further reduce our policy limits or agree to certain exclusions from our coverage. Our results may be affected by the outcome of litigation, as this litigation could be costly and time consuming and could divert our management and key personnel from our business operations.

Our business depends on using totalizator services.

Our customers use information provided by a third party vendor that accumulates wagers, records sales, calculates payoffs and displays wagering data in a secure manner to patrons who wager on our horse races. The failure to keep technology current could limit our ability to serve patrons effectively or develop new forms of wagering or affect the security of the wagering process, thus affecting patron confidence in our product. A perceived lack of integrity in the wagering systems could result in a decline in bettor confidence and could lead to a decline in the amount wagered on horse racing. In addition, a totalizator system failure could cause a considerable loss of revenue if betting machines are unavailable for a significant period of time or during an event with high betting volume.

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

The Company employs a large number of individuals at an hourly wage equal to or slightly above the current state mandated wage of $9.50 per hour. See “Recent Legislation” above for additional information regarding recently enacted minimum wage legislation. Most of these employees are either high school or college students employed on a seasonal basis or tipped employees, many of whom receive, on average, tip income that is significantly higher than the current minimum wage. From time to time legislation is introduced in the U.S. Congress or the Minnesota legislature that would substantially increase the minimum wage. Passage of legislation that would substantially increase the minimum wage could have a material adverse impact on the Company.

Uncertainty regarding the success of a possible real estate development project.

The Company is currently pursuing the commercial development of its Underutilized Land. See discussion above titled “Development Operations.” The development of residential and commercial real estate involves many risks, including but not limited to the selection of development partners, building design and construction, financing, securing and retaining tenants, and the volatility of real estate market conditions. Accordingly, there can be no assurance that the Company’s real estate development activities will be successful.

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

The payment and amount of future quarterly dividends is within the discretion of the Board of Directors and will depend on factors the Board deems relevant at each time it considers declaring a dividend. These factors include, but are not limited to: available cash; management’s expectations regarding future performance and free cash flow; alternative uses of cash to fund capital expenditures and real estate development; and the effect of various risks and uncertainties described in the “Risk Factors” section.

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

We rely on information technology and other systems to maintain and transmit customers' personal and financial information, credit card information, mailing lists and other information. We have taken steps designed to safeguard our customers' personal and financial information and have implemented systems designed to meet all requirements of the Payment Card Industry standards for data protection. However, our information and processes are subject to the ever-changing threat of compromised security, in the form of a risk of potential breach, system failure, computer virus or unauthorized or fraudulent access or use by unauthorized individuals. The steps we take to deter and mitigate these risks may not be successful, and any resulting compromise or loss of data or systems could adversely impact operations or regulatory compliance and could result in remedial expenses, fines, litigation and loss of reputation, potentially impacting our financial results. Although we have invested in and deployed security systems and developed processes that are designed to protect all sensitive data, prevent data loss and reduce the impact of any security breach, such measures cannot provide absolute security.

Item 1B. UNRESOLVED STAFF COMMENTS

Not Applicable.

Item 2. PROPERTIES

General

The Company’s facilities, which are owned and operated under the name “Canterbury Park,” are a modern complex of buildings and grounds that generally compare favorably to other major racetracks located throughout the country. The Racetrack’s grandstand has a patron capacity of approximately 10,000 within enclosed areas and a maximum patron capacity of over 30,000 including outside areas around the grandstand. The grandstand and most public outdoor areas contain numerous pari-mutuel windows, odds information boards, video monitors, food and beverage stands, and other amenities.

The Racetrack is located approximately 25 miles southwest of downtown Minneapolis. The area immediately surrounding the Racetrack consists of retail, commercial and industrial buildings, farmland, and residential areas. The Racetrack is in reasonable proximityclose to a number of major entertainment destinations including: Valleyfair, an amusement park about two miles from the Racetrack that annually attracts visitors during the spring and summer; the Renaissance Festival, a seven-weekend late summer annual event located about five miles from the Racetrack; and Mystic Lake Casino, located about four miles from the Racetrack, which draws thousands of visitors daily. The Mall of America, the largest enclosed shopping mall in the United States, which attracts more than 40 million visitors per year, is approximately 17 miles from the Racetrack.

Racing Surfaces

The racing surfaces consist of a one-mile oval dirt/limestone track and a 7/8-mile oval turf course. The dirt track includes a one and one-quarter mile front stretch chute, a 6-1/2 furlong backstretch chute, and a 3-1/2 furlong chute and is lighted for night racing.

Grandstand

The grandstand is a modern, air-conditioned enclosed structure of approximately 275,000 square feet with a variety of facilities on six levels. The lower level contains space for support functions such as jockey quarters, administrative offices, Racing Commission offices, first aid, mechanical rooms, and electrical rooms. The track level includes pari-mutuel windows, restrooms, a variety of concession stands and other services as well as the Card Casino, which occupies 22,000 square feet. The mezzanine level contains 1,320 fixed seats in a glass-enclosed, air-conditioned area and an additional 3,000 seats located outside. The mezzanine level also contains pari-mutuel windows, restrooms, concession stands, and other guest facilities. A portion of the mezzanine level is currently being used as a simulcast center during live racing, and for banquets and other events during the off-season. The kitchen level is an intermediate level located between the mezzanine and clubhouse floors. It contains a full-service kitchen that supports a full dining menu for the track-side dining terraces on the clubhouse level and food preparation for the other concession areas. The clubhouse level is a multi-purpose area that includes a simulcast center for wagering on televised races, a full-service dining area during the live racing season, and a year-round banquet facility. The clubhouse level includes 325 trackside tables, each equipped with a television set, with a total seating capacity of 1,200 patrons and an additional 1,000 seats are located in lounges located throughout the area. The press box and officials’ level is located in the roof trusses over the clubhouse and contains work areas for the press, racing officials, closed-circuit television, photo finish, and the track announcer. In addition, the grandstand was structurally built to accommodate skyboxes under the press box/officials’ level, although none have yet been constructed. Escalators and elevators are available to move patrons among the various levels within the grandstand.

