What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-10 compared with 2025-03-11 · 62 added, 58 removed, 203 unchanged (37% of the section changed)

10 unchanged sentences

The Casino offers both poker and table games at up to 80 tables.

The Company also derives revenues from related services and activities, such as food and beverage, parking, advertising signage, publication sales, and from other entertainment events and activities held at the Racetrack.

The Company also derives revenues from related services and activities, such as food and beverage, advertising signage, publication sales, and from other entertainment events and activities held at the Racetrack.

In 2025, Canterbury Development continued to pursue various development opportunities that began in 2015 for its underutilized land in a project known as Canterbury Commons.

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Income (Loss) Before Income Taxes

Income Tax (Expense) Benefit

Income Tax Benefit (Expense)

Net (Loss) Income

During fiscal year 2021, the Company reduced operating expenses $6,314,000 by recording an employee retention credit, a refundable tax credit.

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We also present Adjusted EBITDA, a non-GAAP measure, as a supplemental disclosure because we believe it enables investors to understand and assess our core operating results excluding the effect of unusual or non-recurring items, as well as items relating to our real estate development operations, allowing greater transparency related to a significant measure used by management in its financial and operational decision-making.

Adjusted EBITDA has economic substance because it is used by management as a performance measure to analyze the performance of our business and provides a perspective on the current effects of operating decisions For the year ended December 31, 2024 , Adjusted EBITDA excluded from EBITDA stock-based compensation (which includes the Company's 401(k) match in Company stock contribution), the gain on transfer of land, loss on disposal of assets, and depreciation and amortization and interest related to equity investments.

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.

For the year ended December 31, 2025 , Adjusted EBITDA excluded from EBITDA stock-based compensation (which includes the Company's 401(k) match in Company stock contribution), loss on disposal of assets, and depreciation and amortization and interest related to equity investments and their joint ventures.

For the year ended December 31, 2024 , Adjusted EBITDA excluded from EBITDA stock-based compensation (which includes the Company's 401(k) match in stock contribution), the gain on transfer of land, loss on disposal of assets, and depreciation and amortization and interest related to equity investments and their joint ventures.

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:

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Year Ended December 31,

NET (LOSS) INCOME

Interest income, net

Income tax expense

Income tax (benefit) expense

Depreciation and amortization

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Loss on disposal of assets

Gain on transfer/sale of land

Gain on insurance proceeds related to equity investments

Gain on transfer of land

Depreciation and amortization related to equity investments

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For 2024 , Adjusted EBITDA as a percentage of net revenue was 17.6%.

Total net revenues for 2024 were $61,562,000, an increase of $125,000, or 0.2%, compared to total net revenues of $61,437,000 for 2023 .

For 2024 as compared to 2023 , total pari-mutuel revenue decreased 0.3%, Casino revenue decreased 2.5%, food and beverage revenue increased 1.8%, and other revenue increased 18.3%.

See below for a further discussion of our sources of revenues for each of our pari-mutuel, Casino, food and beverage, and other revenues.

Total net revenues for 2025 were $59,568,000, a decrease of $1,996,000, or 3.2%, compared to total net revenues of $61,562,000 for 2024 .

For 2025 as compared to 2024 , total Casino revenue decreased 4.4%, pari-mutuel revenue decreased 6.6%, food and beverage revenue increased 3.5%, and other revenue decreased 0.7%.

See below for a further discussion of our sources of revenues for each of our Casino, pari-mutuel, food and beverage, and other revenues.

CASINO REVENUES

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Casino revenue represented 62.3% and 63.0% of the Company’s net revenues for the years ended December 31, 2025 and 2024 , respectively.

Total Casino revenue decreased $1,006,000, or 2.5%, in 2024 compared to 2023 .The decrease can be primarily attributed to both a decrease in drop and a lower average collection revenue rate in table games, somewhat offset by an increase in our other table games revenue related to our progressive jackpot administration revenue.

Total Casino revenue decreased $1,688,000, or 4.4%, in 2025 compared to 2024 .The decrease was primarily driven by lower table games drop attributable to increased competition, as well as a lower average collection revenue rate resulting from a decreased hold percentage.

These decreases were partially offset by an increase in our other table games revenue, driven by increases in our progressive jackpot administration revenue.

PARI-MUTUEL REVENUES

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Total 2025 pari-mutuel revenue decreased $540,000, or 6.6%, compared to 2024 .

The slight decrease in revenue in 2024 compared to 2023 is primarily due to a decrease in simulcast handle, somewhat offset by increased guest fees from out-state-handle on our live racing product on a per day basis due to increased field size and one additional live race day.

