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What changed in Canterbury Park Holding Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Canterbury Park Holding Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+235 added−233 removedSource: 10-K (2024-03-12) vs 10-K (2023-03-21)

Top changes in Canterbury Park Holding Corp's 2023 10-K

235 paragraphs added · 233 removed · 173 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

71 edited+9 added−18 removed68 unchanged
Biggest changeThe initial development portfolio was weighted heavily in the residential segment with nearly 900 units of multifamily and over 100 units of for sale townhomes. The Company anticipates more opportunity and focus in the entertainment, office, retail, and hospitality segments in the later phases of the Canterbury Commons development.
Biggest changeIn addition to the aforementioned projects, the Company continues to make progress with developer and partner selection for the other development opportunities within Canterbury Commons. The initial development portfolio was weighted heavily in the residential segment with over 800 units of multifamily and over 100 units of for sale townhomes.
The horse racing segment represents our pari-mutuel wagering operations on simulcast and live horse races; the Casino segment represents our unbanked card operations; the food and beverage segment includes concessions, catering, and events services provided at the Racetrack; and the development segment represents our real estate development operations.
The horse racing segment represents our pari-mutuel wagering operations on simulcast and live horse races; the Casino segment represents our unbanked card operations; the food and beverage segment includes concessions, catering, and events and services provided at the Racetrack; and the real estate development segment represents our real estate development operations.
To support its pari-mutuel horse racing, Casino, and catering and events businesses, the Company conducts year-round marketing efforts to maintain the loyalty of existing customers and attract new players to the property. The Company uses radio, television, digital advertising, social media, print advertising, and direct marketing to communicate to its audiences.
To support its Casino, pari-mutuel horse racing, and catering and events businesses, the Company conducts year-round marketing efforts to maintain the loyalty of existing customers and attract new players to the property. The Company uses radio, television, digital advertising, social media, print advertising, and direct marketing to communicate to its audiences.
During the term of the CMA, the Company agreed not to promote or lobby the Minnesota legislature for expanded gambling authority and would support the SMSC’s lobbying efforts against expanding gambling authority. On June 1, 2020, we entered into a Fifth Amendment Agreement to the CMA, which became effective on June 8, 2020 upon MRC approval.
During the term of the CMA, the Company agreed not to promote or lobby the Minnesota legislature for expanded gambling authority and support the SMSC’s lobbying efforts against expanding gambling authority. On June 1, 2020, we entered into a Fifth Amendment Agreement to the CMA, which became effective on June 8, 2020 upon MRC approval.
The food and beverage operations also include our catering and events services. We have one of the largest event spaces in the Twin Cities with more than 100,000 square feet of available space. Our facilities provide a variety of purposes for year-round events and other activities.
The food and beverage operations also include our catering and events operations. We have one of the largest event spaces in the Twin Cities with more than 100,000 square feet of available space. Our facilities provide a variety of purposes for year-round events and other activities.
Our event space has been used for craft shows, trade shows, pool and poker tournaments, automobile and other utility vehicle shows, major art shows, and fundraisers. Our outdoor spaces have been used for concerts, snowmobile races, and other competitions. The infield of the Racetrack is also used as a concert and event area.
Our event space has been used for craft shows, trade shows, pool and poker tournaments, automobile and other utility vehicle shows, major art shows, and fundraisers. Our outdoor spaces have been used for concerts, snowmobile races, and other competitions. The infield of the Racetrack has also been used as a concert and event area.
In addition to its regular advertising and communication program, the Company conducts numerous special promotions, handicapping contests, and poker tournaments to attract incremental visits. The Company also uses a robust player rewards and database marketing program to enhance the loyalty of its guests.
In addition to its regular advertising and communication program, the Company conducts numerous special promotions, handicapping contests, and poker tournaments to attract incremental visits. The Company also uses a player rewards and database marketing program to enhance the loyalty of its guests.
As these consents are obtained annually, no assurance can be given that the MRC and the MHBPA will allow the Company to conduct simulcast operations either as a host or guest track in 2023 or future years.
As these consents are obtained annually, no assurance can be given that the MRC and the MHBPA will allow the Company to conduct simulcast operations either as a host or guest track in future years.
The Company operates in a highly competitive wagering and gaming environment with a large number of participants. The Company competes with competitive wagering operations and activities that include tribal casinos, state-sponsored lotteries, and other forms of legalized gaming in the U.S. and other jurisdictions.
Competition The Company operates in a highly competitive wagering and gaming environment with a large number of participants. The Company competes with competitive wagering operations and activities that include tribal casinos, state-sponsored lotteries, and other forms of legalized gaming in the U.S. and other jurisdictions.
From June 4, 2012 to December 31, 2022, we were a party to a Cooperative Marketing Agreement (“CMA”) with the Shakopee Mdewakanton Sioux Community (“SMSC”), a federally recognized Indian tribe. The primary purpose of the CMA was to increase purses paid during live horse racing at Canterbury Park’s Racetrack in order to strengthen Minnesota’s thoroughbred and quarter horse industry.
From June 4, 2012 to December 31, 2022, we were a party to a Cooperative Marketing Agreement (“CMA”) with the Shakopee Mdewakanton Sioux Community ("SMSC"), a federally recognized Indian tribe. The primary purpose of the CMA was to increase purses paid during live horse racing at Canterbury Park’s Racetrack in order to strengthen Minnesota’s thoroughbred and quarter horse industry.
Canterbury Park Entertainment Through Canterbury Entertainment, we host pari-mutuel wagering on thoroughbred and quarter horse races and “unbanked” card games at our Canterbury Park Racetrack and Casino facility (the “Racetrack”) in Shakopee, Minnesota, which is approximately 25 miles southwest of downtown Minneapolis.
Canterbury Park Entertainment Through Canterbury Entertainment, we host pari-mutuel wagering on thoroughbred and quarter horse races and “unbanked” card games at our Canterbury Park Racetrack and Casino facility (the “Racetrack”) in Shakopee, Minnesota, which is approximately 20 miles southwest of downtown Minneapolis.
Poker games, including Texas Hold ‘Em, Stud, and Omaha, with betting limits per hand ranging between $2 and $100, are currently offered in the poker room. A dealer employed by the Company regulates the play of the game at each table and deals the cards but does not participate in play.
Poker games, including Texas Hold ‘Em, Stud, and Omaha, with betting limits per hand ranging between $2 and $100, are currently offered in our Casino. A dealer employed by the Company regulates the play of the game at each table and deals the cards but does not participate in play.
The following is a summary of our real estate development projects within Canterbury Commons as of December 31, 2022: ● Our first real estate development project in Canterbury Commons began in 2018 with a joint venture agreement between Canterbury Development and an affiliate of Doran Companies (“Doran”) for the development of the upscale Triple Crown Residences at Canterbury Park. ○ In September 2018, Canterbury Development contributed approximately 13 acres of land as its equity contribution in the Doran Canterbury I joint venture and became a 27.4% equity member.
The following is a summary of our real estate development projects within Canterbury Commons as of December 31, 2023: ● Our first real estate development project in Canterbury Commons began in 2018 with Doran Canterbury I, LLC, a joint venture between Canterbury Development and an affiliate of Doran Companies (“Doran”) for the development of the upscale Triple Crown Residences at Canterbury Park. ○ In September 2018, Canterbury Development contributed approximately 13 acres of land as its equity contribution in the Doran Canterbury I, LLC joint venture and became a 27.4% equity member.
If either the MRC or the MHBPA do not consent, the Company’s operations could be adversely affected by a decrease in pari-mutuel revenue, potential reduction in the quality of horses, lower attendance, and lower overall handle. 5 Casino Operations The Casino may offer gaming 24 hours per day, seven days per week, and offers two forms of unbanked card games: poker and table games.
If either the MRC or the MHBPA do not consent, the Company’s operations could be adversely affected by a decrease in pari-mutuel revenue, lower attendance, and lower overall handle. 5 Casino Operations The Casino may offer gaming 24 hours per day, seven days per week, and offers two forms of unbanked card games: poker and table games.
The Company pays 28% of the collected revenues to another Minnesota-based horse track, and records the remaining 72% as revenues and records expenses of at least 50% for purses and breeders’ awards. 4 Live Racing For the years ended December 31, 2022 and 2021, the Racetrack hos ted 64 and 65 d ays, respectively, of live racing beginning in May and concluding in September.
The Company pays 28% of the collected revenues to another Minnesota-based horse track, records the remaining 72% as revenues, and records expenses of at least 50% for purses and breeders’ awards. 4 Live Racing For the years ended December 31, 2023 and 2022, the Racetrack hos ted 53 and 64 d ays of live racing, respectively, beginning in May and concluding in September.
The closing of phase two of the Pulte transaction and the sale of the remaining 4.2 acres occurred in June 2022. ○ Development approvals by Pulte on 109 new for sale row homes and townhome residences at Canterbury Commons was completed in late 2020.
The closing of phase two of the Pulte transaction and the sale of the remaining 4.2 acres occurred in June 2022. ○ Development approvals by Pulte on 109 new for sale row homes and townhome residences at Canterbury C ommons was completed in late 2020.
The remaining 90% of purse monies are divided between thoroughbred (90%) and quarter horse (10%) purse funds. Food and Beverage Operations We derive revenue from our food and beverage operations through sales at concession stands, restaurant and buffet, bars, and other food venues.
The remaining 90% of purse monies are divided between thoroughbred (95%) and quarter horse (5%) purse funds. Food and Beverage Operations We derive revenue from our food and beverage operations through sales at concession stands, restaurant and buffet, bars, and other food venues.
Canterbury Entertainment is the direct owner of all land, facilities, and substantially all other assets related to our pari-mutuel wagering, Casino, concessions and other related businesses (“Racetrack Operations”), and is subject to direct regulation by the MRC. We own approximately 300 acres of land as of December 31, 2022, in Shakopee, Minnesota where the Racetrack is located.
Canterbury Entertainment is the direct owner of all land, facilities, and substantially all other assets related to our pari-mutuel wagering, Casino, concessions, and other related businesses (“Racetrack Operations”), and is subject to direct regulation by the MRC. We own approximately 260 acres of land as of December 31, 2023, in Shakopee, Minnesota where the Racetrack is located.
In addition to event space, we offer space in our horse stable area for rent for boat storage during the winter months. 6 Development Operations Beginning in 2015, we began executing our development plan for Company land that was not necessary to conduct our Racetrack Operations (grandstand, racetrack, stable area, parking areas, and land for other facilities including the expo center).
In addition to event space, we have offered space in our horse stable area for rent for boat storage during the winter months. 6 Development Operations Beginning in 2015, we began executing our development plan for Company land that was not necessary to conduct our Racetrack Operations (grandstand, racetrack, stable area, and parking areas) and land for other facilities, including the event center.
After meeting the $6 million threshold, the Company must pay 14% of gross Casino revenues as purse monies. Of funds allocated for purses, the Company pays 10% of the purse monies to the Minnesota Breeders’ Fund (the “MBF”), which is a fund apportioned by the MRC among various purposes related to Minnesota’s horse breeding and horse racing industries.
After meeting the $6 million threshold, the Company must pay 14% of gross Casino revenues as purse monies. Of funds allocated for purses, the Company pays 10% of the purse monies to the MBF, which is a fund apportioned by the MRC among various purposes related to Minnesota’s horse breeding and horse racing industries.
The Company competes with a number of tribal casinos in the State of Minnesota that offer video slot machines, table games, and both banked and unbanked card games, including Minnesota’s largest casino, Mystic Lake, which is located approximately four miles from the Racetrack and which is owned by the Shakopee Mdewakanton Sioux Community.
The Company competes with a number of tribal casinos in the State of Minnesota that offer video slot machines, table games, and both banked and unbanked card games, including Minnesota’s largest casino, Mystic Lake, which is located approximately four miles from the Racetrack and which is owned by the SMSC.
The ADW source market revenue to the Company totaled approximately $1,511,000 and $1,382,000 for the fiscal years ended December 31, 2022 and 2021, respectively. As part of the agreement, 50% of source market fees is allocated to purse accounts and the MBF.
The ADW source market revenue to the Company totaled approximately $1,331,000 and $1,511,000 for the fiscal years ended December 31, 2023 and 2022 , respectively. As part of the agreement, 50% of source market fees is allocated to purse accounts and the MBF.
Remaining units were completed and available for occupancy by the end of 2020. ○ In August 2020, Doran exercised its option for Phase II of the project, which will include an additional 305 residential units, and the Company entered into a second joint venture agreement with Doran.
Remaining units were completed and available for occupancy by the end of 2020. ○ In August 2020, Doran exercised its option for Phase II of the project, which include an additional 305 residential units, and the Company entered into a second joint venture with Doran called Doran Canterbury II, LLC.
Currently, the fee for a Class A License is $252,000 per fiscal year.
Currently, the fee for a Class A License is $253,000 per fiscal year.
This includes delivering great customer service, developing new food and beverage offerings, creating fan education programs, and providing entertainment opportunities that go beyond the traditional pari-mutuel wagering and card playing activities. 11 Human Capital and Team Members Talent Management At December 31, 202 2 , the Company had 2 41 full-time team members and 5 12 part-time team members.
This includes delivering great customer service, developing new food and beverage offerings, creating fan education programs, and providing entertainment opportunities that go beyond the traditional pari-mutuel wagering and card playing activities. 11 Human Capital and Team Members Talent Management At December 31, 2023, the Company had 227 full-time team members and 538 part-time team members.
Executive Officers The executive officers of the Company, their ages and their positions with the Company at March 15, 2023 are as follows: Name Age Position with Company Randall D. Sampson 64 President, CEO, and Chairman of the Board Randy J. Dehmer 40 Senior Vice President of Finance and CFO Randall D.
Executive Officers The executive officers of the Company, their ages and their positions with the Company at March 15, 2024 are as follows: Name Age Position with Company Randall D. Sampson 65 President, CEO, and Chairman of the Board Randy J. Dehmer 41 Senior Vice President of Finance and CFO Randall D.