Expo Center

In 2014, the Company added an Expo Center, which is a 30,000 square foot structure designed for year-round special events, trade shows, and exhibits. The facility features 24,000 square feet of open event space and another 6,000 square feet containing an entry area, offices, restrooms and storage. Canterbury Park now offers the fourth largest event space in the Twin Cities with more than 100,000 total square feet of available space.

Barn and Backside Facilities

The stable area consists of 33 barns with a total of approximately 1,650 stalls. In the stable area, there are 240 dormitory rooms for the grooms and others working at the Racetrack. The stable area also contains a combination racing office and cafeteria/recreation building for stable personnel, two blacksmith buildings, and a one and 5/8 mile training track.

Parking

Approximately 7,5005,500 paved parking spaces are available for patron and employee vehicles at the Racetrack, including parking spaces that are reserved for handicapped patrons. The Racetrack also has unpaved areas available for overflow parking for approximately 5,0003,000 additional automobiles.

Underutilized Land

Approximately 140In 2020, the Company transferred approximately 23 acres of land to the Doran Canterbury II and Canterbury DBSV joint ventures as part of its equity contribution in these projects. As of December 31, 2020, the Company has approximately 38390 acres of land remaining that are owned or controlled by the Company that are not currently used for its current business operations, and could be developed or sold, in whole or in part. See discussion above titled “Development Operations.”Operations” and footnote 12 to the consolidated financial statements for more information.

Item 3. LEGAL PROCEEDINGS

There are no material legal proceedings pending against the Company. From time to time, the Company is party to ordinary and routine litigation or claims incidental to our business. We do not expect the outcome of any such litigation or claims pending at this time to have a material adverse effect on our consolidated financial position or results of operations.

Item 4. MINE SAFETY DISCLOSURES

Not Applicable.

PART II

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

(a)          MARKET INFORMATION

The Company’s common stock trades on the NASDAQNasdaq Global Market under the symbol CPHC. The table set forth below indicates the high and low sale prices and cash dividends declared for the Common Stock in the quarterly periods ending December 31, 2017 and 2016:

(b)          HOLDERS

¹ During fiscal year 2016, the Company paid a special dividend of $.25 to its shareholders.

At March 15, 2018,2021, the Company had 750615 shareholders of record of its common stock. Since many holders’ shares are listed under their brokerage firms’ names, the actual number of shareholders is estimated by the Company to be over 2,000.

(c)          DIVIDENDS

On September 15, 2016,March 16, 2020, the Company announced that due to the effect of the COVID-19 coronavirus, the Company’s Board of Directors had suspended declaring and paying its quarterly cash dividend until the Company's business operations return to normal. Prior to 2020, the Company had a dividend policy to pay regular quarterly cash dividends to its shareholders based on the Company’s earnings, projected future earnings, and cash requirements. Under this policyIn 2019, the Company paid a $.05$0.07 per share dividend to its shareholders in October of 2016, January, of 2017,April, July, and April of 2017. The Company increased its quarterly dividend to $.06 per share which was paid to its shareholders in July of 2017, October of 2017, and January of 2018. In July of 2016, the Company also paid a special dividend of $0.25 per share to its shareholders. In March 2018, the Company increased its quarterly dividend to $.07 per share, which will be paid to its shareholders on April 13, 2018.October.

(d)          SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

The following table sets forth information as of December 31, 20172020 regarding our equity compensation plans:

Securities Authorized for Issuance Under Equity Compensation Plans

(1) Adopted by the Company’s Board of Directors in 1997, the purpose of the Stock Option Plan for Non-Employee Consultants and Advisors is to attract and retain the services of experienced and knowledgeable non-employee consultants and advisors to assist in projects having strategic significance for the Company, to provide an alternative form of cash compensation to such persons and to provide such persons with the opportunity to participate in the Company’s long term progress and success.

(e)          REGULATION S-K, ITEM 201(e) INFORMATION

Not Applicable for Smaller Reporting Companies.

(f)           RECENT SALE OF UNREGISTERED SECURITIES

Not Applicable.

(g)          PURCHASES OF EQUITY SECURITIES BY THE ISSUER

In 2007, the Company’s Board of Directors adopted a plan that authorized the repurchase of up to 250,000 shares of the Company’s common stock pursuant to Exchange Act Rule 10b-18 in open market transactions or block purchases of privately negotiated transactions (the “Stock Repurchase Plan”). The Company repurchased 216,543 shares under the 2008 Stock Repurchase Plan and in 2012, authorized the repurchase of an additional 100,000 shares of the Company’s common stock. No shares were repurchased in 20172020 or 2016,2019, and currently the Company is authorized to repurchase up to 128,781 shares under the Stock Repurchase Plan.

Item 6. SELECTED FINANCIAL DATA

The following table sets forth selected consolidated financial data for each of the five fiscal years ended December 31, 2017. The operating and balance sheet data for the years ended and as of December 31, 2017, 2016, 2015, 2014 and 2013 are derived from our audited consolidated financial statements. The following information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and with our consolidated financial statements and the related notes thereto included elsewhere in this report.Reserved.

Item 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(In thousands except for per share amounts)

¹ During fiscal year 2014, the Company reduced operating expenses $958,000 by recording a gain on insurance recoveries due to damage to our property resulting from multiple severe storms at the Racetrack.

² During fiscal year 2015, the Company reduced operating expenses $1,502,000 by recording a $495,000 gain on insurance recoveries, $347,000 gain on sale of its Shakopee Valley RV Park, and $660,000 gain on sale of land.

³ During fiscal year 2016, the Company reduced operating expenses $5,311,000 by recording a $1,465,000 gain on insurance recoveries and $3,846,000 gain on sale of land.

