UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED ~~September 30, 2022.~~March 31, 2023.

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

Commission File Number: 001-37858

CANTERBURY PARK HOLDING CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

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

	1100 Canterbury Road
	Shakopee, MN 55379

(Address of principal executive offices and zip code)

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes

☒

☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).

Yes

☒

☐

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

	Large accelerated filer	☐		Accelerated filer	☐
	Non-accelerated filer	☒		Smaller reporting company	☒	Emerging growth company	☐

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

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

Yes

☐

☒

The Company had ~~4,880,031~~4,910,408 shares of common stock, $.01 par value, outstanding as of ~~November 14, 2022.~~May 12, 2023.

	(Unaudited)				(Unaudited)
	*September 30,*		*December 31,*		*March 31,*		*December 31,*
	*2022*		*2021*		*2023*		*2022*
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	18,654,496	$	11,869,866	$	16,732,959	$	12,989,087
Restricted cash		3,555,359		3,728,887		3,620,234		3,116,916
Short-term investments						5,000,000		5,000,000
Accounts receivable, net of allowance of $19,250 for both periods		1,887,657		388,304		963,371		618,365
Employee retention credit receivable		6,103,236		6,314,468		2,505,601		6,103,236
Inventory		291,771		248,389		268,350		262,073
Prepaid expenses		486,554		580,799		620,665		557,520
Income taxes receivable and prepaid income taxes		2,550,987		1,264,056		1,738,364		2,052,364
Total current assets		33,530,060		24,394,769		31,449,544		30,699,561

LONG-TERM ASSETS
Deposits		27,000		29,500		27,000		27,000
Other prepaid expenses		41,774		66,632		21,034		41,774
TIF receivable		13,035,746		12,502,743		13,499,248		13,294,337
Related party receivable		2,323,840		2,178,799		2,601,176		2,555,320
Operating lease right-of-use assets		—		22,786
Equity investment		6,980,111		6,389,869		6,840,285		6,863,517
Land held for development		2,303,010		3,116,771		2,303,010		2,303,010
Property, plant, and equipment, net		34,508,390		34,360,586
Land, buildings, and equipment, net						37,011,180		36,491,660
Total long-term assets		59,219,871		58,667,686		62,302,933		61,576,618
TOTAL ASSETS	$	92,749,931	$	83,062,455	$	93,752,477	$	92,276,179

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Accounts payable	$	3,954,580	$	2,306,431	$	2,094,734	$	3,368,683
Card Casino accruals		2,696,641		3,257,277
Casino accruals						2,964,798		2,684,444
Accrued wages and payroll taxes		2,252,008		1,769,578		2,036,595		1,814,879
Cash dividend payable		341,082		—		346,052		341,602
Accrued property taxes		971,499		774,324		993,234		795,646
Deferred revenue		572,420		733,292		846,795		413,442
Payable to horsepersons		1,480,991		923,423		1,177,828		993,529
Current portion of finance lease obligations		25,865		27,062		11,994		18,973
Current portion of operating lease obligations		—		22,786
Total current liabilities		12,295,086		9,814,173		10,472,031		10,431,198

LONG-TERM LIABILITIES
Deferred income taxes		7,684,915		7,671,015		8,201,015		7,474,015
Investee losses in excess of equity investment		2,671,561		1,205,068		1,304,179		3,185,923
Finance lease obligations, net of current portion		—		18,973
Total long-term liabilities		10,356,476		8,895,056		9,505,194		10,659,938
TOTAL LIABILITIES		22,651,562		18,709,229		19,977,225		21,091,136

STOCKHOLDERS’ EQUITY
Common stock, $.01 par value, 10,000,000 shares authorized, 4,880,031 and 4,812,085 respectively, shares issued and outstanding		48,800		48,121
Common stock, $.01 par value, 10,000,000 shares authorized, 4,910,408 and 4,888,975 respectively, shares issued and outstanding						49,104		48,890
Additional paid-in capital		25,549,302		24,894,571		26,084,008		25,914,644
Retained earnings		44,500,267		39,410,534		47,642,140		45,221,509
Total stockholders’ equity		70,098,369		64,353,226		73,775,252		71,185,043
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	92,749,931	$	83,062,455	$	93,752,477	$	92,276,179

	*Three Months Ended September 30,*						*Nine Months Ended September 30,*						*Three Months Ended March 31,*
	*2022*			*2021*			*2022*			*2021*			*2023*			*2022*
OPERATING REVENUES:
Card Casino	$	10,039,527		$	10,452,206		$	30,394,387		$	27,207,088
Casino													$	9,714,355		$	10,360,427
Pari-mutuel		4,730,827			4,300,570			9,599,070			8,999,154			1,133,334			1,246,687
Food and beverage		3,913,320			3,475,027			7,150,715			5,119,588			1,469,831			1,088,722
Other		3,608,729			3,119,531			6,560,477			5,118,864			982,038			942,136
Total Net Revenues		22,292,403			21,347,334			53,704,649			46,444,694			13,299,558			13,637,972

OPERATING EXPENSES:
Purse expense		2,979,947			2,906,225			6,931,243			6,346,172			1,334,973			1,437,641
Minnesota Breeders’ Fund		323,156			318,938			874,464			808,096			210,905			229,057
Other pari-mutuel expenses		212,102			231,358			740,282			755,120			189,609			204,698
Salaries and benefits		6,860,590			6,399,950			18,881,258			16,054,814			5,874,805			5,507,957
Cost of food and beverage and other sales		1,365,748			1,178,346			2,771,338			1,938,677			585,052			497,053
Depreciation and amortization		747,267			730,164			2,234,790			2,113,917			735,261			745,949
Utilities		654,000			633,009			1,425,074			1,299,688			388,848			358,384
Advertising and marketing		1,567,163			1,095,788			2,739,638			1,525,844			298,507			301,432
Professional and contracted services		1,571,128			1,533,804			3,781,005			3,372,138			1,004,228			940,479
Other operating expenses		1,602,933			1,933,761			3,800,281			3,743,240			1,123,549			989,086
Total Operating Expenses		17,884,034			16,961,343			44,179,373			37,957,706			11,745,737			11,211,736
Gain on sale/transfer of land		-			-			12,151			263,581
INCOME FROM OPERATIONS		4,408,369			4,385,991			9,537,427			8,750,569			1,553,821			2,426,236
OTHER (LOSS) INCOME
Loss from equity investment		(500,143	)		(685,741	)		(1,274,058	)		(1,964,321	)
OTHER INCOME (LOSS)
Gain (Loss) from equity investment														1,858,512			(239,522	)
Interest income, net		222,671			180,357			620,811			524,757			399,175			192,840
Net Other Loss		(277,472	)		(505,384	)		(653,247	)		(1,439,564	)
Net Other Income (Loss)														2,257,687			(46,682	)
INCOME BEFORE INCOME TAXES		4,130,897			3,880,607			8,884,180			7,311,005			3,811,508			2,379,554
INCOME TAX EXPENSE		(1,209,777	)		(1,123,209	)		(2,434,078	)		(2,133,030	)		(1,041,000	)		(605,641	)
NET INCOME	$	2,921,120		$	2,757,398		$	6,450,102		$	5,177,975		$	2,770,508		$	1,773,913

Basic earnings per share	$	0.60		$	0.58		$	1.33		$	1.09		$	0.57		$	0.37
Diluted earnings per share	$	0.60		$	0.58		$	1.32		$	1.09		$	0.56		$	0.36
Weighted average basic shares outstanding		4,872,674			4,786,283			4,845,743			4,769,201			4,893,324			4,818,339
Weighted average diluted shares		4,901,189			4,786,283			4,879,803			4,769,203			4,923,132			4,864,247
Cash dividends declared per share	$	0.07		$	0.00		$	0.28		$	0.00		$	0.07		$	0.14

Number of

Common

Additional

Retained

Shares

Stock

Paid-in Capital

Earnings

Total

Balance at December 31, 2021
4,812,085 $ 48,121 $ 24,894,571 $ 39,410,534 $ 64,353,226

Stock-based compensation
— — 325,152 — 325,152
Dividend declared
— — — (1,360,369 ) (1,360,369 )
401(k) stock match
21,191 212 470,100 — 470,312
Issuance of deferred stock awards
41,816 418 (213,026 ) — (212,608 )
Shares issued under Employee Stock Purchase Plan
4,939 49 72,505 — 72,554
Net income
— — — 6,450,102 6,450,102

Balance at September 30, 2022
4,880,031 $ 48,800 $ 25,549,302 $ 44,500,267 $ 70,098,369

Number of

Common

Additional

Retained

Shares

Stock

Paid-in Capital

Earnings

Total

Balance at June 30, 2021
4,786,173 $ 47,861 $ 24,200,481 $ 30,032,958 $ 54,281,300