The MHBPA is the horseperson’s organization representing the majority of horsepersons at the Racetrack. In addition, the MBF receives 1% of the handle. The current pari-mutuel tax applicable to wagering on all simulcast and live races is 6% of takeout in excess of $12 million during the twelve-month period beginning July 1 and ending the following June 30.
In addition, the MBF receives 1% of the handle. The current pari-mutuel tax applicable to wagering on all simulcast and live races is 6% of takeout in excess of $12 million during the twelve-month period beginning July 1 and ending the following June 30.
Unbanked card games, in which patrons compete against each other, are hosted in the Casino at the Racetrack. The Casino has historically operated 24 hours a day, seven days a week and has historically offered both poker and table games at up to 80 tables.
Unbanked card games, in which patrons compete against each other instead of the house, are hosted in the Casino at the Racetrack. The Casino has historically operated 24 hours a day, seven days a week and has offered both poker and table games at up to 80 tables as allowed by Minnesota statute.
The minimum wage for 2022 was $10.33 per hour and for 2023 is $10.59 per hour. This legislation has had an adverse financial impact on the Company by increasing expenses and we expect will continue to have an adverse impact on the Company.
The minimum wage for 2023 was $10.59 per hour and is $10.85 per hour for 2024. T his legislation has had an adverse financial impact on the Company by increasing expenses and we expect will continue to have an adverse impact on the Company.
In January 2005, this additional Class A license was issued for the location that later became known as Running Aces (see “Competition” above).
In January 2005, this additional Class A license was issued for the location that later became known as Running Aces (see “Risk Factors” below).
The Company also has created various internal committees, including a specific rewards and recognition committee to support our team member recognition programs. To help retain talent, we measure team member engagement, including conducting regular engagement surveys to all team members.
The Company offers training and development opportunities for team members to enhance leadership and communication skills. The Company also has created various internal committees, including a specific rewards and recognition committee to support our team member recognition programs. To help retain talent, we measure team member engagement, including conducting regular engagement surveys to all team members.
The law requires that the Company reimburse the MRC for its actual costs, including personnel costs, of regulating the Casino. For fiscal years ended December 31, 2022 and 2021, the Company paid $248,000 and $247,000, respectively, to the MRC as reimbursement for costs of regulating Casino operations.
The law requires that the Company reimburse the MRC for its actual costs, including personnel costs, of regulating the Casino. For fiscal years ended December 31, 2023 and 2022 , the Compa ny paid $297,000 and $248,000, respec tively, to the MRC as reimbursement for costs of regulating Casino operations.
For fiscal years ended December 31, 2022 and 2021, the Company paid $152,000 and $172,000 respectively, to the MRC as reimbursement for costs of regulating live racing operations. The MRC is also authorized by the Racing Act to regulate Casino operations.
For fiscal years ended December 31, 2023 and 2022 , the Com pany paid $497,000 and $152,000, respectively, to the MRC as reimbur sement for costs of regulating live racing operations. The MRC is also authorized by the Racing Act to regulate Casino operations.
As entertainment demand recovers from the lows seen in the early months of the COVID-19 pandemic, we have seen and continue to see industry-wide labor shortages causing challenges in hiring or re-hiring for certain positions. In response, we have enhanced our recruitment and retention efforts and increased compensation where needed to maintain competitiveness in this extremely difficult market.
We have seen and continue to see industry-wide labor shortages causing challenges in hiring or re-hiring for certain positions. In response, we have enhanced our recruitment and retention efforts and increased compensation where needed to maintain competitiveness in this extremely difficult market.
The Company is able to offer simulcast racing from up to 20 racetracks per day, seven days a week, 364 days per year, including Churchill Downs, Santa Anita, Gulfstream Park, Belmont Park, and Saratoga Racecourse.
The Company is able to offer simulcast racing seven days a week, 364 days a year from racetracks around the world, in cluding Churchill Downs, Santa Anita, Gulfstream Park, Belmont Park, Saratoga Racecourse, and Dubai.
The project received its approvals from the City of Shakopee in a joint planned urban development application with Lifestyle Communities who is located adjacent to the townhome project. Ground improvements and utility work commenced in early 2021 for both projects. Lifestyle Communities will be a 4-story 56-unit age restricted active senior cooperative community.
The project received its approvals from the City of Shakopee in a joint planned urban development application with Lifestyle Communities, which is located adjacent to the townhome project. Ground improvements and utility work commenced in early 2021 for both projects.
Canterbury expects to make additional announcements of new partners for this phase in the future. See footnote 12 of the consolidated financial statements for more detailed information on recent transactions and development activity.
The Company anticipates more opportunity and focus in the entertainment, office, retail, and hospitality segments in the later phases of the Canterbury Commons development. Canterbury expects to make additional announcements of new partners for this phase in the future. See footnote 12 of the consolidated financial statements for more detailed information on recent transactions and development activity.
The most recent survey was conducted in 2022 and reflected an engagement level among our team members that exceeded the average engagement levels of benchmarked companies. Health and Safety During 2021 and 2022, we continued to focus significant attention to enhancing health and safety protocols, including in response to COVID-19 pandemic.
The most recent survey was conducted in 2022 and reflected an engagement level among our team members that exceeded the average engagement levels of benchmarked companies. The Company intends to complete a similar survey in late 2024. Health and Safety During 2022 and 202 3, we continued to focus significant attention to enhancing health and safety protocols.
In addition to receiving 27.4% ownership in the Doran Phase II joint venture, the exchange resulted in the repayment of a $2.9 million note receivable which was on the Company’s balance sheet as a related party receivable as of June 30, 2020.
Pursuant to this second agreement, the Company transferred roughly 10 acres of land to Doran Canterbury II, LLC. In addition to receiving 27.4% ownership in Doran Canterbury II, the exchange resulted in the repayment of a $2.9 million note receivable which was on the Company’s balance sheet as a related party receivable as of June 30, 2020.
Sports Betting As of the date of filing this Form 10-K, the Minnesota legislature is considering a bill to legalize sports betting in Minnesota at tribal casinos and online through mobile applications operated by the tribes. It is not certain whether this bill will be adopt ed into law.
Sports Betting The Minnesota legislature is continuing to consider bills to legalize sports betting in Minnesota at tribal casinos and online through mobile applications operated by the tribes. It is not certain whether any of these bills will be adopt ed into law.
Beginning January 1, 2016, the matching of employee contributions were issued in Company stock, which we believe aligns the interests of Company employees with our shareholders and allows employees to participate in the success that they help create at our company. Our success depends in large part upon our ability to attract, retain, train, lead, and motivate skilled team members.
Beginning January 1, 2016, the matching of employee contributions has been issued in Company stock, which we believe aligns the interests of Company employees with our shareholders and allows employees to participate in the success that they help create at our company.
The land will be used for the development of a new 11,000 square foot building to be occupied by a local restaurant and brewery. ○ Finally, during the fourth quarter of 2022, Canterbury DBSV sold 1.68 acres of land to A&M Kerber Holdings, LLC for total consideration of approximately $925,000 for the construction of a Next Steps Learning Center and child care facility. 7 ● In April 2020, Canterbury Development entered into two agreements to sell approximately 14 acres of land on the west side of the Racetrack to Pulte Homes of Minnesota ("Pulte") and Lifestyle Communities for total consideration of approximately $3,500,000.
The land was used for the development of a 147-unit senior living community with initial occupancy beginning during the fourth quarter of 2023. ○ Finally, during the fourth quarter of 2022, C anterbury DBSV sold approximately 1.7 acres of land to A&M Kerber Holdings, LLC for total consideration of approximately $925,000 for the construction of a Next Steps Learning Center and child care facility, which began operations during the fourth quarter of 2023. 7 ● In April 2020, Canterbury Development entered into two agreements to sell approximately 14 acres of land on the west side of the Racetrack to Pulte Homes of Minnesota ("Pulte") and Lifestyle Communities for total consideration of approximately $3,500,000.
Groundwork on the Doran Canterbury II site began in October 2020, paving the way for the ground-up construction of the second phase of apartments, which began construction in March 2022. ○ As a result of these joint ventures, Canterbury Development holds a 27.4% equity interest in Doran Canterbury I, LLC governed by an operating agreement effective as of March 1, 2018 with Doran Shakopee LLC, and Canterbury Development holds a 27.4% equity interest in Doran Canterbury II, LLC governed by an operating agreement effective as of July 30, 2020 with Doran Shakopee LLC and amended October 1, 2021. ● Development work related to the Company’s joint venture with Greystone Construction (“Greystone”) is also underway on the southwest portion of the Canterbury Commons site.
Groundwork on the Doran Canterbury II site began in October 2020, paving the way for the ground-up construction of the second phase of apartments, which began construction in March 2022 with initial occupancy occurring in January 2024. ○ As a result of these joint ventures, Canterbury Development holds a 27.4% equity interest in Doran Canterbury I, LLC governed by an operating agreement effective as of March 1, 2018 with Doran Shakopee LLC, and Canterbury Development also holds a 27.4% equity interest in Doran Canterbury II, LLC governed by an operating agreement effective as of July 30, 2020 with Doran Shakopee LLC and amended October 1, 2021. ● On June 16, 2020, Canterbury Development, entered into an operating agreement with an affiliate of Greystone Construction ("Greystone"), as the two members of a Minnesota limited liability company named Canterbury DBSV Development, LLC ("Canterbury DBSV").
Canterbury Development is not subject to direct regulation by the MRC. Originally, approximately 140 acres were considered underutilized and were targeted for real estate development by Canterbury Development complementary with our Racetrack Operations. In 2022, Canterbury Development continued to pursue various development opportunities for the underutilized land in a project known as Canterbury Commons™.
Both Canterbury Development and the land held by Canterbury Development are not subject to direct regulation by the MRC. Originally, approximately 140 acres were considered underutilized and were targeted for real estate development by Canterbury Development to be complementary with our Racetrack Operations.
In addition, we have agreed to sell several parcels of land to third parties that will then develop the property as described below. Although we will have no continuing ownership in these land sales, we believe the future developments of this property contribute to the overall vitality of Canterbury Commons and drive visitation and spend to Canterbury Park.
Al though we will have no continuing ownership in these land sales, we believe the future developments of this property will contribute to the overall vitality of Canterbury Commons and drive visitation and spend to Canterbury Park.
This $1 5 million barn area redevelopment project will continue the Company’s ongoing commitment to provide quality horse racing in the state of Minnesota as well as allow for future development of Canterbury’s underutilized land. In addition to the aforementioned projects, the Company continues to make progress with developer and partner selection for the other development opportunities within Canterbury Commons.
We believe this $1 5 million barn area redevelopment project will continue the Company’s ongoing commitment to provide quality horse racing in the state of Minnesota as well as allow for future development of Canterbury’s underutilized land.
Marketing The Company’s primary market is the seven-county Minneapolis-Saint Paul metropolitan area (Hennepin, Ramsey, Anoka, Washington, Dakota, Scott, and Carver) plus the two counties to the south of the Racetrack and Casino (Le Sueur and Rice).
These measures could themselves have an adverse effect because higher prices and diminished service levels may discourage customers from visiting the Racetrack. Marketing The Company’s primary market is the seven-county Minneapolis-Saint Paul metropolitan area (Hennepin, Ramsey, Anoka, Washington, Dakota, Scott, and Carver) plus the two counties to the south of the Racetrack and Casino (Le Sueur and Rice).
We conduct our (i) horse racing, (ii) Casino, and (iii) food and beverage segments through Canterbury Entertainment. We conduct our real estate development segment through Canterbury Development.
We conduct our (i) horse racing, (ii) Casino, and (iii) food and beverage segments through Canterbury Entertainment. We conduct our real estate development segment through Canterbury Development. In 2023, we developed a five-year strategic plan focused on growing Casino revenue.
Traditionally, our revenues have been principally derived from three activities: Casino operations, wagering on live and simulcast horse races, and food and beverage sales. For the year ended December 31, 2022, revenues from Casino operations represented 60.2% of total revenues, wagering on horse races generated 26.3% of total revenues, and food and beverage revenue represented 13.5% of total revenues.
Traditionally, our revenues have been principally derived from three activities: Casino operations, pari-mutuel operations, and food and beverage operations. For the year ended December 31, 2023, revenues from Casino operations represented 64.8% of total net revenues, wagering on horse races represented 13.4% of total net revenues, and food and beverage revenue represented 12.7% of total net revenues.
The balance of the takeout remaining after these deductions is commonly referred to as the “retainage.” While the Minnesota Racing Act regulates that a minimum of 8.4% of the live racing handle be paid as purses to the owners of the horses, purse contributions from other sources are governed by a Horse Association Agreement dated June 4, 2012 by and among the Company, the Shakopee Mdewakanton Sioux Community (“SMSC”), a federally recognized Indian tribe, and the horsepersons’ associations: the MHBPA, the Minnesota Thoroughbred Association (“MTA”) and the Minnesota Quarter Horse Racing Association (“MQHRA”).
The balance of the takeout remaining after these deductions is commonly referred to as the “retainage.” While the Minnesota Racing Act regulates that a minimum of 8.4% of the live racing handle be paid as purses to the owners of the horses, purse contributions are governed by an agreement that we negotiate annually with the MHBPA and the Minnesota Quarter Horse Racing Association ("MQHRA").
In connection with its contribution, Canterbury Development became a 61.87% equity member in Canterbury DBSV. ○ Additionally, during the fourth quarter of 2022, Canterbury DBSV transferred 1.46 acres of land as an equity contribution into a joint venture.
In connection with its contribution, Canterbury Development became a 61.87% equity member in Canterbury DBSV. ○ During the fourth quarter of 2020, Canterbury DBSV transferred approximately 1.5 a cres of land as an equity contribution into another joint venture, called GS Moving Up, LLC, a Minnesota limited liability company.
To facilitate the recruitment, development, and retention of our valuable team members, we strive to make Canterbury Park a diverse, inclusive, and safe workplace, with opportunities for our team to grow and develop. The Company offers training and development opportunities for team members to enhance leadership and communication skills.
Our success depends in large part upon our ability to attract, retain, train, lead, and motivate skilled team members. To facilitate the recruitment, development, and retention of our valuable team members, we strive to make Canterbury Park a diverse, inclusive, and safe workplace, with opportunities for our team to grow and develop.