⁴ During fiscal year 2017, the Company reduced operating expenses $141,000 by recording a gain on insurance recoveries.

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 consolidated financial statements and the accompanying notes to the consolidated financial statements (the “Notes”). Our actual results could differ materially from those anticipated in the forward-looking statements included in this discussion as a result of certain factors, including, but not limited to, those discussed in “Risk Factors” and “Forward-Looking Statements” included elsewhere in this Annual Report on Form 10-K.

STRATEGIC OVERVIEW

Canterbury Park Holding Corporation (the “Company,” “we,” “our,” or “us”) hosts pari-mutuel wagering on thoroughbred and quarter horse races and “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 primarily held at out-of-state racetracks that are televised simultaneously at the Racetrack (“simulcasting”). Unbanked card games, in which patrons compete against each other, are hosted in the Card Casino at the Racetrack. The Card Casino operates 24 hours a day, seven days a week. The Card Casino offers both poker and table games at up to 80 tables. The Company also derives revenues from related services and activities, such as food and beverage, parking, advertising signage, publication sales, and from other entertainment events and activities held at the Racetrack.

In 2020, Canterbury Development continued to pursue various development opportunities begun in 2015 for its underutilized land in a project known as Canterbury Commons. These development opportunities have included contributions of land to joint ventures, three as of the end of December 2020, and sales of parcels of land to third parties that will then develop the property. 

The following summarizes our financial performance for the last five years (in 000’s):

¹ During fiscal year 2014, the Company reduced operating expenses $958,000 by recording a gain on insurance recoveries due to damage to our property resulting from multiple severe storms at the Racetrack.

² During fiscal year 2015, the Company reduced operating expenses $1,502,000 by recording a $495,000 gain on insurance recoveries, a $347,000 gain on sale of its Shakopee Valley RV Park, and a $660,000 gain on sale of land.

³ During fiscal year 2016, the Company reduced operating expenses $5,311,000 by recording a $1,465,000 gain on insurance recoveries and $3,846,000 gain on sale of land.

⁴ During fiscal year 2017, the Company reduced operating expenses $141,000 by recording a gain on insurance recoveries.

Our management team has extensive knowledge of the horse racing, Card Casino, and food and beverage operations, and our staff has demonstrated a commitment to enhancing the customer experience. The Company believes that management has a good relationship with our workforce and is able to retain qualified personnel as demonstrated by our low turnover rate.

Our facilities are modern by racetrack industry standards, and we have invested heavily in the past few years to update and upgrade them to meet the needs of our customers and horsemen. Our 383-acre site, in a prime location on the edge of the Minneapolis–St. Paul metropolitan area in one of the fastest-growing counties in Minnesota, provides us with great long-term growth and development opportunities; our Board of Directors regularly considers additional uses for underutilized portions of our property. Our long-term strategic direction is to continue to enhance our Racetrack as a unique gaming and entertainment destination and develop the approximately 14090 acres of underutilized land not needed for our current business uses.Racetrack Operations. 

COVID-19 PANDEMIC

WeIn 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 a strong commitmenttaken 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 food and beverage 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. 

Despite a strong start to the year, the disruptions arising from the COVID-19 Pandemic had a significant impact on the Company's financial condition and operations during the year ended December 31, 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 2020 has been material, and the Company expects it will continue to be material. The Company cannot reasonably estimate at this time when the COVID-19 Pandemic will end, or when or how quickly the current travel restrictions and capacity restrictions will be modified or cease to be necessary. As a result, it is difficult to predict the continuing and future impact on the Company’s business and the willingness of customers to spend on entertainment in venues such as ours.

The Company had no long-term debt and a $6.0 million credit line as of December 31, 2020. The Company anticipates that its existing cash balance, any cash generated from operations and availability under its credit line will provide the Company with the necessary liquidity and financial flexibility to manage through this challenging operating environment. We have been particularly successful in attracting new customerstaken significant actions to mitigate the effects of the COVID-19 Pandemic on our operations, including initiating workforce reductions and providing a quality live racing experience forfurloughs, suspending the Company’s quarterly cash dividend, postponing non-essential capital expenditures, reducing operating costs, and substantially reducing discretionary spending. We expect these countermeasures to partially mitigate the impact of COVID-19. As the impact of the COVID-19 Pandemic on the economy and our horse racing fans as well asoperations evolves, we will continue to assess the horsemen who enter their horses in live races at Canterbury Park. However, we face a number of longer-term challenges in improving our financial results, including challenges described under “Risk Factors” elsewhere in this report. impact on the Company and respond accordingly.

OPERATIONS REVIEW

YEAR ENDED December 31, 20172020 COMPARED TO YEAR ENDED December 31, 20162019

EBITDA represents earnings before interest income, income tax expense, and depreciation, and amortization. EBITDA is not a measure of performance or liquidity calculated in accordance with generally accepted accounting principles in the United States of America ("GAAP"), and should not be considered an alternative to, or more meaningful than, net income as an indicator of our operating performance or cash flows from operating activities as a measure of liquidity. We present EBITDA as a supplemental disclosure for our Racetrack Operations because it is a widely used measure of performance of and basis for valuation of companies in ourthe gaming industry. Other companies that provide EBITDA information may calculate EBITDA differently than we do. We also compute Adjusted EBITDA, which reflects additional adjustments to Net Income to eliminate unusual or non-recurring items.items, as well as items relating to our real estate development operations. For the year ended December 31, 2017,2020, Adjusted EBITDA excluded the loss on disposal of assets, and gain on insurance recoveries.transfer of land, and depreciation and amortization related to equity investments. For the year ended December 31, 2016,2019, Adjusted EBITDA excluded the gainloss on disposal of assets, gain on sale of land,insurance recoveries, and gain on insurance recoveries.sale of assets. 