Exercise of stock options
— — — — —
Stock-based compensation
— — 130,623 — 130,623
Dividend distribution
— — — — —
401(k) stock match
10,080 101 173,476 — 173,577
Issuance of deferred stock awards
— — — — —
Shares issued under Employee Stock Purchase Plan
— — — — —
Net income
— — — 2,757,398 2,757,398

Balance at September 30, 2021
4,796,253 $ 47,962 $ 24,504,580 $ 32,790,356 $ 57,342,898

Number of

Common

Additional

Retained

Shares

Stock

Paid-in Capital

Earnings

Total

Balance at December 31, 2020
4,748,012 $ 47,480 $ 23,631,618 $ 27,614,087 $ 51,293,185

Exercise of stock options
3,654 36 48,562 — 48,598
Stock-based compensation
— — 400,215 — 400,215
Dividend distribution
— — — (1,706 ) (1,706 )
401(k) stock match
24,700 247 396,480 — 396,727
Issuance of deferred stock awards
14,597 146 (26,094 ) — (25,948 )
Shares issued under Employee Stock Purchase Plan
5,290 53 53,799 — 53,852
Net Income
— — — 5,177,975 5,177,975

Balance at September 30, 2021
4,796,253 $ 47,962 $ 24,504,580 $ 32,790,356 $ 57,342,898

	*Number of*		*Common*		*Additional*			*Retained*
	*Shares*		*Stock*		*Paid-in Capital*			*Earnings*			*Total*
Balance at December 31, 2021		4,812,085	$	48,121	$	24,894,571		$	39,410,534		$	64,353,226

Stock-based compensation		—		—		104,927			—			104,927
Dividend distribution		—		—		—			(675,872	)		(675,872	)
401(k) stock match		7,611		76		156,634			—			156,710
Issuance of deferred stock awards		19,601		196		(212,055	)		—			(211,859	)
Net income		—		—		—			1,773,913			1,773,913

Balance at March 31, 2022		4,839,297	$	48,393	$	24,944,077		$	40,508,575		$	65,501,045

	*Nine Months Ended September 30,*						*Three Months Ended March 31,*
	*2022*			*2021*			*2023*			*2022*
Operating Activities:
Net income	$	6,450,102		$	5,177,975		$	2,770,508		$	1,773,913
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		2,234,790			2,113,917			735,261			745,949
Stock-based compensation expense		325,152			400,215			129,477			104,927
Stock-based employee match contribution		470,312			396,727			206,806			156,710
Deferred income taxes		13,900			—			727,000			—
Gain on sale of land		(12,151	)		(263,581	)
Loss from equity investment		1,274,058			1,964,321
(Gain) Loss from equity investment								(1,858,512	)		239,522
Changes in operating assets and liabilities:
Accounts receivable		(1,499,353	)		(1,755,688	)		(345,006	)		(237,486	)
Employee retention credit		211,232			—
TIF receivable		(501,306	)		(461,844	)
Inventory and prepaid expenses		78,221			(80,753	)
Employee retention credit receivable								3,597,635			—
Increase in TIF receivable								(204,911	)		(165,266	)
Inventory, prepaid expenses and deposits								(48,682	)		(70,963	)
Income taxes receivable/payable and prepaid income taxes		(1,286,931	)		1,235,511			314,000			(212,228	)
Operating lease right-of-use assets		22,786			22,272
Operating lease liabilities		(22,786	)		(22,272	)
Accounts payable		1,595,149			580,871			(1,518,416	)		237,324
Deferred revenue		(160,872	)		408,358			433,353			212,386
Card Casino accruals		(560,636	)		542,250
Casino accruals								280,355			(201,651	)
Accrued wages and payroll taxes		482,430			902,895			221,716			5,249
Accrued property taxes		197,175			167,042			197,588			202,168
Payable to horsepersons		557,568			(1,336,933	)		184,299			146,264
Net cash provided by operating activities		9,868,841			9,991,283			5,822,471			2,936,818

Investing Activities:
Additions to land, buildings, and equipment		(2,663,322	)		(2,582,770	)		(1,010,314	)		(778,041	)
Proceeds from sale of land		1,159,640			2,288,952
Additions for TIF eligible improvements		(31,697	)		(8,907	)
Equity investment contributions		(397,807	)		—			—			(340,026	)
Increase in related party receivable		(145,041	)		(489,859	)		(45,856	)		(5,554	)
Net cash used in investing activities		(2,078,227	)		(792,584	)		(1,056,170	)		(1,123,621	)

Financing Activities:
Proceeds from issuance of common stock		72,554			102,450
Cash dividend paid to shareholders		(1,019,288	)		(1,706	)		(345,427	)		(336,198	)
Payments for taxes related to net share settlement of equity awards		(212,608	)		(25,948	)		(166,705	)		(211,859	)
Principal payments on finance lease		(20,170	)		(19,193	)		(6,979	)		(6,641	)
Net cash (used in) provided by financing activities		(1,179,512	)		55,603
Net cash used in financing activities								(519,111	)		(554,698	)

Net increase in cash, cash equivalents, and restricted cash		6,611,102			9,254,302			4,247,190			1,258,499

Cash, cash equivalents, and restricted cash at beginning of period		15,598,753			4,471,712			16,106,003			15,598,753

Cash, cash equivalents, and restricted cash at end of period	$	22,209,855		$	13,726,014		$	20,353,193		$	16,857,252

Business – Canterbury Park Holding Corporation’s (the “Company,” “we,” “our,” or “us”) Racetrack operations are conducted at facilities located in Shakopee, Minnesota, approximately 25 miles southwest of downtown Minneapolis. In May 1994, the Company commenced year-round horse racing simulcast operations and hosted the first annual live race meet during the summer of 1995. The Company’s live racing operations are a seasonal business, as it typically hosts live race meets each year from May until September. The Company earns additional pari-mutuel revenue by televising its live racing to out-of-state racetracks around the country. Canterbury Park’s ~~Card~~ Casino typically operates 24 hours a day, seven days a week and is limited by Minnesota State law to conducting card play on a maximum of 80 tables. The ~~Card~~ Casino currently offers a variety of poker and table games. The Company’s three largest sources of revenues are from ~~Card~~ Casino operations, pari-mutuel operations, and food and beverage sales. The Company also derives revenues from related services and activities, such as admissions, advertising signage, publication sales, and from other entertainment events and activities held at the Racetrack. Additionally, the Company is developing underutilized land surrounding the Racetrack in a project known as Canterbury Commons™, with approximately 140 acres originally designated as underutilized. The Company is pursuing several mixed-use development opportunities for this land, directly and through joint ventures.

Basis of Presentation and Preparation – The accompanying condensed consolidated financial statements include the accounts of the Company (Canterbury Park Holding Corporation and its direct and indirect subsidiaries Canterbury Park Entertainment, LLC; Canterbury Park Concessions, Inc.; and Canterbury Development, LLC). Intercompany accounts and transactions have been eliminated. The preparation of these condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in these condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates.

These condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual consolidated financial statements and the notes thereto for the fiscal year ended December 31, ~~2021,~~2022, included in its Annual Report on Form 10-K (the “~~2021~~2022 Form 10-K”).

The condensed consolidated balance sheets and the related condensed consolidated statements of operations, stockholders’ equity, and the cash flows for the periods ended ~~September 30, 2022~~March 31, 2023 and ~~2021~~2022 have been prepared by Company management. In the opinion of management, all adjustments (which include only normal recurring adjustments, except where noted) necessary to present fairly the financial position, results of operations, statement of stockholders’ equity, and cash flows at ~~September 30, 2022~~March 31, 2023 and ~~2021~~2022 and for the periods then ended have been made.

Summary of Significant Accounting Policies – A detailed description of our significant accounting policies can be found in our most recent Annual Report on the ~~2021~~2022 Form 10-K. There were no material changes in significant accounting policies during the three ~~and~~ ~~nine~~ months ended ~~September 30, 2022~~March 31, 2023.

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

Restricted Cash – Restricted cash represents refundable deposits and amounts due to horsemen for purses, stakes and awards, and amounts accumulated in card game progressive jackpot pools, the player pool and poker promotional fund to be used to repay card players in the form of promotions, giveaways, prizes, or by other means.

Employee Retention Credit ("ERC") – The Company qualified for federal government assistance through ERC provisions of the CARES Act passed in 2020, for the 2020 second, third, and fourth quarters, as well as the 2021 first and second quarters. The purpose of the ERC is to encourage employers to keep employees on the payroll, even if they are not working during the covered period because of the coronavirus outbreak. We recognize amounts to be refundable as tax credits if there is a reasonable assurance of compliance with grant conditions and receipt of credits. As of ~~September 30,~~March 31, 2023 and December 31, 2022, the Company's expected one-time refunds totaling $2,505,601 and $6,103,236, respectively, are included on the Condensed Consolidated Balance Sheets as an employee retention credit receivable. The Company recorded ~~this amount~~$6,103,236 on the Consolidated Statements of Operations as a credit to salaries and benefits expense in the 2021 fourth quarter.