The decrease in pari-mutuel revenue in 2025 compared to 2024 is primarily due to a decrease in simulcast handle and decreased guest fees from out-state-handle on our live racing product due to decreases in field size and three fewer live race days.

FOOD AND BEVERAGE REVENUES

Food and beverage revenues increased $277,000, or 3.5%, to $8,245,000 for the year ended December 31, 2025 compared to 2024 .

The increase in food and beverage revenues is primarily due to increased catering operations related to hosting large scale special events as well as the one additional live race day year-over-year mentioned above.

The increase in food and beverage revenues is primarily due to increased catering operations and food revenues related to hosting large-scale special events.

OTHER REVENUES

Other revenues, consisting of admission revenues, corporate sponsorships, space rentals, and other miscellaneous activities, increased $1,020,000, or 18.3%, to $6,593,000 in 2024 compared to 2023 .

The increase is primarily due to admission revenue increases related to our first ever rodeo, our first comedy series, and our live racing events.

Other revenues, consisting of admission revenues, corporate sponsorships, space rentals, and other miscellaneous activities, remained relatively flat, decreasing $44,000, or 0.7%, to $6,550,000 in 2025 compared to 2024 .

OPERATING EXPENSES

1 unchanged sentence

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 92.4% in 2024 from 91.8% in 2023 , which was a result of increased operating expenses for 2024 as compared to 2023.

Total purse expense increased $308,000, or 4.1%, in 2024 compared to 2023 .

The increase is primarily due to the expenses incurred as part of our recruiting and participation incentives paid in 2024 under our annual live race meet and purse fund contribution agreement dated December 21, 2023.

Total operating expenses as a percentage of net revenues increased to 95.9% in 2025 from 92.4% in 2024 , which was primarily a result of decreased net revenues for 2025 as compared to 2024.

Total purse expense decreased $845,000, or 10.7%, in 2025 compared to 2024 .

The decrease is primarily due to the expenses incurred as part of our recruiting and participation incentives paid in 2024 under our annual live race meet and purse fund contribution agreement dated December 21, 2023.

See Note 9 fo r further details of the agreement.

No recruiting and participation incentives are planned for the 2025 live race meet.

No recruiting and participation incentives were incurred for the 2025 live race meet.

The decrease was also due to the decrease in total Casino revenues, due to increased competition, and decreased total pari-mutuel revenues, due to a decrease in overall live race days year-over-year.

The table below notes the various components of both purse expense and the Minnesota Breeders' Fund expense.

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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.

Cost of food and beverage and other sales increased $133,000, or 4.3%, in 2024 compared to 2023 .

The increase is primarily due to the increased food and beverage revenues related to increased catering operations as noted above.

Cost of food and beverage and other sales decreased $38,000, or 1.2%, in 2025 compared to 2024 .

The decrease is primarily due to reduced food costs and creating process efficiencies to lower overall costs.

Depreciation and amortization increased $377,000, or 10.4%, in 2025 compared to 2024 .

The increase is primarily due to placing larger fixed assets into service towards the second half of 2023 as well as placing assets into service related to the first and second phases of our barn relocation and redevelopment plan in the second quarter of 2024.

Advertising and marketing costs decreased $719,000, or 34.8%, in 2024 compared to 2023 .

The decrease is primarily due to intentionally reducing overall spend in an effort to reduce costs.

Professional and contracted service expenses decreased $320,000, or 5.4%, in 2024 compared to 2023.

The decrease is primarily due to higher costs in 2023 related to long-term strategic growth initiatives.

The increase is primarily due to placing larger fixed assets into service during the second quarter of 2024 and throughout 2025 related to our barn relocation and redevelopment plan.

Advertising and marketing costs increased $376,000, or 27.9%, in 2025 compared to 2024 .

The increase is primarily due to increasing overall spend for marketing initiatives related to the Casino and special events.

Professional and contracted service expenses increased $190,000, or 3.4%, in 2025 compared to 2024.

The increase is primarily due to higher costs in 2025 for HISA regulatory costs that are required for live racing.

During 2024, the Company recorded a gain on transfer of land of $1,732,000 as result of transferring approximately 3.5 acres of land to the Trackside Investments joint venture.

See Note 11 for further details.

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.

The Company had no sales or transfers of land in 2025.

During 2025, the Company performed a review of any fixed assets that were no longer in service at December 31, 2025 .

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OTHER INCOME (LOSS), NET

Other loss, net, for the year ended December 31, 2024 was $3,396,000, a decrease of $6,875,000, compared to an other income, net, of $3,479,000 for the year ended December 31, 2023 .

The decrease for 2024 is primarily due to our share of a gain recognized on insurance proceeds received on a claim by Doran Canterbury I during 2023.