Additionally, Internet-based interactive gaming and wagering is growing rapidly and adversely affects all forms of wagering offered by the Company. Legislation became effective November 1, 2016 in Minnesota that allowed the Company to begin collecting source market fees from companies that offer ADW wagering. These companies provide legal simulcast horse wagering over the internet.
Legislation became effective November 1, 2016 in Minnesota that allowed the Company to begin collecting source market fees from companies that offer ADW wagering. These companies provide legal simulcast horse wagering over the internet. The legislation now allows the Company to recoup a percentage of all simulcast horse racing wagers made by Minnesota residents over the internet on out-of-state races.
Competition The Company faces direct competition from Running Aces Harness Park ("Running Aces") in Columbus Township, Anoka County, Minnesota, a racetrack and card room that is located approximately 50 miles from Canterbury Park.
The Company faces direct competition from Running Aces Harness Park ("Running Aces") in Columbus Township, Anoka County, Minnesota, a racetrack and card room that is located approximately 40 miles from Canterbury Park. Running Aces offers pari-mutuel wagering on live races of standardbred (“harness”) horses on a seasonal basis and year-round wagering on simulcasting of all breeds of horse races.
Pari-mutuel revenues also include commission and breakage revenues on live on-track and simulcast racing, fees received from out-of-state racetracks for wagering on our live races and proceeds from unredeemed pari-mutuel tickets. Additionally, Minnesota Advanced Deposit Wagering (“ADW”) legislation allows Minnesota residents to engage in pari-mutuel wagering on out-of-state horse races online with a prefunded account through an ADW provider.
Pari-mutuel revenues also include commission and breakage revenues on live on-track and simulcast racing, fees received from out-of-state racetracks for wagering on our live races, and proceeds from unredeemed pari-mutuel tickets and vouchers.
As of March 2023, the Casino was offering the following table games: Blackjack, Mississippi Stud, Fortune Pai Gow, Three Card Poker, Four Card Poker, Ultimate Texas Hold ‘Em, EZ Baccarat, Criss Cross Poker, Free Bet Blackjack, and I Luv Suits.
Table games, including Blackjack, Mississippi Stud, Fortune Pai Gow, Three Card Poker, Four Card Poker, Ultimate Texas Hold ‘Em, EZ Baccarat, Criss Cross Poker, Free Bet Blackjack, DJ Wild, and I Luv Suits, with betting limits ranging between $1 and $300, are currently offered in our Casino.
The Company collects a percentage of monies wagered (generally 2.75% to 5.0%) by Minnesota residents through the ADW provider as a source market fee.
Additionally, Minnesota Advanced Deposit Wagering (“ADW”) legislation allows Minnesota residents to engage in pari-mutuel wagering on out-of-state horse races online with a prefunded account through an ADW provider. The Company collects a percentage of monies wagered (generally 2.75% to 5.0%) by Minnesota residents through the ADW provider as a source market fee.
The player has the option of playing the jackpot with the opportunity to win some or the entire jackpot amount, depending upon the player’s hand. The primary source of poker revenue the Company collects is a “rake” of 5-10%, depending on the limit of the game, of the poker pot up to a maximum of $4 per hand.
The primary source of poker revenue the Company collects is a “rake” of 5-10%, depending on the limit of the game, of the poker pot up to a maximum of $4 per hand. In addition, poker games offer progressive jackpots for most games.
From time to time, we have implemented measures to partially mitigate the impact of increases in the minimum wage by raising our prices and reducing our employee count. These measures could themselves have an adverse effect because higher prices and diminished service levels may discourage customers from visiting the Racetrack.
See the "Management's Discussion and Analysis of Financial Condition and Results of Operations." From time to time, we have implemented measures to partially mitigate the impact of increases in the minimum wage by raising our prices and reducing our employee count.
In 2022, our horse racing, Casino, and food and beverage operations were not subject to any COVID-19 related closures or capacity limitations. 3 Horse Racing Operations The Company’s horse racing operations consist of year-round simulcasting of horse races from around the U.S. and internationally, and wagering on live thoroughbred and quarter horse races (“live meets”) held on a seasonal basis beginning in May and generally concluding in September each year.
In addition, other revenues, which are principally derived from the three activities noted above, represented 9.1% of total net revenues for the year ended December 31, 2023. 3 Horse Racing Operations The Company’s horse racing operations consist of year-round simulcasting of horse races from around the U.S. and internationally and wagering on live thoroughbred and quarter horse races (“live meets”) held on a seasonal basis beginning in May and generally concluding in September each year.
The project was completed in the 2021 third quarter and a lease was executed for the majority of the s pace resulting in 84% building occupancy. The joint venture is governed by an operating agreement with an affiliate of Greystone and Canterbury Development, as the two members of a Minnesota limited liability company named Canterbury DBSV Development, LLC (Canterbury DBSV).
The project was completed in the 2021 third quarter, and a lease was executed for the majority of the space resulting in 90% building occupancy. ○ During the fourth quarter of 2022, Canterbury DBSV transferred 1.5 acres of land as an equity contribution into another joint venture, called SW Gateway, LLC, a Minnesota limited liability company.
Under the Fifth Amendment, the SMSC paid an annual purse enhancement of $7,280,000 for 2022, which was the same amount payable with respect to 2021. Additionally, the SMSC paid an annual marketing payment under the CMA of $1,620,000 for each of 2021 and 2022.
Under the Fifth Amendment, the SMSC paid an annual purse enhancement of $7,280,000 for 2022. Additionally, the SMSC paid an annual marketing payment under the CMA of $1,620,000 for 2022. The CMA expired by its terms on December 31, 2022. Accordingly, for 2023, there were no purse enhancement payments or marketing payments under the CMA.
Canterbury Development’s equity contribution to Canterbury DBSV was approximately 13 acres of land, which was contributed to Canterbury DBSV on July 1, 2020.
Canterbury DBSV was formed as part of a joint venture between Greystone and Canterbury Development for a multi-use development on the 13-acre land parcel located on the southwest portion of the Company’s Racetrack. Canterbury Development’s equity contribution to Canterbury DBSV was approximately 13 acres of land, which were contributed to Canterbury DBSV on July 1, 2020.
Running Aces offers pari-mutuel wagering on live races of standardbred (“harness”) horses on a seasonal basis and year round wagering on simulcasting of all breeds of horse races. In addition to pari-mutuel wagering, Running Aces operates a card room that directly competes with the Company’s Casino.
In addition to pari-mutuel wagering, Running Aces operates a card room that directly competes with the Company’s Casino. Additionally, Internet-based interactive gaming and wagering is growing rapidly and adversely affects all forms of wagering offered by the Company.
The land and infrastructure improvements were completed in 2021. ○ Greystone’s development work to date is primarily for a new 28,000 square foot office building, with Greystone occupying the second floor as its new corporate headquarters.
In connection with it's contribution, Canterbury DBSV became a 45.87% equity member in GS Moving Up, LLC. The land was used for the development of a new 28,000 square foot office building, with Greystone occupying the second floor as its corporate headquarters.
The joint venture is governed by an operating agreement with Winners Circle Drive, LLC and Canterbury DBSV, as the two members of a Minnesota limited liability company named SW Gateway, LLC. In connection with its contribution, Canterbury DBSV became a 45.9% equity member in SW Gateway, LLC.
In connection with its contribution, Canterbury DBSV became a 45.9% equity member in SW Gateway, LLC.
In addition, poker games offer progressive jackpots for most games. In order to fund the poker jackpot pools, the dealer withholds $2 from each final pot in excess of the $15 minimum. Under Minnesota law, the Company is required to pay 10% of the first $6 million of gross Casino revenues towards purses for live horse racing at the Racetrack.
The player has the option of playing the jackpot with the opportunity to win some or the entire jackpot amount, depending upon the player’s hand. Under Minnesota law, the Company is required to pay 10% of the first $6 million of gross Casino revenues towards purses for live horse racing at the Racetrack.
Canterbury Development continues to pursue various mixed use development opportunities, such as residential development, office, restaurants, hotel, entertainment, and retail operations. As of December 31, 2022, Canterbury Development has contributed approximately 36 acres of l and to three separate joint ventures described below.
In 2023, Canterbury Development continued to pursue various development opportunities for the underutilized land in a project known as Canterbury Commons™. Canterbury Development continues to pursue various mixed use development opportunities, such as residential development, office, restaurants, hotel, entertainment, and retail operations.
Pulte has initiated ground up construction of a number of townhome buildings and its first model units were completed in the first quarter of 2022. ● In September 2021, the Company entered into a purchase agreement to sell approximately 40 acres of land on the northeast corner of the Racetrack to Minneapolis-based Swervo Development Corporation ("Swervo").
The building is programmed with over 5,000 square feet of amenity spaces and outdoor spaces. ● In September 2021, the Company entered into a purchase agreement to sell approximately 37 acres of land on the northeast corner of the Racetrack to Minneapolis-based Swervo Development Corporation ("Swervo"). Swervo intends to construct a state-of-the-art amphitheater as part of the Canterbury Commons development.
In 2022, the Company had one day of live racing cancelled due to inclement weather. Currently, Minnesota law requires the Company to schedule a minimum of 125 days of live racing annually, unless a majority of horsepersons at the Racetrack agree to a fewer number of live racing days.
In 2023, the Company had one day of live racing cancell ed and two othe r days shortened due to inclement weather. In 2022, the Company had one day of live racing cancelled due to inclement weather.
The legislation now allows the Company to recoup a percentage of all simulcast horse racing wagers made by Minnesota residents over the internet on out-of-state races. The Minnesota legislature may consider bills to legalize sports betting in the State of Minnesota.
The Minnesota legislature continues to consider bills to legalize sports betting in the State of Minnesota.
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These components of revenue are described in more detail below. In the first half of 2021, the continuing COVID-19 pandemic had a negative impact on the financial condition and operations of the segments within Canterbury Entertainment, although to a much lesser extent than 2020.
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As part of our execution on the five-year strategic plan, we are actively evaluating new opportunities that would diversify and grow our business, including through potential strategic transactions and initiatives.
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We temporarily suspended all Casino, simulcast, and special event operations at Canterbury Park for a total of approximately one week at the beginning of January 2021.
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These components of revenue are described in more detail below.
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Additionally, 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 under pre-pandemic guidelines.
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In order to fund the poker progressive jackpot pools, the dealer withholds up to $2 from each pot in excess of $15.
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Our Casino also began operating without capacity restrictions effective May 28, 2021, but we maintained throughout the balance of 2021 and throughout 2022 and intend to maintain certain operational changes and improvements initiated in 2020 in response to the COVID-19 pandemic.
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As of December 31, 2023, Canterbury Development has contributed approximately 36 acres of l and to three, separate joint ventures described below. In addition, we have sold several parcels of land, totaling approximately 50 acres, to third parties that have and will develop the property as described below.
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Pursuant to a consent and waiver dated June 1, 2020, the MHBPA agreed to waive the minimum of 125 days of racing required in 2020, provided that there were 65 scheduled live racing days each year beginning in 2021.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf a business interruption were to occur due to inclement weather and continue for a significant length of time at our racetrack, it could have a material adverse impact on our business, financial condition, and results of operations. The Company maintains insurance for incremental weather conditions that would help mitigate the financial impact on our business.
Biggest changeWhile the Company maintains insurance for inclement weather conditions, if a prolonged business interruption were to occur due to inclement weather and continue for a significant length of time at our racetrack, it could have a material adverse impact on our business, financial condition, and results of operations. 15 Risks Related to Government Regulation of our Horse Racing and Gaming Generally We are subject to changes in the laws that govern our business, including the possibility of an increase in gaming taxes, which would increase our costs, and changes in other laws may adversely affect our ability to compete.
Additionally, we compete with other forms of gambling, including betting on professional sports, spectator sports, other forms of entertainment, and other racetracks throughout the country. We expect competition for our existing and future operations to increase from Running Aces, existing tribal casinos, and racetracks that are able to subsidize their purses with alternative gaming revenues.
Additionally, we compete with other forms of gambling, including betting on professional sports, spectator sports, other forms of entertainment, and other racetracks throughout the country. 14 We expect competition for our existing and future operations to increase from Running Aces, existing tribal casinos, and racetracks that are able to subsidize their purses with alternative gaming revenues.
Various factors have led to declines in the horse population in some areas of the country, including competition from racetracks in other areas, increased costs, and changing economic returns for owners and breeders, and the spread of various debilitating and contagious equine diseases.
Various factors have led to declines in the horse population in Minnesota and other areas of the country, including competition from racetracks in other areas, increased costs, changing economic returns for owners and breeders, and the spread of various debilitating and contagious equine diseases.
On June 16, 2020, Canterbury Development entered into an operating agreement with an affiliate of Greystone Construction, as the two members of a Minnesota limited liability company named Canterbury DBSV Development, LLC (Canterbury DBSV).
On June 16, 2020, Canterb ury Development entered into an operating agreement with an affiliate of Greystone Construction, as the two members of a Minnesota limited liability company named Canterbury DBSV Development, LLC (Canterbury DBSV).
While we maintain insurance coverage specific to cyber-insurance matters, any failure on our part to maintain adequate safeguards may subject us to significant liabilities. 18 Additionally, if third parties we work with, such as vendors, violate applicable laws or our policies, these violations may also put our customers’ information at risk and could in turn have an adverse effect on our business.
While we maintain insurance coverage specific to cyber-insurance matters, any failure on our part to maintain adequate safeguards may subject us to significant liabilities. 18 Additionally, if third parties we work with, such as vendors, violate applicable laws or our policies or suffer a significant cybersecurity incident, these violations may also put our customers’ information at risk and could in turn have an adverse effect on our business.
We have taken steps designed to safeguard our customers’ personal and financial information and have implemented systems designed to meet all requirements of the Payment Card Industry standards for data protection.
We have taken steps designed to safeguard our customers’ personal and financial information and have implemented systems designed to meet the applicable requirements of the Payment Card Industry standards for data protection.
Decreases in discretionary consumer spending or consumer preferences brought about by factors such as perceived or actual general economic conditions or the economic conditions in the Twin Cities or Minnesota specifically, effects of declines in consumer confidence in the economy, any future employment and credit crisis, the impact of high and prolonged inflation, particularly with respect to housing, energy and food costs, the increased cost of travel, decreased disposable consumer income and wealth, fears of war and future acts of terrorism, or widespread illnesses or epidemics, including COVID-19, can have a material adverse effect on discretionary spending and other areas of economic behavior that directly impact the gaming and entertainment industries in general and could further reduce customer demand in our casino, Racetrack and food and beverage segments, which may negatively impact our revenues and operating cash flow.
Decreases in discretionary consumer spending or consumer preferences brought about by factors such as perceived or actual general economic conditions or the economic conditions in the Twin Cities or Minnesota specifically, effects of declines in consumer confidence in the economy, any future employment and credit crisis, the impact of high and prolonged inflation, particularly with respect to housing, energy and food costs, the increased cost of travel, decreased disposable consumer income and wealth, fears of war and future acts of terrorism, or widespread illnesses or epidemics, including COVID-19, can have a material adverse effect on discretionary spending and other areas of economic behavior that directly impact the gaming and entertainment industries in general and could further reduce customer demand in our Casino, Racetrack and food and beverage segments, which may negatively impact our revenues and operating cash flow. 13 We have experienced a decrease in revenue and profitability from live racing.
An increase in the minimum wage mandated under Federal or Minnesota law could have a material adverse effect on our operations and financial results. The Company employs a large number of individuals at an hourly wage equal to or slightly above the current state mandated wage of $10.59 per hour for 2023.
An increase in the minimum wage mandated under Federal or Minnesota law could have a material adverse effect on our operations and financial results. The Company employs a large number of individuals at an hourly wage equal to or slightly above the current state mandated wage of $10.85 per hour for 2024.
Although we have invested in and deployed security systems and developed processes that are designed to protect all sensitive data, prevent data loss and reduce the impact of any security breach, such measures cannot provide absolute security.
Although we have invested in and deployed security systems and developed processes that are designed to protect all sensitive data, prevent data loss and reduce the impact of a security incident, such measures cannot provide absolute security.
Our information technology and other systems are subject to cyber security risk including misappropriation of customer information or other breaches of information security. We rely on information technology and other systems to maintain and transmit customers’ personal and financial information, credit card information, mailing lists and other information.
Our information technology and other systems are subject to cybersecurity risk including misappropriation of customer information or other information security incidents. We rely on information technology and other systems to maintain and transmit customers’ personal and financial information, credit card information, mailing lists, and other information.
Amendments to the Minnesota Racing Act or decisions by the MRC in regard to any one or more of the following matters could also adversely affect the Company’s operations: the granting of operating licenses to Canterbury Park and other racetracks after an application process and public hearings; the licensing of all track employees, jockeys, trainers, veterinarians, and other participants; regulating the transfer of ownership interests in licenses; allocating live race days and simulcast-only race days; approving race programs; regulating the conduct of races; setting specifications for the racing ovals, animal facilities, employee quarters, and public areas of racetracks; changes to the types of wagers on horse races; and approval of significant contractual agreements Risks Related to our Real Estate Development Efforts We rely on the efforts of our partner Doran for the development and profitable operation of our Triple Crown Residences at Canterbury Park joint venture.
Amendments to the Minnesota Racing Act or decisions by the MRC in regard to any one or more of the following matters could also adversely affect the Company’s operations: the granting of operating licenses to Canterbury Park and other racetracks after an application process and public hearings; the licensing of all track employees, jockeys, trainers, veterinarians, and other participants; regulating the transfer of ownership interests in licenses; allocating live race days and simulcast-only race days; approving race programs; regulating the conduct of races; setting specifications for the racing ovals, animal facilities, employee quarters, and public areas of racetracks; changes to the types of wagers on horse races; and approval of significant contractual agreements.
In connection with its contribution, Canterbury Development became a 61.87% equity member in Canterbury DBSV. The Company will rely on the efforts of our partner Greystone Construction for the success of this new development project. We may not be successful in executing our real estate development strategy.
In connection with its contribution, Canterbury Development became a 61.87% equity member in Canterbury DBSV. The Company will rely on the efforts of our partner Greystone Construction for the success of this new development project.
Internet-based interactive gaming and wagering, both legal and illegal, is growing rapidly and we anticipate competition in this area will become more intense as new Internet-based ventures enter our industry and as state and federal regulations on Internet-based activities are clarified.
We anticipate competition in this area will become more intense as new Internet-based ventures enter our industry and as state and federal regulations on Internet-based activities are clarified.
While we are pursuing initiatives to strengthen the financial returns of live racing at the Racetrack and to manage our marketing spend, there can be no assurance that we will identify and implement initiatives that will advance these goals in a cost-effective or timely manner or at all. 13 We may not be able to attract a sufficient number of horses and trainers to achieve above average field sizes.
While we are pursuing initiatives to strengthen the financial returns of live racing at the Racetrack and to manage our marketing spend, there can be no assurance that we will identify and implement initiatives that will advance these goals in a cost-effective or timely manner or at all.
In September 2018, Canterbury Development contributed approximately 13 acres of land as its equity contribution in the Doran Canterbury I joint venture and became a 27.4% equity member. Construction of the 321-unit first phase began in late 2018 with initial occupancy on June 1, 2020. As of the end of December 2021, all 321 units were available for occupancy.
In September 2018, Canterbury Development contributed approxi mately 13 acr es of land as its equity contribution in the Doran Canterbury I joint venture and became a 27.4% equity member. Construction of the 321-unit first phase began in late 2018 with initial occupancy on June 1, 2020.
In addition, if the Company fails to follow payment card industry security standards, even if no customer information is compromised, the Company could incur significant fines or experience a significant increase in payment card transaction costs. We are also subject to federal and Minnesota laws that affect businesses generally.
In addition, if the Company fails to follow payment card industry security standards, even if no customer information is compromised, the Company could incur significant fines or experience a significant increase in payment card transaction costs.
The existence of inflation in the economy has the potential to result in higher interest rates and capital costs, supply shortages, increased costs of labor and other similar effects. As a result of inflation, we have experienced and may continue to experience, increases in the costs of food and beverage supplies, labor, materials, energy, fuel, and other inputs.
As a result of inflation, we have experienced and may continue to experience, increases in the costs of food and beverage supplies, labor, materials, energy, fuel, and other inputs.
Since horse racing is conducted outdoors, unfavorable weather conditions, including extremely high and low temperatures, high winds, storms, tornadoes and hurricanes, could cause events to be postponed or canceled or attendance to be lower, resulting in reduced wagering.
Since horse racing is conducted outdoors, unfavorable weather conditions, including extremely high and low temperatures, high winds, storms, tornadoes, and hurricanes, could cause events to be postponed or canceled or attendance to be lower, resulting in reduced wagering. For example, in 2023, the Company had one day of live racing cancelled and two other days shortened due to inclement weather.
A loss of confidence in the fairness of our industries could have a material adverse impact on our business. Horse racing is an inherently dangerous sport and our racetrack is subject to personal injury litigation.
To prevent cheating or erroneous payouts, oversight processes must be in place to ensure that these activities cannot be manipulated. A loss of confidence in the fairness of our industries could have a material adverse impact on our business. Horse racing is an inherently dangerous sport and our racetrack is subject to personal injury litigation.
We face significant competition, both directly from other racing and gaming operations and indirectly from other forms of entertainment and leisure time activities, which could have a material adverse effect on our operations.
Our inability in the future to attract adequate fields, for whatever reason, could have a material adverse impact on our business, financial condition, and results of operations. We face significant competition, both directly from other racing and gaming operations and indirectly from other forms of entertainment and leisure time activities, which could have a material adverse effect on our operations.
Canterbury Development is currently pursuing other opportunities for the commercial development of its underutilized land. The development of residential and commercial real estate involves many risks, including, but not limited to, the selection of development partners; building design and construction; obtaining government permits; financing; securing and retaining tenants; and the volatility of real estate market conditions.
The development of residential and commercial real estate involves many risks, including, but not limited to, the selection of development partners; building design and construction; obtaining government permits; financing; securing and retaining tenants; and the volatility of real estate market conditions. Accordingly, there can be no assurance that our real estate development activities will be successful.
In August 2020, Doran exercised its option for Phase II of the project, which will include an additional 300 residential units, and Canterbury Development entered into a second joint venture agreement with Doran. Pursuant to this second agreement, in early August 2020, the Company transferred roughly 10 acres of land to the second joint venture with Doran.
As of the end of December 2021, all 321 units were available for occupancy. In August 2020, Doran exerc ised its option for Phase II of the project, which will include an additional 300 residential units, and Canterbury Development entered into a second joint venture agreement with Doran.
Our in-person visitors are predominately local, so we compete for more day-to-day discretionary spending as compared with destination spending.
Our business is sensitive to downturns in the economy and the associated impact on discretionary spending on entertainment, gaming, and other leisure activities. Our in-person visitors are predominately local, so we compete for more day-to-day discretionary spending as compared with destination spending.
These Native American facilities have the advantage of being exempt from some state and federal taxes and state regulation of indoor smoking, and have the ability to offer a wider variety of gaming products.
In addition to pari-mutuel wagering, Running Aces operates a card room that directly competes with the Company’s Casino. We also compete with Native American owned casinos. These Native American facilities have the advantage of being exempt from some state and federal taxes and state regulation of indoor smoking, and have the ability to offer a wider variety of gaming products.
Under the Redevelopment Agreement with the City of Shakopee, the Company has agreed to undertake a number of specific public infrastructure improvements within the TIF District. The funding that the Company will be paid as reimbursement under the TIF program for these improvements is not guaranteed, but will depend on future tax revenues generated from the developed property.
The funding that the Company will be paid as reimbursement under the TIF program for these improvements is not guaranteed, but will depend on future tax revenues generated from the developed property. We face competition from other real estate developers.
We believe that patrons prefer to wager on races with a number of horses in the race (the “field”) at or above the national average. A failure to offer races with adequate fields results in less wagering on our horse races. Our ability to attract adequate fields depends on several factors.
We may not be able to attract a sufficient number of horses and trainers to achieve above average field sizes. We believe that patrons prefer to wager on races with a number of horses in the race (the “field”) at or above the national average.
Regardless, we recognize that a general decline in interest in horse racing and pari-mutuel wagering could have a material adverse impact on our business, financial condition and results of operations in future years. 14 A lack of confidence in the integrity of our core businesses could affect our ability to retain our customers and engage with new customers.
Declining interest in horse racing has had a negative impact on revenues and profitability in our racing business. A general decline in interest in horse racing and pari-mutuel wagering could have a material adverse impact on our business, financial condition, and results of operations in future years.
General Risk Factors We may be adversely affected by the effects of inflation. Inflation has the potential to adversely affect our business, results of operations, financial position and liquidity by increasing our overall cost structure.
Inflation has the potential to adversely affect our business, results of operations, financial position and liquidity by increasing our overall cost structure. The existence of inflation in the economy has the potential to result in higher interest rates and capital costs, supply shortages, increased costs of labor and other similar effects.
We face intense competition in our market, particularly competition from Running Aces in Columbus Township, Anoka County, Minnesota, a racetrack and card room that is located approximately 50 miles from Canterbury Park. We also compete with Native American owned casinos.
We face intense competition in our market, particularly direct competition from Running Aces in Columbus Township, Anoka County, Minnesota, a racetrack and card room that is located approximately 40 miles from Canterbury Park. Running Aces offers pari-mutuel wagering on live races of standardbred (“harness”) horses on a seasonal basis and year-round wagering on simulcasting of all breeds of horse races.
Increased competition from the tribal casinos could divert customers from our Casino and Racetrack and thus adversely affect our financial condition, results of operations and cash flows. Nationally, the popularity of horse racing has declined.
Increased competition from the tribal casinos could divert customers from our Casino and Racetrack and thus adversely affect our financial condition, results of operations and cash flows. Furthermore, the Company faces indirect competition from a variety of sources for discretionary consumer spending, including spectator sports and other entertainment and gaming options.
In 2022, the SMSC paid an annual purse enhancement of $7,280,000 and an annual marketing payment of $1,620,000. The purse enhancement payments were paid directly to the MHBPA and accordingly, such payments had no direct impact on the Company’s consolidated financial statements or operations.
The purse enhancement payments were paid directly to the MHBPA to support purse sizes and accordingly, such payments had no direct impact on the Company’s consolidated financial statements or operations. The marketing payments under the CMA offset the Company’s expense relating to certain marketing efforts, including signage, promotions, player benefits, and events.
Because purse enhancement payments and marketing payments under our CMA with SMSC will not continue after December 31, 2022, we are likely to experience decreased revenue and profitability from live racing. Following the expiration of the CMA on December 31, 2022, we will not receive any purse enhancement, marketing payments or other amounts under the CMA.
Following the expiration of the CMA on December 31, 2022, we did not receive any purse enhancement, marketing payments, or other amounts under the CMA. In 2022, the SMSC paid an annual purse enhancement of $7,280,000 and an annual marketing payment of $1,620,000.
The integrity of horse racing, casino gaming, and pari-mutuel wagering industries must be perceived as fair to patrons and the public at large. To prevent cheating or erroneous payouts, oversight processes must be in place to ensure that these activities cannot be manipulated.
A lack of confidence in the integrity of our core businesses could affect our ability to retain our customers and engage with new customers. The integrity of horse racing, casino gaming, and pari-mutuel wagering industries must be perceived as fair to patrons and the public at large.
Accordingly, there can be no assurance that our real estate development activities will be successful. We are obligated to make improvements in the TIF district and will be reimbursed only to the extent of future tax revenue.
We are obligated to make improvements in the TIF district and will be reimbursed only to the extent of future tax revenue. Under the Redevelopment Agreement with the City of Shakopee, the Company has agreed to undertake a number of specific public infrastructure improvements within the TIF District.
Canterbury Development will rely on Doran for the successful leasing and operation of the Triple Crown Residences as well as completion of the second phase of the project. 16 We rely on the efforts of our partner Greystone Construction for a new development project.
Risks Related to our Real Estate Development Efforts We rely on the efforts of our partner Doran for the development and profitable operation of our Triple Crown Residences at Canterbury Park joint venture.
The marketing payments under the CMA offset the Company’s expense relating to certain marketing efforts, including signage, promotions, player benefits, and events. Accordingly, due to the lack of an annual purse enhancement, the purses we are able to offer for our live racing events after December 31, 2022 are likely to be smaller than they have been in the past.
Accordingly, due to the lack of an annual purse enhancement, the purses and the number of races we were able to offer in the 2023 live racing season were smaller than they h ave been in the past.
First, it depends on our ability to offer and fund competitive purses. Second, it depends on the overall horse population available for racing.
A failure to offer races with adequate fields generally results in less wagering on our horse races, which we experienced during the 2023 live racing season. Our ability to attract adequate fields depends on several factors, including our ability to offer and fund competitive purses and overall horse population available for racing.
Risk Factors Related to Horse Racing and Gaming Generally Our business is sensitive to reductions in discretionary consumer spending as a result of downturns in the economy and other factors outside of our control. Our business is particularly sensitive to downturns in the economy and the associated impact on discretionary spending on entertainment, gaming and other leisure activities.
There can be no assurance that we will develop and implement transactions and initiatives that will advance the goals of our strategic plan in a cost-effective or timely manner or at all. Our business is sensitive to reductions in discretionary consumer spending as a result of downturns in the economy and other factors outside of our control.
This may result in a decrease in field size and decrease in wagering on live races (particularly out-of-state handle), which ultimately result in a decrease in revenue from live racing. For the year ended December 31, 2022, pari-mutuel revenue was $10,958,000, or 16.4%, of total revenues.
These factors resulte d in a decrease in wagering on live races (particularly out-of-state handle), which ultimately result in a decrease in revenue from live racing in 2023 as compared to 2022. We enter into an agreement with the horsepersons each year for the following year’s live racing season.
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If revenue decreases from live racing, the profitability of live racing will likely also decrease due to the fixed expenses relating to live racing and the lack of marketing payments under the CMA. We also will bear increased marketing expenses relating to our casino and food and beverage segments without the marketing payments under the CMA.
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Risk Factors Related to Horse Racing and Gaming Generally We may not be successful at implementing our growth strategy. In 2023, we developed a five-year strategic plan focused on growing Casino revenue.
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While our ability to offer adequate fields to patrons during our live meets was substantially strengthened by the purse enhancement payments that were made under the CMA through 2022, our inability to attract adequate fields, for whatever reason, could have a material adverse impact on our business, financial condition, and results of operations.
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As part of our execution on the five-year strategic plan, we are actively evaluating new opportunities that would diversify and grow our business, including through potential strategic transactions and initiatives.
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According to industry sources, pari-mutuel handle declined 27% from 2007 to 2011 and has been relatively stable since 2011, experiencing less than a 1% decline between 2011 and 2019. Pari-mutuel handle declined more than 1% in 2020 due the COVID-19 pandemic, however, pari-mutuel handle returned to pre-pandemic levels in 2021.
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We cannot ensure that this growth strategy will be successful either in the short-term or in the long-term, or that this overall strategy will generate a positive return on our investment. We must commit significant resources to these strategic transactions and initiatives before knowing whether our investments will result in the operational or financial results we expect or intend.
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Declining interest in horse racing has had a negative impact on revenues and profitability in our racing business. However, as a result of the purse enhancement payments and marketing payments we received under the CMA, we outperformed the industry as it relates to field size, live handle, and simulcast handle in 2022.
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The return on our investments in strategic transactions and initiatives may be lower, or may develop more slowly, than we expect. Our growth strategy may place significant de mands on our financial, operational and management resources.
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Our business and operations have been, and may in the future, be adversely affected by epidemics, pandemics, outbreaks of disease, and other adverse public health developments, including COVID-19.
Added
We may not execute successfully on our growth strategy because of legislative, regulatory, financial, or other hurdles that we fail to overcome in a timely fashion, or lack of appropriate resources. Addit ionally, we may compete with other companies for attractive strategic opportunities.
Removed
Due to the COVID-19 pandemic, we temporarily suspended all Card Casino, simulcast, and food and beverage operations at Canterbury Park or operated with capacity and other restrictions throughout much of 2020 and the first half of 2021, although to a much lesser extent than 2020.
Added
The process of identifying and exploring strategic transactions and initiatives is time consuming and may result in a diversion of management’s time and attention away from existing business activities.
Removed
These suspension of operations and capacity restrictions caused significant disruptions to our ability to generate revenues, profitability, and cash flows and had a material adverse impact on our financial condition, results of operations, and cash flows.
Added
Additionally, if we do not effectively communicate our growth strategy to our investors and stakeholders, we may not realize the full benefits that we would otherwise gain through successful execution of that strategy.
Removed
While we have returned to more normalized operations, there remains continuing logistical challenges faced by the entire gaming industry resulting from COVID-19-related labor shortages and supply chain disruptions. Future disruptions, as well as significant negative economic trends, due to the COVID-19 pandemic or other widespread illnesses or epidemics, may adversely affect our stock price.
Added
If we do not achieve the benefits anticipated from our investments in our growth strategy or if the achievement of these benefits is delayed, our operating results may be adversely affected.
Removed
Epidemics, pandemics, outbreaks of novel diseases, and other adverse public health developments may arise at any time. Such developments, including the COVID-19 pandemic, have had, and in the future may have, an adverse effect on our business, financial condition and results of operations.
Added
For the 2024 live racing season, we have agreed with the MHBPA and MQHRA to a 54-day racing season and have agreed to contribute an additional share of our Casino revenue to the statutorily required purse amounts to guarantee purses for overnight races at $23,000 per race.
Removed
These effects include a potentially negative impact on the availability of our key personnel, labor shortages and increased turnover, temporary closures of Canterbury Park or the businesses of our business partners, third-party service providers or other vendors, and interruption of domestic and global supply chains, distribution channels and liquidity and capital or financial markets.
Added
In order to ensure the guaranteed minimum overnight purse structure, we will be making an overpayment that may be repaid to us through reimbursement in subsequent racing years. This anticipated overpayment of purses is intended to create a short-term bridge until additional purse supplements can be obtained from other sources.
Removed
The impact of a widespread illnesses or epidemics, including COVID-19, may also have the effect of exacerbating many of the other risks we face. 15 Risks Related to Government Regulation of our Horse Racing and Gaming Generally We are subject to changes in the laws that govern our business, including the possibility of an increase in gaming taxes, which would increase our costs, and changes in other laws may adversely affect our ability to compete.
Added
In the event that additional purse revenue is secured through additional forms of gaming at Canterbury, new revenue streams, or legislative action are obtained to fund purses and beyond the current statutory requirements, we will be eligible for reimbursement of the actual 2024 overpayment amount from those purse supplements.
Removed
In addition to receiving 27.4% ownership in the Doran Phase II joint venture, the exchange resulted in the repayment of a $2.9 million note receivable which was on the Company’s balance sheet as a related party receivable as of June 30, 2020.
Added
This arrangement will have the effect of increasing the average purse size per live race for the 2024 live racing season, which we expect will lead to larger field sizes, an increase in wagering on live races and increased revenue from live racing as compared to 2023.
Removed
Some of these laws, such as laws pertaining to immigration, have severe penalties for law violations. In addition, it is possible, as a result of the legislative process, that legislation directly or indirectly adverse to the Company may be enacted into law.
Added
However, there can be no assurance that our agreed-upon purse supplements will have the expected impact on the financial performance of live racing or that any improved financial performance of live racing will offset the amounts we contribute to purses. Further, there can be no assurance that we will receive any reimbursement of any 2024 overpayment amount.
Added
Additionally, if, for any reason, we are unable to reach an annual agreement with the MHBPA and the MQHRA for any future live racing season, our operations would be adversely affected by a decrease in the daily purses, potential reduction in the quality of horses, lower attendance, lower overall average handle, and substantially greater operating expenses.
Added
The Company competes with racetracks located throughout the United States in securing horses to run at the Racetrack. Attracting owners and trainers that can bring high quality horses to our Racetrack is largely dependent on our ability to offer competitive purses. The Company experiences significant competition for horses from racetracks located near Des Moines, Iowa and Chicago, Illinois.
Added
We expect this competition to continue for the foreseeable future. Internet-based interactive gaming and wagering, both legal and illegal, is growing rapidly and adversely affects all forms of wagering offered by the Company.
Added
In the Minneapolis-Saint Paul metropolitan area, competition includes a wide range of live and televised professional and collegiate sporting events. In addition, live horse racing competes with a wide variety of summer attractions, including amusement parks, sporting events, and other local activities. Nationally, the popularity of horse racing has declined.
Added
Pursuant to this second agreement, in early August 2020, the Company transferred roughly 10 acres of land to the second joint venture with Doran, resulting in receiving 27.4% ownership in the Doran Phase II joint venture. Canterbury Development will rely on Doran for the successful leasing and operation of the Triple Crown Residences.
Added
If Doran's ability to successfully lease and operate this project is impaired, it could have a material adverse effect on our business, prospects, financial condition, or results of operations. 16 We rely on the efforts of our partner Greystone Construction for a new development project.
Added
If Greystone Construction’s ability to successfully develop this project is impaired, it could have a material adverse effect on our business, prospects, financial condition, or results of operations. We may not be successful in executing our real estate development strategy. Canterbury Development is currently pursuing other opportunities for the commercial development of its underutilized land.
Added
Canterbury Development and its joint ventures face competition from developers of other residential, mixed use, office, retail, hotel, and entertainment spaces around Shakopee, Minnesota and elsewhere in Minnesota. These other developers may be larger and have more resources than Canterbury Development or than Canterbury Devel opment and its developer partners on a combined basis.
Added
The leasing of real estate is highly competitive. The principal competitive factors are rent, location, lease term, lease concessions, services provided, and the nature and condition of the property to be leased. The Canterbury Development joint ventures will directly compete with all owners, developers, and operators of similar space in the areas in which our properties are located.
Added
The number of competitive multifamily properties in our particular market could adversely affect lease rates at residential properties in Canterbury Commons, as well as the rents able to be charged.
Added
In addition, other forms of residential properties, including single family housing and town homes, provide housing alternatives to potential residents of luxury apartment communities like our Triple Crown Residences at Canterbury Park. Likewise, the competition for high quality tenants for retail, office, and other spaces is intense.
Added
In order to be successful, our real estate joint ventures must have competitive rental rates and maintain high occupancy rates with a financially stable tenant base. We may again in the future seek developers or other partners for joint venture arrangements or opportunities for Canterbury Development to develop our properties.
Added
We will be competing with other property owners, both around Shakopee and elsewhere, for high quality builders, commercial and residential real estate firms, and developers that share our vision for Canterbury Commons.
Added
We have in the past and may agree in the future to sell parcels of land to third parties that will then develop the properties and in that case, we will also be in competition with other sellers of properties for purchasers.
Added
Although we will have no continuing ownership in these land sales, we believe that the ability to effectively compete for tenants will be a factor in the purchasers’ selection of our property over other competing properties for their developments. General Risk Factors We may be adversely affected by the effects of inflation.

Item 2. Properties

Properties — owned and leased real estate

2 edited+1 added−1 removed1 unchanged
Biggest changeAs of December 31, 2022, the Company has approximately 75 acres of land re maining that are owned or controlled by the Company that are not currently used for its business operations, and could be developed or sold, in whole or in part. See discussion above titled “Development Operations” and footnote 12 to the consolidated financial statements for more information.
Biggest changeIn 2022, the Company sold approximate ly four acres of land to the west of the Racetrack. As of December 31, 2023, the Company has approximately 40 acres of land re maining that are owned or controlled by the Company that are not currently used for its business operations, and could be developed or sold, in whole or in part.
The Racetrack’s grandstand has a patron capacity of approximately 10,000 within enclosed areas and a maximum patron capacity of over 30,000 including outside areas around the grandstand.
The Racetrack’s grandstand has a patron capacity of approximately 10,000 within enclosed areas and a maximum patron capacity of over 30,000 including outside areas around the grandstand. 19 Underutilized Land In 2023, the Company sold approximat ely 37 acres of land to the north of the racetrack for the development of a state-of-the-art amphitheater.
Removed
In connection with the Company's general credit and security agreement, the Company's land used for business operations is subject to a mortgage with a financial institution as additional collateral on its line of credit. 19 Underutilized Land In 2022, the Company sold approximate ly four acres of land to the west of the Racetrack.
Added
See discussion above titled “Development Operations” and footnote 12 to the consolidated financial statements for more information.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

1 edited+0 added−2 removed0 unchanged
Biggest changeItem 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES MARKET INFORMATION The Company’s common stock trades on the Nasdaq Global Market under the symbol CPHC. HOLDERS At March 15, 2023, the Company had 577 shareholders of record of its common stock.
Biggest changeItem 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES MARKET INFORMATION The Company’s common stock trades on the Nasdaq Global Market under the symbol CPHC. HOLDERS At March 7, 2024, the Company had 568 sha reholders of record of its common stock. 20 Item 6. [RESERVED]
Removed
Securities Authorized for Issuance Under Equity Compensation Plans The following table sets forth information as of December 31, 2022 regarding our equity compensation plans, all of which were approved by our shareholders: Plan Category Number of shares of common stock to be issued upon exercise of outstanding options, warrants and rights (1) Weighted-average exercise price of outstanding options, warrants and rights Number of shares of common stock remaining available for future issuance under equity compensation plans (2) Equity compensation plans approved by security holders: Stock Plan 48,430 $ — 143,230 Employee Stock Purchase Plan — — 95,866 Equity compensation plans not approved by security holders: Total 48,430 239,096 (1) For the Stock Plan, represents number of shares that may be issued upon settlement of outstanding deferred stock awards.
Removed
(2) Excludes shares of common stock listed in the first column 20 Item 6. [RESERVED]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

60 edited+24 added−26 removed25 unchanged
Biggest changeThese important factors include, but are not limited to: ● Our business is sensitive to reductions in discretionary consumer spending as a result of downturns in the economy and other factors outside of our control. ● Because purse enhancement payments and marketing payments under our CMA with SMSC will not continue after December 31, 2022, we are likely to experience decreased revenue and profitability from live racing. ● We may not be able to attract a sufficient number of horses and trainers to achieve above average field sizes. ● We face significant competition, both directly from other racing and gaming operations and indirectly from other forms of entertainment and leisure time activities, which could have a material adverse effect on our operations. ● Nationally, the popularity of horse racing has declined. ● A lack of confidence in the integrity of our core businesses could affect our ability to retain our customers and engage with new customers. ● Horse racing is an inherently dangerous sport and our racetrack is subject to personal injury litigation. ● Our business depends on using totalizator services. ● Inclement weather and other conditions may affect our ability to conduct live racing. ● Our business and operations have been, and may in the future, be adversely affected by epidemics, pandemics, outbreaks of disease, and other adverse public health developments, including COVID-19. ● We are subject to changes in the laws that govern our business, including the possibility of an increase in gaming taxes, which would increase our costs, and changes in other laws may adversely affect our ability to compete. ● We are subject to extensive regulation from gaming authorities that could adversely affect us. ● We rely on the efforts of our partner Doran for the development and profitable operation of our Triple Crown Residences at Canterbury Park joint venture. ● We rely on the efforts of our partner Greystone Construction for a new development project. ● We may not be successful in executing our real estate development strategy. ● We are obligated to make improvements in the TIF district and will be reimbursed only to the extent of future tax revenue. ● We may be adversely affected by the effects of inflation. ● An increase in the minimum wage mandated under Federal or Minnesota law could have a material adverse effect on our operations and financial results. ● Our success may be affected if we are not able to attract, develop and retain qualified personnel. ● The payment and amount of future dividends is subject to Board of Director discretion and to various risks and uncertainties. ● Our information technology and other systems are subject to cyber security risk including misappropriation of customer information or other breaches of information security. ● We process, store, and use personal information and other data, which subjects us to governmental regulation and other legal obligations related to privacy, and our actual or perceived failure to comply with such obligations could harm our business.
Biggest changeThese important factors include, but are not limited to: ● We may not be successful at implementing our growth strategy. ● Our business is sensitive to reductions in discretionary consumer spending as a result of downturns in the economy and other factors outside of our control. ● We have experienced a decrease in revenue and profitability from live racing. ● We may not be able to attract a sufficient number of horses and trainers to achieve above average field sizes. ● We face significant competition, both directly from other racing and gaming operations and indirectly from other forms of entertainment and leisure time activities, which could have a material adverse effect on our operations. ● Nationally, the popularity of horse racing has declined. ● A lack of confidence in the integrity of our core businesses could affect our ability to retain our customers and engage with new customers. ● Horse racing is an inherently dangerous sport and our racetrack is subject to personal injury litigation. ● Our business depends on using totalizator services. ● Inclement weather and other conditions may affect our ability to conduct live racing. ● We are subject to changes in the laws that govern our business, including the possibility of an increase in gaming taxes, which would increase our costs, and changes in other laws may adversely affect our ability to compete. ● We are subject to extensive regulation from gaming authorities that could adversely affect us. ● We rely on the efforts of our partner Doran for the development and profitable operation of our Triple Crown Residences at Canterbury Park joint venture. ● We rely on the efforts of our partner Greystone Construction for a new development project. ● We may not be successful in executing our real estate development strategy. ● We are obligated to make improvements in the TIF district and will be reimbursed only to the extent of future tax revenue. ● We face competition from other real estate developers. ● We may be adversely affected by the effects of inflation. ● An increase in the minimum wage mandated under Federal or Minnesota law could have a material adverse effect on our operations and financial results. ● Our success may be affected if we are not able to attract, develop and retain qualified personnel. ● The payment and amount of future dividends is subject to Board of Director discretion and to various risks and uncertainties. ● Our information technology and other systems are subject to cyber security risk including misappropriation of customer information or other breaches of information security. ● We process, store, and use personal information and other data, which subjects us to governmental regulation and other legal obligations related to privacy, and our actual or perceived failure to comply with such obligations could harm our business.
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. The Company qualified for federal government assistance through the ERC provisions 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. The Company qualified for federal government assistance through the ERC provisions for the second, third, and fourth quarters of 2020, as well as the first and second quarters of 2021.
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 the receivable to be potentially uncollectable exist. The Company utilizes the assistance of a third party to assist with the projected tax increments.
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 the receivable to be potentially uncollectable exist. The Company utilizes 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.
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 expected future tax increment revenue will exceed the Company's development costs on infrastructure improvements.
CASH FLOWS FROM FINANCING ACTIVITIES Net cash used in financing activities for 2022 was $1,435,000 primarily due to the reinstituted quarterly cash dividend as well as payments for taxes of equity awards, partially offset by proceeds from the issuance of common stock.
Net cash used in financing activities for 2022 was $1,435,000 primarily due to the reinstituted quarterly cash dividend as well as payments for taxes of equity awards, partially offset by proceeds from the issuance of common stock.
STRATEGIC OVERVIEW Canterbury Park Holding Corporation (the “Company,” “we,” “our,” or “us”) hosts pari-mutuel wagering on thoroughbred and quarter horse races and “unbanked” card games at its Canterbury Park Racetrack and Casino facility (the “Racetrack”) in Shakopee, Minnesota, which is approximately 25 miles southwest of downtown Minneapolis.
STRATEGIC OVERVIEW Canterbury Park Holding Corporation (the “Company,” “we,” “our,” or “us”) hosts pari-mutuel wagering on thoroughbred and quarter horse races and “unbanked” card games at its Canterbury Park Racetrack and Casino facility (the “Racetrack”) in Shakopee, Minnesota, which is approximately 20 miles southwest of downtown Minneapolis.
The Company has committed to payment of statutory distributions under a $500,000 bond issued to the MRC as required under Minnesota law. The Company was not required to make any payments related to this bond in 2022 or 2021, and there is no liability related to this bond on the balance sheet as of December 31, 2022.
The Company has committed to payment of statutory distributions under a $500,000 bond issued to the MRC as required under Minnesota law. The Company was not required to make any payments related to this bond in 2023 or 2022 , and there is no liability related to this bond on the balance sheet as of December 31, 2023 .
There were no unpaid purse fund obligations due to the MHBPA at December 31, 2022 or 2021. In March 2014, the Company entered into a seven-year agreement with a new totalizator provider, which was extended an additional year in 2021.
There were no unpaid purse fund obligations due to the MHBPA at December 31, 2023 or 2022 . In March 2014, the Company entered into a seven-year agreement with a new totalizator provider, which was extended an additional year in 2021. In March 2022, the Company entered into a five-year agreement with a new totalizator provider.
Unbanked card games, in which patrons compete against each other, are hosted in the Casino at the Racetrack. The Casino operates 24 hours a day, seven days a week. The Casino offers both poker and table games at up to 80 tables.
Unbanked card games, in which patrons compete against each other and not the house, are hosted in the Casino at the Racetrack. The Casino operates 24 hours a day, seven days a week. The Casino offers both poker and table games at up to 80 tables.
Management believes that the resolution of any pending claims and legal actions at December 31, 2022 and as of the date of this report will not have a material impact on the Company’s consolidated financial position or results of operations.
Management believes that the resolution of any pending claims and legal actions at December 31, 2023 and as of the date of this report will not have a material impact on the Company’s consolidated financial position or results of operations.
CONTINGENCIES Effective on December 21, 2021, the Company entered into a Contribution and Indemnity Agreement ("Indemnity Agreement") with affiliates of Doran Companies ("Doran") relating to debt financing by Doran Canterbury I, LLC as borrower, which is guaranteed by Doran affiliates.
COMMITMENTS AND CONTINGENCIES Effective December 21, 2021, the Company entered into a Contribution and Indemnity Agreement ("Indemnity Agreement") with affiliates of Doran Companies ("Doran") relating to debt financing by Doran Canterbury I, LLC as borrower, which is guaranteed by Doran affiliates.
As a result of our analysis for the year ended December 31, 2022, management believes the TIF receivable will be fully collectible and no allowance related to this receivable is necessary.
As a result of our analysis for the year ended December 31, 2023, management believes the TIF receivable will be fully collectible and no allowance related to this receivable is necessary.
COOPERATIVE MARKETING AGREEMENT The amounts received from the marketing payments under the CMA are recorded as a component of other revenue and the related expenses are recorded as a component of advertising and marketing expense and depreciation in the Company’s consolidated statements of operations.
COOPERATIVE MARKETING AGREEMENT The amounts received from the marketing payments under the CMA were recorded as a component of other revenue and the related expenses were recorded as a component of advertising and marketing expense and depreciation in the Company’s consolidated statements of operations.
These development opportunities have included contributions of land to joint ventures, three as of the end of December 2022, and sales of parcels of land to third parties that will then develop the property.
These development opportunities have included contributions of land to joint ventures, three as of the end of December 2023, and sales of parcels of land to third parties that will then develop the property.
The MRC regulates the operation of the player pool and progressive jackpot pools. These liabilities have the potential for significant fluctuation on a daily basis. All games in the Casino are played using chips. The value of chips issued and outstanding, referred to as the “outstanding chip liability,” was $587,000 and $475,000 at December 31, 2022 and 2021, respectively.
The MRC regulates the operation of the player pool and progressive jackpot pools. These liabilities have the potential for significant fluctuation on a daily basis. All games in the Casino are played using chips. The value of chips issued and outstanding, referred to as the “outstanding chip liability,” was $558,000 and $587,000 at December 31, 2023 and 2022 , respectively.
The Company also derives revenues from related services and activities, such as food and beverage, parking, advertising signage, publication sales, and from other entertainment events and activities held at the Racetrack. In 2022, Canterbury Development continued to pursue various development opportunities begun in 2015 for its underutilized land in a project known as Canterbury Commons.
The Company also derives revenues from related services and activities, such as food and beverage, parking, advertising signage, publication sales, and from other entertainment events and activities held at the Racetrack. In 2023, Canterbury Development continued to pursue various development opportunities that began in 2015 for its underutilized land in a project known as Canterbury Commons.
Pursuant to an agreement with the MHBPA, we transferred into a trust account or paid directly to the MHBPA, approximately $7,846,000 and $8,903,000 in purse funds related to thoroughbred races for 2022 and 2021, respectively. Minnesota law provides that amounts transferred into this trust account are the property of the trust and not the Company.
Pursuant to an agreement with the MHBPA, we transferred into a trust account or paid directly to the MHBPA, approximately $7,133,000 and $7,846,000 in purse funds related to thoroughbred races for 2023 and 2022 , respectively. Minnesota law provides that amounts transferred into this trust account are the property of the trust and not the Company.
We designate cash balances that will be required to satisfy certain short-term liabilities such as progressive jackpots, the player pool, and amounts due horsemen for purses and awards as “restricted” as a separate balance sheet item.
We designate cash balances that will be required to satisfy certain short-term liabilities such as progressive jackpots, the player pool, collateral needed for joint venture operations, and amounts due horsemen for purses and awards as “restricted” as a separate balance sheet item.
This was partially offset by an increase in our TIF receivable of $792,000 and a decrease in employee retention credit receivable of $211,000.
This was partially offset by an increase in our TIF receivable of $792,000 and a de crease in employee retention credit receivable of $211,000.
The Company is required to return accumulated player pool funds to the players through giveaways, promotional items, prizes or by other means. The player pool liability was $1,064,000 and $973,000 at December 31, 2022 and 2021, respectively. Additionally, the table games jackpot pool was $309,000 and $675,000 at December 31, 2022 and 2021, respectively.
The Company is required to return accumulated player pool funds to the players through giveaways, promotional items, prizes, or by other means. The player pool liability was $1,055,000 and $1,064,000 at December 31, 2023 and 2022 , respectively. Additionally, the table games jackpot pool was $524,000 and $309,000 at December 31, 2023 and 2022 , respectively.
The poker promotional pool liability was $576,000 and $934,000 at December 31, 2022 and 2021, respectively. The Casino offers progressive jackpots for poker games. Amounts collected for these jackpot funds are accrued as liabilities until paid to winners. At December 31, 2022 and 2021, accrued jackpot funds totaled $132,000 and $189,000, respectively.
The poker promotional pool liability was $339,000 and $576,000 at December 31, 2023 and 2022, respectively. The Casino offers progressive jackpots for poker games. Amounts collected for these jackpot funds are accrued as liabilities until paid to winners. At December 31, 2023 and 2022 , accrued jackpot funds totaled $172,000 and $132,000, respectively.
Our long-term strategic direction is to continue to enhance our Racetrack as a unique gaming and entertainment destination and develop the approximately 80 acres of underutilized land not needed for our Racetrack Operations.
Our long-term strategic direction is to continue to enhance our Racetrack as a unique gaming and entertainment destination and develop the approximat ely 40 acres of underutilized land not needed for our Racetrack Operations.
The following summarizes our financial performance for the last five years (in 000’s): Financial Performance Summary 2022 2021 2020 2019 2018 Net Revenues $ 66,824 $ 60,400 $ 33,140 $ 59,227 $ 59,142 Operating Expenses 55,943 42,882 (1) 34,882 (2) 55,591 (3) 53,866 (4) Gain on Transfer/Sale of Land 12 264 2,368 — 2,371 Income (Loss) Before Income Taxes 10,235 15,798 (189 ) 3,963 7,708 Income Tax (Expense) Benefit (2,722 ) (3,999 ) 1,251 (1,244 ) (1,990 ) Net Income 7,513 11,798 1,062 2,718 5,718 1 During fiscal year 2021, the Company reduced operating expenses $6,314,000 by recording an employee retention credit, a refundable tax credit. 2 During fiscal year 2019, the Company reduced operating expenses $21,000 by recording a gain on insurance recoveries. 3 During fiscal year 2018, the Company reduced operating expenses $141,000 by recording a gain on insurance recoveries. 4 During fiscal year 2017, the Company reduced operating expenses by $1,465,000 by recording a gain on insurance recoveries. 21 EMPLOYEE RETENTION CREDIT The employee retention credit (“ERC”), as originally enacted on March 27, 2020 by the CARES Act, is a refundable tax credit against certain employment taxes equal to 50% of the qualified wages an eligible employer pays to employees after March 12, 2020, and before January 1, 2021.