Deferred Revenue – Deferred revenue includes advance sales related to racing, events and corporate partnerships. Revenue from these advance billings is recognized when the related event occurs or services have been performed. ~~Deferred revenue also includes advanced Cooperative Marketing Agreement (“CMA”) promotional funds, for which revenue is recognized when expenses are incurred.~~

Payable to Horsepersons - The Minnesota Pari-mutuel Horse Racing Act requires the Company to segregate a portion of funds (recorded as purse expense in the statements of operations) received from ~~Card~~ Casino operations and wagering on simulcast and live horse races, for future payment as purses for live horse races or other uses of the horsepersons’ association. Pursuant to an agreement with the Minnesota Horsemen’s Benevolent and Protective Association (“MHBPA”), the Company transferred into a trust account or paid directly to the MHBPA, $~~5,877,000~~1,234,000 and ~~$6,566,000~~$1,298,000 for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021~~2022, respectively, related to thoroughbred races. Minnesota Statutes provide that amounts transferred into the trust account are the property of the trust and not of the Company, and therefore these amounts are not recorded on the Company’s Condensed Consolidated Balance Sheet.

Revenue Recognition – The Company’s primary revenues with customers consist of ~~Card~~ Casino operations, pari-mutuel wagering on simulcast and live horse races, and food and beverage transactions. We determine revenue recognition through the following steps:

The transaction price for a ~~Card~~ Casino contract is a set percentage of wagers and is recognized at the time that the wagering process is complete. The transaction price for pari-mutuel wagering is the commission received on a wager, exclusive of any track fees and is recognized upon occurrence of the live race that is presented for wagering and after that live race is made official by the respective state’s racing regulatory body. The transaction price for food and beverage contracts is the net amount collected from the customer for these goods. Food and beverage services have been determined to be separate, stand-alone performance obligations and the transaction price is recorded as revenue as the good is transferred to the customer when delivery is made.

Contracts for ~~Card~~ Casino operations and pari-mutuel wagering involve two performance obligations for those customers earning points under the Company’s loyalty program and a single performance obligation for customers who do not participate in the program. The Company applies a practical expedient by accounting for its gaming contracts on a portfolio basis as these wagers have similar characteristics and the Company reasonably expects the effects on the financial statements of applying the revenue recognition guidance to the portfolio would not differ materially from what would result if the guidance were applied on an individual wagering contract. For purposes of allocating the transaction price in a wagering contract between the wagering performance obligation and the obligation associated with the loyalty points earned, the Company allocates an amount to the loyalty point contract liability based on the stand-alone redemption value of the points earned, which is determined by the value of a point that can be redeemed for a cash voucher, food and beverage voucher, racing admission, valet parking, or racing forms. Based on past experience, the majority of customers redeem their points for cash vouchers. Therefore, there are no further performance obligations by the Company.

We have two general types of liabilities related to contracts with customers: (1) our MVP Loyalty Program and (2) outstanding chip liability. These are included in the line item ~~Card~~ Casino accruals on the consolidated balance sheet. We defer the full retail value of these complimentary reward items until the future revenue transaction occurs.

The Company offers certain promotional allowances at no charge to patrons who participate in its player rewards program.

We evaluate our on-track revenue, export revenue (as described below), and import revenue (as described below) contracts to determine whether we are acting as the principal or as the agent when providing services, to determine if we should report revenue on a gross or net basis. An entity acts as a principal if it controls a specified service before that service is transferred to a customer.

For on-track revenue and “import revenue,” that is revenue we generate for racing held elsewhere that our patrons wager on, we are entitled to retain a commission for providing a wagering service to our customers. For these arrangements, we are the principal because we control the wagering service; therefore, any charges, including simulcast fees, we incur for delivering the wagering service are presented as operating expenses.

For “export revenue,” when the wagering occurs outside our premises, our customer is the third-party wagering site such as a racetrack, Off Track Betting (“OTB”), or advance deposit wagering (“ADW”) provider. Therefore, the revenue we recognize for export revenue is the simulcast host fee we earn for exporting our racing signal to the third-party wagering site.

~~For the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2021,~~ ~~the Company recorded as other revenue $515,000 of COVID-~~19 relief grants, including a lump sum grant of $500,000 from the Convention Center Relief Grant Program, which is overseen by the Minnesota Department of Employment and Economic Development. There were no grants received in the ~~nine~~ ~~months ended~~ ~~September 30, 2022.~~

The Long Term Incentive Plan (the “LTI Plan”) authorizes the grant of Long Term Incentive Awards that provide an opportunity to Named Executive Officers (“NEOs”) and other Senior Executives to receive a payment in cash or shares of the Company’s common stock to the extent of achievement at the end of a period greater than one year (the “Performance Period”) as compared to Performance Goals established at the beginning of the Performance Period. Currently, there are no awards outstanding as of ~~September 30, 2022.~~March 31, 2023. Beginning in 2020, and as a result of the COVID-19 Pandemic, the Company temporarily suspended the granting of performance awards under its LTI Plan, and instead granted deferred stock awards designed to retain NEOs and other Senior Executives in lieu of LTI Plan awards for 2020, 2021, 2022and ~~2022.~~2023.

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

The Company’s Stock Plan currently authorizes annual grants of restricted stock, deferred stock, stock options, or any combination of the three, to non-employee members of the Board of Directors at the time of the Company’s annual shareholders’ meeting as determined by the Board prior to each such meeting. Deferred stock awards represent the right to receive shares of the Company's common stock upon vesting. Options granted under the Plan generally expire 10 years after the grant date. Restricted stock and deferred stock grants to non-employee directors generally vest 100% one year after the date of the annual meeting at which they were granted, are subject to restrictions on resale for an additional year, and are subject to forfeiture if a board member terminates his or her board service prior to the shares vesting. The unvested deferred stock awards outstanding as of ~~September 30, 2022~~March 31, 2023 to our non-employee directors consisted of ~~5,512~~7,230 shares with a weighted average fair value per share of ~~$21.76.~~$22.12. There were no unvested restricted stock or stock options outstanding at ~~September 30, 2022~~March 31, 2023.

The Company's Stock Plan permits its Compensation Committee to grant stock-based awards, including deferred stock awards, to key employees and non-employee directors. The Company has made deferred stock grants that vest over one to four years.

During the ~~nine~~three months ended ~~September 30,~~March 31, 2023, the Company granted employees deferred stock awards totaling 19,020 shares of common stock, with a vesting term of approximately four years and a fair value of $25.52 per share. During the three months ended March 31, 2022, the Company granted employees deferred stock awards totaling 18,600 shares of common stock, with a vesting term of approximately four years and a fair value of $21.62 per share. ~~During the~~ ~~nine~~ ~~months ended~~ ~~September~~ ~~30,~~~~2021,~~ ~~the Company granted employees deferred stock awards totaling 27,900 shares of common stock, with a vesting term of approximately~~ ~~three~~ ~~years and a fair value of $13.33 per share.~~

Employee deferred stock transactions during the ~~nine~~three months ended ~~September~~ March 31, 2023~~30,~~~~2022~~ are summarized as follows:

Stock-based compensation expense related to the LTI Plan, deferred stock awards, and restricted stock awards is included on the Condensed Consolidated Statements of Operations and totaled approximately ~~$325,000~~$118,000 and ~~$400,000~~$105,000 for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021~~2022. At ~~September~~March 31, 2023, ~~30,~~~~2022,~~there was approximately ~~$555,000~~$801,000 of total unrecognized stock-based compensation expense related to unvested employee and board of director deferred stock awards that is expected to be recognized over a period of approximately ~~3.5~~4.0 years.

The following is a reconciliation of the numerator and denominator of the earnings per common share computations for the three ~~and~~ ~~nine~~months ended ~~September 30, 2022~~March 31, 2023 and ~~2021~~2022:

The Company has a general credit and security agreement with a financial institution, which provides a revolving credit line up to $10,000,000 and allows for letters of credit in the aggregate amount of up to $2,000,000 to be issued under the credit agreement. The line of credit is collateralized by all receivables, inventory, equipment, and general intangibles of the Company. The line of credit also includes collateral in the form of a Mortgage, Security Agreement, Fixture Financing Statement and Assignment of Leases and Rents. The maturity date of the revolving line of credit is January 31, 2024. As of ~~September 30, 2022~~March 31, 2023, the outstanding balance on the line of credit was $0.

The Company has four reportable operating segments: horse racing, ~~Card~~ Casino, food and beverage, and development. The horse racing segment primarily represents simulcast and live horse racing operations. The ~~Card~~ Casino segment represents operations of Canterbury Park’s ~~Card~~ Casino. The food and beverage segment represents food and beverage operations provided during simulcast and live racing, in the ~~Card~~ Casino, and during special events. The development segment represents our real estate development operations. The Company’s reportable operating segments are strategic business units that offer different products and services. They are managed separately because the segments differ in the nature of the products and services provided as well as process to produce those products and services. The Minnesota Racing Commission regulates the horse racing and ~~Card~~ Casino segments.

