**U.S. SECURITIES AND EXCHANGECOMMISSION**

**Washington, D.C.  20549**

 

**FORM 10-Q**

 

 
| (Mark One)                                                                                                                                                                                                                          |                                                                                    |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------|
| **ý**                                                                                                                                                                                                                          | **QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**  |
|                                                                                                                                                                                                                                |                                                                                    |
| **FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005.**                                                                                                                                                                                   |
|                                                                                                                                                                                                                                |                                                                                    |
| **o**                                                                                                                                                                                                                               | **TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
| ** **                                                                                                                                                                                                                          | ** **                                                                              |
| **FOR THE TRANSITION PERIOD FROM                   TO                .** |

 

Commission File Number **001-31569**

 

 

### **CanterburyPark Holding Corporation**

(Exact name of business issuer as specified in its charter)

 

| **Minnesota**                                                   | **41-1775532**                    |
|-----------------------------------------------------------------|-----------------------------------|
| (State or other jurisdiction  of incorporation or organization) | (IRS Employer Identification No.) |
|                                                            |                              |
| **1100 Canterbury Road, Shakopee, Minnesota**                   | **55379**                         |
| (Address of principal executive offices)                        | (Zip Code)                        |
|                                                            |                              |
| **(952) 445-7223**                                              |
| (Issuer’s Telephone Number)                                |

 

Indicate by check mark whetherthe Registrant (1) filed all reports required to be filed by Section 13 or15(d) of the Exchange Act during the past 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days. YES ý  NO o

 

Indicate by check mark whether the registrantis an accelerated filer (as defined in Rule 12b-2 of the Exchange Act. YES o  NO ý

 

The Company had 3,901,369shares of common stock, $.01 par value per share, outstanding as of August 9,2005.

 

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**Canterbury Park Holding Corporation**

#### **INDEX**

 
|          |                       |                                                                                        |       |
|---------------|----------------------------|---------------------------------------------------------------------------------------------|------------|
| **PART  I.**  | **FINANCIAL  INFORMATION** | ** **                                                                                  |
| ** **    | ** **                 | ** **                                                                                  | ** ** |
|          | Item 1.                    | Financial  Statements                                                                       |       |
|          |                       |                                                                                        |       |
|          |                       | Consolidated Balance Sheets as of June 30,  2005 and December 31, 2004                      |       |
|          |                       |                                                                                        |       |
|          |                       | Consolidated Statements of Operations for  the periods ended June 30, 2005 and 2004         |       |
|          |                       |                                                                                        |       |
|          |                       | Consolidated Statements of Cash Flows for  the periods ended June 30, 2005 and 2004         |       |
|          |                       |                                                                                        |       |
|          |                       | Notes to Consolidated Financial Statements                                                  |       |
|          |                       |                                                                                        |       |
|          | Item 2.                    | Management’s Discussion and Analysis of  Financial Condition and Results of Operations |       |
|          |                       |                                                                                        |       |
|          | Item 3.                    | Quantitative and Qualitative Disclosures  about Market Risk                                 |       |
|          |                       |                                                                                        |       |
|          | Item 4.                    | Controls and Procedures                                                                     |       |
|          |                       |                                                                                        |       |
| **PART  II.** | **OTHER  INFORMATION**     |                                                                                        |
|          |                       |                                                                                        |       |
|          | Item 1.                    | Legal Proceedings                                                                           |       |
|          |                       |                                                                                        |       |
|          | Item 2.                    | Unregistered Sales of Equity Securities and  Use of Proceeds                                |       |
|          |                       |                                                                                        |       |
|          | Item 3.                    | Defaults Upon Senior Securities                                                             |       |
|          |                       |                                                                                        |       |
|          | Item 4.                    | Submission of Matters to a Vote of Security  Holders                                        |       |
|          |                       |                                                                                        |       |
|          | Item 5.                    | Other Information                                                                           |       |
|          |                       |                                                                                        |       |
|          | Item 6.                    | Exhibits                                                                                    |       |
|          |                       |                                                                                        |       |
|          | Signatures                 |                                                                                        |
|          |                       |                                                                                        |
|          | Exhibits                   |                                                                                        |

 

2

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**Part I — Financial Information**

 

###### **CANTERBURY PARK HOLDINGCORPORATION AND SUBSIDIARIES**

 

**CONSOLIDATED BALANCE SHEETS**

**JUNE 30, 2005 AND DECEMBER 31, 2004**

** **
| ** **                                                                                                                         | ** ** | **(Unaudited)  June 30,  2005** | ** ** | **December 31,  2004** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------|------------|------------------------|------------|
| **ASSETS**                                                                                                                         |       |                            |       |                   |       |
|                                                                                                                               |       |                            |       |                   |       |
| CURRENT  ASSETS                                                                                                                    |       |                            |       |                   |       |
| Cash                                                                                                                               |       | $                               | 5,251,032  |                   | $          | 4,178,544 |   |
| Restricted Cash                                                                                                                    |       | 4,175,093                       |       | 1,746,599              |       |
| Accounts receivable                                                                                                                |       | 605,876                         |       | 750,612                |       |
| Inventory                                                                                                                          |       | 278,693                         |       | 134,653                |       |
| Deposits                                                                                                                           |       | 20,000                          |       | 20,000                 |       |
| Prepaid expenses                                                                                                                   |       | 697,956                         |       | 850,881                |       |
| Income tax refund receivable                                                                                                       |       | 153,715                         |       |                   |       |
| Deferred Income Taxes                                                                                                              |       | 257,600                         |       | 103,000                |       |
| Total current assets                                                                                                               |       | 11,439,965                      |       | 7,784,289              |       |
|                                                                                                                               |       |                            |       |                   |       |
| LAND, BUILDING AND EQUIPMENT, net of  accumulated depreciation of $10,517,850 and $9,869,193, respectively                         |       | 22,513,244                      |       | 20,438,532             |       |
|                                                                                                                               |       |                            |       |                   |       |
|                                                                                                                               |       | $                               | 33,953,209 |                   | $          | 28,222,821 |   |
|                                                                                                                               |       |                            |       |                   |       |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                      |       |                            |       |                   |       |
|                                                                                                                               |       |                            |       |                   |       |
| CURRENT  LIABILITIES                                                                                                               |       |                            |       |                   |       |
| Accounts payable                                                                                                                   |       | $                               | 5,877,337  |                   | $          | 2,129,405 |   |
| Card club accruals                                                                                                                 |       | 1,617,097                       |       | 1,736,746              |       |
| Accrued wages and payroll taxes                                                                                                    |       | 1,788,089                       |       | 1,799,419              |       |
| Accrued interest                                                                                                                   |       | 6,211                           |       | 229                    |       |
| Due to MHBPA                                                                                                                       |       | 338,519                         |       | 131,146                |       |
| Accrued property taxes                                                                                                             |       | 293,229                         |       | 282,119                |       |
| Cash dividend payable                                                                                                              |       | 973,717                         |       |                   |       |
| Income taxes payable                                                                                                               |       |                            |       | 17,486                 |       |
| Payable to horsepersons                                                                                                            |       | 413,678                         |       | 414,621                |       |
| Total current liabilities                                                                                                          |       | 11,307,877                      |       | 6,511,171              |       |
|                                                                                                                               |       |                            |       |                   |       |
| DEFERRED INCOME TAXES                                                                                                              |       | 682,900                         |       | 716,000                |       |
|                                                                                                                               |       |                            |       |                   |       |
| COMMITMENTS AND CONTINGENCIES (Note 4)                                                                                             |       |                            |       |                   |       |
|                                                                                                                               |       |                            |       |                   |       |
| STOCKHOLDERS’ EQUITY                                                                                                          |       |                            |       |                   |       |
| Common stock, $.01 par value, 10,000,000  shares authorized, 3,895,369 and 3,835,669, respectively, shares issued and  outstanding |       | 38,954                          |       | 38,357                 |       |
| Additional paid-in capital                                                                                                         |       | 13,169,136                      |       | 12,763,811             |       |
| Accumulated earnings                                                                                                               |       | 8,754,342                       |       | 8,193,482              |       |
| Total stockholders’ equity                                                                                                    |       | 21,962,432                      |       | 20,995,650             |       |
|                                                                                                                               |       | $                               | 33,953,209 |                   | $          | 28,222,821 |   |
|                                                                                                                                    |            |                                 |            |                        |            |  |  |  |  |  |  |