The Company's portion of the gain on insurance proceeds recognized by Doran Canterbury I was $4,228,000.

The loss on equity investments for the year ended December 31, 2024 is primarily due to non-cash expenses from depreciation and amortization.

This was slightly offset by increased interest income of approximately $93,000 year-over-year, due to the Company transferring available cash into certificates of deposit and money market funds as well as increasing balances related to both our member loans to Doran Canterbury I and Doran Canterbury II and our increase in TIF receivable.

The Company recorded a provision for income taxes of $924,000 and $4,417,000 for 2024 and 2023, respectively.

The decrease in our tax expense for 2024 compared to 2023 is due to a decrease in income before taxes from operations, primarily related to the 2023 gain on land sale mentioned above.

Other loss, net, for the year ended December 31, 2025 was $3,276,000, a decrease of $120,000, compared to an other loss, net, of $3,396,000 for the year ended December 31, 2024 .

The decrease for 2025 is primarily due to increased leasing rates for our Doran Canterbury equity investments, resulting in decreased overall losses recognized.

The loss on equity investments for the years ended December 31, 2025 and 2024 is primarily due to non-cash expenses from depreciation and amortization.

This was slightly offset by decreased interest income of approximately $105,000 year-over-year, due to both lower average interest rates and a decrease in the Company's average cash balance during 2025 compared to 2024.

The Company recorded a provision for income taxes with a benefit of $285,000 and expense of $924,000 for 2025 and 2024, respectively.

The income tax benefit for 2025 compared to the income tax expense in 2024 is primarily due to a decrease in income before taxes from operations and a federal interest income tax refund received in the first quarter of 2025.

Our effective tax rate was 35.0% and 30.4% for 2025 and 2024, respectively.

NET (LOSS) INCOME

The Company recorded a net loss of $529,000, or $0.10 per basic and diluted share for 2025.

The Company recorded net income of $2,113,000, or $0.42 per basic and diluted share for 2024.

The Company recorded net income of $10,563,000, or $2.15 per basic and $2.13 per diluted share for 2023.

CRITICAL ACCOUNTING ESTIMATES

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However, if actual experience differs from the assumptions and other considerations used in estimating amounts reflected in our Consolidated Financial Statements, the resulting changes could have a material adverse effect on our financial condition, results of operations, and cash flows.

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

Estimate of the allowance for credit losses - Property Tax Increment Financing “ TIF” Receivable

As of December 31, 2025 , the Company recorded a TIF receivable of approximately $19,986,000, which represents $16,305,000 of principal and $3,681,000 of interest.

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The TIF receivable was generated in connection with the Contract for Private Redevelopment, in which the City of Shakopee has agreed that a portion of the future tax increment revenue generated from the developed property around the Racetrack will be paid to the Company to reimburse it for expenses in constructing public infrastructure improvements.

For the year ended December 31, 2025, the Company received its first payment from the City of Shakopee totaling $582,000 related to this receivable.

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 increment revenues.

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.

As a result of our analysis for the year ended December 31, 2024 , management believes the TIF receivable will be fully collectible and no allowance related to this receivable is necessary.

As a result of our analysis as well as initial payments received in 2025 with additional payments expected to be received in 2026 from the City of Shakopee, for the year ended December 31, 2025 , management believes the TIF receivable will be fully collectible and no allowance related to this receivable is necessary.

COMMITMENTS AND CONTINGENCIES

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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 I ndemnity 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 I ndemnity Agreement was amended to increase the maximum indemnification by an additional $500,000.

Effective December 30, 2025, the Indemnity Agreement was amended to increase the maximum indemnification by an additional $250,000, bringing the total to a maximum of $7,750,000.

Effective December 18, 2024, t he Company entered into 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 30, 2025, the Indemnity Agreement was amended to increase the maximum indemnification by an additional $1,750,000, bringing the total to a maximum of $2,750,000.

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.

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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.

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 as Other long-term receivables on the Company's balance sheet as of 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.

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 2025 live race meet.

In an effort to maintain field size and improve the quality of racing for the 2025 season, the Company guaranteed an additional $500,000 of purse monies to be distributed above the minimum amount defined in Minnesota Statutes Chapter 240.

The parties recognized there was 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 made an overpayment that may be repaid to the Company by the MNHBPA 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 2025 live race meet, the Company recorded a receivable related to the overpayment of 2025 purses in the amount of $500,000.

The combined amounts from the 2024 and 2025 live race meet agreements of $2,097,463 is presented as Other long-term receivables on the Company's balance sheet as of December 31, 2025.

As mentioned above, 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 and 2025 overpayment amounts 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 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 both December 31, 2025 and 2024.