The following table sets forth a reconciliation of net income, a GAAP financial measure, to EBITDA and Adjusted EBITDA (defined above), which is also a non-GAAP measure, for the years ended:

SUMMARY OF EBITDA DATA

Adjusted EBITDA increased $2,557,000,decreased $5,560,000, or 58.7%87.3%, and increaseddecreased as a percentage of net revenues to 12.1%2.4% from 8.3%10.7% for 20172020 compared to 2016.  2019.

REVENUES

Total net revenues for 20172020 were $56,953,000, an increase$33,140,000, a decrease of $4,493,000,$26,087,000, or 8.6%44.0%, compared to total net revenues of $52,460,000$59,227,000 for 2016.2019. Total pari-mutuel revenue increased 10.9%decreased 18.9%, Card Casino revenue increased 9.3%decreased 42.2%, and food and beverage revenue increased 1.1%decreased 73.3%, and other revenue decreased 52.4% in 20172020 compared to 2016.2019. See below for a further discussion of our sources of revenues.

PARI-MUTUEL REVENUES

Simulcast and Live Racing pari-mutuel revenues include commission and breakage revenues from on-track live and simulcast wagering. We receive guest fees from out-of-state racetracks and ADW companies for out-of-state wagering on our live races. Other revenues include source market fees paid by ADW companies for wagers made by Minnesota residents on out-of-state races and proceeds from unredeemed pari-mutuel tickets.

Total 20172020 pari-mutuel revenue increased $1,037,000,decreased $1,854,000, or 10.9%18.9%, compared to 2016. Other pari-mutuel2019. Simulcast revenue decreased $2,486,000, or 46.3%, and live racing revenue decreased $1,428,000, or 66.4% in 2020 compared to 2019. These decreases are due to the COVID-19 Pandemic described above, including the fact that these operations were closed from March 16, 2020 until June 10, 2020 and from November 21, 2020 through December 31, 2020. Guest fees increased $737,000$1,540,000, or 128.0%, in 2020 compared to 2019 primarily due to receivingincreased out of state handle as a full yearresult of source market fees under the ADW legislation that became effective November 1, 2016. We expect that the source market fees for 2018 will be similar to the $881,000 recordedracing weekdays in 2017. Live Racing pari-mutuel2020. Other revenue increased $249,000,$520,000, or 11.9%,46.6% in 2020 compared to 2019 primarily due to an increase in take-out levels as compared to 2016 when the Company reduced the take-out on its live races to promote increased wagering, but did not experience the gain in net revenues that we anticipated.ADW revenues. 

The primary source of Card Casino revenue is a percentage of the wagers received from the players as compensation for providing the Card Casino facility and services, referred to as “collection revenue”.revenue.” Other Revenue presented above includes fees collected for the administration of tournaments and amounts earned as reimbursement of the administrative costs of maintaining jackpot funds. Card Casino revenue represented 56.2%60.0% and 55.8%58.1% of the Company’s net revenues for the years ended December 31, 20172020 and 2016,2019, respectively.

Total Card Casino revenue increased $2,727,000,decreased $14,520,000, or 9.3%42.2%, in 20172020 compared to 2016.2019. Poker revenue decreased $372,000,$3,754,000, or 4.0%50.0%, in 2017 compared to 2016. The decrease in poker revenue reflects a continuing industry decline in the popularity of poker. Tableand table games collection revenue increased $2,949,000,decreased $8,899,000, or 17.1%38.3%, in 20172020 compared to 2016. In management’s judgement, increased play is attributable to players spending more money2019. These decreases are due to a stronger economy, as well as an overall increase in card casino marketing initiatives. Additionally, higher jackpotsthe COVID-19 Pandemic described above. When the Company reopened its table games operations on certain games drove increased play.June 15, 2020 and poker operations on July 9, 2020, this included reduced seating at tables and capacity limitations to follow Minnesota state guidelines. 

FOOD AND BEVERAGE REVENUES

Food and beverage revenue increased $90,000,decreased $6,522,000, or 1.1%73.3%, to $2,373,000 for the year ended December 31, 20172020 compared to 2016. This increase2019. The decrease is primarily due to hosting more special events in 2017,the COVID-19 Pandemic described above, including the fact that these operations were closed from March 16, 2020 until June 10, 2020 and an increase in the number of catering events. This was partially offset by a reduction of two racing days compared to 2016.from November 21, 2020 through December 31, 2020.

OTHER REVENUES

Other revenue increased $651,000,decreased $3,190,000, or 10.8%52.4%, to $6,657,000$2,902,000 in 20172020 compared to 2016. This increase was2019. The decrease is due to increased admission revenuethe COVID-19 Pandemic described above, including the fact that these operations were closed from a greater number of premium priced live racing days during 2017March 16, 2020 until June 10, 2020 and increased event admission revenue from a greater number of special events hosted. Also, the Company received higher payments under the CMA for joint marketing efforts with the SMSC. See “Cooperative Marketing Agreement” below. The amounts earned from the marketing payments are offset by an increase in other expenses related to RiverSouth, an area wide marketing association that promotes Shakopee entertainment venues.November 21, 2020 through December 31, 2020.

OPERATING EXPENSES

Total operating expenses increased approximately $7,113,000,decreased $20,709,000, or 15.7%37.3%, to $52,432,000$34,882,000 in 2017,2020, from $45,319,000$55,591,000 in 2016.2019. Total operating expenses as a percentage of net revenues increased to 92.1%105.3% in 20172020 from 86.4%93.9% in 2016. Excluding the reduction in operating expenses from insurance recoveries booked as an operating expense, loss/gain on sale of assets and gains on land sales from both years, total operating expenses increased from $50,652,000 to $52,570,000, an increase of 3.8%2019.