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

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

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

~~The Company entered into a Cooperative Marketing Agreement (the “CMA”) with the Shakopee Mdewakanton Sioux Community (“SMSC”), which became effective~~ ~~March~~ 4,~~2012,~~ ~~was amended in the~~ ~~first~~ ~~quarter of each of~~ ~~2015,~~~~2016,~~~~2017,~~~~2018,~~ ~~and in~~ ~~June 2020 (~~~~as described below in Note~~ 7~~) and is scheduled to terminate on~~ ~~December~~ ~~31,~~~~2022.~~ The CMA contains certain covenants that, if breached, would trigger an obligation to repay a specified amount related to such covenant. At this time, management believes it unlikely that any breach of a covenant will occur, and that therefore the possibility that the Company will be required to pay the specified amount related to any covenant breach is remote.

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

The Company is periodically involved in various claims and legal actions arising in the normal course of business. Management believes that the resolution of any pending claims and legal actions at ~~September 30, 2022~~March 31, 2023 and as of the date of this report, will not have a material impact on the Company’s consolidated financial positions or results of operations.

In August 2018, the Company entered into a Contract for Private Redevelopment with the City of Shakopee in connection with a Tax Increment Financing District (“TIF District”). On January 25, 2022, the Company received the fully executed First Amendment to the Contract for Redevelopment among the Master Developer, the City and the Authority, which is effective as of September 7, 2021. Under this contract, the Company is obligated to construct certain infrastructure improvements within the TIF District, and will be reimbursed for the cost of TIF eligible improvements by the City of Shakopee by future tax increment revenue generated from the developed property, up to specified maximum amounts. The total amount of funding that Canterbury will be paid as reimbursement under the TIF program for these improvements is not guaranteed and will depend on future tax revenues generated from the developed property.

~~As discussed above in Note~~ 6, onOn March 4, 2012, the Company entered into ~~the CMA~~a Cooperative Marketing Agreement (the "CMA") with the ~~SMSC.~~Shakopee Mdewakanton Sioux Community ("SMSC"). The primary purpose of the CMA iswas to increase purses paid during live horse racing at Canterbury Park’s Racetrack in order to strengthen Minnesota’s thoroughbred and quarter horse industry. Under the CMA, as amended, this iswas achieved through “Purse Enhancement Payments to Horsemen” paid directly to the MHBPA. These payments ~~have~~had no direct impact on the Company’s consolidated financial statements or operations.

Under the CMA, as amended, SMSC also agreed to make “Marketing Payments” to the Company relating to joint marketing efforts for the mutual benefit of the Company and SMSC, including signage, joint promotions, player benefits, and events.

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

The amounts earned from the marketing payments ~~are~~were recorded as a component of other revenue and the related expenses ~~are~~were recorded as a component of advertising and marketing expense and depreciation in the Company’s condensed consolidated statements of operations. For the three ~~and~~ ~~nine~~months ended ~~September~~March 31, 2022, ~~30,~~~~2022,~~the Company recorded ~~$977,000 and $1,764,000~~$112,000 in other revenue, incurred ~~$916,000, and $1,603,000~~$65,000 in advertising and marketing expense, and incurred ~~$61,000 and $161,000~~$47,000 in depreciation related to the SMSC marketing funds. ~~For~~The excess of amounts received over revenue is reflected as deferred revenue on the ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September~~ ~~30,~~~~2021,~~ the Company recorded $1,003,000 and $1,415,000 in other revenue, incurred $962,000, and $1,326,000 in advertising and marketing expense, and incurred $41,000 and $117,000 in depreciation related to the SMSC marketing funds.Company’s consolidated balance sheets.

Under the CMA, the Company agreed for the term of the CMA ~~which is currently scheduled to terminate on~~ ~~December~~ ~~31,~~~~2022,~~ that it would not promote or lobby the Minnesota legislature for expanded gambling authority and will support the SMSC’s lobbying efforts against expanding gambling authority.

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

On September 27, 2018, Canterbury Development LLC contributed approximately 13 acres of land as its equity contribution in the Doran Canterbury I joint venture and became a 27.4% equity member. On December 20, 2018, financing for Doran Canterbury I was secured. As the Company is able to assert significant influence, but not control, over Doran Canterbury I’s operational and financial policies, the Company accounts for the joint venture as an equity method investment. For the three ~~and~~ ~~nine~~months ended ~~September~~March 31, 2023 ~~30,~~and 2022, the Company recorded ~~$455,000~~income of $1,882,000 and ~~$1,466,000,~~a loss of $515,000, respectively, ~~in loss~~ on equity method ~~investments~~investment related to this joint venture. ~~For~~The increased income for the ~~three~~first ~~and~~quarter of ~~nine~~2023 ~~months ended~~ ~~September~~ ~~30,~~~~2021,~~ ~~the Company recorded $670,000 and $1,956,000, respectively, in loss on equity method investments~~ related to this joint ~~venture.~~venture is due to the receipt of insurance proceeds related to an outstanding claim. In accordance with U.S. GAAP, since we are committed to provide future capital contributions to Doran Canterbury I, we also present as a liability in the accompanying Condensed Consolidated Balance Sheets the net balance recorded for our share of Doran Canterbury I's losses in excess of the amount funded into Doran Canterbury I, which was ~~$2,672,000~~ $1,304,000 and ~~$1,205,000~~$3,186,000 at ~~September~~March 31, 2023 ~~30,~~~~2022~~and December 31, ~~2021,~~2022, respectively.

In connection with the execution of the Amended Doran Canterbury I Agreement, on August 18, 2018, Canterbury Development LLC entered into an Operating Agreement with Doran Shakopee, LLC as the two members of a Minnesota limited liability company entitled Doran Canterbury II, LLC (“Doran Canterbury II”). Under the Doran Canterbury II Operating Agreement, Doran Canterbury II will pursue development of Phase II of the Project. Phase II will include an additional 300 apartment units. Canterbury Development’s equity contribution to Doran Canterbury II for Phase II was approximately 10 acres of land, which were contributed to Doran Canterbury II on September 30, 2020. In connection with its contribution, Canterbury Development became a 27.4% equity member in Doran Canterbury II with Doran owning the remaining 72.6%. As the Company is able to assert significant influence, but not control, over Doran Canterbury II’s operational and financial policies, the Company accounts for the joint venture as an equity method investment. As of ~~September~~March 31, 2023, ~~30,~~~~2022,~~the proportionate share of Doran Canterbury II's earnings was immaterial. During the three ~~and~~ ~~nine~~months ended ~~September~~March 31, 2023 ~~30,~~and 2022, the Company contributed approximately $0 and ~~$398,000~~$340,000, respectively, as an equity investment contribution in Doran Canterbury II.

On June 16, 2020, Canterbury Development LLC, entered into an Operating Agreement with an affiliate of Greystone Construction, as the two members of a Minnesota limited liability company named Canterbury DBSV Development, LLC ("Canterbury DBSV"). Canterbury DBSV was formed as part of a joint venture between Greystone and Canterbury Development LLC for a multi-use development on the 13-acre land parcel located on the southwest portion of the Company’s racetrack. Canterbury Development LLC's equity contribution to Canterbury DBSV was approximately 13 acres of land, which were contributed to Canterbury DBSV on July 1, 2020. In connection with its contribution, Canterbury Development became a 61.87% equity member in Canterbury DBSV. As the Company is able to assert significant influence, but not control, over Canterbury DBSV’s operational and financial policies, the Company accounts for the joint venture as an equity method investment. For the three ~~and~~ ~~nine~~months ended ~~September~~March 31, 2023 ~~30,~~and 2022, the Company recorded a loss of ~~$45,000~~$25,000 and income of ~~$194,000,~~$276,000, respectively, on equity investment related to this joint venture.

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

On August 8, 2018, the City Council of the City of Shakopee, Minnesota approved a Contract for Private Redevelopment (“Redevelopment Agreement”) between the City of Shakopee Economic Development Authority (“Shakopee EDA”) and Canterbury Park Holding Corporation and its subsidiary Canterbury Development LLC in connection with a Tax Increment Financing District (“TIF District”) that the City had approved in April 2018. The City of Shakopee, the Shakopee EDA and the Company entered into the Redevelopment Agreement on August 10, 2018.

Under the Original Agreement, the Company agreed to undertake a number of specific infrastructure improvements within the TIF District, and the City agreed that a portion of the tax revenue generated from the developed property will be paid to the Company to reimburse it for its expense in constructing these improvements. Under the Original Agreement, the total estimated cost of TIF eligible improvements to be borne by the Company was $23,336,500.