The Company is periodically involved in various claims and legal actions arising in the normal course of business.

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Cash provided by operating activities for 2025 was $8,900,000, primarily as a result of the following:

the Company reported a net loss of $529,000, depreciation and amortization of $3,998,000, a loss on equity investment of $5,243,000, an increase in deferred income taxes of $625,000, and stock-based compensation and 401(k) match totaling $1,602,000.

Th e Company experienced an increase in cash related to a decrease in income taxes receivable and prepaid income taxes of $760,000, offset by an increase in other long-term receivables of $500,000, related to the 2025 purse fund contribution agreement, an increase in TIF receivable of $916,000, related to interest accrued, and a decrease in accounts payable, net of land, buildings, and equipment funded through accounts payable of $1,623,000, primarily related to payments for our barn relocation and redevelopment plan.

Cash provided by operating activities for 2024 was $6,488,000, primarily as a result of the following:

the Company reported net income of $2,113,000, depreciation of $3,621,000, loss on equity investment of $5,468,000 and stock-based compensation and 401(k) match totaling $1,447,000, offset by a gain on land transfer of $1,732,000.

Th e Company experienced an increase in cash related to a decrease in income taxes receivable and prepaid income taxes of $897,000, offset by an increase in other long-term receivables of $1,597,000, related to the 2024 purse fund contribution agreement, an increase in TIF receivable of $681,000 and a decrease in accounts payable, net of land, buildings, and equipment funded through accounts payable of $2,121,000, primarily related to payments for our barn relocation and redevelopment plan.

Cash provided by operating activities for 2023 was $11,537,000, primarily as a result of the following:

the Company reported net income of $10,563,000, depreciation of $3,145,000, deferred income taxes of $2,826,000, and stock-based compensation and 401(k) match totaling $1,379,000, offset by a gain from equity investment of $1,501,000 and a gain on land sale of $6,490,000.

The Company experienced an increase in cash related to a decrease in 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.

CASH FLOWS FROM INVESTING ACTIVITIES

Net cash used in investing activities for 2025 of $5,453,000 was used primarily for additions to land, buildings, and equipment of $4,183,000, primarily related to our barn relocation and redevelopment plan, additions for TIF eligible improvements of $754,000, an increase in related party receivable of $1,216,000, primarily due to additional member loans and interest related to the member loans, and purchases of short-term investments of $9,500,000.

This was partially offset by proceeds from the sale of short-term investments of $9,500,000 and proceeds from TIF receivable of $582,000.

Net cash used in investing activities for 2024 of $17,349,000 was used primarily for additions to land, buildings, and equipment of $11,984,000, primarily related to our barn relocation and redevelopment plan, additions for TIF eligible improvements of $4,244,000, an increase in related party receivable of $1,218,000, primarily due to additional member loans and interest related to the member loans, and purchases of short-term investments of $7,000,000.

This was partially offset by proceeds from the sale of short-term investments of $7,000,000.

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.

This was partially offset by proceeds received from the sale of land of $8,336,000 and proceeds from the sale of short-term investments of $5,000,000.

CASH FLOWS FROM FINANCING ACTIVITIES

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At December 31, 2025 , we had cash, cash equivalents, and restricted cash of $15,824,000 compared to $13,687,000 at December 31, 2024 .

This $12,155,000 decrease consisted of $6,488,000 of net cash provided by operating activities in 2024, offset by $17,349,000 of net cash used in investing activities in 2024 and $1,293,000 of net cash used in financing activities in 2024.

This $2,137,000 increase consisted of $8,900,000 of net cash provided by operating activities in 2025, offset by $5,453,000 of net cash used in investing activities in 2025 and $1,310,000 of net cash used in financing activities in 2025.

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.

As of December 31, 2024, the Company has completed phases one and two of the barn relocation and redevelopment plan with phase three currently underway, with estimated remaining costs of approximately $2,500,000.

In addition, the Company expects to spend the remaining $2,042,000 in tax increment financing over the next six months for the completion of tax increment related improvements.

We also expect that we will see higher than historic use of cash for guaranteed purses for the 2025 live racing season, which are guaranteed under our annual live race meet and purse fund contribution agreement with the MNHBPA and MQHRA, which may be repaid to the Company through reimbursement in subsequent racing years.

See note 9 for further details.

As of December 31, 2025, the Company has substantially completed phase three of the barn relocation and redevelopment plan with minimal costs remaining.

In addition, the Company expects to spend the remaining $1,288,000 in tax increment financing over the next twelve months for the completion of tax increment related improvements.

The Company has a general credit and security agreement with a financial institution.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis