Canterbury Park Holding Corp 10-K

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (a) Financial Statements The following financial statements of the Company are set forth on pages 24 through 41 of the Form 10-K: Page Report of Independent Registered Public Accounting Firm (PCAOB ID 344 ) 24 Consolidated Balance Sheets as of December 31, 2024 and 2023 25 Consolidated Statements of Operations for the years ended December 31, 2024 and 2023 26 Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2024 and 2023 27 Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023 28 Notes to Consolidated Financial Statements for the years ended December 31, 2024 and 2023 30 23 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders Canterbury Park Holding Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Canterbury Park Holding Corporation and Subsidiaries (the “Company”) as of December 31, 2024 and 2023 , and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for the years then ended and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023 , and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financials are the responsibility of Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter Critical audit matters are matters arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined there are no critical audit matters. /s/ Wipfli LLP We have served as the Company's auditor since 2014. Minneapolis, Minnesota March 11, 2025 24 CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 2024 and 2023 2024 2023 ASSETS CURRENT ASSETS Cash and cash equivalents $ 10,075,642 $ 21,936,210 Restricted cash 3,611,776 3,905,544 Short-term investments 5,000,000 5,000,000 Accounts receivable, net of allowance of $ 7,670 at December 31, 2024 and 2023 439,121 484,092 Inventory 250,658 249,370 Prepaid expenses 1,849,015 645,422 Income taxes receivable and prepaid income taxes 3,186,465 4,083,364 Total Current Assets 24,412,677 36,304,002 LONG-TERM ASSETS Deposits 19,650 — Other prepaid expenses 19,951 10,978 TIF receivable 18,898,445 13,972,875 Related party receivable (Note 12) 4,743,913 3,526,071 Operating lease right-of-use assets 27,674 53,026 Equity investment (Note 11) 6,976,091 6,612,712 Other long-term receivables (Note 9) 1,597,463 — Land held for development 2,183,930 1,756,914 Land, buildings, and equipment, net (Note 3) 51,042,988 42,442,090 Total Long-term Assets 85,510,105 68,374,666 TOTAL ASSETS $ 109,922,782 $ 104,678,668 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES Accounts payable $ 3,665,155 $ 4,599,391 Casino accruals 2,159,249 2,667,499 Accrued wages and payroll taxes 2,151,524 1,662,927 Cash dividend payable 351,373 346,125 Accrued property taxes 1,103,784 741,215 Deferred revenue 311,244 274,898 Payable to horsepersons 870,775 763,383 Current portion of finance lease obligations 32,950 1,604 Current portion of operating lease obligations 27,674 25,352 Total Current Liabilities 10,673,728 11,082,394 LONG-TERM LIABILITIES Deferred income taxes (Note 4) 9,846,000 10,300,015 Investee losses in excess of equity investment 5,016,198 1,464,218 Finance lease obligations, net of current portion 117,182 7,770 Operating lease obligations, net of current portion — 27,674 Other long-term liabilities 181,000 — Total Long-term Liabilities 15,160,380 11,799,677 TOTAL LIABILITIES 25,834,108 22,882,071 STOCKHOLDERS’ EQUITY (Note 5) Common stock, $ .01 par value, 10,000,000 shares authorized, 5,036,717 and 4,962,573 , respectively, shares issued and outstanding 50,367 49,626 Additional paid-in capital 28,940,887 27,351,509 Retained earnings 55,097,420 54,395,462 Total Stockholders’ Equity 84,088,674 81,796,597 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 109,922,782 $ 104,678,668 See notes to consolidated financial statements. 25 CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED December 31, 2024 and 2023 2024 2023 OPERATING REVENUES: Casino $ 38,774,702 $ 39,781,166 Pari-mutuel 8,226,047 8,253,615 Food and beverage 7,968,157 7,828,980 Other 6,593,382 5,573,097 Total Net Revenues 61,562,288 61,436,858 OPERATING EXPENSES: Purse expense 7,908,404 7,600,059 Minnesota Breeders’ Fund 1,027,609 1,053,790 Other pari-mutuel expenses 910,843 915,714 Salaries and benefits 26,142,046 25,490,790 Cost of food and beverage and other sales 3,195,767 3,062,974 Depreciation and amortization 3,620,899 3,145,372 Utilities 1,489,576 1,680,885 Advertising and marketing 1,349,656 2,068,846 Professional and contracted services 5,660,993 5,981,480 Loss on disposal of assets 49,214 157,160 Other operating expenses 5,506,647 5,268,905 Total Operating Expenses 56,861,654 56,425,975 Gain on transfer/sale of land (Note 11) 1,732,353 6,489,976 INCOME FROM OPERATIONS 6,432,987 11,500,859 OTHER INCOME (LOSS) (Loss) income from equity investment ( 5,467,771 ) 1,501,268 Interest income, net 2,071,511 1,978,122 Net Other (Loss) Income ( 3,396,260 ) 3,479,390 INCOME BEFORE INCOME TAXES 3,036,727 14,980,249 INCOME TAX EXPENSE (Note 4) ( 923,885 ) ( 4,417,000 ) NET INCOME $ 2,112,842 $ 10,563,249 Basic earnings per share $ 0.42 $ 2.15 Diluted earnings per share $ 0.42 $ 2.13 Weighted average basic shares outstanding 4,994,905 4,921,379 Weighted average diluted shares 5,032,210 4,949,182 See notes to consolidated financial statements. 26 CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY YEARS ENDED December 31, 2024 and 2023 Number of Common Additional Retained Shares Stock Paid-in Capital Earnings Total Balance at December 31, 2022 4,888,975 $ 48,890 $ 25,914,644 $ 45,221,509 $ 71,185,043 Stock-based compensation — — 527,762 — 527,762 Dividend distribution — — — ( 1,389,296 ) ( 1,389,296 ) 401(K) stock match 38,701 387 850,611 — 850,998 Issuance of deferred stock awards 22,197 222 ( 171,970 ) — ( 171,748 ) Shares issued under Employee Stock Purchase Plan 12,700 127 230,462 — 230,589 Net income — — — 10,563,249 10,563,249 Balance at December 31, 2023 4,962,573 49,626 27,351,509 54,395,462 81,796,597 Stock-based compensation — — 571,632 — 571,632 Dividend distribution — — — ( 1,410,884 ) ( 1,410,884 ) 401(K) stock match 42,086 421 875,377 — 875,798 Issuance of deferred stock awards 17,475 175 ( 109,062 ) — ( 108,887 ) Shares issued under Employee Stock Purchase Plan 14,583 146 251,431 — 251,577 Net income — — — 2,112,842 2,112,842 Balance at December 31, 2024 5,036,717 $ 50,367 $ 28,940,887 $ 55,097,420 $ 84,088,674 See notes to consolidated financial statements. 27 CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED December 31, 2024 and 2023 2024 2023 Operating Activities: Net income $ 2,112,842 $ 10,563,249 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,620,899 3,145,372 Stock-based compensation expense 571,632 527,762 Stock-based employee match contribution 875,798 850,998 Deferred income taxes ( 454,015 ) 2,826,000 Loss on disposal of assets 49,214 157,160 Loss (gain) from equity investment 5,467,771 ( 1,501,268 ) Gain on sale of land — ( 6,489,976 ) Gain on transfer of land ( 1,732,353 ) — Changes in operating assets and liabilities: Accounts receivable 44,971 134,273 Employee retention credit — 6,103,236 Increase in TIF receivable ( 681,332 ) ( 674,378 ) Inventory, prepaid expenses and deposits ( 1,233,504 ) ( 17,403 ) Income taxes receivable and prepaid income taxes 896,899 ( 2,031,000 ) Other long-term receivables ( 1,597,463 ) — Operating lease right-of-use assets 25,352 24,524 Operating lease liabilities ( 25,352 ) ( 24,524 ) Accounts payable ( 2,121,199 ) ( 1,465,498 ) Deferred revenue 36,346 ( 138,544 ) Casino accruals ( 508,250 ) ( 16,945 ) Accrued wages and payroll taxes 488,597 ( 151,952 ) Accrued property taxes 362,569 ( 54,431 ) Other long-term liabilities 181,000 — Payable to horsepersons 107,392 ( 230,146 ) Net cash provided by operating activities 6,487,814 11,536,509 Investing Activities: Additions to land, buildings, and equipment ( 11,984,131 ) ( 7,907,963 ) Proceeds from disposal of assets 