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

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

As of ~~September~~March 31, 2023, ~~30,~~~~2022,~~the Company recorded a TIF receivable of approximately ~~$13,036,000,~~$13,499,000, which represents ~~$11,211,000~~$11,341,000 of principal and ~~$1,825,000~~$2,158,000 of interest. Management believes future tax revenues generated from current development activity will exceed the Company's development costs and thus, management believes no allowance related to this receivable is necessary. As of December 31, ~~2021,~~2022, the Company recorded a TIF receivable of approximately ~~$12,503,000,~~$13,294,000, which represented ~~$11,180,000~~$11,301,000 of principal and ~~$1,323,000~~$1,993,000 of interest.

The Company expects to finance its improvements under the Redevelopment Agreement with funds from its current operating resources and existing credit facility and, potentially, third-party financing sources.

On ~~April 7, 2020,~~ ~~the Company entered into an agreement to sell approximately 11.3 acres of land on the west side of the Racetrack to a~~ ~~third~~ ~~party for total consideration of approximately $2,400,000. The Company closed on the~~ ~~first~~ ~~phase of this transaction in~~ ~~April 2021,~~ ~~which totaled approximately 7.4 acres of land for proceeds of approximately $1,200,000. On~~ ~~May 20, 2022,~~ ~~the Company closed on the~~ ~~second~~ ~~phase of this transaction, which totaled approximately 4 acres of land for proceeds of approximately $1,200,000.~~

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

As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date to determine the present value of lease payments. We recognize expense for operating leases on a straight-line basis over the lease term. The Company’s lease agreements do not contain any variable lease payments, material residual value guarantees or any restrictive covenants.

Lease costs related to operating leases were ~~$22,855 and $22,339~~$0 for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021~~2022. as the Company has no operating leases. The total lease expenses for leases with a term of twelve months or less for which the Company elected not to recognize a lease asset or liability was ~~$411,354~~$110,309 and ~~$350,960~~$108,639 for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021~~2022, respectively.

Lease costs included in depreciation and amortization related to our finance leases were ~~$18,708~~$6,715 and ~~$11,898~~$6,471 for the ~~nine~~three months ended ~~September~~March 31, 2023 ~~30,~~~~2022~~and ~~2021,~~2022, respectively. Interest expense related to our finance leases was immaterial.

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

1 – Finance lease assets are net of accumulated amortization of ~~$99,694~~$113,565 and ~~$79,524~~$106,586 as of ~~September~~March 31, 2023 ~~30,~~~~2022~~and December 31, ~~2021,~~2022, respectively.

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

The maturity of operating leases and finance leases as of ~~September 30, 2022~~March 31, 2023 are as follows:

InSince 2019, ~~2020,~~~~2021,~~ ~~and through the~~ ~~first~~~~nine~~ ~~months of~~ ~~2022,~~the Company has made member loans to the Doran Canterbury I and II joint ventures totaling approximately ~~$2,096,000.~~$2,271,000 and $2,269,000 as of March 31, 2023 and December 31, 2022, respectively. These member loans bear interest at the rate equal to the Prime Rate plus two percent per annum, and accrued interest totaled ~~$226,000~~$329,000 and $275,000 as of ~~September~~March 31, 2023 and ~~30,~~December 31, 2022, ~~2022.~~respectively. The Company expects to be fully reimbursed for these member loans as and when the joint ventures achieve positive cash flow.

The Company has also recorded related party receivables of approximately $2,000 and $11,000 as of ~~September 30,~~March 31, 2023 and December 31, 2022, respectively, for various related costs incurred by the Company. The Company expects to be fully reimbursed for these costs by the related parties in ~~2022.~~2023.

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

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

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

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

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

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

As a result of the COVID-19 Pandemic, the Company temporary suspended all Card Casino, simulcast, food and beverage, and special events operations at Canterbury Park from March 16, 2020 through June 9, 2020 and from November 21, 2020 through January 10, 2021. Canterbury Park re-opened on January 11, 2021 with a capacity limitation of 150 guests per designated area; the capacity limitation was subsequently increased on February 13, 2021 to 250 guests per designated area.

In connection with reopening our pari-mutuel, food and beverage, and Card Casino operations, we adhered to social distancing requirements, which included reduced seating at table games and poker and capacity limitations to follow Minnesota state guidelines. Effective May 28, 2021, all capacity limits, restrictions on large gatherings, and other restrictions, which had been implemented in response to the impact of the COVID-19 Pandemic, were lifted and our Racetrack began operating operated under pre-pandemic guidelines. Our Card Casino also began operating without capacity restrictions effective May 28, 2021, but we maintained and intend to maintain certain operational changes and improvements initiated in 2020 in response to the COVID-19 Pandemic.

The disruptions arising from the COVID-19 Pandemic had a negative impact on the Company's financial condition and operations for the first half of 2021. However, the Company's revenues began to recover starting in the 2021 second quarter. The strong recovery we experienced in 2021 was a result of increased consumer confidence, reduction in capacity restrictions, and faster than anticipated vaccine roll-outs, as well as the success of initiatives begun during the COVID-19 Pandemic to increase attendance at live racing and other events, enhance the player experience, and recruit higher value players. Although the Company has currently appeared to recover from the effects of the COVID-19 Pandemic, the pandemic has caused other global issues that could have a future adverse effect on the Company. Specifically, these issues relate to supply chain issues and labor shortages, which have had some negative impact on our business and may continue to have an impact in the near future. Additionally, the spread of any new COVID-19 variants has had and may in the future have an adverse effect on the Company's financial condition and results. As the impact of the COVID-19 Pandemic on the economy and our operations evolves, we will continue to assess the impact on the Company and respond accordingly.

Operations Review for the Three ~~and Nine~~ Months Ended ~~September 30, 2022:~~March 31, 2023:

Total net revenues for the three months ended ~~September 30, 2022~~March 31, 2023 were ~~$22,292,000, an increase~~$13,300,000, a decrease of ~~$945,000,~~$338,000, or ~~4.4%~~2.5%, compared to total net revenues of ~~$21,347,000~~$13,638,000 for the three months ended ~~September 30, 2021~~March 31, 2022. Total net revenues for the nine months ended September 30, 2022 were $53,705,000, an increase of $7,260,000, or 15.6%, compared to total net revenues of $46,445,000 for the nine months ended September 30, 2021. See below for a further discussion of our sources of revenues.

Total pari-mutuel revenue ~~increased $430,000,~~decreased $114,000, or ~~10.0%, and $600,000. or 6.7%~~9.1%, for the three ~~and nine~~ months ended ~~September 30, 2022, respectively,~~March 31, 2023 compared to the same ~~respective periods~~period in ~~2021.~~2022. The ~~increase~~decrease in pari-mutuel revenues is primarily due to ~~increased live and~~decreased simulcast handle as well as lower source market fees paid by ADW companies for wagers made by Minnesota residents on out-of-state handle on our live racing product along with an overall increase in business levels, including the fact that we have returned to normalized operations and full capacity as compared to the closure of our operations for 10 days in January 2021 and operating at a limited capacity upon reopening until May 2021.races.

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

As indicated by the table above, total ~~Card~~ Casino revenue decreased ~~$412,000,~~$646,000, or ~~3.9%~~6.2%, ~~and increased $3,187,000, or 11.7%~~ for the three ~~and nine~~ months ended ~~September 30, 2022, respectively,~~March 31, 2023 compared to the same ~~respective periods~~period in ~~2021.~~2022. The decrease in ~~Card~~ Casino revenue for the three months ended ~~September 30, 2022~~March 31, 2023 is primarily due to ~~a lower collection revenue rate~~decreased attendance, potentially related to inclement weather experienced in ~~table games. The increase in Card Casino revenue for~~ the first ~~nine~~three months ~~ended September 30, 2022 is primarily due to increased visitation as~~of 2023, along with a decrease in consumer discretionary spending with our business recovers from the effects of the COVID-19 Pandemic described above, as well as increased table games drop from the successful marketing efforts to recruit higher value players. The increase is also due to an increase in revenue generated from poker tournaments in the 2022 first nine months.current inflationary environment.

Food and beverage revenue increased ~~$438,000,~~$381,000, or ~~12.6%, and $2,031,000, or 39.7%~~35.0%, for the three ~~and nine~~ months ended ~~September 30, 2022, respectively,~~March 31, 2023 compared to the same ~~respective periods~~period in ~~2021.~~2022. The ~~increases are~~increase is primarily due to increased visitation ~~and live racing attendance as our business recovers from~~for large scale special events, including the ~~effects of~~Snocross National Championship Series, that took place in the ~~COVID-19 Pandemic described above.~~first quarter. Furthermore, the ~~increase is~~Company also ~~attributable~~increased prices related to ~~hosting larger scale events in the 2022 first nine months, which is more consistent with our pre-COVID~~ food and beverage ~~operations.~~ sales to offset rising inflationary costs.

