Item 7. Management’s Discussion and Analysis
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand Canterbury Park Holding Corporation, our operations, our financial results and financial condition, and our present business environment. This MD&A is provided as a supplement to and should be read in conjunction with our consolidated financial statements and the accompanying notes to the consolidated financial statements (the “Notes”). Our actual results could differ materially from those anticipated in the forward-looking statements included in this discussion as a result of certain factors, including, but not limited to, those discussed in “Risk Factors” and “Forward-Looking Statements” included elsewhere in this Annual Report on Form 10-K.
16
STRATEGIC OVERVIEW
Canterbury Park Holding Corporation (the “Company,” “we,” “our,” or “us”) hosts pari-mutuel wagering on thoroughbred and quarter horse races and “unbanked” card games at its Canterbury Park Racetrack and Casino facility (the “Racetrack”) in Shakopee, Minnesota, which is approximately 20 miles southwest of downtown Minneapolis. The Racetrack is the only facility in the State of Minnesota that offers live pari-mutuel thoroughbred and quarter horse racing.
The Company’s pari-mutuel wagering operations include both wagering on thoroughbred and quarter horse races during live meets at the Racetrack each year from May through September and year-round wagering on races primarily held at out-of-state racetracks that are televised simultaneously at the Racetrack (“simulcasting”). Unbanked card games, in which patrons compete against each other and not the house, are hosted in the Casino at the Racetrack. The Casino operates 24 hours a day, seven days a week. The Casino offers both poker and table games at up to 80 tables. 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. These development opportunities have included contributions of land to joint ventures, four as of the end of December 2025, and sales of parcels of land to third parties that will then develop the property. Our long-term strategic direction is to continue to enhance our Racetrack as a unique gaming and entertainment destination and develop the approximately 35 acres of underutilized land not needed for our Racetrack Operations.
The following summarizes our financial performance for the last five years (in 000’s):
Financial Performance Summary
2025
2024
2023
2022
2021
Net Revenues
$
59,568
$
61,562
$
61,437
$
66,824
$
60,400
Operating Expenses
57,106
56,862
56,426
55,943
42,882
(1)
Gain on Transfer/Sale of Land
—
1,732
6,490
12
264
Income (Loss) Before Income Taxes
(814
)
3,037
14,980
10,235
15,798
Income Tax Benefit (Expense)
285
(924
)
(4,417
)
(2,722
)
(3,999)
Net (Loss) Income
(529
)
2,113
10,563
7,513
11,798
1
During fiscal year 2021, the Company reduced operating expenses $6,314,000 by recording an employee retention credit, a refundable tax credit.
OPERATIONS REVIEW
YEAR ENDED December 31, 2025 COMPARED TO YEAR ENDED December 31, 2024
EBITDA represents earnings before interest income, net, income tax expense, depreciation, and amortization. EBITDA is not a measure of performance or liquidity calculated in accordance with generally accepted accounting principles in the United States of America (“GAAP”), and should not be considered an alternative to, or more meaningful than, net income as an indicator of our operating performance or cash flows from operating activities as a measure of liquidity. We present EBITDA as a supplemental disclosure for our Racetrack Operations because it is a widely used measure of performance of and basis for valuation of companies in the gaming industry. Other companies that provide EBITDA information may calculate EBITDA differently than we do. 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, 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:
SUMMARY OF EBITDA DATA
Year Ended December 31,
2025
2024
NET (LOSS) INCOME
$
(529,431
)
$
2,112,842
Interest income, net
(1,966,803
)
(2,071,511
)
Income tax (benefit) expense
(285,000
)
923,885
Depreciation and amortization
3,998,041
3,620,899
EBITDA
1,216,807
4,586,115
Stock-based compensation
1,601,556
1,447,430
Loss on disposal of assets
56,248
49,214
Gain on transfer of land
—
(1,732,353
)
Depreciation and amortization related to equity investments
3,187,396
3,456,695
Interest expense related to equity investments
3,348,259
2,997,810
ADJUSTED EBITDA
$
9,410,267
$
10,804,911
Adjusted EBITDA decreased $1,395,000, or 12.9%, for 2025 compared to 2024 . For 2025 , Adjusted EBITDA as a percentage of net revenue was 15.8%. For 2024 , Adjusted EBITDA as a percentage of net revenue was 17.6%.