60,800 60,800 Proceeds from sale of land — 8,336,359 Additions for TIF eligible improvements ( 4,244,238 ) ( 4,160 ) Proceeds from sale of short-term investments 7,000,000 5,000,000 Purchase of short-term investments ( 7,000,000 ) ( 5,000,000 ) Cash dividends received from equity investments 36,480 30,368 Increase in related party receivable ( 1,217,842 ) ( 970,751 ) Net cash used in investing activities ( 17,348,931 ) ( 455,347 ) Financing Activities: Proceeds from issuance of common stock 251,577 230,589 Cash dividend paid to shareholders ( 1,405,636 ) ( 1,384,773 ) Payments for taxes related to net share settlement of equity awards ( 108,887 ) ( 171,748 ) Principal payments on finance lease ( 30,272 ) ( 19,479 ) Net cash used in financing activities ( 1,293,218 ) ( 1,345,411 ) Net (decrease) increase in cash, cash equivalents, and restricted cash ( 12,154,336 ) 9,735,751 Cash, cash equivalents, and restricted cash at beginning of year 25,841,754 16,106,003 Cash, cash equivalents, and restricted cash at end of year $ 13,687,418 $ 25,841,754 28 CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED December 31, 2024 and 2023 (continued) Schedule of non-cash investing and financing activities Additions to land, buildings, and equipment funded through accounts payable $ 1,187,000 $ 2,696,000 Dividend declared but not yet paid 351,000 346,125 Change in investee losses in excess of equity investments 3,552,000 ( 1,722,000 ) ROU assets obtained in exchange for operating lease obligations 171,030 87,430 Transfer of assets to Trackside Investments, LLC 583,000 — Supplemental disclosure of cash flow information: Income taxes paid, net of refunds $ 300,000 $ 3,622,000 Interest paid 13,000 1,000 See notes to consolidated financial statements. 29 CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED December 31, 2024 and 2023 1. OVERVIEW AND BASIS OF PRESENTATION Business – The Company’s Racetrack operations are conducted at facilities located in Shakopee, Minnesota, approximately 20 miles southwest of downtown Minneapolis. In May 1994, the Company commenced year-round horse racing simulcast operations and hosted the first annual live race meet during the summer of 1995. The Company’s live racing operations are a seasonal business as it hosts live race meets each year from May until September. The Company earns additional pari-mutuel revenue by televising its live racing to out-of-state racetracks around the country. Canterbury Park’s Casino operates 24 hours a day, seven days a week and is limited by Minnesota State law to conducting card play on a maximum of 80 tables. The Casino currently offers a variety of poker and table games. The Company’s three largest sources of revenues include: Casino operations, pari-mutuel operations, and food and beverage sales. The Company also derives revenues from related services and activities, such as admissions, advertising signage, publication sales, and from other entertainment events and activities held at the Racetrack. Additionally, the Company continues its ongoing development of approximately 140 acres of underutilized land surrounding the Racetrack in a project known as Canterbury Commons. The Company is pursuing several mixed-use development opportunities for this land, directly and through joint ventures. Basis of Presentation - The consolidated financial statements include the accounts of Canterbury Park Holding Corporation and its direct and indirect subsidiaries Canterbury Park Entertainment, LLC, Canterbury Park Concessions, Inc., and Canterbury Development, LLC (collectively, the “Company”), after elimination of intercompany accounts and transactions. Estimates – The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Reclassifications - Certain amounts in prior period financial statements have been reclassified to conform to current period presentations. 2. ACCOUNTING STANDARDS AND SIGNIFICANT ACCOUNTING POLICIES Summary of Significant Accounting Policies Revenue Recognition – The Company’s primary revenues with customers consist of Casino operations, pari-mutuel wagering on simulcast and live horse races, and food and beverage transactions. We determine revenue recognition through the following steps: ● Identification of the contract, or contracts, with a customer ● Identification of the performance obligations in the contract ● Determination of the transaction price ● Allocation of the transaction price to the performance obligation in the contract ● Recognition of revenue when, or as, we satisfy a performance obligation The transaction price for a Casino contract is a set percentage of wagers and is recognized at the time that the wagering process is complete. The transaction price for pari-mutuel wagering is the commission received on a wager, exclusive of any track fees and is recognized upon occurrence of the live race that is presented for wagering and after that live race is made official by the respective state’s racing regulatory body. The transaction price for food and beverage contracts is the net amount collected from the customer for these goods. Food and beverage services have been determined to be separate, stand-alone performance obligations and the transaction price is recorded as revenue as the good is transferred to the customer when delivery is made. Contracts for Casino operations and pari-mutuel wagering involve two performance obligations for those customers earning points under the Company’s loyalty program and a single performance obligation for customers who do not participate in the program. The Company applies a practical expedient by accounting for its gaming contracts on a portfolio basis as these wagers have similar characteristics and the Company reasonably expects the effects on the financial statements of applying the revenue recognition guidance to the portfolio will not differ materially from that which would result if applying the guidance to an individual wagering contract. For purposes of allocating the transaction price in a wagering contract between the wagering performance obligation and the obligation associated with the loyalty points earned, the Company allocates an amount to the loyalty point contract liability based on the stand-alone redemption value of the points earned, which is determined by the value of a point that can be redeemed for a cash voucher, food and beverage voucher, racing admission, valet parking, or racing forms. Based on past experience, the majority of customers redeem their points for cash vouchers. We have two general types of liabilities related to Casino contracts with customers: ( 1 ) our MVP Loyalty Program and ( 2 ) outstanding chip liability. These are included in the line item Casino accruals on the Consolidated Balance Sheets. We defer the full retail value of these complimentary reward items until the future revenue transaction occurs. The Company offers certain promotional allowances at no charge to patrons who participate in its player rewards program. The retail value of these promotional items is included as a deduction from pari-mutuel revenues. We evaluate our on-track revenue (live racing), export revenue (simulcast), and import revenue (guest fees) contracts to determine whether we are acting as the principal or as the agent when providing services, which we consider in determining if revenue should be reported gross or net. An entity is a principal if it controls the specified service before that service is transferred to a customer. 30 The revenue we recognize for on-track revenue and import revenue is the commission we are entitled to retain for providing a wagering service to our customers. For these arrangements, we are the principal as we control the wagering service; therefore, any charges, including simulcast fees, we incur for delivering the wagering service are presented as operating expenses. For export revenue, our customer is the third party wagering site such as a racetrack, OTB, or advance deposit wagering provider. Therefore, the revenue we recognize for export revenue is the simulcast host fee we earn for exporting our racing signal to the third party wagering site. Cash and Cash Equivalents – Cash and cash equivalents include all investments with original maturities of three months or less or which are readily convertible into known amounts of cash and are not legally restricted. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents. Restricted Cash – Restricted cash represents refundable deposits and amounts due to horsemen for purses, stakes and awards, collateral needed for joint venture operations, and amounts accumulated in card game progressive jackpot pools, the player pool, and poker promotional fund to be used to repay card players in the form of promotions, giveaways, prizes, or by other means. Short-Term Investments – Short-term investments include cash investments into short to intermediate-term fixed income securities. Such investments are not included as “Cash and cash equivalents” as the original maturities are greater than three months and are intended to be held until maturity. Accounts Receivable – Accounts receivable are initially recorded for amounts due from other tracks for simulcast revenue, net of amounts due to other tracks, and for amounts due from customers related to catering and events. Credit is granted in the normal course of business without collateral. Accounts receivable are stated net of allowances for doubtful accounts, which represent estimated losses resulting from the inability of customers to make the required payments. Accounts that are outstanding longer than the contractual terms are considered past due. We evaluate our allowance for credit losses and estimate collectability of current and non-current accounts receivable based on historical bad debt experience, our assessment of the financial condition of individual companies with which we do business, current market conditions, and reasonable and supportable forecasts of future economic conditions. In times of economic turmoil, our estimates and judgments with respect to the collectability of our receivables are subject to greater uncertainty than in more stable periods. The Company does not have accounts receivable with original maturities greater than one year. The allowance for credit losses and activity as of December 31, 2024 and 2023 , was not material. Inventory – Inventory consists primarily of food and beverages, small wares and supplies and retail goods and is recorded at the lower of cost ( first -in, first -out) or net realizable value. Property Tax Increment Financing (TIF) Receivable – In connection with the Contract for Private Redevelopment (“Redevelopment Agreement”) and First Amendment to the Contract for Private Redevelopment (the “First Amendment”) between the City of Shakopee Economic Development Authority and Canterbury Development LLC signed in August 2018 and amended in September 2021, the City of Shakopee has agreed that a portion of the tax increment revenue generated from the developed property will be paid to the Company to reimburse it for expenses in constructing public infrastructure improvements. The interest rate on the TIF Receivable is 6%. Other long-term receivables - In connection with the 2024 live race meet and purse fund contribution agreement with the MNHBPA and the MQHRA, the Company recorded an overpayment of purses. This overpayment was intended to create a short-term bridge until additional purse supplements can be obtained from other sources. In the event that additional purse revenue is secured within the five years following the 2025 live race meet through additional forms of gaming at the Company, new revenue streams, or legislative action, the Company will be eligible for reimbursement of the actual 2024 overpayment amount from those purse supplements. For more information on the Company’s overpayment of purses related to the 2024 live race agreement, see Note 9. Impairment of Long-Lived Assets – The Company reviews its long-lived assets whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. In the event that facts and circumstances indicate that the carrying value of any long-lived assets may be impaired, an evaluation of recoverability would be performed. If the sum of the expected undiscounted cash flows is less than the carrying value of the related asset or group of assets, a loss is recognized for the difference between the fair value and carrying value of the asset or group of assets. During 2024 and 2023 , the Company determined that no evaluations of recoverability were necessary. Land, Buildings, and Equipment – Land, buildings, equipment, and building improvements are capitalized at a level of $ 2,000 or greater and are recorded at cost. Repair and maintenance costs are charged to operations when incurred. Furniture, fixtures, and equipment are depreciated using the straight-line method over estimated useful lives ranging from 5 – 7 years, while buildings are depreciated over 15 – 39 years. Building improvements are amortized using the straight-line method over the useful life of the assets. Pre-development costs are incurred prior to vertical construction and for certain land held for development during the due diligence phase. This includes legal, engineering, architecture, and other professional fees incurred in pursuit of new development opportunities for which we believe future development is probable. Future development is dependent upon various factors, including zoning and regulatory approval, rental market conditions, construction costs, and availability of capital. Pre-development costs incurred for which future development is not yet considered probable are expensed as incurred. The Company capitalizes property taxes incurred on its land held for development during periods in which activities necessary to get the property ready for its intended use are in progress. Costs incurred after the property is substantially complete and ready for its intended use are charged to expense as incurred. Land Held for Development – Land held for development consists of land owned for potential real estate development. 31 Unredeemed Pari-mutuel Tickets – The Company records a liability for winning tickets and vouchers upon the completion of a race and when a voucher is printed, respectively. As uncashed winning tickets and vouchers are redeemed, this liability is reduced for the respective cash payment. The Company recognizes revenue associated with the uncashed winning tickets and vouchers when the likelihood of redemption, based on historical experience, is remote. While the Company continues to honor all winning tickets and vouchers presented for payment, management may determine the likelihood of redemption to be remote due to the length of time that has elapsed since the ticket was issued. In these circumstances, if management also determines there is no requirement for remitting balances to government agencies under unclaimed property laws, uncashed winning tickets and vouchers may then be recognized as revenue in the Company’s Consolidated Statement of Operations. Deferred Revenue – Deferred revenue includes advance sales related to racing, events, and corporate partnerships. Revenue from these advance billings is recognized when the related event occurs or services have been performed. Due to Minnesota Horsemen’s Benevolent and Protective Association, Inc. (“MNHBPA”) – The Minnesota Pari-mutuel Horse Racing Act specifies that the Company is required to segregate a portion of funds (recorded as purse expense in the statements of operations), received from Casino operations and wagering on simulcast and live horse races, for future payment as purses for live horse races or other uses of the horsepersons’ associations. Pursuant to an agreement with the MNHBPA, the Company transferred into a trust account or paid directly to the MNHBPA, approximately $ 8,288,000 and $ 7,133,000 for the years ended December 31, 2024 and 2023 , respectively, related to thoroughbred races. Minnesota Statutes specify that amounts transferred into the trust account are the property of the trust and not of the Company. Casino Accruals – Minnesota law allows the Company to collect amounts from patrons to fund progressive jackpot pools in the Casino. These amounts, along with amounts earned by the player pool, promotional pools, and the outstanding chip liability, are accrued as short-term liabilities at each balance sheet date. Advertising and Marketing – Advertising and marketing costs are charged to expense as incurred. The related amounts are presented separately in the Company’s Consolidated Statements of Operations. Income Taxes – Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to reverse. The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. Interest and penalties associated with uncertain income tax positions are presented in income tax expense. For the years ended December 31, 2024 and 2023 , the Company did not recognize any expense related to interest and penalties. Net Income Per Share – Basic net income per common share is based on the weighted average number of common shares outstanding during each year. Diluted net income per common share takes into effect the dilutive effect of potential common shares outstanding. The Company’s only potential common shares outstanding are stock options and unvested deferred stock awards. Fair Values of Financial Instruments – Due to the current classification of all financial instruments and given the short-term nature of the related account balances, carrying amounts reported in the Consolidated Balance Sheets approximate fair value. Stock-Based Employee Compensation – The Company accounts for share-based compensation awards on a fair value basis. The estimated grant date fair value of each stock-based award is recognized as expense over the requisite service period (generally the vesting period). The estimated fair value of each option is calculated using the Black-Scholes option-pricing model. For more information on the Company’s stock-based compensation plans, see Note 5. 3. LAND, BUILDINGS AND EQUIPMENT Land, buildings and equipment, at cost, consist of the following at December 31, 2024 and 2023 : 2024 2023 Land $ 2,835,655 $ 2,878,308 Buildings and building improvements 55,620,120 45,338,216 Furniture and equipment 21,102,057 20,805,643 Construction in progress 6,586,250 6,892,192 86,144,082 75,914,359 Accumulated depreciation ( 35,101,094 ) ( 33,472,269 ) Total land, buildings, and equipment, net $ 51,042,988 $ 42,442,090 The Company has included land held for development as a separate line on the consolidated balance sheet. This represents land owned for potential real estate development and totaled $ 2,183,930 and $ 1,756,914 as of December 31, 2024 and 2023 , respectively. 32 4. INCOME TAXES A reconciliation between income taxes computed at the statutory federal income tax rate and the effective tax rate for the years ended December 31, 2024 and 2023 is as follows: 2024 2023 Federal tax expense at statutory rates $ 637,700 $ 3,145,900 Nondeductible lobbying expense 32,000 30,200 State expense, net of federal impact 275,700 1,204,200 Stock-based compensation expense 4,900 ( 52,500 ) Other ( 26,415 ) 89,200 Total income tax expense $ 923,885 $ 4,417,000 Income tax expense (benefit) for the years ended December 31, 2024 and 2023 consists of the following: 2024 2023 Current Federal $ 522,900 $ 931,000 State 674,000 660,000 1,196,900 1,591,000 Deferred, Federal 51,985 1,961,700 Deferred, State ( 325,000 ) 864,300 Total income tax expense $ 923,885 $ 4,417,000 Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2024 and 2023 are as follows: 2024 2023 Deferred tax assets: Vacation accrual $ 82,300 $ 47,600 Player rewards program accrual 94,800 116,800 Stock-based compensation expense 160,200 135,900 Other 1,700 2,785 Net deferred tax assets 339,000 303,085 Deferred tax liabilities: Land, building and equipment - cost and depreciation ( 5,523,200 ) ( 5,352,900 ) Investment in equity investments ( 3,468,100 ) ( 4,314,400 ) Prepaid expenses ( 231,600 ) ( 169,500 ) TIF receivable accrued interest ( 962,100 ) ( 766,300 ) Net deferred tax liabilities ( 10,185,000 ) ( 10,603,100 ) Net long-term deferred tax liabilities $ ( 9,846,000 ) $ ( 10,300,015 ) The Company is subject to U.S. and Minnesota taxation. The Company is no longer subject to U.S. federal or state by tax authorities for years before 2021 and 2020, respectively. 33 Unrecognized tax benefits — January 1, 2024 $ — Gross increases — tax positions taken during the prior period 630,000 Gross decreases — tax positions taken during the current period ( 449,000 ) Unrecognized tax benefits — December 31, 2024 $ 181,000 The balances of unrecognized tax benefits as of December 31, 2024 and December 31, 2023 are $ 181,000 and $ 0 , respectively, and if recognized, would result in adjustments to deferred taxes and would not impact the effective tax rate. It is reasonably expected that the total amounts of unrecognized tax benefits will fully reverse within 12 months of the reporting period. 5. STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION Stockholders’ Equity Employee Stock Purchase Plan: The Company offers an Employee Stock Purchase Plan (the “ESPP”) that is open to all employees working more than 15 hours per week. Shares of the Company’s common stock may be purchased by employees at six -month intervals at 85 % of the fair market value of one share of common stock at the beginning or end of each stock purchase period or phase. Employees purchased 14,583 and 12,700 shares in 2024 and 2023 , respectively. As of December 31, 2024 , a total of 381,417 shares have been issued from the 450,000 shares authorized. KSOP: The Company offers a KSOP Plan (the “KSOP”) that includes the Employee Stock Ownership Plan (the “ESOP”) and the 401 (k) Plan. The KSOP allows the Company to use Company stock to match contributions from its employees should it so choose. The KSOP is available to eligible employees who had completed six months of service. Beginning January 1, 2016, the matching of employee contributions were issued in Company stock. Employer contributions charged to operations for stock matching of employee contributions for the year ended December 31, 2024 and 2023 totaled approximately $ 876,000 and $ 851,000 , respectively. Stock-Based Compensation Stock-based compensation is recorded at fair value as of the date of grant, is included in the salaries and benefits expense line item on the consolidated statements of operations and amounted to approximately $ 572,000 and $ 528,000 for the years ended December 31, 2024 and 2023 , respectively. Stock Options: The Company’s Stock Plan, as amended, (the “Plan”) provides for the granting of awards in the form of stock options, restricted stock, stock appreciation rights, and deferred stock to key employees and non-employees, including directors of and consultants to the Company and any subsidiary, to purchase up to a maximum of 1,650,000 shares of common stock. The Company currently has 135,238 shares available for grant under the Plan. The Plan is administered by the Board of Directors which determines the persons who are to receive awards under the Plan, the type of award to be granted, the number of shares subject to each award and, if an option, the exercise price of each option. The Plan provides that payment of the exercise price may be made in the form of unrestricted shares of common stock already owned by the optionee. The Company calculates the fair market value of unrestricted shares as the average of the high and low sales prices on the date of the option exercise. The Company’s common stock is purchased upon the exercise of stock