Other revenue increased ~~$489,000,~~$40,000, or ~~15.7%~~4.2%, ~~and $1,442,000, or 28.2%~~ for the three ~~and nine~~ months ended September 30, 2022, respectively, compared to the same respective periods in 2021. The increases are primarily due to increased visitation and live racing attendance as our business recovers from the effects of the COVID-19 Pandemic described above as well as hosting larger scale events. Additionally, we recognized increased advertising revenue for marketing initiatives related to the Cooperative Marketing Agreement (the “CMA”) in the nine months ended September 30, 2022March 31, 2023 compared to the same period in ~~2021, which saw capacity constraints and various restrictions continue through May 28, 2021.~~2022. The increase is ~~partially offset by the Company receiving $515,000~~primarily due to increased admission revenues for special events mentioned above as well as an increase in ~~COVID-19 relief grants in the 2021 first quarter.~~ corporate sponsorship revenues.

Total operating expenses increased ~~$923,000,~~$534,000, or ~~5.4%, and $6,222,000 or 16.4%~~4.8%, for the three ~~and nine~~ months ended ~~September 30, 2022, respectively,~~March 31, 2023 compared to the same ~~respective periods~~period in 2021. The increases reflect increases in nearly all of the Company's operating expenses, primarily as a result of the return to normalized operations in the three and nine months ending September 30, 2022 as compared to the prior year which included a temporary suspension of operations through January 10, 2021 and the limitations placed on operations upon reopening until May 2021.2022. The following paragraphs provide further detail regarding certain operating expenses.

Purse expense ~~increased $74,000,~~decreased $103,000, or ~~2.5%~~7.1%, ~~and $585,000, or 9.2%~~ for the three ~~and nine~~ months ended ~~September 30, 2022, respectively,~~March 31, 2023 compared to the same ~~respective periods~~period in ~~2021.~~2022. The ~~increases are~~decrease is primarily due to the overall ~~increases~~decreases in pari-mutuel and ~~Card~~ Casino revenues.

Salaries and benefits increased ~~$461,000,~~$367,000, or ~~7.2%, and $2,826,000, or 17.6%~~6.7%, for the three ~~and nine~~ months ended ~~September 30, 2022, respectively,~~March 31, 2023 compared to the same ~~respective periods~~period in ~~2021.~~2022. The ~~increases are~~increase is primarily due to an increase in the number of personnel to support our resumption of normalized operations in the three and nine months ended September 30, 2022 as well as the fact that the majority of employees were placed on an unpaid furlough during the first week of 2021. Additionally, to attract and retain front-line workers and get closer to full staffing levels, we have increased our wage-rate structure for seasonal as well as year-round ~~employees.~~employees to attract and retain front-line workers. The Company also increased its 401(k) match percentage, effective January 1, 2023.

Cost of food and beverage sales increased ~~$187,000,~~$88,000, or ~~15.9%, and $832,000, or 42.9%~~17.7%, for the three ~~and nine~~ months ended ~~September 30, 2022,~~ ~~respectively,~~March 31, 2023 compared to the same ~~respective~~ ~~periods~~period in ~~2021.~~2022. The ~~increases are~~increase is primarily due to the increased food and beverage revenue noted above as well as inflation related increases to our cost of goods.

~~Advertising and marketing~~Other operating expenses increased ~~$471,000,~~$134,000, or ~~43.0%~~13.6%, ~~and $1,214,000, or 79.5%,~~ for the three ~~and nine~~ months ended September 30, 2022, respectively, compared to the same respective periods in 2021. The increases are primarily due to an increase in advertising spend for the first nine months of 2022 to be more consistent with historic levels and to target higher value players and higher visitation. Additionally, we incurred additional advertising expenses for marketing initiatives related to the CMA in the nine months ended September 30, 2022 March 31, 2023 compared to the same period in ~~2021, which saw capacity constraints and various restrictions continue through May 28, 2021.~~2022

~~Other operating expenses decreased $331,000, or 17.1%, and increased $57,000 or 1.5%, for the three and nine months ended September 30, 2022 compared to the same periods in 2021.~~. The ~~decrease~~increase for the three months ended ~~September 30, 2022~~March 31, 2023 is primarily due to increased recruiting expenses and Horseracing Integrity and Safety Authority ("HISA") related costs as well as the timing of events as more events occurred throughout the year to date rather than a more condensed schedule of special events in the same period 2021 due to the lifting of pandemic related restrictions in May 2021. miscellaneous repairs and maintenance year-over-year.

Other income for the three months ended March 31, 2023 was $2,258,000, an increase of $2,304,000, compared to a net other loss of $47,000 for the three months ended March 31, 2022 ~~second quarter,~~. The increase for the three months ended March 31, 2023 is primarily due to insurance proceeds received from an equity investment related to an outstanding claim by the Doran Canterbury I, LLC joint venture against a third party. Also contributing to the increase was an increase in interest income due to the Company ~~recorded a gain on sale~~transferring available cash into certificates of ~~land of $12,000~~deposit as ~~a result of the sale of approximately 4 acres of land for approximately $1,200,000 in gross proceeds.~~well as increasing interest rates related to our member loans.

The Company recorded a provision for ~~income~~income taxes of ~~$1,210,000~~$1,041,000 and ~~$1,123,000~~$606,000 for ~~the~~the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively. The Company recorded a provision for income taxes of $2,434,000 and $2,133,000 for the nine months ended September 30, 2022 and 2021,~~ respectively. We record our quarterly provision for income taxes based on our estimated annual effective tax rate for the year. The increase in our tax expense for ~~the three months ended September 30,~~2023 compared to 2022 is ~~primarily~~ due to aan increase in income before taxes from operations. Our effective tax rate was ~~29.3%~~27.3% and ~~27.4%~~25.5% for ~~the three~~2023 and ~~nine months ended September 30, 2022. respectively. Our effective tax rate was 28.9% and 29.2% for the three and nine months ended September 30, 2021,~~2022, respectively. The ~~small fluctuations~~increase in the effective tax ~~rates are~~rate is primarily the result of favorable discrete items that occurred during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022.

The Company recorded ~~net~~net income of ~~$2,921,000~~$2,771,000 and ~~$6,450,000~~$1,774,000 for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~respectively. The Company recorded net income of $2,757,000 and $5,178,000 for the three and nine months ended September 30, 2021,~~ respectively.

To supplement our financial statements, we also provide investors with information about our EBITDA and Adjusted EBITDA, each of which is a non-GAAP measure, which excludes certain items from net income, a GAAP measure. See the table below, which presents reconciliations of these measures to the GAAP equivalent financial measures. We define EBITDA as earnings before interest, income tax expense, and depreciation and amortization. We also compute Adjusted EBITDA, which reflects additional adjustments to Net Income to eliminate unusual or non-recurring items, as well as items relating to our real estate development operations and we believe the exclusion of these items allows for better comparability of our performance between ~~periods.~~periods and is useful in allowing greater transparency related to a significant measure used by management in its financial and operational decision-making. Adjusted EBITDA has economic substance because it is used by management as a performance measure to analyze the performance of our business, excluding the impact of our real estate segment, and provides a perspective on the current effects of operating decisions relating to our core, non-real estate business. For the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 Adjusted EBITDA excluded depreciation, amortization, and interest expense related to equity investments. Neither EBITDA nor adjusted EBITDA is a measure of performance calculated in accordance with GAAP and should not be considered an alternative to, or more meaningful than, net income as an indicator of our operating performance. EBITDA is presented as a supplemental disclosure because we believe that, when considered with measures calculated in accordance with GAAP, EBITDA provides a more complete understanding of our operating results before the impact of investing and financing transactions and income taxes, and it is a widely used measure of performance and a basis for valuation of companies in our industry. Moreover, other companies that provide EBITDA information may calculate EBITDA differently than we do.

The following table sets forth a reconciliation of net income, a GAAP financial measure, to EBITDA and to adjusted EBITDA (defined above) which are non-GAAP financial measures, for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~:

Adjusted ~~EBITDA increased $165,000 and $2,341,000~~EBITDA decreased $1,065,000 for the three ~~and nine~~ months ended ~~September 30, 2022, respectively, as~~March 31, 2023 compared to the same ~~respective periods~~period in ~~2021.~~2022. The ~~increase~~decrease is due to ~~increased visitation~~a decrease in the Company's income from operations related to decreased Pari-mutuel and ~~live-racing attendance as COVID-19 Pandemic restrictions have been lifted and social distancing measures and operating capacity limitations have ceased. The increase is also due~~Casino revenues noted above. Furthermore, Adjusted EBITDA was reduced by insurance proceeds received by the Company's equity investment related to ~~increased operational efficiencies that have been implemented since~~an insurance claim by the ~~COVID-19 Pandemic.~~Doran Canterbury I, LLC joint venture against a third party. For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023, Adjusted EBITDA as a percentage of net revenue was 18.7%. For the three months ended March 31, 2022, Adjusted EBITDA as a percentage of net revenue was ~~24.0% and 23.2%, respectively. For the three and nine months ended September 30, 2021, Adjusted EBITDA as a percentage of net revenue was 24.2% and 21.8%, respectively.~~26.0%.

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

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

The Company's primary source of liquidity and capital resources have been and are expected to be cash flow from operations and cash available under our revolving line of credit. The Company has a general credit and security agreement with a financial institution, which provides a revolving credit line up to $10,000,000 and allows for letters of credit in the aggregate amount of up to $2,000,000 to be issued under the credit agreement which matures January 31, 2024. The line of credit is collateralized by all receivables, inventory, equipment, and general intangibles of the Company. The line of credit also includes collateral in the form of a Mortgage, Security Agreement, Fixture Financing Statement and Assignment of Leases and Rents. As of ~~September 30, 2022~~March 31, 2023, the outstanding balance on the line of credit was $0. As of ~~September 30, 2022,~~March 31, 2023, the Company was in compliance with the financial covenants of the general credit and security agreement.

The Company’s cash, cash equivalents, and restricted cash balance at ~~September 30, 2022~~March 31, 2023 was ~~$22,210,000~~$20,353,000 compared to ~~$15,599,000~~$16,106,000 as of December 31, ~~2021~~2022. The Company believes that unrestricted funds available in its cash accounts, amounts available under its revolving line of credit, along with funds generated from operations and future land sales, will be sufficient to satisfy its ongoing liquidity and capital resource requirements for regular operations, as well as its planned development expenses for the next twelve months. However, if the Company engages in any additional significant real estate development, significant improvements to its facilities, the Racetrack or surrounding grounds, or strategic growth or diversification transactions, additional financing would more than likely be required and the Company may seek this additional financing through joint venture arrangements, through incurring debt, or through an equity financing, or a combination of any of these.

Trends in our operating cash flows tend to follow trends in operating income but can be affected by changes in working capital, the timing of significant interest payments, and tax payments or refunds. Net cash provided by operating activities for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 was ~~$9,610,000,~~$5,822,000, primarily as a result of the following: the Company reported net income of ~~$6,450,000,~~$2,771,000, depreciation of ~~$2,235,000,~~$735,000, deferred income taxes of $727,000, a ~~loss~~gain from equity investment of ~~$1,274,000,~~$1,859,000, and stock-based compensation and 401(k) match totaling ~~$795,000.~~$336,000. Primarily due to timing of ~~our live racing season,~~larger development related transactions, the Company also experienced ~~an increase~~a decrease in accounts payable of ~~$1,336,000 and an increase to payable to horsepersons of $558,000, offset by~~$1,518,000 as well as a decrease in accounts receivable of ~~$1,499,000~~$345,000, offset by an increase due to cash received related to employee retention credit receivable of $3,598,000 and income taxes receivable and prepaid income taxes of ~~$1,287,000 for~~$314,000 for the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023.

Net cash provided by operating activities for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 was ~~$9,991,000,~~$2,937,000, primarily as a result of the following: ~~The~~the Company reported net income of ~~$5,178,000,~~$1,774,000, depreciation of ~~$2,114,000,~~$746,000, a loss from equity investment of ~~$1,964,000,~~$240,000, and stock-based compensation and 401(k) match totaling ~~$797,000. The~~$262,000. Primarily due to timing, the Company also experienced an increase in ~~accrued wages and payroll taxes~~accounts payable of ~~$903,000 and~~$239,000 for the three months ended March 31, 2022, offset by a decrease in ~~payable to horsepersons~~accounts receivable of ~~$1,337,000~~$237,000 for the ~~nine~~three months ended ~~September 30, 2021. The increase in accrued wages and payroll taxes is due to the timing of our payroll dates as well as the fact the Company's operations were temporarily suspended as of December~~March 31, ~~2020 resulting in a reduction in payroll costs. The decrease in our payable to horsepersons is primarily due to timing.~~2022.

Net cash used in investing activities for the ~~first nine~~three months ~~of 2022~~ended March 31, 2023 was ~~$1,819,000,~~$1,056,000, primarily due to additions to land, buildings, ~~equipment,~~ and ~~equity investment contributions.~~ equipment.

Net cash ~~provided by~~used in investing activities for the ~~first nine~~three months ~~of 2021~~ended March 31, 2022 was ~~$793,000~~$1,124,000, primarily due to additions to land, buildings, and equipment and an equity ~~investments being somewhat offset by the proceeds from sale of land.~~ investment contribution.

Net cash used in financing activities ~~during~~for the ~~first nine~~three months of ~~2022~~ended March 31, 2023 was ~~$1,180,000,~~$519,000, primarily due to cash dividends paid to shareholders and payments for taxes of equity awards.

Net cash ~~provided by~~used in financing activities ~~during~~for the ~~first nine~~three months ~~of 2021~~ended March 31, 2022 was ~~$56,000~~$555,000, primarily due to ~~proceeds from the issuance of common stock upon exercise of stock option awards, partially offset by~~cash dividends paid to shareholders and payments for taxes of equity awards.

The preparation of the Condensed Consolidated Financial Statements in accordance with GAAP requires us to make estimates and judgments that are subject to an inherent degree of uncertainty. The nature of the estimates and assumptions are material due to the levels of subjectivity and judgment necessary to account for highly uncertain factors or the susceptibility of such factors to change. The development and selection of critical accounting estimates, and the related disclosures, have been reviewed with the Audit Committee of our Board of Directors. We believe the current assumptions and other considerations used to estimate amounts reflected in our Condensed Consolidated Financial Statements are appropriate. However, if actual experience differs from the assumptions and other considerations used in estimating amounts reflected in our Condensed Consolidated Financial Statements, the resulting changes could have a material adverse effect on our financial condition, results of operations and cash flows.

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

As of ~~September 30, 2022,~~March 31, 2023, the Company recorded a TIF receivable on its Consolidated Balance Sheet of approximately ~~$13,036,000,~~$13,499,000, which represents ~~$11,211,000~~$11,341,000 of principal and ~~$1,825,000~~$2,159,000 of interest. The TIF receivable requires significant management estimates and judgement pertaining to whether an allowance for doubtful accounts is necessary. The TIF receivable was generated in connection with the Contract for Private Redevelopment, in which the City of Shakopee has agreed that a portion of the future tax increment revenue generated from the developed property around the Racetrack will be paid to the Company to reimburse it for expenses in constructing public infrastructure improvements.

The Company typically performs an annual collectability analysis of the TIF receivable in the fourth quarter of each year, or more frequently if indicators of potential uncollectability exist. The Company utilizes the assistance of a third party to assist with the projected tax increments. The quantitative analysis includes assumptions based on the market values of the completed development projects within Canterbury Commons, which derives the future projected tax increment revenue. The Company uses the analysis to determine if the future tax increment revenue will exceed the Company's development costs on infrastructure improvements. As a result of our analysis for the year ended December 31, ~~2021,~~2022, management believes the TIF receivable will be fully collectible and no allowance related to this receivable is necessary. There were no indicators of potential uncollectability in the quarter ended ~~September 30, 2022.~~March 31, 2023.

~~Commitments and Contractual Obligations:~~Cooperative Marketing Agreement:

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

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

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

The amounts earned from the marketing payments ~~are~~were recorded as a component of other revenue and the related expenses ~~are~~were recorded as a component of advertising and marketing expense and depreciation in the Company’s condensed consolidated statements of operations. For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022, the Company recorded ~~$977,000 and $1,764,000~~$112,000 in other revenue, incurred ~~$916,000, and $1,603,000~~$65,000 in advertising and marketing expense, and incurred ~~$61,000 and $161,000~~$47,000 in depreciation related to the SMSC marketing funds. ~~For~~The excess of amounts received over revenue is reflected as deferred revenue on the three and nine months ended September 30, 2021, the Company recorded $1,003,000 and $1,415,000 in other revenue, incurred $962,000, and $1,326,000 in advertising and marketing expense, and incurred $41,000 and $117,000 in depreciation related to the SMSC marketing funds.Company’s consolidated balance sheets .

Under the CMA, the Company ~~has~~ agreed for the term of the CMA ~~which has a stated term ending December 31, 2022~~ that it ~~will~~would not promote or lobby the Minnesota legislature for expanded gambling authority and will support the SMSC’s lobbying efforts against expanding gambling authority.

~~If,~~The CMA expired by its terms on 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 payments under the CMA will cease and future financial results from the live racing segment could be materially adversely affected.2022.

As mentioned above in Note 8 of Notes to Financial Statements, on August 10, 2018, the City of Shakopee, the City of Shakopee Economic Development Authority, and the Company entered into a Redevelopment Agreement in connection with a Tax Increment Financing District (“TIF District”) that the City had approved in April 2018. Under the Redevelopment Agreement, the Company has agreed to undertake a number of specific infrastructure improvements within the TIF District, including the development of public streets, utilities, sidewalks, and other public infrastructure and the City of Shakopee agreed that a portion of the tax revenue generated from the developed property will be paid to the Company to reimburse it for its expense in constructing these improvements. The Company expects to finance its improvements under the Redevelopment Agreement with funds from its current operating resources and existing credit facility and, potentially, third-party financing sources.

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

From time-to-time, in reports filed with the Securities and Exchange Commission, in press releases, and in other communications to shareholders or the investing public, we may make forward-looking statements concerning possible or anticipated future financial performance, prospective business activities or plans that are typically preceded by words such as “believes,” “expects,” “anticipates,” “intends” or similar expressions. For these forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in federal securities laws. Shareholders and the investing public should understand that these forward-looking statements are subject to risks and uncertainties that could affect our actual results and cause actual results to differ materially from those indicated in the forward-looking statements. These risks and uncertainties include, but are not limited to:

The Company’s President and Chief Executive Officer, Randall D. Sampson and Chief Financial Officer, Randy J. Dehmer, have reviewed the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based upon this review, these officers have concluded that the Company’s disclosure controls and procedures are effective.

There have been no significant changes in our internal control over financial reporting (as defined in Rules 13a-15(f) under the Exchange Act) that occurred during our fiscal quarter ended ~~September 30, 2022~~March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The most significant risk factors applicable to the Company are described in Part I, Item 1A "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2021. There have been no material changes from the risk factors previously disclosed.

~~Not Applicable.~~In the three months ending March 31, 2023, the Company repurchased shares of stock in connection with payment of taxes upon issuance of deferred stock awards issued to employees as follows:

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			Page

PART I.	FINANCIAL INFORMATION

	Item 1.	Financial Statements (unaudited)

		Condensed Consolidated Balance Sheets as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022	2

		Condensed Consolidated Statements of Operations for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~	3

		Condensed Consolidated Statements of Stockholders’ Equity for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~	4

		Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~	5

		Notes to Condensed Consolidated Financial Statements	7

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	26

	Item 4.	Controls and Procedures	26

PART II.	OTHER INFORMATION

	Item 1.	Legal Proceedings	27

	Item 1A.	Risk Factors	27

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27

	Item 3.	Defaults Upon Senior Securities	27

	Item 4.	Mine Safety Disclosures	27

	Item 5.	Other Information	27

	Item 6.	Exhibits	28

	Signatures		28

Schedule of non-cash investing and financing activities
Additions to land, buildings, and equipment funded through accounts payable	$	53,000	$	198,000	$	244,000		$	119,000
Dividend declared but not yet paid		341,000		—		346,000			340,000
Transfer of future TIF reimbursed costs from land, buildings, and equipment		—		471,000
Change in investee losses in excess of equity investments		1,466,000		1,286,000		(1,882,000	)		515,000

Supplemental disclosure of cash flow information:
Income taxes paid, net of refunds	$	3,707,000	$	1,220,000	$	—		$	818,000
Interest paid		1,000		2,000		—			1,000

				*Weighted*					*Weighted*
				*Average*					*Average*
	*Deferred*			*Fair Value*		*Deferred*			*Fair Value*
	*Stock*			*Per Share*		*Stock*			*Per Share*
Non-Vested Balance, December 31, 2021		43,400		$	12.48
Non-Vested Balance, December 31, 2022							41,200		$	16.62
Granted		18,600			21.62		19,020			25.52
Vested		(20,800	)		21.32		(20,050	)		14.33
Forfeited		—			—		(1,950	)		19.07
Non-Vested Balance, September 30, 2022		41,200		$	16.62
Non-Vested Balance, March 31, 2023							38,220		$	22.13

		*September 30, 2022*
Segment Assets		$	70,382			$	2,500			$	30,391			$	26,012			$	129,285

		*March 31, 2023*
Segment Assets		$	74,802			$	2,350			$	30,705			$	28,768			$	136,625

	*Nine Months Ended September 30, 2022*												*Three Months Ended March 31, 2023*
	*Horse Racing*			*Card Casino*		*Food and Beverage*		*Development*			*Total*		*Horse Racing*			*Casino*		*Food and Beverage*		*Development*		*Total*
Net revenues from external customers	$	15,406		$	30,395	$	7,904	$	—		$	53,705	$	2,042		$	9,714	$	1,544	$	—	$	13,300
Intersegment revenues		150			—		785		—			935		128			—		273		—		401
Net interest income		24			—		—		597			621		180			—		—		219		399
Depreciation		1,860			226		149		—			2,235		612			75		48		—		735
Segment income (loss) before income taxes		1,241			8,474		2,383		(846	)		11,252		(105	)		3,944		349		2,006		6,194
Segment tax expense (benefit)		(309	)		2,322		653		(232	)		2,434		(679	)		1,077		95		548		1,041

	*Nine Months Ended September 30, 2021*											*Three Months Ended March 31, 2022*
	*Horse Racing*		*Card Casino*		*Food and Beverage*		*Development*			*Total*		*Horse Racing*			*Casino*		*Food and Beverage*		*Development*			*Total*
Net revenues from external customers	$	13,815	$	27,207	$	5,423	$	—		$	46,445	$	2,112		$	10,360	$	1,166	$	—		$	13,638
Intersegment revenues		25		—		553		—			578		64			—		244		—			308
Net interest income		1		—		—		524			525		1			—		—		192			193
Depreciation		1,887		75		152		—			2,114		621			75		50		—			746
Segment income (loss) before income taxes		94		7,193		1,417		(1,400	)		7,304		(14	)		2,447		171		(119	)		2,485
Segment tax expense (benefit)		30		2,099		413		(409	)		2,133		(31	)		624		43		(30	)		606

		*December 31, 2021*
Segment Assets		$	44,509			$	2,801			$	26,888			$	26,773			$	100,971

		*December 31, 2022*
Segment Assets		$	71,338			$	2,425			$	30,341			$	26,475			$	130,579

Income before income taxes
Total segment income (loss) before income taxes	$	11,252		$	7,304	$	6,194		$	2,485
Elimination of intersegment (income) loss before income taxes		(2,368	)		7		(2,382	)		(105	)
Total consolidated income before income taxes	$	8,884		$	7,311	$	3,812		$	2,380

		Equity Investment		Investee losses in excess of equity investment		Net Equity Investment
Net Equity Investment Balance at 12/31/22	$	6,863,517	$	(3,185,923)	$	3,677,594

Equity investment income (loss)		(23,232)		1,881,744		1,858,512

Net Equity Investment Balance at 3/31/23	$	6,840,285	$	(1,304,179)	$	5,536,106

Nine Months Ended September 30, 2022	*Operating leases*		*Finance leases*
2022 remaining	$	—	$	7,186
2023		—		19,332
Three Months Ended March 31, 2023						Finance leases
2023 remaining						$	12,146
2024							—
Total minimum lease obligations		—		26,518			12,146
Less: amounts representing interest		—		(653	)		(152	)
Present value of minimum lease payments		—		25,865			11,994
Less: current portion		—		(25,865	)		(11,994	)
Lease obligations, net of current portion	$	—	$	—		$	—

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Simulcast	$	901,000	$	964,000	$	2,997,000	$	3,059,000
Live Racing		1,214,000		1,091,000		1,890,000		1,663,000
Guest Fees		2,133,000		1,897,000		3,449,000		3,222,000
Other revenue		483,000		349,000		1,263,000		1,055,000
Total Pari-Mutuel Revenue	$	4,731,000	$	4,301,000	$	9,599,000	$	8,999,000

	Three Months Ended March 31,
	2023		2022
Simulcast	$	852,000	$	915,000
Other revenue		281,000		332,000
Total Pari-Mutuel Revenue	$	1,133,000	$	1,247,000

Period	Total Number of Shares Purchased		Average Price Paid Per Share
January 1-31, 2023		-	$	-
February 1-28, 2023		3,931	$	25.62
March 1-31, 2023		2,490	$	26.50
Total		6,421	$	25.96

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

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

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

99.1	Press Release dated ~~November 10, 2022~~May 11, 2023 announcing ~~2022 Third~~2023 First Quarter Results.

101	The following financial information from Canterbury Park Holding Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended ~~September 30, 2022,~~March 31, 2023, formatted in Inline eXtensible Business Reporting Language XBRL: (i) Condensed Consolidated Balance Sheets as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, (ii) Condensed Consolidated Statements of Operations for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2023 and March 31, 2022, ~~and September 30, 2021,~~ (iii) Condensed Consolidated Statements of Stockholders’ Equity for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2023 and March 31, 2022, ~~and September 30, 2021,~~ (iv) Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2023 and March 31, 2022, ~~and September 30, 2021,~~ and (v) Notes to Financial Statements.

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


	Canterbury Park Holding Corporation

Dated: ~~November 14, 2022~~May 12, 2023	/s/ Randall D. Sampson
	Randall D. Sampson
	President and Chief Executive Officer (principal executive officer)


Dated: ~~November 14, 2022~~May 12, 2023	/s/ Randy J. Dehmer
	Randy J. Dehmer
	Chief Financial Officer (principal financial officer, principal accounting officer)