The following summarizes our financial performance for the last five years (in 000’s): Financial Performance Summary 2023 2022 2021 2020 2019 Net Revenues $ 61,437 $ 66,824 $ 60,400 $ 33,140 $ 59,227 Operating Expenses 56,426 55,943 42,882 (1) 34,882 55,591 (2) Gain on Transfer/Sale of Land 6,490 12 264 2,368 — Income (Loss) Before Income Taxes 14,980 10,235 15,798 (189 ) 3,963 Income Tax (Expense) Benefit (4,417 ) (2,722 ) (3,999 ) 1,251 (1,244 ) Net Income 10,563 7,513 11,798 1,062 2,718 1 During fiscal year 2021, the Company reduced operating expenses $6,314,000 by recording an employee retention credit, a refundable tax credit. 2 During fiscal year 2019, the Company reduced operating expenses $21,000 by recording a gain on insurance recoveries. 21 EMPLOYEE RETENTION CREDIT The employee retention credit (“ERC”), as originally enacted on March 27, 2020 by the CARES Act, is a refundable tax credit against certain employment taxes equal to 50% of the qualified wages an eligible employer pays to employees after March 12, 2020, and before January 1, 2021.
LIQUIDITY AND CAPITAL RESOURCES CASH FLOWS FROM OPERATING ACTIVITIES Cash provided by operating activities for 2022 was $11,217,000 as a result of net income of $7,513,000 and was increased by 2022 noncash charges from depreciation of $2,981,000, stock-based compensation expense of $449,000, stock-based employee match contribution of $618,000, and loss from equity investment of $1,568,000.
Cash provided by operating activities for 2022 was $11,217,000 as a result of net income of $7,513,000 and was increased by 2022 noncash charges from depreciation of $2,981,000, stock-based compensation expense of $450,000, stock-based employee match contribution of $619,000, and loss from equity investment of $1,568,000.
We receive guest fees from out-of-state racetracks and ADW companies for out-of-state wagering on our live races. Other revenues include source market fees paid by ADW companies for wagers made by Minnesota residents on out-of-state races and proceeds from unredeemed pari-mutuel tickets. Total 2022 pari-mutuel revenue increased $714,000, or 7.0%, compared to 2021.
We receive guest fees from out-of-state racetracks and ADW companies for out-of-state wagering on our live races. Other revenues include source market fees paid by ADW companies for wagers made by Minnesota residents on out-of-state races and proceeds from unredeemed pari-mutuel tickets. Total 2023 pari-mutuel revenue decreased $2,704,000, or 24.7%, compared to 2022 .
For the year ended December 31, 2022, the Company recorded $1,920,000 in other revenue and incurred $1,697,000 in advertising and marketing expense and $222,000 in depreciation related to the SMSC marketing payment.
For the year ended December 31, 2022, the Company recorded $1,920,000 in other revenue and incurred $1,698,000 in advertising and marketing expense and $222,000 in depreciation related to the SMSC marketing payment. The CMA expired by its terms on December 31, 2022.
Under the Indemnity Agreement, the Company is obligated to reimburse and indemnify each loan guarantor for any amounts paid by such loan guarantor to the lender on debt financing by Doran Canterbury I, LLC, up to a maximum of $5,000,000.
Under the Indemnity Agreement, the Company is obligated to reimburse and indemnify each loan guarantor for any amounts paid by such loan guarantor to the lender on debt financing by Doran Canterbury I, LLC, up to a maximum of $5,000,000. Effective October 27, 2022, the Indemnity Agreement was amended to increase the maximum indemnification by an additional $700,000.
We believe our existing cash and cash equivalents, along with our short-term investments and cash flow from operations and availability of borrowing under our revolving line of credit agreement, will be sufficient to meet our liquidity and working capital requirements beyond the next 12 months. Additionally, we expect to receive the remaining employee retention credit payments of $6,103,236 in 2023.
We believe our existing cash and cash equivalents, along with our short-term investments and cash flow from operations and availability of borrowing under our revolving line of credit agreement, will be sufficient to meet our liquidity and working capital requirements beyond the next 12 months.
CASINO REVENUES Year Ended December 31, 2022 2021 Poker Games Collection $ 7,607,000 $ 7,110,000 Other Poker Revenue 2,875,000 2,133,000 Total Poker Revenue 10,482,000 9,243,000 Table Games Collection 27,392,000 27,120,000 Other Table Games Revenue 2,345,000 1,728,000 Total Table Games Revenue 29,737,000 28,848,000 Total Casino Revenue $ 40,219,000 $ 38,091,000 The primary source of Casino revenue is a percentage of the wagers received from the players as compensation for providing the Casino facility and services, referred to as “collection revenue.” Other Revenue presented above includes fees collected for the administration of tournaments and amounts earned as reimbursement of the administrative costs of maintaining jackpot funds.
CASINO REVENUES Year Ended December 31, 2023 2022 Poker Games Collection $ 7,477,000 $ 7,607,000 Other Poker Revenue 3,016,000 2,875,000 Total Poker Revenue 10,493,000 10,482,000 Table Games Collection 26,970,000 27,392,000 Other Table Games Revenue 2,318,000 2,345,000 Total Table Games Revenue 29,288,000 29,737,000 Total Casino Revenue $ 39,781,000 $ 40,219,000 The primary source of Casino revenue is a percentage of the wagers received from the players as compensation for providing the Casino facility and services, referred to as “collection revenue.” Other Revenue presented above includes fees collected for the administration of tournaments and amounts earned as reimbursement of the administrative costs of maintaining jackpot funds.
CASH FLOWS FROM INVESTING ACTIVITIES Net cash used in investing activities for 2022 of $9,275,000 was used primarily for additions to land, buildings, and equipment, an increase in related party receivable, purchases of short-term investments, and an equity investment contribution. This was partially offset by proceeds received from the sale of land.
Net cash used in investing activities for 2022 of $9,275,000 was used primarily for additions to land, buildings, and equipment of $4,997,000, an increase in related party receivable of $377,000, purchases of short-term investments of $5,000,000, and an equity investment contribution of $398,000.
For the year ended December 31, 2022, Adjusted EBITDA excluded from EBITDA the gain on sale of land, loss on disposal of assets, and depreciation, amortization and interest related to equity investments.
For the year ended December 31, 2022, Adjusted EBITDA excluded from EBITDA stock-based compensation (which includes the Company's 401(k) match in stock contribution), the gain on saleof land, loss on disposal of assets, and depreciation, and amortization and interest related to equity investments.
The TIF receivable requires significant management estimates and judgement pertaining to whether an allowance for doubtful accounts is necessary.
The TIF receivable requires significant management estimates and judgement pertaining to expected future tax revenue, the Company's development cost on infrastructure improvements, and whether an allowance for doubtful accounts is necessary.
Estimate of the allowance for doubtful accounts - Property Tax Increment Financing "TIF" Receivable As of December 31, 2022, the Company recorded a TIF receivable on its Consolidated Balance Sheet of approximately $13,294,000, which represents $11,301,000 of principal and $1,993,000 of interest.
Estimate of the allowance for doubtful accounts - Property Tax Increment Financing "TIF" Receivable As of December 31, 2023, the Company recorded a TIF receivable of approximately $13,973,000, which represents $11,307,000 of principal and $2,666,000 of interest.
PARI-MUTUEL REVENUES Year Ended December 31, 2022 2021 Simulcast $ 3,862,000 $ 3,959,000 Live racing 1,890,000 1,663,000 Guest fees 3,517,000 3,236,000 Other revenue 1,689,000 1,386,000 Total Pari-Mutuel Revenue $ 10,958,000 $ 10,244,000 Racing Days Simulcast only racing days 290 289 Live and simulcast racing days 64 65 Total Number of Racing Days 354 354 Simulcast and Live Racing pari-mutuel revenues include commission and breakage revenues from on-track live and simulcast wagering.
PARI-MUTUEL REVENUES Year Ended December 31, 2023 2022 Simulcast $ 3,717,000 $ 3,862,000 Live racing 1,526,000 1,890,000 Guest fees 1,582,000 3,517,000 Other revenue 1,429,000 1,689,000 Total Pari-Mutuel Revenue $ 8,254,000 $ 10,958,000 Racing Days Simulcast only racing days 311 300 Live and simulcast racing days 53 64 Total Number of Racing Days 364 364 Simulcast and Live Racing pari-mutuel revenues include commission and breakage revenues from on-track live and simulcast wagering.
For 2022 as compared to 2021, total pari-mutuel revenue increased 7.0%, Casino revenue increased 5.6%, food and beverage revenue increased 33.0%, and other revenue increased 26.2%. See below for a further discussion of our sources of revenues for each of our pari-mutuel, Casino, food and beverage, and other revenues.
For 2023 as compared to 2022, total pari-mutuel revenue decreased 24.7%, Casino revenue decreased 1.1%, food and beverage revenue decreased 4.8%, and other revenue decreased 24.9%. See below for a further discussion of our sources of revenues for each of our pari-mutuel, Casino, food and beverage, and other revenues.
In addition to this write-off, the Company had three additional asset disposals for a gain of $18,300, resulting in a net loss on disposal of assets of $157,435 for the year ended December 31, 2022.
In addition to this write-off, the Company had multiple additional asset disposals for a gain of $18,000, resulting in a net loss on disposal of assets of $157,000 for the year ended December 31, 2022. 24 OTHER INCOME (LOSS), NET Other income, net, for the year ended December 31, 2023 was $3,479,000, an increase of $4,137,000, compared to an other loss, net, of $658,000 for the year ended December 31, 2022.
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”) which was amended in September 2021.
The amounts charged to operations for totalizator expenses for the years ended December 31, 2023 and 2022 were $205,000 and $253,000, respectively. In August 2018, the Company entered into a Contract for Private Redevelopment with the City of Shakopee in connection with a Tax Increment Financing District (“TIF District”) which was amended in September 2021.
OPERATIONS REVIEW YEAR ENDED December 31, 2022 COMPARED TO YEAR ENDED December 31, 2021 EBITDA represents earnings before interest income, income tax expense, depreciation, and amortization.
As indicated, the Company received its remaining employee retention credit receivable in 2023. OPERATIONS REVIEW YEAR ENDED December 31, 2023 COMPARED TO YEAR ENDED December 31, 2022 EBITDA represents earnings before interest income, income tax expense, depreciation, and amortization.
Minnesota Breeders’ Purse Expense Fund Expense 2022 2021 2022 2021 Casino $ 4,852,000 $ 4,584,000 $ 539,000 $ 509,000 Simulcast Racing 1,477,000 1,463,000 482,000 467,000 Live Racing 2,201,000 1,991,000 98,000 85,000 Total $ 8,530,000 $ 8,038,000 $ 1,119,000 $ 1,061,000 Salaries and benefits expense increased $9,249,000, or 61.2%, in 2022 compared to 2021.
Minnesota Breeders’ Purse Expense Fund Expense 2023 2022 2023 2022 Casino $ 4,797,000 $ 4,852,000 $ 533,000 $ 539,000 Simulcast Racing 1,435,000 1,477,000 442,000 482,000 Live Racing 1,368,000 2,201,000 79,000 98,000 Total $ 7,600,000 $ 8,530,000 $ 1,054,000 $ 1,119,000 Salaries and benefits expense increased $1,136,000, or 4.7%, in 2023 compared to 2022 .
Under the new agreement, $166,400 was charged to operations in 2022. The future minimum purchase obligations under the new agreement are $166,400 per year for each of the next four years.
Pursuant to the agreement, the vendor provides totalizator equipment and related software that records and processes all wagers and calculates odds and payoffs. Under the new agreement, $166,400 was charged to operations in 2023. The future minimum purchase obligations under the new agreement are $166,400 per year for each of the next four years.
The credit agreement contains covenants requiring the Company to maintain certain financial ratios. The Company was in compliance with these requirements at all times throughout 2022. Our three largest sources of revenue: pari-mutuel wagering, Casino operations, and food and beverage, are all based on cash transactions. Consequently, we have significant inflows of cash on a daily basis.
Our three largest sources of revenue: pari-mutuel wagering, Casino operations, and food and beverage, are all based on cash transactions. Consequently, we have significant inflows of cash on a daily basis.
During 2022, the Company performed a review of any fixed assets that were no longer in service at December 31, 2022. As a result of this review, management determined to dispose of assets resulting in a loss on disposal of $175,735.
As a result of this review, management determined to dispose of assets resulting in a loss on disposal of $175,000 during the fourth quarter of 2022.
Net cash provided by financing activities for 2022 was $130,000 primarily due to proceeds from the issuance of common stock, partially offset by payments for taxes of equity awards. Given that we reinstituted our quarterly cash dividend in January 2022, we expect net cash used by financing activities to increase in 2022.
CASH FLOWS FROM FINANCING ACTIVITIES Net cash used in financing activities for 2023 was $1,345,000 primarily due to cash dividends paid to shareholders and payments for taxes of equity awards, partially offset by proceeds from the issuance of common stock.
Casino revenue represented 60.2% and 63.1% of the Company’s net revenues for the years ended December 31, 2022 and 2021, respectively. Total Casino revenue increased $2,128,000, or 5.6%, in 2022 compared to 2021.
Casino revenue represented 64.8% and 60.2% of the Company’s net revenues for the years ended December 31, 2023 and 2022, respectively. Total Casino revenue decreased $438,000, or 1.1%, in 2023 compared to 2022.The decrease is primarily due to a decrease in live race days year-over-year.
This agreement was amended as of December 23, 2020 to extend the maturity date to February 28, 2021. The agreement was also amended as of February 28, 2021 to extend the maturity date to January 31, 2024 and increase its revolving credit line up to $10,000,000.