options, and restricted stock awards are settled in shares of the Company’s common stock. The grant-date fair value of options outstanding and exercisable at December 31, 2024 and 2023 was $ 0 . As of December 31, 2024 , there are no options outstanding. There were no options granted in 2024 or 2023. The total fair value of options exercised during the years ended December 31, 2024 and 2023 was $ 0 . The total intrinsic value of options exercised during 2024 and 2023 was $ 0 . Long Term Incentive Plan The Long Term Incentive Plan (the “LTI Plan”) authorizes the grant of Long Term Incentive Awards that provide an opportunity to Named Executive Officers (“NEOs”) and other Senior Executives to receive a payment in cash or shares of the Company’s common stock to the extent of achievement at the end of a period greater than one year (the “Performance Period”) as compared to Performance Goals established at the beginning of the Performance Period. Beginning in 2020, and as a result of the COVID- 19 pandemic, the Company temporarily suspended the granting of performance awards under its LTI Plan, and instead granted deferred stock awards designed to retain NEOs and other senior executives in lieu of LTI Plan awards from 2020 through 2024. In February 2022, the Compensation Committee made determinations regarding the achievement of 2021 performance goals and payouts under the 2019 - 2021 LTI Plan, which completed the performance period and awards under the 2019 - 2021 LTI Plan, and the last outstanding awards under the LTI Plan. Accordingly, there are no awards outstanding under the LTI Plan. The Company did not record compensation expense related to the LTI Plan for 2024 or 2023 . 34 Board of Directors Stock Option, Deferred Stock Awards, and Restricted Stock Grants The Company’s Stock Plan was amended to authorize annual grants of restricted stock, deferred stock, stock options, or any combination of the three, to non-employee members of the Board of Directors at the time of the Company’s annual shareholders’ meeting as determined by the Board prior to each such meeting. Options granted under the Plan generally expire 10 years after the grant date. Restricted stock and deferred stock grants generally vest 100 % one year after the date of the annual meeting at which they were granted, are subject to restrictions on resale for an additional year, and are subject to forfeiture if a board member terminates his or her board service prior to the shares vesting. The unvested deferred stock awards outstanding as of December 31, 2024 to our non-employee directors consists of only a grant of deferred stock on June 6, 2024 of 10,734 shares with a weighted average fair value per share of $ 22.35 . Below is a summary of changes in Board of Directors unvested deferred stock award grants as of December 31, 2024 : Weighted Average Deferred Fair Value Stock Per Share Non-Vested Balance, December 31, 2023 7,818 $ 23.01 Granted 10,734 22.35 Vested ( 7,818 ) 23.01 Forfeited — — Non-Vested Balance, December 31, 2024 10,734 $ 22.35 Employee Deferred Stock Awards In 2024, the Company granted employees deferred stock awards totaling 22,100 shares of common stock, with a vesting term of approximately four years and a fair value of $ 21.08 per share. In 2023, the Company granted employees deferred stock awards totaling 19,020 shares of common stock, with a vesting term of approximately four years and a fair value of $ 25.52 per share. The vesting schedule of the awards is as follows: (i) 25 % vesting and being issued in March 2025, ( ii) 25 % vesting and being issued in March 2026, ( iii) 25 % vesting and being issued in March 2027 and (iv) 25 % vesting and being issued in March 2028. The compensation cost associated with these grants of deferred stock awards are recorded in “Salaries and benefits” on the Consolidated Statements of Operations. A summary of the changes in employee unvested deferred stock award grants as of December 31, 2024 , is as follows: Weighted Average Deferred Fair Value Stock Per Share Non-Vested Balance, December 31, 2023 36,920 $ 22.00 Granted 22,100 21.08 Vested ( 15,230 ) 19.15 Forfeited — — Non-Vested Balance, December 31, 2024 43,790 $ 22.52 At December 31, 2024 , there was approximately $ 770,000 of total unrecognized stock-based compensation expense related to unvested employee and board of director deferred stock awards that is expected to be recognized over a period of approximately 2.3 years. 6. NET INCOME PER SHARE COMPUTATIONS The following is a reconciliation of the numerator and denominator of the net income per common share computations for the years ended December 31, 2024 and 2023 . Year Ended December 31, 2024 2023 Net income (numerator) amounts used for basic and diluted per share computations: $ 2,112,842 $ 10,563,249 Weighted average shares (denominator) of common stock outstanding: Basic 4,994,905 4,921,379 Plus dilutive effect of stock options 37,305 27,803 Diluted $ 5,032,210 $ 4,949,182 Net income per common share: Basic $ 0.42 $ 2.15 Diluted 0.42 2.13 There were no out-of-the money stock options at December 31, 2024 or December 31, 2023 . 35 7. GENERAL CREDIT AGREEMENT The Company has a general credit and security agreement with a financial institution. The agreement was amended as of February 28, 2021 to extend the maturity date to January 31, 2024 and increase its revolving credit line up to $ 10,000,000 . The line of credit 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, 2024 . As of December 31, 2024 , the outstanding balance on the line of credit was $ 0 . In the event that the Company borrowed under the agreement, the annual interest rate paid by the Company would be equal to the greater of the Prime Rate or 3.0 %. The credit agreement contains covenants requiring the Company to maintain certain financial ratios. The general credit and security agreement was further amended as of January 31, 2024 to extend the maturity date to January 31, 2027 and reduce the maximum borrowing under the line of credit to $ 5,000,000 . In connection with the amendment, the financial institution terminated a mortgage to release certain Company real property as collateral and the parties entered into a negative pledge agreement under which the Company agreed not to create any liens or encumbrances on certain Company real property. 8. LEASES The Company determines if an arrangement is a lease or contains a lease at inception. The Company leases certain office equipment under finance leases. We also lease equipment related to our horse racing operations under operating leases. For lease accounting purposes, we do not separate lease and nonlease components, nor do we record operating or finance lease assets and liabilities for short term leases. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date to determine the present value of lease payments. We recognize expense for operating leases on a straight-line basis over the lease term. The Company’s lease agreements do not contain any variable lease payments, material residual value guarantees or any restrictive covenants. Lease costs related to operating leases were $ 26,785 and $ 26,784 for the years ended December 31, 2024 and 2023 , respectively. The total lease expenses for leases with a term of twelve months or less for which the Company elected not to recognize a lease asset or liability was $ 457,454 and $ 488,937 for the years ended December 31, 2024 and 2023 , respectively. Lease costs included in depreciation and amortization related to our finance leases were $ 33,332 and $ 18,701 for the years ended December 31, 2024 and 2023 , respectively. Interest expense related to our finance leases was immaterial. The following table shows the classification of the right of use assets on our Consolidated Balance Sheets: Year Ended December 31, Assets Balance Sheet Location 2024 2023 Finance Land, buildings and equipment, net (1) $ 150,132 $ 9,374 Operating Operating lease right-of-use assets 27,674 53,026 Total Leased Assets $ 177,806 $ 62,400 1 – Finance lease assets are net of accumulated amortization of $ 30,779 and $ 118,424 for the years ended December 31, 2024 and 2023 , respectively. The following table shows the lease terms and discount rates related to our leases: Year Ended December 31, 2024 2023 Weighted average remaining lease term (in years): Finance 4.0 4.9 Operating 0.4 0.8 Weighted average discount rate (%): Finance 8.5 % 4.8 % Operating 8.0 % 8.0 % The maturity of operating leases and finance leases for the year ended December 31, 2024 are as follows: Year Ended December 31, 2024 Operating Leases Finance Leases 2025 $ 28,228 $ 44,447 2026 — 44,447 2027 — 44,447 2028 and beyond — 44,252 Total minimum lease obligations 28,228 177,593 Less: amounts representing interest ( 554 ) ( 27,461 ) Present value of minimum lease payments 27,674 150,132 Less: current portion ( 27,674 ) ( 32,950 ) Lease obligations, net of current portion $ — $ 117,182 36 Purchase Obligations In March 2022, the Company entered into a five -year agreement with a totalizator provider. Pursuant to the agreement, the vendor provides totalizator equipment and related software which records and processes all wagers and calculates odds and payoffs. The future minimum purchase obligations under the new agreement are $ 166,400 per year. The amounts charged to operations for totalizator expenses for the years ended December 31, 2024 and 2023 w ere $ 200,000 and $ 205,000 , res pectively. 9. 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. 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 . Effective December 12, 2023, the Indemnity Agreement was amended to increase the maximum indemnification by an additional $ 1,300,000 . Effective December 18, 2024, the Indemnity Agreement was amended to increase the maximum indemnification by an additional $ 500,000 , bringing the total to a maximum of $ 7,500,000 . Effective December 18, 2024, the Company entered i nto an Indemnity Agreement with affiliates of Doran relating to debt financing by Doran Canterbury II, LLC as borrower, which is guaranteed by Doran affiliates. 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 II, LLC, up to a maximum of $ 1,000,000 . Effective December 21, 2023, the Company entered into its annual live race meet and purse fund contribution agreement with the Minnesota Horsemen’s Benevolent & Protective Association (“MNHBPA”) and the Minnesota Quarter Horse Racing Association (“MQHRA”) regarding the 2024 live race meet. In an effort to increase field size and improve the quality of racing for the 2024 season, the Company guaranteed purses for overnight races at $ 23,000 per race. The parties recognized there was likely to be a significant financial cost to the Company in establishing a 2024 thoroughbred purse structure intended to average $ 23,000 per conducted overnight race and that to maintain that average purse structure, the Company made an overpayment that may be repaid to the Company through reimbursement in subsequent racing years. This overpayment of purses by the Company was intended to create a short-term bridge until additional purse supplements can be obtained from other sources. At the conclusion of the 2024 live race meet, the Company recorded a receivable related to the overpayment of 2024 purses in the amount of $ 1,597,463 , which is presented on the Company's balance sheet as of December 31, 2024. In the event that additional purse revenue is secured within the five years following the 2025 live race meet through additional forms of gaming at the Company, new revenue streams, or legislative action, the Company will be eligible for reimbursement of the actual 2024 overpayment amount from those purse supplements. Management believes it is likely that additional purse supplements will ultimately be obtained when considering both the length of time to secure such funds ( five years following the 2025 live race meet) and the fact that legislation has been introduced in both chambers of the Minnesota legislature that would provide those supplements through revenues from taxes paid by sports wagering licenses. Accordingly, management believes no allowance related to this receivable is necessary at December 31, 2024. In addition, the Company agreed to allocate approximately $ 400,000 to be used as recruiting and participation incentives to attract thoroughbred trainers, owners, and stables for the 2024 live meet in an effort to generate additional pari-mutuel handle through improved field size. For the year ended 2024, the Company recognized expenses of $ 418,000 related to these incentives. Effective January 31, 2025, the Company entered into its annual live race meet and purse fund contribution agreement with the MNHBPA and the MQHRA regarding the upcoming 2025 live race meet. In an effort to maintain field size and improve the quality of racing for the 2025 season, the Company has guaranteed an additional $ 500,000 of purse monies to be distributed above the minimum amount defined in Minnesota Statutes Chapter 240. In the event that additional purse revenues are secured throughout the duration of the 2025 live race agreement through additional forms of gaming at the Company, new revenue streams, or legislative action, the Company has agreed to provide additional purse monies of up to $ 1,500,000 , to a total of $ 2,000,000 in potential overpayment of purses to support the 2025 live race meet. The parties recognize there is likely to be a significant financial cost to the Company in establishing this 2025 thoroughbred purse structure and that to maintain that average purse structure, the Company will be making an overpayment that may be repaid to the Company through reimbursement in subsequent racing years. This anticipated overpayment of purses by the Company is intended to create a short-term bridge until additional purse supplements can be obtained from other sources. In the event that additional purse revenue is secured within the five years following the 2025 live race meet through additional forms of gaming at the Company, new revenue streams, or legislative action, the Company will be eligible for reimbursement of the actual 2025 overpayment amount from those purse supplements. The Company is periodically involved in various claims and legal actions arising in the normal course of business. Management believes that the resolution of any pending claims and legal actions at December 31, 2024 and as of the date of this report will not have a material impact on the Company’s consolidated financial positions or results of operations. The Company has committed to payment of statutory distributions under a $ 500,000 bond issued to the Minnesota Racing Commission as required by Minnesota statute. The Company was not required to make any payments related to this bond in 2024 or 2023 , and there is no liability related to this bond on the balance sheet as of December 31, 2024 . 