 

See notes to consolidated financialstatements.

 

3

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**CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES**

 

# **CONSOLIDATED STATEMENTS OF OPERATIONS**

# **PERIODS ENDED JUNE 30, 2005 AND 2004 (Unaudited)**

 
| ** **                                                            | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
|-----------------------------------------------------------------------|------------|---------------------------------|------------|-------------------------------|------------|
| ** **                                                            | ** ** | **2005**                        | ** ** | **2004**                      | ** ** | **2005** | ** ** | **2004** | ** ** |
| OPERATING REVENUES:                                                   |       |                            |       |                          |       |   |   |   |   |
| Pari-mutuel                                                           |       | $                               | 4,861,902  |                          | $          | 5,128,225 |   | $ | 7,777,188 |   | $ | 8,307,954 |   |
| Card Club                                                             |       | 7,273,912                       |       | 6,788,541                     |       | 14,710,912 |   | 13,676,742 |   |
| Concessions                                                           |       | 1,804,959                       |       | 1,612,092                     |       | 2,684,525 |   | 2,439,014 |   |
| Admissions and parking                                                |       | 228,171                         |       | 189,379                       |       | 254,341 |   | 228,097 |   |
| Publications                                                          |       | 186,746                         |       | 196,799                       |       | 300,585 |   | 304,840 |   |
| Other operating revenue                                               |       | 551,229                         |       | 507,613                       |       | 901,923 |   | 851,967 |   |
|                                                                  |       | 14,906,919                      |       | 14,422,649                    |       | 26,629,474 |   | 25,808,614 |   |
|                                                                  |       |                            |       |                          |       |   |   |   |   |
| OPERATING EXPENSES:                                                   |       |                            |       |                          |       |   |   |   |   |
| Statutory purses                                                      |       | 2,450,693                       |       | 2,472,686                     |       | 3,745,230 |   | 3,687,256 |   |
| Minnesota breeders’ fund                                         |       | 355,279                         |       | 356,735                       |       | 620,953 |   | 626,172 |   |
| Host track fees                                                       |       | 631,909                         |       | 695,307                       |       | 1,113,695 |   | 1,215,145 |   |
| Pari-mutuel taxes                                                     |       | 58,684                          |       | 73,615                        |       | 104,875 |   | 124,597 |   |
| Salaries and benefits                                                 |       | 5,752,024                       |       | 5,380,013                     |       | 10,399,920 |   | 9,557,866 |   |
| Cost of concessions andpublication sales                              |       | 1,023,337                       |       | 890,707                       |       | 1,634,506 |   | 1,461,935 |   |
| Depreciation and amortization                                         |       | 398,250                         |       | 311,000                       |       | 740,250 |   | 596,000 |   |
| Utilities                                                             |       | 286,925                         |       | 274,442                       |       | 547,572 |   | 518,026 |   |
| Repairs, maintenance and supplies                                     |       | 457,639                         |       | 527,300                       |       | 686,721 |   | 814,583 |   |
| License fees and property taxes                                       |       | 161,494                         |       | 154,492                       |       | 309,190 |   | 295,186 |   |
| Advertising and marketing                                             |       | 830,717                         |       | 844,510                       |       | 1,157,997 |   | 1,212,818 |   |
| Insurance                                                             |       | 317,520                         |       | 306,047                       |       | 621,801 |   | 555,356 |   |
| Other operating expenses                                              |       | 1,275,831                       |       | 1,107,858                     |       | 2,112,967 |   | 1,835,509 |   |
|                                                                  |       | 14,000,302                      |       | 13,394,712                    |       | 23,795,677 |   | 22,500,449 |   |
| NONOPERATING (EXPENSES)REVENUES:                                      |       |                            |       |                          |       |   |   |   |   |
| Interest expense                                                      |       | (5,151                          | )          | (5,087                        | )          | (6,740 | ) | (6,433 | ) |
| Other, net                                                            |       | 29,981                          |       | 12,229                        |       | 48,938 |   | 22,834 |   |
|                                                                  |       | 24,830                          |       | 7,151                         |       | 42,198 |   | 16,401 |   |
|                                                                  |       |                            |       |                          |       |   |   |   |   |
| INCOME BEFORE INCOME TAXEXPENSE                                       |       | 931,447                         |       | 1,035,088                     |       | 2,875,995 |   | 3,324,566 |   |
|                                                                  |       |                            |       |                          |       |   |   |   |   |
| INCOME TAX EXPENSE (Note 1)  BENEFIBENEFITEXPENSE) (Note 1) |       | (477,298                        | )          | (454,228                      | )          | (1,341,418 | ) | (1,483,528 | ) |
|                                                                  |       |                            |       |                          |       |   |   |   |   |
| NET INCOME                                                            |       | $                               | 454,149    |                          | $          | 580,860 |   | $ | 1,534,577 |   | $ | 1,841,038 |   |
|                                                                  |       |                            |       |                          |       |   |   |   |   |
| BASIC NET INCOME PER COMMON SHARE (Note 1)                            |       | $                               | .12        |                          | $          | .15 |   | $ | .40 |   | $ | .49 |   |
|                                                                  |       |                            |       |                          |       |   |   |   |   |
| DILUTED NET INCOME PER COMMON SHARE (Note  1)                         |       | $                               | .11        |                          | $          | .14 |   | $ | .37 |   | $ | .44 |   |
|                                                                       |            |                                 |            |                               |            |  |  |  |  |  |  |  |  |  |  |  |

 

See notes to consolidated financialstatements.