17
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
Year Ended December 31,
2025
2024
Poker Games Collection
$
7,343,000
$
7,581,000
Other Poker Revenue
2,986,000
3,035,000
Total Poker Revenue
10,329,000
10,616,000
Table Games Collection
22,541,000
24,768,000
Other Table Games Revenue
4,217,000
3,391,000
Total Table Games Revenue
26,758,000
28,159,000
Total Casino Revenue
$
37,087,000
$
38,775,000
The primary source of Casino revenue is a percentage of the wagers received from the players as compensation for providing the Casino facility and services, referred to as “collection revenue.” Other revenue presented above includes fees collected for the administration of tournaments and amounts earned as reimbursement of the administrative costs of maintaining jackpot funds. Casino 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 $1,688,000, 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
Year Ended December 31,
2025
2024
Simulcast
$
3,321,000
$
3,595,000
Live racing
1,430,000
1,557,000
Guest fees
1,493,000
1,702,000
Other revenue
1,442,000
1,372,000
Total Pari-Mutuel Revenue
$
7,686,000
$
8,226,000
Racing Days
Simulcast only racing days
314
311
Live and simulcast racing days
50
53
Total Number of Racing Days
364
364
Simulcast and Live Racing pari-mutuel revenues include commission and breakage revenues from on-track live and simulcast wagering. We receive guest fees from out-of-state racetracks and ADW companies for out-of-state wagering on our live races. Other revenues include source market fees paid by ADW companies for wagers made by Minnesota residents on out-of-state races and proceeds from unredeemed pari-mutuel tickets.
Total 2025 pari-mutuel revenue decreased $540,000, or 6.6%, compared to 2024 . 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 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, remained relatively flat, decreasing $44,000, or 0.7%, to $6,550,000 in 2025 compared to 2024 .
18
OPERATING EXPENSES
Total operating expenses increased $244,000, or 0.4%, to $57,106,000 in 2025 , from $56,862,000 in 2024 . 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 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 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.
Minnesota Breeders’
Purse Expense
Fund Expense
2025
2024
2025
2024
Casino
$
4,457,000
$
4,668,000
$
495,000
$
519,000
Simulcast Racing
1,281,000
1,335,000
415,000
428,000
Live Racing
1,325,000
1,905,000
72,000
81,000
Total
$
7,063,000
$
7,908,000
$
982,000
$
1,028,000
Salaries and benefits expense increased $315,000, or 1.2%, in 2025 compared to 2024 . 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 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 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. 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 . As a result of this review, management determined to dispose of assets resulting in a loss on disposal of $97,000 during the fourth quarter of 2025. In addition to this write-off, the Company had multiple additional asset disposals for a gain of $41,000, resulting in a net loss on disposal of assets of $56,000 for the year ended December 31, 2025 . During 2024, the Company performed a review of any fixed assets that were no longer in service at December 31, 2024 . As a result of this review, management determined to dispose of assets resulting in a loss on disposal of $56,000 during the fourth quarter of 2024. In addition to this write-off, the Company had multiple additional asset disposals for a gain of $7,000, resulting in a net loss on disposal of assets of $49,000 for the year ended December 31, 2024 .
OTHER INCOME (LOSS), NET
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.
INCOME TAXES
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.
19
CRITICAL ACCOUNTING ESTIMATES
The preparation of the Consolidated Financial Statements in accordance with GAAP requires us to make estimates and judgments that are subject to an inherent degree of uncertainty. The nature of the estimates and assumptions are material due to the levels of subjectivity and judgment necessary to account for highly uncertain factors or the susceptibility of such factors to change. The development and selection of critical accounting estimates, and the related disclosures, have been reviewed with the Audit Committee of our Board of Directors. We believe the current assumptions and other considerations used to estimate amounts reflected in our Consolidated Financial Statements are appropriate. 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 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. The TIF receivable requires significant management estimates and judgement pertaining to expected future tax revenue, the Company's development cost on infrastructure improvements, and whether an allowance for doubtful accounts is necessary. 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 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 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
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 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. 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 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 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 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. 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.
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. Management believes that the resolution of any pending claims and legal actions at December 31, 2025 and as of the date of this report will not have a material impact on the Company’s consolidated financial position or results of operations.
The Company has committed to payment of statutory distributions under a $500,000 bond issued to the MRC as required under Minnesota law. The Company was not required to make any payments related to this bond in 2025 or 2024 , and there is no liability related to this bond on the balance sheet as of December 31, 2025 .
20
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS FROM OPERATING ACTIVITIES
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 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.
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash used in financing activities for 2025 was $1,310,000 primarily due to cash dividends paid to shareholders and payments for taxes of equity awards, partially offset by proceeds from the issuance of common stock.
Net cash used in financing activities for 2024 was $1,293,000 primarily due to cash dividends paid to shareholders and payments for taxes of equity awards, partially offset by proceeds from the issuance of common stock.
CASH AND CAPITAL RESOURCES
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 $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, 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. The agreement was amended as of February 28, 2021 to extend the maturity date to January 31, 2024 and increase its revolving credit line up to $10,000,000. The line of credit was collateralized by all receivables, inventory, equipment, and general intangibles of the Company, as well as a mortgage on certain real property. The Company had no borrowings under the credit line during the year ended December 31, 2025 . As of December 31, 2025 , the outstanding balance on the line of credit was $0. The credit agreement contains covenants requiring the Company to maintain certain financial ratios. The Company was in compliance with these requirements at all times throughout 2025 . 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.
Our three largest sources of revenue: pari-mutuel wagering, Casino operations, and food and beverage, are all based on cash transactions. Consequently, we have significant inflows of cash on a daily basis. We designate cash balances that will be required to satisfy certain short-term liabilities such as progressive jackpots, the player pool, collateral needed for joint venture operations, and amounts due horsemen for purses and awards as “restricted” as a separate balance sheet item.
The Company offers unbanked table games that refer to a wagering system or game where wagers “lost” or “won” by the host are accumulated into a “player pool” to enhance the total amount paid back to players in any other card game. The Company is required to return accumulated player pool funds to the players through giveaways, promotional items, prizes, or by other means. The player pool liability was $418,000 and $542,000 at December 31, 2025 and 2024 , respectively. Additionally, the table games jackpot pool was $1,149,000 and $697,000 at December 31, 2025 and 2024 , respectively.
The Company also maintains a poker promotional pool where a portion of the poker “rake” is collected and accumulated into a promotional pool to enhance the total amount paid back to poker players. The Company is required to return accumulated poker promotional pool funds to the players through poker jackpots, giveaways, promotional items, prizes, or by other means. The poker promotional pool liability was $117,000 and $364,000 at December 31, 2025 and 2024 , respectively.
21
The Casino offers progressive jackpots for poker games. Amounts collected for these jackpot funds are accrued as liabilities until paid to winners. At December 31, 2025 and 2024 , accrued jackpot funds totaled $152,000 and $88,000, respectively. The MRC regulates the operation of the player pool and progressive jackpot pools. These liabilities have the potential for significant fluctuation on a daily basis.
All games in the Casino are played using chips. The value of chips issued and outstanding, referred to as the “outstanding chip liability,” was $469,000 and $447,000 at December 31, 2025 and 2024 , respectively. This liability has the potential for significant fluctuation on a daily basis depending upon the demand for chip redemptions and sales.
Our second largest individual operating expense item is purse expense. Pursuant to an agreement with the MNHBPA, we transferred into a trust account or paid directly to the MNHBPA, approximately $6,956,000 and $8,288,000 in purse funds related to thoroughbred races for 2025 and 2024 , respectively. Minnesota law provides that amounts transferred into this trust account are the property of the trust and not the Company. There were no unpaid purse fund obligations due to the MNHBPA at December 31, 2025 or 2024 .
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, 2025 and 2024 w ere $203,000 and $200,000, res pectively.
In August 2018, the Company entered into a Contract for Private Redevelopment with the City of Shakopee in connection with a Tax Increment Financing District (“TIF District”) which was amended in September 2021. The Company is obligated to construct certain public infrastructure improvements within the TIF District, and will be reimbursed by the City of Shakopee by future tax increment revenue generated from the developed property. See Note 11 for a more detailed description of the agreement.
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains various “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically identified by the use of terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “predict,” “project,” “seek,” “should,” “will,” and similar words or similar expressions (or negative versions of such words or expressions). We also may make forward-looking statements in other reports filed with the SEC, in press releases, and in other communications to shareholders or the investing public.
Forward-looking statements are not guarantees of future actions, outcomes, results or performance. Any forward-looking statement made by us or on our behalf speaks only as of the date on which such statement is made. There are many important factors that could cause our future results to differ materially from historical results or trends, results anticipated or planned by us, or the results expressed in or implied by any forward-looking statements. These important factors include, but are not limited to:
●
We may not be successful at implementing our growth strategy.
●
Our business is sensitive to reductions in discretionary consumer spending as a result of downturns in the economy and other factors outside of our control.
●
We have experienced a decrease in revenue and profitability from live racing.
●
We may not be able to attract a sufficient number of horses and trainers to achieve above average field sizes.
●
We face significant competition, both directly from other racing and gaming operations and indirectly from other forms of entertainment and leisure time activities, which could have a material adverse effect on our operations.
●
Nationally, the popularity of horse racing has declined.
●
A lack of confidence in the integrity of our core businesses could affect our ability to retain our customers and engage with new customers.
●
Horse racing is an inherently dangerous sport and our racetrack is subject to personal injury litigation.
●
Our business depends on using totalizator services.
●
Inclement weather and other conditions may affect our ability to conduct live racing.
●
We are subject to changes in the laws that govern our business, including the possibility of an increase in gaming taxes, which would increase our costs, and changes in other laws may adversely affect our ability to compete.
●
We are subject to extensive regulation from gaming authorities that could adversely affect us.
●
We rely on the efforts of our partner Doran for the development and profitable operation of our Triple Crown Residences at Canterbury Park joint venture.
●
We rely on the efforts of our partner Greystone Construction for a new development project.
●
We may not be successful in executing our real estate development strategy.
●
We are obligated to make improvements in the TIF district and will be reimbursed only to the extent of future tax revenue.
●
We face competition from other real estate developers.
●
We may be adversely affected by the effects of inflation.
●
Our success may be affected if we are not able to attract, develop and retain qualified personnel.
●
The payment and amount of future dividends is subject to Board of Director discretion and to various risks and uncertainties.
●
Our information technology and other systems are subject to cyber security risk including misappropriation of customer information or other breaches of information security.
●
We process, store, and use personal information and other data, which subjects us to governmental regulation and other legal obligations related to privacy, and our actual or perceived failure to comply with such obligations could harm our business.
We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
22