37 10. OPERATING SEGMENTS The Company has four reportable operating segments: horse racing, Casino, food and beverage, and development. The horse racing segment primarily represents simulcast and live horse racing operations. The Casino segment represents operations of Canterbury Park’s Casino, the food and beverage segment represents food and beverage operations provided during simulcast and live racing, in the Casino, and during special events, and the development segment represents our real estate development operations. The Company’s reportable operating segments are strategic business units that offer different products and services. They are managed separately because the segments differ in the nature of the products and services provided as well as process to produce those products and services. The Minnesota Racing Commission regulates the horse racing and Casino segments. Depreciation, interest expense, and income taxes are allocated to the segments but no allocation is made to food and beverage for shared facilities. However, the food and beverage segment pays approximately 25 % of gross revenues earned on special event days to the horse racing segment for use of the facilities. The following tables represent a disaggregation of revenues from contracts with customers along with the Company’s operating segments (in 000’s ): Year Ended December 31, 2024 Horse Racing Casino Food and Beverage Development Total Net revenues from external customers $ 13,967 $ 38,775 $ 8,820 $ — $ 61,562 Intersegment revenues 281 — 1,325 — 1,606 Net interest income 1,014 — — 1,058 2,072 Depreciation 3,157 301 163 — 3,621 Segment (loss) income before income taxes ( 1,838 ) 5,855 1,891 ( 2,871 ) 3,037 Segment tax (benefit) expense ( 559 ) 1,781 575 ( 873 ) 924 At December 31, 2024 Segment Assets $ 99,810 $ 1,041 $ 35,679 $ 39,088 $ 175,618 Year Ended December 31, 2023 Horse Racing Casino Food and Beverage Development Total Net revenues from external customers $ 13,198 $ 39,781 $ 8,458 $ — $ 61,437 Intersegment revenues 235 — 1,181 — 1,416 Net interest income 1,058 — — 920 1,978 Depreciation 2,674 301 170 — 3,145 Segment (loss) income before income taxes ( 5,142 ) 9,320 2,132 8,670 14,980 Segment tax (benefit) expense ( 1,516 ) 2,748 629 2,556 4,417 At December 31, 2023 Segment Assets $ 92,970 $ 2,125 $ 33,175 $ 34,892 $ 163,162 The following are reconciliations of reportable segment revenues, income before income taxes, and assets, to the Company’s consolidated totals for the years ended December 31, 2024 and 2023 (in 000’s ): Year Ended December 31, 2024 2023 Revenues Total net revenue for reportable segments $ 63,168 $ 62,853 Elimination of intersegment revenues ( 1,606 ) ( 1,416 ) Total consolidated net revenues $ 61,562 $ 61,437 Income (loss) before income taxes Total segment income before income taxes $ 5,661 $ 17,946 Elimination of intersegment loss before income taxes ( 2,624 ) ( 2,966 ) Total consolidated income before income taxes $ 3,037 $ 14,980 December 31, December 31, 2024 2023 Assets Total assets for reportable segments $ 175,618 $ 163,162 Elimination of intercompany balances ( 65,695 ) ( 58,483 ) Total consolidated assets $ 109,923 $ 104,679 38 11. REAL ESTATE DEVELOPMENT Equity Investments Doran Canterbury I, LLC On April 2, 2018, the Company’s subsidiary Canterbury Development LLC entered into an operating agreement with an affiliate of Doran Companies (“Doran”), a national commercial and residential real estate developer, as the two members of a Minnesota limited liability company named Doran Canterbury I, LLC (“Doran Canterbury I”). Doran Canterbury I was formed as part of a joint venture between Doran and Canterbury Development LLC to construct an upscale apartment complex on land adjacent to the Company’s Racetrack. Doran Canterbury has developed Phase I of the project, which includes approximately 300 units, a heated parking ramp, and a clubhouse. On September 27, 2018, Canterbury Development LLC contributed approximately 13 acres of land as its equity contribution in the Doran Canterbury I joint venture and became a 27.4 % equity member. On December 20, 2018, financing for Doran Canterbury I was secured. As the Company is able to assert significant influence, but not control, over Doran Canterbury I’s operational and financial policies, the Company accounts for the joint venture as an equity method investment. For the years ended December 31, 2024 and 2023 , the Company recorded a loss of $ 3,552,000 and income of $ 1,722,000 , respectively, on equity method investments related to this joint venture. The increased income for 2023 is primarily due to a gain recognized on insurance proceeds received by Doran Canterbury I related to an outstanding claim. In accordance with U.S. GAAP, since we are committed to provide future capital contributions to Doran Canterbury I, we also present as a liability in the accompanying Consolidated Balance Sheets for the net balance recorded for our share of Doran Canterbury I's losses in excess of the amount funded into Doran Canterbury I, which was $ 5,016,000 and $ 1,464,000 at December 31, 2024 and 2023 , respectively. We are a party to a contribution and indemnity agreement with affiliates of Doran relating to debt financing by Doran Canterbury I as borrower, which is guaranteed by Doran affiliates. Under the contribution and indemnity agreement, as amended, the Company is obligated to reimburse and indemnify each loan guarantor for any amounts paid by such loan guarantor to the lender on debt financing by Doran Canterbury I, up to a maximum of $ 7,500,000 as of December 31, 2024 . See Note 9. “Commitments and Contingencies.” Doran Canterbury II, LLC In connection with the execution of the amended operating agreement for Doran Canterbury I, on August 18, 2018, Canterbury Development LLC entered into an operating agreement with Doran Shakopee, LLC as the two members of a Minnesota limited liability company entitled Doran Canterbury II, LLC (“Doran Canterbury II”). Under the Doran Canterbury II operating agreement, Doran Canterbury II will pursue development of Phase II of the project. Phase II will include an additional 305 apartment units. Canterbury Development’s equity contribution to Doran Canterbury II for Phase II was approximately 10 acres of land, which were contributed to Doran Canterbury II on July 30, 2020. In connection with its contribution, Canterbury Development became a 27.4 % equity member in Doran Canterbury II with Doran owning the remaining 72.6 %. As the Company is able to assert significant influence, but not control, over Doran Canterbury II’s operational and financial policies, the Company accounts for the joint venture as an equity method investment. For the year ended December 31, 2024 , the Company recorded a loss of $ 1,923,000 on equity method investments related to this joint venture. As of December 31, 2023, the proportionate share of Doran Canterbury II's earnings was immaterial. We are a party to a contribution and indemnity agreement with affiliates of Doran relating to debt financing by Doran Canterbury II as borrower, which is guaranteed by Doran affiliates. Under the contribution and indemnity agreement, as amended, the Company is obligated to reimburse and indemnify each loan guarantor for any amounts paid by such loan guarantor to the lender on debt financing by Doran Canterbury II, up to a maximum of $ 1,000,000 as of December 31, 2024 . See Note 9. “Commitments and Contingencies.” Canterbury DBSV Development, LLC On June 16, 2020, Canterbury Development, entered into an operating agreement with an affiliate of Greystone Construction, as the two members of a Minnesota limited liability company named Canterbury DBSV Development, LLC (“Canterbury DBSV”). Canterbury DBSV was formed as part of a joint venture between Greystone and Canterbury Development LLC for a multi-use development on the 13 -acre land parcel located on the southwest portion of the Company’s racetrack. Canterbury Development’s equity contribution to Canterbury DBSV was approximately 13 acres of land, which were contributed to Canterbury DBSV on July 1, 2020. In connection with its contribution, Canterbury Development became a 61.87 % equity member in Canterbury DBSV. As the Company is able to assert significant influence, but not control, over Canterbury DBSV’s operational and financial policies, the Company accounts for the joint venture as an equity method investment. For the years ended December 31, 2024 and 2023 , the Company recorded income of $ 8,000 and a loss of $ 223,000 , respectively, on equity investment related to this joint venture. For the years ended December 31, 2024 and 2023 , the Company also received dividend distributions of $ 36,000 and $ 30,000 , respectively, related to this joint venture. Trackside Investments, LLC On