Total purse expense increased $478,000,decreased $2,033,000, or 7.5%29.1%, in 20172020 compared to 20162019. The decrease is due to an increasedecreases in card casino revenue,Card Casino and pari-mutuel revenues as well as an increase in ADW revenue. These factorsa result of the COVID-19 Pandemic. This also resulted in an increasea decrease in MBFMinnesota Breeders' Fund (the "MBF") expense (shown below). As discussed in greater detail in Item 1 above, Minnesota law requires us to allocate a portion of Card Casino revenues, wagering handle on simulcast and live horse races, and ADW source market fees for future payment as purses for live horse races and other authorized uses. While most of these amounts were paid into the purse funds for thoroughbred and quarter horse races, Minnesota law requires that a portion of the amounts allocated for purses be paid into the Minnesota Breeders’ Fund (the “MBF”). The increase in the MBF is primarily due to ADW expense of $184,000, which is included in Simulcast Racing in the table below.MBF.

Salaries and benefits expense increased $541,000,decreased $9,601,000, or 2.4%37.6%, in 20172020 compared to 2016.2019. The increasedecrease 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. Labor costs also significantly declined upon reopen in June due to the Company's limited operations requiring significantly reduced number of personnel. 

Cost of food and beverage sales decreased $2,845,000, or 69.8%, in 2020 compared to 2019. The decrease is due to lower food and beverage revenues due to decreased attendance, primarily due to capacity limitations mandated across the StateCompany’s operations as a result of Minnesota mandated increase of $0.50 in the minimum wage effective August 2016, as well as an increase in employee incentive compensation resulting from better than anticipated operational performance. These increases are slightly offset due to the 2016 amount including $279,000 in severance compensation payments related to restructuring of senior management positions.COVID-19 Pandemic.

Advertising and marketing costs increased $383,000,decreased $1,775,000, or 16.4%82.5%, in 20172020 compared to 2016.2019. The changes are primarily attributable to the increased expenditures that are funded by payments received under the CMA for joint marketing. These expenditures related primarily to RiverSouth, an area wide marketing initiative thatdecrease is designed to increase visitors to Shakopee’s entertainment, hospitality and retail businesses.

Professional and contracted services expense increased $248,000, or 6.0%, in 2017 compared to 2016. The increase is primarily due to increased live racing contracted servicesa reduction in advertising and marketing spend due to capacity limitations mandated across the Company’s operations as a result of additional live racing weeks. Additional costs also relate to a short term customer rental agreement in the fourth quarter of 2017. As part of the rental agreement, these costs were reimbursed and included in Other Revenue.COVID-19 Pandemic.

During 2014, the Company incurred damage to buildings from multiple severe storms at the Racetrack. During the year ended December 31, 2015, the Company recognized as a reduction in operating expenses a $495,000 insurance recoveries gain in the Consolidated Statements of Operations as “Gain on insurance recoveries.” For the year ended December 31, 2016, the Company received additional insurance proceeds of $592,000 and recognized as a reduction in operating expenses as insurance recoveries gain in the Consolidated Statements of Operations as “Gain on insurance recoveries.” The Company had also concluded an additional $873,000 of insurance reimbursement would be received in 2017 when roof repair work was completed. However, the Company was notified in 2017 that the costs of the repairs have exceeded the original contract price. Therefore, the Company recognized an additional $141,000 “Gain on insurance recoveries” as a reduction in operating expenses in the Consolidated Statements of Operations. Because the claim has been settled and confirmed by the insurance company, that amount has been recognized as a gain on insurance recovery receivable in accordance with U.S. GAAP. The storms did not cause any interruptions to the business or otherwise affect the Company’s consolidated financial results of operations.

On October 6, 2015, the Company sold six acres of land adjacent to the Racetrack for $1,459,000 and recorded a gain of $660,000, reported on the Consolidated Statements of Operations – Gain on sale of land. This transaction was structured as a “deferred exchange using a qualified intermediary” pursuant to Internal Revenue Code (IRC) Section 1031 exchange (“1031 Exchange”) for income tax purposes. Under the agreement, the Company has the option to repurchase up to one acre within three years from closing date at the sale price of approximately $240,000 per acre. According to ASC 360-20-40-38 - Derecognition, the Company recorded the repurchase option acre as a deferred gain liability in the amount of $240,000 on the Consolidated Balance Sheets. Since the risks and rewards were not completely transferred to the buyer based on the repurchase option the Company maintains the asset on our financials in the amount of $110,000. The Company believes any additional expenses associated with the option under the profit-sharing method will be immaterial because land is a non-depreciable asset.

In 2016,2020, the Company recorded a gain on saletransfer of land of $3,846,000 due to the sale of approximately 24 acres of land adjacent to the Racetrack for a total consideration of $4.3 million.

Other operating expenses increased $133,000, or 2.5%, in 2017 compared to 2016. The changes are primarily attributable to an increase in insurance and personnel expenses in 2017 due to the Company experiencing higher premiums and increased recruiting costs.

Income tax expense for 2017 and 2016 was $480,000 and $2,924,000, respectively. As a result of the U.S Tax Cuts and Jobs Act (“TCJA”) signed on December 22, 2017, we recorded a tax benefit of $1,345,000 in the fourth quarter of 2017$2,368,000 as a result of a revaluation of the net deferred tax liabilities duetransferring land to the corporate tax rate change from 34%Doran Canterbury II and Canterbury DBSV joint ventures.

In 2019, the Company recorded a loss on disposal of assets totaling $262,000. Included in this amount is the write-off of assets disposed of in remodeling the Card Casino. The Company also recorded a loss on disposal of assets related to 21% starting in 2018.development site work costs. Additionally, the Company disposed of assets related to its RV Park as a result of developing the property around the Racetrack.

In 2019, the Company recorded a gain on insurance recoveries of $199,000 as a result of insurance proceeds related to water damage incurred at the Racetrack.

Net Income for the years 20172020 and 20162019 was $4,091,000$1,062,000 and $4,196,000,$2,718,000, respectively.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our financial statements have been prepared in conformity with U.S. GAAP and are based upon certain critical accounting policies. These policies may require management to make estimates, judgments and assumptions that we believe are reasonable based on our historical experience, contract terms, observance of known trends in our Company and the industry as a whole, and information available from other outside sources. Our estimates affect the reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results may differ from those initial estimates.