 

4

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**CANTERBURY PARK HOLDING CORPORATION ANDSUBSIDIARIES**

 

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**PERIODS ENDED JUNE 30, 2005 AND 2004 (Unaudited)**

 
| ** **                                                               | ** ** | **Six Months Ended June 30,** | ** ** |
|--------------------------------------------------------------------------|------------|-------------------------------|------------|
| ** **                                                               | ** ** | **2005**                      | ** ** | **2004** | ** ** |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                    |       |                          |       |   |   |
| Net Income                                                               |       | $                             | 1,534,577  |   | $ | 1,841,038 |   |
| Adjustments to reconcile net income to net  cash provided by operations: |       |                          |       |   |   |
| Depreciation and amortization                                            |       | 740,250                       |       | 596,000 |   |
| Tax benefit from exercise of stock options                               |       | 116,600                       |       | 335,900 |   |
| Increase in deferred income taxes                                        |       | (187,700                      | )          | (107,000 | ) |
| Decrease (increase) in accounts receivable                               |       | 144,736                       |       | (127,488 | ) |
| Decrease (increase) in other current assets                              |       | 8,885                         |       | (302,415 | ) |
| Decrease in income taxes payable                                         |       | (171,201                      | )          | (21,319 | ) |
| Increase in accounts payable and accrued  wages &payroll taxes       |       | 3,736,602                     |       | 3,369,363 |   |
| (Decrease) increase in card club accruals                                |       | (119,649                      | )          | 195,995 |   |
| Increase in accrued interest                                             |       | 5,982                         |       | 3,930 |   |
| Increase (decrease) in accrued property  taxes                           |       | 11,110                        |       | (3,653 | ) |
| (Decrease) increase in payable to  horsepersons                          |       | (943                          | )          | 67,544 |   |
| Increase (decrease) in due to MHBPA                                      |       | 207,373                       |       | (3,789 | ) |
| Net cash provided by operations                                          |       | 6,026,622                     |       | 5,844,106 |   |
|                                                                     |       |                          |       |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                    |       |                          |       |   |   |
| Additions to land, building and equipment                                |       | (2,814,962                    | )          | (2,949,312 | ) |
| Increase in restricted cash                                              |       | (2,428,494                    | )          | (2,467,236 | ) |
| Net cash used in investing activities                                    |       | (5,243,456                    | )          | (5,416,548 | ) |
|                                                                     |       |                          |       |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                    |       |                          |       |   |   |
| Proceeds from issuance of common stock                                   |       | 289,322                       |       | 265,461 |   |
| Net cash provided by financing activities                                |       | 289,322                       |       | 265,461 |   |
|                                                                     |       |                          |       |   |   |
| NET INCREASE IN CASH                                                     |       | 1,072,488                     |       | 693,019 |   |
|                                                                     |       |                          |       |   |   |
| CASH AT BEGINNING OF PERIOD                                              |       | 4,178,544                     |       | 2,523,560 |   |
|                                                                     |       |                          |       |   |   |
| CASH AT END OF PERIOD                                                    |       | $                             | 5,251,032  |   | $ | 3,216,579 |   |
|                                                                     |       |                          |       |   |   |
| INTEREST PAID                                                            |       | $                             | 0          |   | $ | 0 |   |
|                                                                     |       |                          |       |   |   |
| INCOME TAXES PAID                                                        |       | $                             | 1,585,000  |   | $ | 1,265,000 |   |
|                                                                     |       |                          |       |   |   |
| DIVIDEND DECLARED                                                        |       | $                             | 973,717    |   | $ | 947,129 |   |
|                                                                          |            |                               |            |  |  |  |  |  |  |  |

 

See notes to consolidated financialstatements.

 

5

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###### **CANTERBURY PARK HOLDINGCORPORATION AND SUBSIDIARIES**

 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**PERIODS ENDED JUNE 30, 2005 AND 2004**

 

1.     SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES

 

The summary of significant accountingpolicies is included in the notes to consolidated financial statements in the2004 Annual Report on form 10-K.

 

*Unaudited Financial Statements* - Theconsolidated balance sheet as of June 30, 2005, the consolidated statements ofoperations for the three and six months ended June 30, 2005 and 2004, theconsolidated statements of cash flows for the six months ended June 30, 2005and 2004, and the related information contained in these notes have beenprepared by management without audit.  Inthe opinion of management, all adjustments (consisting only of normal recurringadjustments) which are necessary for a fair presentation of financial positionand results of operations for such periods have been made.  Results for an interim period should not beconsidered as indicative of results for a full year.

 

*Reclassifications* —In our consolidated statement of cash flows for the six months ended June 30,2005, we changed the classification of changes in restricted cash balances topresent such changes as an investing activity. We previously presented such changes as an operating activity.  In the accompanying consolidated statementsof cash flows for the six months ended June 30, 2004, we reclassified changesin restricted cash balances to be consistent with our 2005 presentation whichresulted in a $2,467,236 increase in cash used in investing activities and acorresponding increase in cash flows provided by operations from the amountspreviously reported.

 

*Restricted Cash* —Restricted cash represents refundable deposits and amounts due to horsemen forpurses, stakes and awards, and amounts accumulated in the Player Pool andjackpot pools to be used to repay card club players in the form of promotions,giveaways, prizes, or by other means.

 

*Income Taxes*- Income tax expense is computedby applying the estimated annual effective tax rate to the year-to-date income.

 

*Net Income Per Share*- Basic net income per common shareis based on the weighted average number of common shares outstanding duringeach year.  The weighted average numberof common shares outstanding for the three and six-month periods ended June 30,2005 were 3,892,153 and 3,884,318, respectively.  The weighted average number of common sharesoutstanding for the three and six-month periods ended June 30, 2004 were3,764,585 and 3,746,289, respectively. Diluted net income per common share takes into effect the dilutive effectof potential common shares outstanding. The Company’s only potential common shares outstanding are stockoptions.  After considering the dilutiveeffect of stock options outstanding, the weighted average shares used tocalculate diluted earnings per share for the three and six-month periods endedJune 30, 2005 were 4,235,928 and 4,184,009, respectively.  The weighted average shares used to calculatediluted earnings per share for the three and six-month periods ended June 30,2004 were 4,177,286 and 4,162,752, respectively.

 

*Fair values of Financial Instruments*— Due to the current classification of allfinancial instruments of the Company, given the short-term nature of therelated account balances, carrying amounts reported in the consolidated balancesheets approximates fair value.

 

*Stock Based Employee Compensation*-At June 30, 2005, the Company has a stock option plan which provides for thegranting of awards in the form of stock options, restricted stock, stockappreciation rights, and deferred stock to key employees and non-employees, includingdirectors of and consultants to the Company and any subsidiary, to purchase upto a maximum of 1,450,000

 

6

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shares of common stock.  The Company accounts for that plan under therecognition and measurement principles of APB Opinion No. 25, *Accounting for Stock Issued to Employees,*and related interpretations.  Nostock-based employee compensation cost is reflected in net income, as alloptions granted under the plan had an exercise price equal to the market valueof the underlying common stock on the date of grant.  The following table illustrates the effect onnet income and earnings per share if the Company had applied the fair valuerecognition provisions of FASB Statement No. 123, *Accounting for Stock-Based Compensation,*to stock-basedemployee compensation.

 

***Stock Based EmployeeCompensation Table****:*

 

** **
| ** **                                                                                                                                    | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------|------------|-------------------------------|------------|
| ** **                                                                                                                                    | ** ** | **2005**                        | ** ** | **2004**                      | ** ** | **2005** | ** ** | **2004** | ** ** |
| Net Income:                                                                                                                                   |       |                            |       |                          |       |   |   |   |   |
| As reported                                                                                                                                   |       | $                               | 454,149    |                          | $          | 580,860 |   | $ | 1,534,577 |   | $ | 1,841,038 |   |
| Deduct: Total stock-based employee  compensation expense determined under fair value based method for all awards,  net of related tax effects |       | (328,010                        | )          | (148,716                      | )          | (373,069 | ) | (264,499 | ) |
|                                                                                                                                          |       |                            |       |                          |       |   |   |   |   |
| Pro forma net income                                                                                                                          |       | $                               | 126,139    |                          | $          | 432,144 |   | $ | 1,161,508 |   | $ | 1,576,539 |   |
|                                                                                                                                          |       |                            |       |                          |       |   |   |   |   |
| Earnings Per  Share:                                                                                                                          |       |                            |       |                          |       |   |   |   |   |
| Basic - as reported                                                                                                                           |       | $                               | .12        |                          | $          | .15 |   | $ | .40 |   | $ | .49 |   |
|                                                                                                                                          |       |                            |       |                          |       |   |   |   |   |
| Basic - pro forma                                                                                                                             |       | $                               | .03        |                          | $          | .12 |   | $ | .30 |   | $ | .42 |   |
|                                                                                                                                          |       |                            |       |                          |       |   |   |   |   |
| Diluted - as reported                                                                                                                         |       | $                               | .11        |                          | $          | .14 |   | $ | .37 |   | $ | .44 |   |
|                                                                                                                                          |       |                            |       |                          |       |   |   |   |   |
| Diluted - pro forma                                                                                                                           |       | $                               | .03        |                          | $          | .10 |   | $ | .28 |   | $ | .38 |   |
|                                                                                                                                               |            |                                 |            |                               |            |  |  |  |  |  |  |  |  |  |  |  |  |

 

 

2.             BORROWINGS UNDER CREDIT AGREEMENT

 

Borrowings under the Company’s creditagreement with Bremer Bank include a commercial revolving credit line, which providesfor maximum advances of $2,250,000 with interest at the prime rate.  The Company had no borrowings under thiscredit line at June 30, 2005.  The creditagreement contains certain covenants requiring the Company to maintain certainfinancial ratios.  The Company was incompliance with these requirements as of June 30, 2005.  Management believes that funds availableunder this line of credit, along with funds generated from card club andsimulcast operations, will be sufficient to satisfy its liquidity and capitalresource requirements during 2005.

 

3.   OPERATING SEGMENTS

 

During the first six months of 2005 and 2004,the Company had three reportable operating segments:  horse racing, card club and concessions.  The card club segment primarily representsoperations of the Canterbury Card Club. The horseracing segment primarily represents simulcast and live horseracing operations, and the concessions segment primarily represents concessionsprovided during simulcast and live racing, in the card club, and during specialevents.  The Company’s reportableoperating segments are strategic business units that offer different productsand services.  They are managedseparately because the segments differ in the nature of the products andservices provided

 

7

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as well as processes to produce thoseproducts and services.  The horse racingand card club segments are regulated by the State of Minnesota RacingCommission.

 

The accounting policies of the operating segmentsare the same as those described in the summary of significant accountingpolicies in the 2004 Annual Report on Form 10-K.

 

Depreciation, interest expense and incometaxes are allocated to the segments but no allocation is made to concessionsfor shared facilities.  However, theconcessions segment pays approximately 25% of gross revenues earned on liveracing and special event days to the horse racing segment for use of thefacilities.

 

The following tables provide informationabout the Company’s operating segments (in 000’s):

 
| ** **                         | ** ** | **Six Months Ended June 30, 2005** | ** ** |
|------------------------------------|------------|------------------------------------|------------|
| ** **                         | ** ** | **Card Club**                      | ** ** | **Horse Racing** | ** ** | **Concessions** | ** ** | **Total** | ** ** |
| Revenues from external customers   |       | $                                  | 14,711     |   | $ | 9,233 |   | $ | 2,685 |   | $ | 26,629 |   |
|                               |       |                               |       |   |   |   |   |   |   |
| Intersegment revenues              |       |                               |       | 152 |   | 958 |   | 1,110 |   |
|                               |       |                               |       |   |   |   |   |   |   |
| Net interest income                |       |                               |       | 42 |   |   |   |   |   |
|                               |       |                               |       |   |   |   |   |   |   |
| Depreciation and amortization      |       | 270                                |       | 470 |   |   |   | 740 |   |
|                               |       |                               |       |   |   |   |   |   |   |
| Segment income before income taxes |       | 2,772                              |       | 132 |   | 486 |   | 3,390 |   |
|                               |       |                               |       |   |   |   |   |   |   |
| Segment Assets                     |       | $                                  | 3,610      |   | $ | 30,117 |   | $ | 3,495 |   | $ | 37,222 |   |

 
|                                |       | **Six Months Ended June 30, 2004** |       |
|-------------------------------------|------------|------------------------------------|------------|
| ** **                          | ** ** | **Card Club**                      | ** ** | **Horse Racing** | ** ** | **Concessions** | ** ** | **Total** | ** ** |
| Revenues  from external customers   |       | $                                  | 13,677     |   | $ | 9,678 |   | $ | 2,454 |   | $ | 25,809 |   |
|                                |       |                               |       |   |   |   |   |   |   |
| Intersegment  revenues              |       |                               |       | 151 |   | 905 |   | 1,056 |   |
|                                |       |                               |       |   |   |   |   |   |   |
| Net interest  income                |       |                               |       | 16 |   |   |   | 16 |   |
|                                |       |                               |       |   |   |   |   |   |   |
| Depreciation  and amortization      |       | 242                                |       | 354 |   |   |   | 596 |   |
|                                |       |                               |       |   |   |   |   |   |   |
| Segment  income before income taxes |       | 2,848                              |       | 423 |   | 473 |   | 3,744 |   |
|                                     |            |                                    |            |  |  |  |  |  |  |  |  |  |  |

 
|            |   | **Twelve  Months Ended December 31, 2004** |   |
|-----------------|--------|--------------------------------------------|--------|
| Segment  Assets |   | $                                          | 3,688  |   | $ | 24,397 |   | $ | 3,164 |   | $ | 31,249 |   |
|                 |        |                                            |        |  |  |  |  |  |  |  |  |  |  |

 

8

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The following are reconciliations ofreportable segment revenue, income before income taxes, and assets, to theCompany’s consolidated totals (in 000’s):

 
| ** **                                              | ** ** | **Six Months Ended June 30,** | ** ** |
|---------------------------------------------------------|------------|-------------------------------|------------|
| ** **                                              | ** ** | **2005**                      | ** ** | **2004** | ** ** |
| Revenues                                                |       |                          |       |   |   |
| Total  revenue for reportable segments                  |       | $                             | 27,739     |   | $ | 26,865 |   |
| Elimination  of intersegment revenues                   |       | (1,110                        | )          | (1,056 | ) |
| Total  consolidated revenues                            |       | $                             | 26,629     |   | $ | 25,809 |   |
|                                                    |       |                          |       |   |   |
| Income  before income taxes                             | ** ** | ** **                    | ** ** | ** ** | ** ** |
| Total  segment income before income taxes               |       | $                             | 3,390      |   | $ | 3,744 |   |
| Elimination  of intersegment income before income taxes |       | (514                          | )          | (419 | ) |
| Total  consolidated income before income taxes          |       | $                             | 2,876      |   | $ | 3,325 |   |

 
| ** **                               | ** ** | **June 30, 2005** | ** ** | **December 31, 2004** | ** ** |
|------------------------------------------|------------|-------------------|------------|-----------------------|------------|
| Assets                                   |       |              |       |                  |       |
| Total assets  for reportable segments    |       | $                 | 37,222     |                  | $          | 31,249 |   |
| Elimination  of intercompany receivables |       | (3,269            | )          | (3,026                | )          |
| Total  consolidated assets               |       | $                 | 33,953     |                  | $          | 28,223 |   |

 

4.     CONTINGENCIES

 

In accordance with an Earn Out Note, given tothe prior owner of the racetrack as part of the consideration paid by theCompany to acquire the racetrack in 1994, if (i) off-track betting becomeslegally permissible in the State of Minnesota and (ii) the Company begins toconduct off-track betting with respect to or in connection with its operations,the Company will be required to pay to the IMR Fund, L.P. the greater of$700,000 per operating year, as defined, or 20% of the net pretax profit, asdefined, for each of the next five operating years.  At this time, management believes that thelikelihood that these two conditions will be met, and that the Company will berequired to pay these amounts, is remote. In the event these conditions are metand the subsequent payments made, they will be capitalized as part of thepurchase price in accordance with generally accepted accounting principles.

 

The Company is periodically involved invarious legal actions arising in the normal course of business.  At June 30, 2005, management believes thatthe resolution of any legal actions outstanding will not have a material impacton the consolidated financial statements.

 

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**ITEM2:**MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS

 

**General**

 

                Canterbury Park Holding Corporation (the “Company”)owns and operates the Canterbury Park Racetrack and Card Club in Shakopee,Minnesota.  The primary businesses of theCompany are simulcast and live pari-mutuel horse racing, hosting unbanked cardgames, and food and beverage operations.

 

                The Racetrack is the only pari-mutuel horseracing facility in the State of Minnesota. The Racetrack earns revenues from pari-mutuel take-out on racessimulcast year-round to Canterbury Park from racetracks throughout the countryand from live race meets featuring thoroughbred and quarter horse racing.  The Company conducts live horse racing at itsfacility generally from mid-May until early September each year.  During live race meets, the Company televisesits races to out-of-state racetracks around the country, and earns additionalpari-mutuel revenue on wagers placed at the out-of-state racetracks.

 

                Canterbury Park’s Card Club (the “Card Club”)hosts “unbanked” card games in which players compete against each other and notagainst the house.  The Card Club is opentwenty-four hours a day, seven days a week. Under Minnesota law, the Company is required to pay up to 14% of thegross Card Club revenues to the Racetrack’s purse fund and the State ofMinnesota Breeders’ Fund.  However, theCompany has agreed with the Minnesota Horseman’s Benevolent and ProtectiveAssociation (“MHBPA”) to pay 15% of Card Club revenues into the purse fund for2005 and 2004.

 

The Companyalso generates revenues from other activities such as admission and parking feesand from the sale of food and beverage, programs and other racing publications,and corporate sponsorships. Additional revenues are derived from an RV park andthe use of the Racetrack facilities for special events such as concerts, craftshows and snowmobile racing.

 

**Results ofOperations for the****Three and****Six Months Ended June 30,2005 and June 30, 2004**

 

                Total operating revenues increasedapproximately $821,000 or 3.2% during the six months ended June 30, 2005compared to the six months ended June 30, 2004, and increased approximately$484,000 or 3.4% for the three months ended June 30, 2005 compared to the threemonths ended June 30, 2004.

 

                Pari-mutuel revenues decreased approximately$531,000 or 6.4% in the six-month period ended June 30, 2005 compared to thesame period in 2004, and decreased approximately $266,000 or 5.2% for thethree-month period ended June 30, 2005 compared to the same period in 2004.Total handle for the six months ended June 30, 2005 was down $2,721,000 or 6.2%compared to total handle during the six-month period in 2004. Total handlewagered on simulcast races year-to-date in 2005 is down $3,347,000 or 10.1%compared to last year, primarily due to the overall industry decline inpari-mutuel wagering, the lack of a Triple Crown contender in the BelmontStakes, and growing competition from internet wagering on simulcast races.  However, on-track live handle increased by$784,000 or 12.5% compared to the same period in 2004 primarily due to twoadditional days of live racing and increased

 

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attendance.  Finally, out-of-state handle on live racesdecreased $159,000 or 3.7% compared to the same period last year due to adecline in simulcast outlets, primarily because the Racetrack excluded selectedinternet wagering and off-shore entities. For further information, see the “Summary of Pari-mutuel Data” below.

 
| ** **                         | ** ** | **Six Months Ended June 30,** | ** ** |
|------------------------------------|------------|-------------------------------|------------|
| **Summary of Pari-mutuel Data:**   | ** ** | **2005**                      | ** ** | **2004** | ** ** |
| ** **                         | ** ** | ** **                    | ** ** | ** ** | ** ** |
| **Racing  Days**                   | ** ** | ** **                    | ** ** | ** ** | ** ** |
| Simulcast only days                |       | 153                           |       | 156 |   |
| Live and simulcast days            |       | 28                            |       | 26 |   |
| Total Racing Days                  |       | 181                           |       | 182 |   |
| ** **                         | ** ** | ** **                    | ** ** | ** ** | ** ** |
| **On-Track  Handle**               | ** ** | ** **                    | ** ** | ** ** | ** ** |
| Simulcast only days                |       | $                             | 21,884,000 |   | $ | 25,591,000 |   |
| Live and simulcast days            |       |                          |       |   |   |
| Live racing                        |       | 7,072,000                     |       | 6,288,000 |   |
| Simulcast racing                   |       | 7,854,000                     |       | 7,494,000 |   |
| **Out-of-state  Live Handle**      |       | 4,175,000                     |       | 4,334,000 |   |
| Total Handle                       |       | $                             | 40,985,000 |   | $ | 43,707,000 |   |
| ** **                         | ** ** | ** **                    | ** ** | ** ** | ** ** |
| **On-Track  Average Daily Handle** | ** ** | ** **                    | ** ** | ** ** | ** ** |
| Simulcast only days                |       | $                             | 143,033    |   | $ | 164,045 |   |
| Live and simulcast days            |       | 533,071                       |       | 530,077 |   |

 

                Total Card Club revenue increased 7.6% to$14,711,000 for the first six months of 2005 compared to $13,677,000 for thesame period in 2004. The primary source of Card Club revenue is a percentage ofthe wagers from the players as compensation for providing the Card Clubfacility and services, referred to as the “collection revenue”. The Companyalso receives a specified percentage of the jackpot fund collection asreimbursement for administrative costs of maintaining the jackpot funds, andcollects fees for administering tournaments, which represents “other revenue”.The increase in revenue is due primarily to growth in the Card Club’s pokergames. Poker collection revenue grew $1.3 million or 17.7% compared to thefirst half of 2004 and continues to be fueled by the popularity of televisedpoker tournaments. This increase was partially offset by a $288,000, or 5%,decrease in Casino Games compared to the first six months of 2004. Thisdecrease is partially due to new competition from Native American casinos,which have expanded their gaming options to include many of the same unbankedcard games as those offered at Canterbury Park. Card Club revenues represented 55.2% and 48.8% of total revenues for thesix-month and three-month periods ended June 30, 2005, respectively.  For further information, see the “Summary ofCard Club Data” below.

 

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| ** **                      | ** ** | **Six Months Ended June 30,** | ** ** |
|---------------------------------|------------|-------------------------------|------------|
| ** **                      | ** ** | **2005**                      | ** ** | **2004** | ** ** |
| **Summary  of Card Club Data:** |       |                          |       |   |   |
| Poker Games                     |       | $                             | 9,006,000  |   | $ | 7,653,000 |   |
| Casino Games                    |       | 5,381,000                     |       | 5,670,000 |   |
| Total Collection Revenue        |       | 14,387,000                    |       | 13,323,000 |   |
|                            |       |                          |       |   |   |
| Other Revenue                   |       | 324,000                       |       | 354,000 |   |
| Total Card Club Revenue         |       | $                             | 14,711,000 |   | $ | 13,677,000 |   |
|                            |       |                          |       |   |   |
| Number of Days Offered          |       | 181                           |       | 182 |   |
| Average Revenue per Day         |       | $                             | 81,276     |   | $ | 75,147 |   |

 

Concessionsales for the six-month and three-month periods ended June 30, 2005 increased10.1% and 12.0%, respectively, compared to the same periods in 2004.  The increase is primarily due to increasedpatronage in the Card Club.

 

                Other operating revenues for the six-monthand three-month periods ended June 30, 2005 increased approximately $50,000 or5.9% and $44,000 or 8.6%, respectively, compared to the same periods in2004.  The increase is primarily due toincreased cash services fees and revenues from in-house photography related tolive racing.

 

Totaloperating expenses increased approximately $1.3 million or 5.8% during thesix-month period ended June 30, 2005 compared to the six-month period endedJune 30, 2004, and $606,000 or 4.5% during the three months ended June 30, 2005compared to the three-month period ended June 30, 2004.

 

Statutorypurses and Minnesota breeders’ fund expenses have increased approximately$53,000 or 1.2% and decreased $23,000 or 1.0%, respectively, during the six andthree month periods of 2005 compared to 2004, due primarily to increasedpayments to the purse fund from Card Club revenues, offset by decreased purseliability associated with the decrease in simulcast wagering.  Salaries and benefits increased approximately$842,000 or 8.8% in the six-month period and approximately $372,000 or 6.9% inthe three-month period compared to the same periods last year primarily due toan increase of approximately 8.5% in total hours worked caused by higher levelsof operations in the Card Club and concessions, an overall increase in salaryand wage rates, and a 14% increase in group medical costs caused by increasesin the number of participants and premium rates.  Cost of sales expense increased approximately$173,000 or 11.8% in the six-month period and $133,000 or 14.9% in thethree-month period compared to the same periods last year primarily due to theincrease in associated revenues for concessions.  Depreciation increased $144,000 or 24.2% in thesix- month period and $87,000 or 28.1% in the three-month period compared tothe same periods last year due to the completion of several facilitiesimprovements related to live racing. Repairs, maintenance and supplies decreased approximately $128,000 or15.7% in the six-month period and $70,000 or 13.2% in the three-month periodcompared to the same periods last year primarily due to additional chipexpenses incurred in 2004.  Otheroperating expenses increased approximately $277,000 or 15.1% in the six-monthperiod and $168,000 or 15.2% in the three-month period compared to the sameperiods in 2004 due to the cost of consultants hired to assist withimplementation of the Sarbanes-Oxley act of 2002, and professional fees relatedto the Company’s legislative efforts for additional gaming authorizations.Total operating

 

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expenses as a percentage oftotal operating revenues were 89.4% for the six-month period ended June 30,2005 compared to 87.2% for 2004 as the volume increase in revenues wasinsufficient to cover the additional expenses, in particular the otheroperating expenses related to regulatory and legislative initiatives.

 

                Income before income taxes was $2,876,000 forthe six months ended June 30, 2005 compared to $3,325,000 for the six monthsended June 30, 2004.  After income taxexpense of $1,341,000 for the six months ended June 30, 2005, net income was$1,535,000 in 2005 compared to $1,841,000 in 2004.  Income before income taxes for the quarterended June 30, 2005 was $931,000 compared to $1,035,000 for the quarter endedJune 30, 2004.  After income tax expenseof $477,000 in the second quarter of 2005, net income was $454,000 compared to$581,000 for the second quarter of 2004.

 

##### **Commitments and Contingencies**

 

                On June 2, 2005 the Company’s Board of Directorsdeclared a special cash dividend of $.25 per share of common stock payable onJuly 8, 2005 to shareholders of record on June 25, 2005.  The Company has not adopted any policiesregarding dividend payments and there can be no assurance that any dividendwill be paid in the future.

 

Therehave been no additional material changes in our outstanding commitments andcontingencies since those reported at December 31, 2004.

 

**Liquidityand Capital Resources**

 

                During the period January 1, 2005 throughJune 30, 2005, cash provided by operating activities was $6,026,622, whichresulted primarily from net income of $1,534,577; depreciation and amortizationof $740,250; an increase in accounts payable and accrued wages and payrolltaxes of $3,736,602, caused by a seasonal increase of $2.3 million in horsemenpayables, a $1.1 million increase in trade accounts payable, and a $263,000increase in deferred revenues for corporate sponsorships; an increase in MHBPApayables of $207,373; and an increase in accounts receivable of $144,736. Theseitems were partially offset by an $115,000 decrease in the card club’s jackpotpools and player pool caused by timing differences due to jackpots, prizes andgiveaways paid to the players; and an increase in deferred taxes of$187,700.  Pursuant to an agreement withthe MHBPA, during the six months ended June 30, 2005 and 2004, the Companytransferred into a trust account or paid directly to the MHBPA approximately$3,150,000 and $3,275,000, respectively. At June 30, 2005, the Company had an additional liability to the MHBPAof $338,519.  This liability will be paidin 2005, including interest earned.

 

                Net cash used in investing activities for thefirst six months of 2005 of $5,243,456 resulted primarily from improvements tothe backside barns and facilities related to live racing and an increase inrestricted cash of $2,428,494 due to a $2.3 million seasonal increase in pursespayable for horsemen.  During thesix-month period ended June 30, 2004, net cash used for investing activitieswas $5,416,548 related primarily to building improvements related to therenovation of the club-level of the Racetrack’s grandstand facility forapproximately $1.5 million, the acquisition of equipment and an increase inrestricted cash of $2,467,236 due to a $2.2 million seasonal increase in pursespayable for horsemen.

 

13

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                During the period January 1, 2005 throughJune 30, 2005, cash provided by financing activities was $289,322 resultingfrom the exercise of stock options. During the period January 1, 2004 through June 30, 2004, cash providedby financing activities was $265,461 representing the exercise of stockoptions.

 

                The Company has renewed a general creditagreement with Bremer Bank, which provides a revolving credit line of up to$2,250,000 with interest at the prime rate until April 20, 2007.  The Company had no borrowings under the lineof credit at June 30, 2005 or December 31, 2004.  The credit agreement contains certaincovenants requiring the Company to maintain certain financial ratios.  The Company was in compliance with theserequirements at all times throughout the quarter ended June 30, 2005.

 

                Unrestricted cash balances at June 30, 2005were $5,251,032 compared to $4,178,544 at December 31, 2004. The Companybelieves that the funds available in its cash accounts, amounts available underthe general credit and security agreement, along with funds generated fromoperations, will be sufficient to satisfy its liquidity and capital resourcerequirements during 2005 for regular operations.

 

##### **Critical Accounting Policies**

 

The preparation ofconsolidated financial statements in conformity with generally acceptedaccounting principles requires management to make estimates that effect theamounts reported and disclosed in the consolidated financial statements. Bytheir nature, these estimates are subject to an inherent degree of uncertainty.These estimates are based on our experience and various other assumptions thatare believed to be reasonable in the circumstances, the results of which formthe basis for making judgments about the carrying values of assets andliabilities. On an ongoing basis, we evaluate our estimates. However, actualresults could differ from those estimates.

 

Our significantaccounting policies are included in Note 1 to our consolidated financialstatements in our 2004 Annual Report on Form 10-K. We believe the followingcritical accounting policies affect our more significant judgments andestimates used in the preparation of our consolidated financial statements.

 

*Land,Buildings and Equipment* - We have significant capital investedin our property and equipment, which represents approximately 66% of our totalassets. We utilize our judgment in various ways including: determining whetheran expenditure is considered a maintenance expense or a capital asset;determining the estimated useful lives of assets; and determining if or when anasset has been impaired. Our property and equipment is evaluated for impairmentwhenever circumstances indicate that the carrying value of an asset may not berecoverable from the estimated future cash flows expected to result from itsuse. If the sum of the expected future cash flows (undiscounted and withoutinterest charges) is less than the carrying amount, we recognize an impairmentloss. The impairment loss recognized is the amount by which the carrying amountexceeds the fair value and is charged to operations in the period in which suchimpairment is determined by management. We do not believe that any impairmenthas occurred or is likely to occur in the near future.

 

*Regulation -*Ourbusiness can be materially impacted both positively and negatively bylegislative and regulatory changes, such as those described below. Significantnegative

 

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changes resulting from theseactivities could result in an impairment of our property and equipment inaccordance with generally accepted accounting standards. Additional informationregarding how our business can be impacted by legislative and regulatorychanges are included in Item 1 (vi), and Item 1 (vii), respectively, in our2004 Annual Report on Form 10-K.

 

**Legislation:**

 

                On March 10, 2005, a bill was introduced inthe Minnesota Legislature, to allow electronic gaming devices to be operated bythe Minnesota State Lottery at the Racetrack. This concept, often referred to as a “Racino”, as proposed forCanterbury Park would include 3,000 gaming devices, a 250-room hotel, anOlympic scale horse park and additional restaurant venues.  Legislation was also introduced in the 2005session to remove the 50-table limit in the card room defined by currentMinnesota Law, and to impose a gaming tax on card room revenues. However, onJuly 13, 2005 the Minnesota Legislature adjourned without taking further actionon any of these bills.

 

Legislation has been enacted inMinnesota to raise the minimum wage from $5.15 to $6.15 an hour.  Minnesota will join 15 other states withhigher minimums than those set by the Federal government.  This legislation became effective August 1,2005 and management believes it will have an adverse affect on future resultsof operations. In addition, the Minnesota Legislature passed a law authorizingsocial Texas Hold’em tournaments in bars and restaurants.  Under this new law, bars and restaurantscannot charge an entry fee for participating in a tournament or award totalprizes more than $200.  Management isunable to determine what effect this legislation may have on the Company’s cardclub operations.

 

The MinnesotaLegislature will reconvene in March 2006, and the Racino legislation will bepending in the Minnesota House. Based on the success of several Racinos inother states, the Company believes that if this legislation becomes law, itwill enhance horse racing with increased purses, provide growth and developmentopportunities for the Company, and produce significant new tax revenues forstate and local governments.  The effortto obtain legislative authority for these initiatives has required, and willcontinue to require, substantial expenditures and there can be no assurancethat any bill favorable to the Company’s interests will be enacted into law.

 

**FactorsAffecting Future Performance:**

 

                From time to time, in reportsfiled with the Securities and Exchange Commission, in press releases, and inother communications to shareholders or the investing public, the Company maymake forward-looking statements concerning possible or anticipated futurefinancial performance, business activities or plans which are typicallypreceded by the words “believes,” “expects,” “anticipates,” “intends” orsimilar expressions.  For suchforward-looking statements, the Company claims the protection of the safeharbor for forward-looking statements contained in federal securitieslaws.  Shareholders and the investingpublic should understand that such forward-looking statements are subject torisks and uncertainties which could cause actual performance, activities orplans to differ significantly from those indicated in the forward-lookingstatements.  Such risks and uncertaintiesinclude, but are not limited to: fluctuations in attendance at the Racetrack,material changes in the level of wagering by

 

15

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patrons,decline in interest in the unbanked card games offered at the Card Club,legislative and regulatory changes, the impact of wagering products andtechnologies introduced by competitors; increases in the percentage of revenuesallocated for purse fund payments; increase in compensation and employeebenefit costs; the general health of the gaming sector; higher than expectedexpense related to new marketing initiatives; and other factors discussed fromtime to time in the Company’s filings with the Securities and ExchangeCommission.

 

**ITEM 3:****                      ****QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

          We are exposed to market risk fromchanges in interest rates on borrowings under our commercial revolving creditline that bears interest at the prime rate. At June 30, 2005 we have no debt borrowings under our credit facility.

 

          We have no derivative financialinstruments or derivative commodity instruments in our cash and cashequivalents and marketable securities. We invest cash and cash equivalents in investment grade, highly liquidinvestments, consisting of money market instruments, bank certificates ofdeposit, and short-term government and corporate bonds.

 

**ITEM 4:****                      ****CONTROLS AND PROCEDURES**

 

(a)           Evaluationof Disclosure Controls and Procedures:

 

Management,with the participation of the Company’s principal executive officer, Randall D.Sampson, and principal financial officer, David C. Hansen, has evaluated theeffectiveness of the design and operation of the disclosure controls andprocedures, as defined in Rules 13a-15(e) under the Securities Exchange Act of1934, as of the end of the period covered by this report.  Management has concluded that the Company’sdisclosure controls and procedures are effective to ensure that informationrequired to be disclosed in the reports that the Company files under theExchange Act is recorded, processed, summarized and reported within the timeperiods specified in the rules and forms of the SEC and that the disclosurecontrols are also effective to ensure that information required to be disclosedin the Company’s Exchange Act reports is accumulated and communicated tomanagement, including the principal executive officer and principal financialofficer, to allow timely decisions regarding required disclosure.

 

(b)           Changesin Internal Control Over Financial Reporting:

 

There have been no changesin internal control overfinancial reporting that occurred during the fiscal quarter covered by thisreport that have materiallyaffected, or are reasonably likely to materially affect, the registrant’sinternal control over financial reporting.

 

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**PART II**

**OTHER INFORMATION**

 

Item 1.                                **Legal Proceedings**

 

Not Applicable

 

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

 

Not Applicable

 

Item 3.                                **Defaults Upon Senior Securities**

 

Not Applicable

 

Item 4.                                **Submission of Matters to a Vote of Security Holders**

 

The Company held its Annual Meeting ofShareholders on June 2, 2005. Shareholders elected or reelected the following directors for a one yearterm:  Patrick R. Cruzen, Burton F.Dahlberg, Carin J. Offerman, Curtis A. Sampson, Randall D. Sampson, and Dale H.Schenian.  Not less than 3,441,148 shareswere voted in favor of each of the directors (approximately 93.12% of allshares present and voting).

 

Item 5.                                **Other Information**

 

Not Applicable

 

Item 6.                                **Exhibits and Reports on Form 8-K**

 

(a)               The following exhibits are includedherein:

 

11                          Statementre computation of per share earnings — See Net Income Per Share under Note 1 ofNotes to Consolidated Financial Statements under Part 1, Item 1, which isincorporated herein by reference.

 

31.1                 Certificationof Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of2002 (rules 13a-14 and 15d-14 of the Exchange Act).

 

31.2                 Certificationof Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of2002 (rules 13a-14 and 15d-14 of the Exchange Act).

 

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

 

17

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**SIGNATURES**

 

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

 
|                    | **Canterbury Park Holding Corporation**      |
|-------------------------|----------------------------------------------|
|                    |                                         |
| Dated:  August 15, 2005 | /s/ Randall  D. Sampson                      |
|                    | Randall D.  Sampson,                         |
|                    | President,  and Chief Executive Officer      |
|                    |                                         |
|                    |                                         |
| Dated:  August 15, 2005 | /s/ David C.  Hansen                         |
|                    | David C.  Hansen,                            |
|                    | Vice  President, and Chief Financial Officer |

 

 

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