September 20, 2023, Canterbury Development, entered into an Operating Agreement with Trackside Hospitality, LLC as the two members of a Minnesota limited liability company named Trackside Investments, LLC ("Trackside Investments"). Trackside Investments was formed as a joint venture for the development of an approximately 16,000 square foot restaurant and entertainment venue. Canterbury Development, LLC's equity contribution to Trackside Investments was approximately 3.5 acres of land, which were contributed to Trackside Investments on August 20, 2024. In connection with its contribution, Canterbury Development became a 50 % equity member in Trackside Investments. In addition, Canterbury Development is guaranteed an annual 6 % preferred return on the balance of Canterbury Development's undistributed base capital. As the Company is able to assert significant influence, but not control, over Trackside Investments' operational and financial policies, the Company accounts for the joint venture as an equity method investment. In accordance with ASC 610 - 20, we determined that we do not have a controlling financial interest in the Trackside Investments joint venture and the arrangements meet the criteria to be accounted for as a contract. Therefore, we derecognized the land and recognized a full gain in 2024 (approximately $ 1,732,000 ) between the carrying amount of the land and the estimated fair value of the land transferred. In future periods, the Company will recognize its proportionate share of Trackside Investments' earnings as an increase or decrease in its Equity investment and as Income or Loss from Investment in this joint venture. 39 The following table summarizes changes to the Equity investment and Investee losses in excess of equity investment lines on our consolidated balance sheets for the year ended December 31, 2024 : Equity Investment Investee Losses in Excess of Equity Investment Equity Investment, net Net Equity Investment Balance at 12/31/22 $ 6,863,517 $ ( 3,185,923 ) $ 3,677,594 Equity investment (loss) income ( 220,437 ) 1,721,705 1,501,268 Dividends received from investments ( 30,368 ) — ( 30,368 ) Net Equity Investment Balance at 12/31/23 $ 6,612,712 $ ( 1,464,218 ) $ 5,148,494 Equity investment loss ( 1,915,791 ) ( 3,551,980 ) ( 5,467,771 ) Contribution to equity investment 2,315,650 — 2,315,650 Dividends received from investments ( 36,480 ) — ( 36,480 ) Net Equity Investment Balance at 12/31/24 $ 6,976,091 $ ( 5,016,198 ) $ 1,959,893 Tax Increment Financing On August 8, 2018, the City Council of the City of Shakopee, Minnesota approved a Contract for Private Redevelopment (“Original Agreement”) between the City of Shakopee Economic Development Authority (“Shakopee EDA”) and Canterbury Park Holding Corporation and its subsidiary Canterbury Development LLC in connection with a Tax Increment Financing District (“TIF District”) that the City had approved in April 2018. The City of Shakopee, the Shakopee EDA and the Company entered into the Redevelopment Agreement on August 10, 2018. Under the Original Agreement, the Company agreed to undertake a number of specific infrastructure improvements within the TIF District and the City agreed that a portion of the tax revenue generated from the developed property will be paid to the Company to reimburse it for its expense in constructing these improvements. Under the Original Agreement, the total estimated cost of TIF eligible improvements to be borne by the Company was $ 23,336,500 . On January 25, 2022, the Company received the fully executed First Amendment to the Contract for Private Redevelopment (the “First Amendment”) among the Company, the City of Shakopee, and the Shakopee EDA, which is effective as of September 7, 2021. Under the First Amendment and as part of the authorized changes regarding the responsibilities of the Company and the City, improvements on Unbridled Avenue will be primarily constructed by the City of Shakopee. As a result, the total estimated cost of TIF eligible improvements to be borne by the Company will be reduced by $ 5,744,000 to an amount not to exceed $ 17,592,881 . In order to reimburse the Company for the qualified costs related to constructing the developer improvements, the Authority will issue and the Company will receive a TIF Note in the maximum principal amount of $ 17,592,881 . The First Amendment also memorialized that the Company completed the Shenandoah Drive improvements as required prior to December 31, 2019. The City is obligated to issue bonds to finance the portion of the improvements required to be constructed by the City. A detailed Schedule of the Public Improvements under the First Amendment, the timeline for their construction and the source and amount of funding is set forth in Exhibit 10.1 of the Form 8 -K filed on January 31, 2022. The Company expects to substantially complete the remaining Developer Improvements by July 17, 2027 and will be reimbursed for costs of the Developer Improvements incurred by no later than July 17, 2027. The total amount of funding that the Company will be paid as reimbursement under the TIF program for these improvements is not guaranteed, however, and will depend in part on future tax revenues generated from the developed property. As of December 31, 2024 , the Company recorded a TIF receivable of approximately $ 18,898,000 , which represents $ 15,551,000 of principal and $ 3,347,000 of interest. Management believes future tax revenues generated from current development activity will exceed the Company's development costs and thus, management believes no allowance related to this receivable is necessary. As of December 31, 2023 , the Company recorded a TIF receivable of approximately $ 13,973,000 , which represents $ 11,307,000 of principal and $ 2,666,000 of interest. The Company expects to finance its improvements under the Redevelopment Agreement with funds from its current operating resources and existing credit facility and, potentially, third -party financing sources. Recently Closed Transactions Under Real Estate Agreements On August 20, 2024, the Company completed the transfer of approximately 3.5 acres of land to the Trackside Investments joint venture for total consideration of $ 2,316,000 . Trackside Investments, LLC was formed as a joint venture for the development of an approximately 16,000 square foot restaurant and entertainment venue, with the venue opening anticipated to be Summer 2025. On April 28, 2023, the Company completed the sale of 37 acres of land to Bloomington Investments, LLC, an entity related to Swervo Development (“Swervo”), for total consideration of $ 8,800,000 . With the land sale and government approvals now complete, Swervo began construction of its planned state-of-the-art amphitheater in 2023. As a result of these two land transactions, the Company recorded a gain of approximately $ 1,732,000 and $ 6,490,000 on the Consolidated Statements of Operations for the years ended December 31, 2024 and December 31, 2023 , respectively. 40 12. RELATED PARTY RECEIVABLES Since 2019, the Company has loaned money to the Doran Canterbury I and II joint ventures in member loans totaling approximately $ 3,812,000 and $ 2,957,000 as of December 31, 2024 and 2023 , respectively. These member loans bear interest at the rate equal to the Prime Rate plus two percent per annum and totaled $ 898,000 and $ 522,000 as of December 31, 2024 and 2023 , respectively. The Company expects to be fully reimbursed for these member loans when the joint ventures achieve positive cash flow. The Company has also recorded related party receivables of approximately $ 34,000 and $ 47,000 as of December 31, 2024 and 2023 , respectively, for various related costs incurred by the Company. The Company expects to be fully reimbursed for these costs by the related parties in the following year. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not Applicable.