Our critical accounting policies are:

Our significant accounting policies and recently adopted accounting policies are more fully described in Note 12 to the Notes to Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

Revenue recognition - Racing revenue is generated by pari-mutuel wagering on live and simulcast racing content. Additionally, we also generate revenue through sponsorships, admissions, concessions, and publications. Our racing revenue and income are influenced by our racing calendar. Therefore, revenue and operating results for any interim quarter are not generally indicative of the revenue and operating results for the year and may not be comparable with results for the corresponding period of the previous year. We recognize pari-mutuel revenue upon occurrence of the live race that is presented for wagering after that live race is made official by the respective state’s racing regulatory body. We recognize other operating revenue such as sponsorships, admissions, concessions, and publication revenue once delivery of the product or service has occurred. Card Casino revenue is a percentage of the wagers received from the players as compensation for providing the Card Casino facility and services, referred to as “collection revenue.”

Property and Equipment -We have significant capital invested in our property and equipment, which represents approximately 68%49% of our total assets at December 31, 2017.2020. 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, we will determine whether an impairment loss should be recognized. An impairment loss would be measured by the amount by which the carrying value of the asset exceeds the fair value of the asset. As of December 31, 2017,2020, we have determined that no impairment of these assets exists.

Income taxes - We use estimates and judgments for financial reporting to determine our current tax liability and deferred taxes. In accordance with the liability method of accounting for income taxes, we recognize the amount of taxes payable or refundable for the current year and deferred tax assets and liabilities for the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. Adjustments to deferred taxes are determined based upon changes in differences between the book basis and tax basis of our assets and liabilities and measured by enacted tax rates we estimate will be applicable when these differences are expected to reverse. Changes in current tax laws, enacted tax rates or the estimated level of taxable income or non-deductible expense could change the valuation of deferred tax assets and liabilities and affect the overall effective tax rate and tax provision. See footnote 3 of the consolidated financial statements for more information on the U.S Tax Cuts and Jobs Act (“TCJA”) signed on December 22, 2017.

MINIMUM WAGE LEGISLATION

In 2014, Minnesota Legislation that waslegislation enacted into law an increase in 2014 increased the minimum wage that must be paid to most company employees from $7.25 to $8.00 on August 1, 2014, from $8.00 to $9.00 per hour on August 1, 2015, and from $9.00 to $9.50 per hour went into effect on August 1, 2016. In addition, startingCompany employees. Beginning January 1, 2018, the minimum wage willwas set to increase at the beginning of each year by the rate of inflation with a maximum increase of up to 2.5% per year. The minimum wage for 2018 will be $9.652021 is $10.08 per hour. Prior to August 1, 2014, the Company employed a large number of individuals who received an hourly wage equal to or slightly above $7.25 per hour. As a result, this legislation had an adverse financial effectimpact on usthe Company in 2014 2015, 2016, and 2017through 2020, and will continue to have an adverse impact.impact on the Company. We have implemented measures to partially mitigate the effectimpact of this increase by raising our prices and reducing our employee count. However, theseThese measures could themselves have an adverse effect because higher prices and diminished service levels may discourage customers from visiting the Racetrack.

COOPERATIVE MARKETING AGREEMENT

On June 4, 2012, the Company entered into the CMA with the SMSC. The primary purpose of the CMA is to increase purses paid during live horse racing at Canterbury Park’s Racetrack in order to strengthen Minnesota’s thoroughbred and quarter horse industry. Under the CMA, 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 2020. 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 terms of the CMA, as amended, the SMSC paid the horsemen $7.2made payments of $5.6 million and $6.7$7.4 million during 2020 and 2019, respectively, primarily for purse enhancements for the years ended December 31, 2017 and 2016, respectively.respective live race meets.

Under the CMA, as amended, SMSC also agreed to make “Marketing Payments” to the Company relating to joint marketing efforts for the mutual benefit of the Company and SMSC, including signage, joint promotions, player benefits, and events. Under the CMA,Fifth Amendment, the SMSC paidwas not required to pay the Company $1,581,000 and $1,198,000a 2020 annual marketing payment, but the Company used previously paid but unspent funds for marketing purposes for 2017 and 2016, respectively.these purposes.

The CMA was amended three times effective January 2015, 2016As noted above and 2017 to adjustaffirmed in the payment amounts between the “Purse Enhancement Payments to Horsemen” and “Marketing Payments to Canterbury Park.” Under the CMA as most recently amended,Fifth Amendment, SMSC has agreedis obligated to make the following purse enhancement and marketing payments for 20182021 through 2022:

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

The amounts earnedreceived 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 consolidated statements of operations. For 2017,the year ended December 31, 2020, the Company recorded $1,399,000$900,000 in other revenue and incurred $1,173,000$740,000 in advertising and marketing expense and $226,000$160,000 in depreciation related to the SMSC marketing payment. For 2016,the year ended December 31, 2019, the Company recorded $1,096,000$1,114,000 in other revenue and incurred $870,000$888,000 in advertising and marketing expense and $226,000 in depreciation related to the SMSC marketing payment. The excess of amounts received over revenue is reflected as deferred revenue which is included in accounts payable on the Company’s consolidated balance sheets.

The Company has agreed for the term of the CMA that it would not promote or lobby the Minnesota legislature for expanded gambling authority and would support the SMSC’s lobbying efforts against expanding gambling authority.

CONTINGENCIES

In accordance with an Earn Out Promissory Note given to the prior owner of the Racetrack as part of the consideration paid by the Company to acquire the Racetrack in 1994, if (i) off-track betting becomes legally permissible in the State of Minnesota and (ii) the Company begins to conduct off-track betting with respect to or in connection with its operations, the Company would be required to pay to the IMR Fund, L.P. the greater of (a) $700,000 per operating year, as defined, or (b) 20% of the net pretax profit, as defined for each of five operating years. At this time, management believes that the likelihood that these two conditions will be met and that the Company would be required to pay these amounts is remote. If these two conditions are met, the five minimum payments would be discounted back to their present value and the sum of those discounted payments would be capitalized as part of the purchase price in accordance with generally accepted accounting principles. The purchase price would be further increased if payments become due under the “20% of Net Pretax Profit” calculation. The first payment is to be made 90 days after the end of the third operating year in which off-track betting is conducted by the Company. Remaining payments would be made within 90 days of the end of each of the next four operating years.

The Company entered into a Cooperative Marketing Agreement (the “CMA”)CMA with the Shakopee Mdewakanton Sioux Community that became effective on June 4, 2012 and has been amended.amended, as discussed above. The CMA contains certain covenants which,that, if breached, would trigger an obligation to repay a specified amount related to such covenant. At this time, management believes that the likelihood that the breach of a covenant will occur and that the Company will be required to pay the specified amount related to such covenant is remote.

The Company is periodically involved in various claims and legal actions arising in the normal course of business. Management believes that the resolution of any pending claims and legal actions at December 31, 20172020 and as of the date of this report will not have a material impact on the Company’s consolidated financial position or results of operations.

The Company has committed to payment of statutory distributions under a $500,000 bond issued to the Minnesota Racing CommissionMRC as required byunder Minnesota statute.law. The Company was not required to make any payments related to this bond in 20172020 or 2016,2019, and there is no liability related to this bond on the balance sheet as of December 31, 2017.2020.

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOWS FROM OPERATING ACTIVITIES

Cash provided by operating activities for 20172020 was $7,086,000 primarily$1,677,000 as a result of the following: The Company reported net income of $4,091,000, which included a gain from insurance recoveries of $141,000. Cash from operating activities$1,062,000 and was increased by 2020 noncash charges from depreciation of $2,529,000,$2,749,000, stock-based compensation expense of $352,000, and$469,000, stock-based employee match contribution of $487,000.$371,000, deferred income taxes of $2,943,000, and loss from equity investment of $1,478,000. Cash from operating activities in 2020 was reduced by a gain on transfer of land of $2,368,000. The Company also experienced an increase in payable to horsepersons of $1,817,000 in 2020 as compared to 2019. This was partially offset by a decrease in accrued wages and payroll taxes of $1,104,000, decrease in deferred revenue of $1,046,000, and increase in income taxes receivable of $4,153,000 in 2020 as compared to 2019. 

Cash provided by operating activities for 2019 was $6,738,000 as a result of net income of $2,718,000 and was increased by 2019 noncash charges from depreciation of $2,680,000, stock-based compensation expense of $235,000, stock-based employee match contribution of $689,000, and a loss on disposal of assets of $262,000. Cash from operating activities in 2019 was reduced by a gain on insurance recoveries of $199,000. The Company also experienced an increase in deferred revenue of $503,000. This was partially offset by a decline in deferred income taxes of $1,355,000 and an increase in restricted cash of $1,147,000.

Cash provided by operating activities for 2016 was $4,941,000 primarily as a result of the following: The Company reported net income of $4,196,000, which included a gain from insurance recoveries of $1,465,000 and gain on disposal of assets of $3,869,000. Cash from operating activities was increased by noncash charges from depreciation of $2,548,000, deferred income taxes of $2,015,000, stock-based compensation expense of $314,000, and stock-based employee match contribution of $371,000. The Company also experienced an increase in accounts payable and accrued wages and payroll taxes of $656,000 and Card Casino accrual of $875,000.$1,364,000 in 2019 as compared to 2018.

CASH FLOWS FROM INVESTING ACTIVITIES

Net cash used in investing activities for 20172020 of $3,782,000$758,000 was used primarily for building remodel projects.additions to land, buildings, and equipment, including the costs of TIF eligible public infrastructure improvements. This was partially offset by a decrease in related party receivables when an affiliate of the controlling member of the Doran Canterbury I and II joint ventures repaid the $2,940,000 promissory note in full on August 3, 2020 and repaid the $268,000 of costs for preliminary grading work on parcels of land the Company had designated for Doran Canterbury II.

Net cash used in investing activities for 20162019 of $3,817,000$13,037,000 was used primarily for buildingadditions to land, buildings, and equipment, including the costs of TIF eligible public infrastructure improvements, and purchasethe issuance of land. The capital purchases werea note receivable to a related party. This was partially offset by the proceeds received from insurance claimsa decrease in the amount of $592,000.notes receivable.

CASH FLOWS FROM FINANCING ACTIVITIES

Net cash used by financing activities for 20172020 was $715,000$374,000 and primarily consisted of $962,000$329,000 cash dividend paid to shareholders prior to the suspension of dividends by our Board of Directors on March 16, 2020. 

Net cash used by financing activities for 2019 was $978,000 and primarily consisted of $1,281,000 cash dividend paid to shareholders, partially offset by proceeds from issuance of common stock of $246,000.$383,000.

Net cash used by financing activities for 2016 was $3,100,000 and primarily consisted of $1,288,000 cash dividend paid to shareholders and principal payments on capital lease of $1,887,000, partially offset by proceeds received from issuance of common stock of $145,000.

CASH AND CAPITAL RESOURCES

At December 31, 2017,2020, we had cash, and cash equivalents, and restricted cash of $8,888,000$4,472,000 compared to $6,299,000$3,927,000 at December 31, 2016.2019. This $2,589,000$545,000 increase consisted of $7,086,000$1,677,000 of net cash provided by operating activities, partially offset by $3,782,000$758,000 of net cash used in investing activities and $715,000$374,000 of net cash used in financing activities.