The agreement was amended as of February 28, 2021 to extend the maturity date to January 31, 2024 and increase its revolving credit line up to $10,000,000. The line of credit was collateralized by all receivables, inventory, equipment, and general intangibles of the Company, as well as a mortgage on certain real property.
This also resulted in an increase in Minnesota Breeders' Fund (the "MBF") expense (shown below).
The decrease is due primarily to the decrease in pari-mutuel revenues. This also resulted in a decrease in Minnesota Breeders' Fund (the "MBF") expense (shown below).
CRITICAL ACCOUNTING ESTIMATES The preparation of the Consolidated Financial Statements in accordance with GAAP requires us to make estimates and judgments that are subject to an inherent degree of uncertainty.
Our effective tax rate was 29.5% a nd 26.6% for 2023 and 2022, respectively. Net income for the years 2023 and 2022 was $10,563,000 an d $7,513,000, respectively. CRITICAL ACCOUNTING ESTIMATES The preparation of the Consolidated Financial Statements in accordance with GAAP requires us to make estimates and judgments that are subject to an inherent degree of uncertainty.
The Company's expected one-time refunds at December 31, 2022 and 2021 were $6,103,236 and $6,314,468, respectively, and are included on the Consolidated Balance Sheets as an employee retention credit receivable, as well as on the Consolidated Statements of Operations as a credit to salaries and benefits expense in 2021.
We recognize government grants for which there is a reasonable assurance of compliance with grant conditions and receipt of credits. The Company's expected one-time refunds at December 31, 2023 and 2022 were $0 and $6,103,236, respectively, and are included on the Consolidated Balance Sheets as an employee retention credit receivable.
The following table sets forth a reconciliation of net income, a GAAP financial measure, to EBITDA and Adjusted EBITDA (defined above), which are non-GAAP measures, for the years ended: SUMMARY OF EBITDA DATA Year Ended December 31, 2022 2021 NET INCOME $ 7,512,946 $ 11,798,153 Interest income, net (909,958 ) (719,365 ) Income tax (benefit) expense 2,721,800 3,999,400 Depreciation 2,981,168 2,844,647 EBITDA 12,305,956 17,922,835 Loss on disposal of assets 157,435 — Gain on sale/transfer of land (12,151 ) (263,581 ) Employee Retention Credit — (6,314,468 ) Depreciation and amortization related to equity investments 1,782,870 1,735,883 Interest expense related to equity investments 907,099 905,729 Other revenue, COVID-19 relief grants — (515,000 ) ADJUSTED EBITDA $ 15,141,209 $ 13,471,398 Adjusted EBITDA increased $1,670,000, or 12.4%, for 2022 compared to 2021.
The following table sets forth a reconciliation of net income, a GAAP financial measure, to EBITDA and Adjusted EBITDA (defined above), which are non-GAAP measures, for the years ended: SUMMARY OF EBITDA DATA Year Ended December 31, 2023 2022 NET INCOME $ 10,563,249 $ 7,512,946 Interest income, net (1,978,122 ) (909,958 ) Income tax expense 4,417,000 2,721,800 Depreciation 3,145,372 2,981,168 EBITDA 16,147,499 12,305,956 Stock-based compensation 1,378,373 1,068,366 Loss on disposal of assets 157,160 157,435 Gain on sale of land (6,489,976 ) (12,151 ) Gain on insurance proceeds related to equity investments (4,227,701 ) — Depreciation and amortization related to equity investments 1,753,256 1,782,870 Interest expense related to equity investments 1,727,192 907,099 ADJUSTED EBITDA $ 10,445,803 $ 16,209,575 Adjusted EBITDA decreased $5,764,000, or 35.6%, for 2023 compared to 2022.
We expect to invest approximately $15 million in the stable area improvement plan as currently designed, staged over the course of the next two years. We expect to use nearly all of the proceeds from the land sale to Swervo in connection with the amphitheater to fund the stable area improvement plan, as well as our other sources of liquidity.
Additionally, we also have finalized our stable area improvement plan, and have begun construction on our barn demo and relocation. We expect to invest approximately $15 million in the stable area improvement plan as currently designed, staged over the course of the next two years.
For 2022, Adjusted EBITDA as a percentage of net revenue was 22.8%. For 2021, Adjusted EBITDA as a percentage of net revenue, excluding the $515,000 other revenue from COVID-19 relief grants, was 22.5%. 22 REVENUES Total net revenues for 2022 were $66,824,000, an increase of $6,424,000, or 10.6%, compared to total net revenues of $60,400,000 for 2021.
For 2023, Adjusted EBITDA as a percentage of net revenue was 17.0%. For 2022, Adjusted EBITDA as a percentage of net revenue was 24.3%. 22 REVENUES Total net revenues for 2023 were $61,437,000, a decrease of $5,387,000, or 8.1%, compared to total net revenues of $66,824,000 for 2022.
Net cash used in investing activities for 2022 of $2,502,000 was used primarily for additions to land, buildings, and equipment, increase in related party receivable, and an equity investment contribution. This was partially offset by proceeds received from the sale of land.
CASH FLOWS FROM INVESTING ACTIVITIES Net cash used in investing activities for 2023 of $455,000 was used primarily for additions to land, buildings, and equipment of $7,908,000, an increase in related party receivable of $971,000, primarily due to additional member loans and interest related to the member loans, and purchases of short-term investments of $5,000,000.
CASH AND CAPITAL RESOURCES At December 31, 2022, we had cash, cash equivalents, and restricted cash of $16,106,000 compared to $15,599,000 at December 31, 2021. This $507,000 increase consisted of $11,217,000 of net cash provided by operating activities, offset by $9,275,000 of net cash used in financing activities and $1,435,000 of net cash used in investing activities.
This $9,736,000 increase consisted of $11,537,000 of net cash provided by operating activities in 2023, offset by $455,000 of net cash used in financing activities in 2023 and $1,345,000 of net cash used in investing activities in 2023.
This was partially offset by a decrease in payable to horsepersons of $1,451,000, an increase in TIF receivable of $614,000, and an increase in employee retention credit receivable of $6,314,000.
The Company experienced an increase in cash related to an employee retention credit receivable of $6,103,000, offset by a decrease in accounts payable, net of land, buildings, and equipment funded through accounts payable, of $1,465,000, and an increase in income taxes receivable of $2,031,000.
The line of credit is collateralized by all receivables, inventory, equipment, and general intangibles of the Company, as well as a mortgage on certain real property. The Company had no borrowings under the credit line during the year ended December 31, 2022. As of December 31, 2022, the outstanding balance on the line of credit was $0.
The Company had no borrowings under the credit line during the year ended December 31, 2023 . As of December 31, 2023 , the outstanding balance on the line of credit was $0. The credit agreement contains covenants requiring the Company to maintain certain financial ratios. The Company was in compliance with these requirements at all times throughout 2023 .
During 2021, the Company recorded a gain on sale of land of $264,000 as of result of the sale of approximately 9.8 acres of land for approximately $3,500,000 in gross proceeds. 24 The Company recorded a provision for income taxes of $2,722,000 and $3,999,000 for 2022 and 2021, respectively.
During 2022, the Company recorded a gain on sale of land of $12,000 as of result of the sale of approximately 4.2 acres of land for approximately $1,200,000 in gross proceeds. During 2023, the Company performed a review of any fixed assets that were no longer in service at December 31, 2023.
For the year ended December 31, 2021, Adjusted EBITDA excluded from EBITDA the gain on transfer of land, employee retention credit, and depreciation, amortization and interest related to equity investments, as well as $515,000 of COVID-19 relief grants included in other revenue for that year.
For the year ended December 31, 2023, Adjusted EBITDA excluded from EBITDA stock-based compensation (which includes the Company's 401(k) match in stock contribution), the gain on sale of land, loss on disposal of assets, insurance proceeds received by the Company's equity investment and depreciation, and amortization and interest related to equity investments.
The increase in 2022 is due to an increase in overall business operations, an increase in the number of personnel to support our resumption of normalized operations, as well as an increase to the wage rate for those personnel. Cost of food and beverage sales increased $836,000, or 34.3%, in 2022 compared to 2021.
The increase is primarily due to an increase in our wage-rate structure for seasonal as well as year-round employees to attract and retain front-line workers. The Company also increased its 401(k) match percentage, effective January 1, 2023. Cost of food and beverage sales decreased $209,000, or 6.4%, in 2023 compared to 2022 .
The decrease in our tax expense for 2022 compared to 2021 is due to a decrease in income before taxes from operations. Our effective tax rate was 26.6% and 25.3% for 2022 and 2021, respectively. Net income for the years 2022 and 2021 was $7,513,000 and $11,798,000, respectively.
The Company recorded a provision for income taxes of $4,417,000 and $2,722,000 for 2023 and 2022, respectively. The increase in our tax expense for 2023 compared to 2022 is due to an increase in income before taxes from operations, primarily related to the gain on land sale mentioned above.
Total operating expenses as a percentage of net revenues increased to 83.7% in 2022 from 81.5% in 2021 when removing the employee retention credit from 2021. Total purse expense increased $492,000, or 6.1%, in 2022 compared to 2021. The increase is due to increases in Casino and pari-mutuel revenues.
An explanation of changes in specific categories of operating expense is set forth below. Total operating expenses as a percentage of net revenues increased to 91.8% in 2023 from 83.7% in 2022 , which was a result of decreased net revenues for 2023 as compared to 2022. Total purse expense decreased $930,000, or 10.9%, in 2023 compared to 2022 .
Removed
In the first half of 2021, the continuing COVID-19 pandemic had a negative impact on the financial condition and operations of the segments within Canterbury Entertainment, although to a much lesser extent than 2020. We temporarily suspended all Casino, simulcast, and special event operations at Canterbury Park for a total of approximately one week at the beginning of January 2021.
Added
The decrease in revenue in 2023 compared to 2022 is primarily due to a decrease in live race days year-over-year (53 race days in 2023 compared to 64 race days in 2022) as well as decreased guest fees from out-state-handle on our live racing product on a per day basis due to decreased field size. 23 FOOD AND BEVERAGE REVENUES Food and beverage revenue decreased $398,000, or 4.8%, to $7,829,000 for the year ended December 31, 2023 compared to 2022 .
Removed
Additionally, 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 under pre-pandemic guidelines.
Added
The decrease in food and beverage revenues is primarily due to Twin Cities Summer Jam not taking place in 2023 as it did during the third quarter of 2022. OTHER REVENUES Other revenue, consisting of admission revenues, corporate sponsorships, space rentals, and other miscellaneous activities, decreased $1,847,000, or 24.9%, to $5,573,000 in 2023 compared to 2022 .
Removed
Our Casino also began operating without capacity restrictions effective May 28, 2021, but we maintained throughout the balance of 2021 and throughout 2022 and intend to maintain certain operational changes and improvements initiated in 2020 in response to the COVID-19 pandemic.
Added
The decrease is primarily due to the expiration of the CMA as marketing funds received from the agreement were used and subsequently recorded in other revenues as well as being recorded as operating expenses, primarily advertising and marketing. OPERATING EXPENSES Total operating expenses increased $483,000, or 0.9%, to $56,426,000 in 2023 , from $55,943,000 in 2022 .
Removed
In 2022, our horse racing, casino, and food and beverage operations were not subject to any COVID-19 related closures or capacity limitations.
Added
The decrease is primarily due to the decreased food and beverage revenue due to Twin Cities Summer Jam not taking place in 2023 as noted above. Advertising and marketing costs decreased $1,030,000, or 33.2%, in 2023 compared to 2022 . The decrease is primarily attributable to the expiration of the Cooperative Marketing Agreement mentioned above in the other revenues section.
Removed
We recognize government grants for which there is a reasonable assurance of compliance with grant conditions and receipt of credits.
Added
Professional and contracted service expenses increased $1,209,000, or 25.3% in 2023 compared to 2022. The increase is primarily attributable to long-term strategic growth initiatives being pursued as part of the execution on our five-year strategic plan focused on growing Casino revenue.
Removed
We expect to receive the remaining employee retention credit payments in 2023. Upon receipt, we expect to allocate these funds towards a combination of further investment in our team members, growth investments, capital expenditures, and deferred maintenance capital spending.
Added
During 2023, the Company recorded a gain on sale of land of $6,490,000 as of result of the sale of approximately 37 acres of land to an affiliate of Swervo Development for approximately $8,800,000 in total consideration.
Removed
The increase in revenue in 2022 compared to 2021 is due to increased business levels, including higher attendance, visitation, and per cap spend from consumers that attended our live race meet and increased revenue from out-of-state wagers.
Added
As a result of this review, management determined to dispose of assets resulting in a loss on disposal of $223,000 during the fourth quarter of 2023.
Removed
The increase is due to increased visitation as we returned to more normalized operations in 2022 as described above, as well as increased poker drop and tournament revenue in 2022 from the removal of various capacity restrictions that were in effect through May 28, 2021.
Added
In addition to this write-off, the Company had multiple additional asset disposals for a gain of $ 66,000, resulting in a net loss on disposal of assets of $157,000 for the year ended December 31, 2023. During 2022, the Company performed a review of any fixed assets that were no longer in service at December 31, 2022.
Removed
We also intend to maintain certain operational changes and improvements, to both poker and table games, which we believe is preferred by players and is contributing to increased revenue and margins. 23 FOOD AND BEVERAGE REVENUES Food and beverage revenue increased $2,041,000, or 33.0%, to $8,227,000 for the year ended December 31, 2022 compared to 2021.
Added
The increase for the 2023 is primarily due to our share of a gain recognized on insurance proceeds received on a claim by Doran Canterbury I. The Company's portion of the gain on insurance proceeds recognized by Doran Canterbury I was $4,228,000.
Removed
The increase is due to increased visitation in 2022 as our business recovers from the effects of the COVID-19 pandemic described above. The Company also increased prices related to food and beverage sales to offset rising inflationary costs.
Added
Also contributing to the 2023 increase was increased interest income of approximately $1,068,000 year-over-year, due to the Company transferring available cash into certificates of deposit and money market funds as well as increasing interest rates related to our member loans to Doran Canterbury I and Doran Canterbury II.

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