On November 11, 2016, theThe Company entered intohas a general credit and security agreement with Bremer Bank, which provides a revolving credit line of up to $6,000,000.financial institution. This agreement was amended on September 30, 2017as of December 23, 2020 to extend the maturity date to September 30, 2018.February 28, 2021. The agreement was also 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. See footnote 14 for additional information. The line of credit is collateralized by all receivables, inventory, equipment, and general intangibles of the Company. The Company had no borrowings of $5,866,000 under the credit line during the year ended December 31, 2017.2020. As of December 31, 2020, the outstanding balance on the line of credit was $0. The credit agreement contains covenants requiring the Company to maintain certain financial ratios. The Company was in compliance with these requirements at all times throughout 2017.2020.

Our three largest sources of revenue: pari-mutuel wagering, Card Casino operations, and food and beverage, are all based on cash transactions. Consequently, we have significant inflows of cash on a daily basis. We designate cash balances that will be required to satisfy certain short-term liabilities such as progressive jackpots, the player pool, and amounts due horsemen for purses and awards as “restricted” as a separate balance sheet item.

The Company offers unbanked table games that refer to a wagering system or game where wagers “lost” or “won” by the host are accumulated into a “player pool” to enhance the total amount paid back to players in any other card game. The Company is required to return accumulated player pool funds to the players through giveaways, promotional items, prizes or by other means. The player pool liability was $1,711,000$576,000 and $1,214,000$640,000 at December 31, 20172020 and 2016,2019, respectively. Additionally, the table games jackpot pool was $663,000$664,000 and $377,000$670,000 at December 31, 2020 and 2019, respectively.

The Company also maintains a poker promotional pool where a portion of the poker "rake" is collected and accumulated into a promotional pool to enhance the total amount paid back to poker players. The Company is required to return accumulated poker promotional pool funds to the players through poker jackpots, giveaways, promotional items, prizes or by other means. The poker promotional pool liability was $631,000 and $175,000 at December 31, 20172020 and 2016,2019, respectively.

The Card Casino offers progressive jackpots for poker games. Amounts collected for these jackpot funds are accrued as liabilities until paid to winners. At December 31, 20172020 and 2016,2019, accrued jackpot funds totaled $58,000$186,000 and $75,000,$134,000, respectively. The MRC regulates the operation of the player pool and progressive jackpot pools. These liabilities have the potential for significant fluctuation on a daily basis.

All games in the Card Casino are played using chips. The value of chips issued and outstanding, referred to as the “outstanding chip liability,” was $425,000$253,000 and $457,000$435,000 at December 31, 20172020 and 2016,2019, respectively. This liability has the potential for significant fluctuation on a daily basis depending upon the demand for chip redemptions and sales.

Our second largest individual operating expense item is purse expense. Pursuant to an agreement with the MHBPA, we transferred into a trust account or paid directly to the MHBPA, approximately $5,716,000$2,885,000 and $6,512,000$6,314,000 in purse funds related to thoroughbred races for 20172020 and 2016,2019, respectively. Minnesota Statutes specifylaw provides that amounts transferred into this trust account are the property of the trust and not the Company. There were no unpaid purse fund obligations due to the MHBPA at December 31, 20172020 or 2016.2019.

The Company believes that unrestricted funds available in its cash accounts, amounts available under its revolving line of credit, along with funds generated from operations, will be sufficient to satisfy its liquidity and capital resource requirements for regular operations for the foreseeable future.

OFF-BALANCE SHEET ARRANGEMENTS

The Company currently has no off-balance sheet arrangements and has no intent to enter into any such agreements in the near future.

For a description of the nature and extent of related party transactions, see Note 13.

COMMITMENTS AND CONTRACTUAL OBLIGATIONS

In March 2014, the Company entered into a seven-year agreement with a new totalizator provider.provider, which was extended an additional year in 2020. Pursuant to the agreement, the vendor provides totalizator equipment and related software that records and processes all wagers and calculates odds and payoffs. The amounts charged to operations for totalizator expenses for the years ended December 31, 20172020 and 20162019 were $228,000$176,000 and $226,000,$233,000, respectively.

In August 2018, the Company entered into a Contract for Private Redevelopment with the City of Shakopee in connection with a Tax Increment Financing District (“TIF District”). The Company has entered into operating leases for rental of office equipment and for track equipmentis obligated to maintainconstruct certain public infrastructure improvements within the Racetrack. Amounts charged to operations under these agreements for 2017 and 2016 were $85,000 and $104,000, respectively. All these leases expire in 2018TIF District, and will be evaluatedreimbursed by the City of Shakopee by future tax increment revenue generated from the developed property. See Note 12 for renewal.a more detailed description of the agreement.

Subsequent to December 31, 2017,2020, there have been no material changes outside the ordinary course of business to our contractual obligations as set forth above. As of December 31, 2017,2020, we had no borrowings pursuant to our line of credit and were not party to capitalfinance lease obligations, significant purchase obligations or other long-term obligations, other than described above.

FORWARD-LOOKING STATEMENTS

From time to time,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 whichthat 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 whichthat 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: material fluctuations in attendance at the Racetrack; decline in interest in wagering on horse races at the Racetrack, at other tracks, or on unbanked card games offered at the Card Casino; competition from other venues offering unbanked card games or other forms of wagering; competition from other sports and entertainment options; increases in compensation and employee benefit costs; increases in the percentage of revenues allocated for purse fund payments; higher than expected expense related to new marketing initiatives; the impact of wagering products and technologies introduced by competitors, legislative and regulatory decisions and changes; the general health of the gaming sector, and other factors that are beyond our ability to control or predict and other risk factors described under “Risk Factors” above.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Pursuant to Item 3.05(e) of Regulation S-K, Canterbury Park Holding Company is not required to provide the information requested by this Item as it qualifies as a smaller reporting company.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

(a)          Financial Statements

The following financial statements of the Company are set forth on pages 3036 through 5360 of the Form 10-K: