Table of Contents





|                                  
|----------------------------------
|UNITED STATES                     
|SECURITIES AND EXCHANGE COMMISSION
|Washington,
 D.C. 20549           
|                                  
|FORM 10-Q                         

(Mark One)


|   |                                                                                                                                           | 
|-- | ----------------------------------------------------------------------------------------------------------------------------------------- | 
|ý  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
 THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31,
 2011. 
|   |                                                                                                                                          
|OR
|   |                                                                                                                                          
|o  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
 THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO
 _____.

Commission File Number: 001-31569

(CANTERBURY PARK LOGO)

|                                                      
|------------------------------------------------------
|CANTERBURY
 PARK HOLDING CORPORATION                  
|(Exact Name of Registrant as Specified in Its Charter)

|                                                                 |           |                                       |  |  |            | 
|---------------------------------------------------------------- | --------- | ------------------------------------- |  |  | ---------- | 
|                                                                 | Minnesota |                                       |  |  | 41-1775532 | 
|(State or Other Jurisdiction
 of Incorporation or
 Organization) |           | (I.R.S. Employer
 Identification No.)

|                                                      |                                          | 
|----------------------------------------------------- | ---------------------------------------- | 
|                                                      | 1100 Canterbury Road
 Shakopee, MN 55379 | 
|(Address of principal executive offices and zip code)

Indicate by
check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.


YES   x              NO  o


Indicate by
check mark whether the Registrant has submitted electronically and posted on its
corporate Website, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T during the preceding 12
months (or for such shorter period that the Registrant was required to submit
and post such files).


YES   o              NO  o


Indicate by
check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer (as defined in Exchange Act Rule 12b-2).

|                           |  |                             
|-------------------------- |  | ----------------------------
|                           |  |                             
|Large accelerated filer  o |  | Accelerated filer  o        
|Non-accelerated filer  o   |  | Smaller reporting company  x

Indicate by
check mark whether the registrant is a shell company (as defined in Exchange
Act Rule 12b-2).


YES   o              NO  x


The Company
had 4,074,686 shares of common stock, $.01 par value, outstanding as of May 13,
2011.

1





---



Canterbury Park Holding Corporation

INDEX

|          |  |                        |  |                                                                                                |    |     
|--------- |  | ---------------------- |  | ---------------------------------------------------------------------------------------------- | -- | ----
|PART
 I.  |  | FINANCIAL
 INFORMATION |  |                                                                                               
|          |  |                        |  |                                                                                                |    |     
|          |  |                        |  |                                                                                                |    | Page
|          |  | Item
 1.               |  | Financial
 Statements                                                                          |    |     
|          |  |                        |  |                                                                                                |    |     
|          |  |                        |  | Condensed Consolidated Balance Sheets as of March 31,
 2011 and December 31, 2010              |    | 3   
|          |  |                        |  |                                                                                                |    |     
|          |  |                        |  | Condensed Consolidated Statements of Operations for
 the periods ended March 31, 2011 and 2010 |    | 4   
|          |  |                        |  |                                                                                                |    |     
|          |  |                        |  | Condensed Consolidated Statements of Cash Flows for
 the periods ended March 31, 2011 and 2010 |    | 5   
|          |  |                        |  |                                                                                                |    |     
|          |  |                        |  | Notes to Condensed Consolidated Financial Statements                                           |    | 6   
|          |  |                        |  |                                                                                                |    |     
|          |  | Item 2.                |  | Managements Discussion and Analysis of Financial
 Condition and Results of Operations         |    | 14  
|          |  |                        |  |                                                                                                |    |     
|          |  | Item 3.                |  | Quantitative and Qualitative Disclosures about Market
 Risk                                    |    | 19  
|          |  |                        |  |                                                                                                |    |     
|          |  | Item 4.                |  | Controls and Procedures                                                                        |    | 19  
|          |  |                        |  |                                                                                                |    |     
|PART
 II. |  | OTHER
 INFORMATION     |  |                                                                                               
|          |  |                        |  |                                                                                                |    |     
|          |  | Item 1.                |  | Legal Proceedings                                                                              |    | 20  
|          |  |                        |  |                                                                                                |    |     
|          |  | Item 1A.               |  | Risk Factors                                                                                   |    | 20  
|          |  |                        |  |                                                                                                |    |     
|          |  | Item 2.                |  | Unregistered Sales of Equity Securities and Use of
 Proceeds                                   |    | 20  
|          |  |                        |  |                                                                                                |    |     
|          |  | Item 3.                |  | Defaults Upon Senior Securities                                                                |    | 20  
|          |  |                        |  |                                                                                                |    |     
|          |  | Item 4.                |  | Removed and Reserved                                                                           |    | 20  
|          |  |                        |  |                                                                                                |    |     
|          |  | Item 5.                |  | Other Information                                                                              |    | 20  
|          |  |                        |  |                                                                                                |    |     
|          |  | Item 6.                |  | Exhibits                                                                                       |    | 20  
|          |  |                        |  |                                                                                                |    |     
|          |  | Signatures             |  |                                                                                                | 21
|          |  |                        |  |                                                                                                |    |     
|          |  | Certifications         |  | 22                                                                                            

2

---



Table of Contents

|                                                     
|-----------------------------------------------------
|PART I - FINANCIAL INFORMATION                       
|                                                     
|CANTERBURY PARK HOLDING
 CORPORATION AND SUBSIDIARIES
|CONDENSED CONSOLIDATED BALANCE SHEETS                
|MARCH 31, 2011 AND DECEMBER 31,
 2010 (Unaudited)    

|                                                                                                                                  |  |                 |            |                    |   |            | 
|--------------------------------------------------------------------------------------------------------------------------------- |  | --------------- | ---------- | ------------------ | - | ---------- | 
|                                                                                                                                  |  | March 31,
 2011 |            | December 31,
 2010 |  
|                                                                                                                                  |  |                 |            |                    |   |            | 
|ASSETS                                                                                                                            |  |                 |            |                    |   |            | 
|CURRENT ASSETS                                                                                                                    |  |                 |            |                    |   |            | 
|Cash                                                                                                                              |  | $               | 6,975,271  |                    | $ | 5,451,462  | 
|Restricted cash                                                                                                                   |  |                 | 1,373,955  |                    |   | 1,341,656  | 
|Short-term investments                                                                                                            |  |                 | 100,000    |                    |   | -          | 
|Accounts receivable, net of allowance of
 $34,805                                                                                 |  |                 | 468,822    |                    |   | 394,314    | 
|Inventory                                                                                                                         |  |                 | 170,770    |                    |   | 176,211    | 
|Prepaid expenses                                                                                                                  |  |                 | 492,207    |                    |   | 564,984    | 
|Income taxes receivable                                                                                                           |  |                 | 277,732    |                    |   | 381,898    | 
|Deferred income taxes                                                                                                             |  |                 | 350,500    |                    |   | 320,400    | 
|Due from Minnesota horsemen associations                                                                                          |  |                 | -          |                    |   | 49,241     | 
|Total current assets                                                                                                              |  |                 | 10,209,257 |                    |   | 8,680,166  | 
|                                                                                                                                 
|LONG-TERM ASSETS                                                                                                                  |  |                 |            |                    |   |            | 
|Deposits                                                                                                                          |  |                 | 20,000     |                    |   | 20,000     | 
|Land, buildings and equipment, net of
 accumulated depreciation of $19,371,796 and $19,006,314, respectively                      |  |                 | 23,589,914 |                    |   | 23,948,330 | 
|                                                                                                                                  |  | $               | 33,819,171 |                    | $ | 32,648,496 | 
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                              |  |                 |            |                    |   |            | 
|                                                                                                                                  |  |                 |            |                    |   |            | 
|CURRENT LIABILITIES                                                                                                               |  |                 |            |                    |   |            | 
|Accounts payable                                                                                                                  |  | $               | 2,344,282  |                    | $ | 2,252,527  | 
|Card Casino accruals                                                                                                              |  |                 | 1,697,254  |                    |   | 1,433,798  | 
|Accrued wages and payroll taxes                                                                                                   |  |                 | 781,328    |                    |   | 686,964    | 
|Due to MHBPA                                                                                                                      |  |                 | 99,525     |                    |   | 193,592    | 
|Accrued property taxes                                                                                                            |  |                 | 709,649    |                    |   | 562,349    | 
|Payable to horsepersons                                                                                                           |  |                 | 45,594     |                    |   | 21,551     | 
|Total current liabilities                                                                                                         |  |                 | 5,677,632  |                    |   | 5,150,781  | 
|                                                                                                                                  |  |                 |            |                    |   |            | 
|DEFERRED INCOME TAXES                                                                                                             |  |                 | 1,298,500  |                    |   | 951,900    | 
|                                                                                                                                  |  |                 |            |                    |   |            | 
|COMMITMENTS AND CONTINGENCIES (Note 7)                                                                                            |  |                 | -          |                    |   | -          | 
|                                                                                                                                  |  |                 |            |                    |   |            | 
|STOCKHOLDERS EQUITY                                                                                                              |  |                 |            |                    |   |            | 
|Common stock, $.01 par value, 10,000,000
 shares authorized, 4,068,981 and 4,053,660 shares issued and outstanding,
 respectively |  |                 | 40,690     |                    |   | 40,537     | 
|Additional paid-in capital                                                                                                        |  |                 | 15,970,069 |                    |   | 15,883,899 | 
|Retained earnings                                                                                                                 |  |                 | 10,832,280 |                    |   | 10,621,379 | 
|Total stockholders equity                                                                                                        |  |                 | 26,843,039 |                    |   | 26,545,815 | 
|                                                                                                                                  |  | $               | 33,819,171 |                    | $ | 32,648,496 | 

See
notes to condensed consolidated financial statements.

3

---



Table of Contents

|                                                    
|----------------------------------------------------
|CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES
|CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS     
|PERIODS
 ENDED MARCH 31, 2011 AND 2010 (Unaudited)  

|                                                       |  |                              |           |      |   |           |  
|------------------------------------------------------ |  | ---------------------------- | --------- | ---- | - | --------- | -
|                                                       |  | Three Months Ended March 31, |          
|                                                       |  | 2011                         |           | 2010 |  
|OPERATING REVENUES:                                    |  |                              |           |      |   |           |  
|Pari-mutuel                                            |  | $                            | 1,683,750 |      | $ | 1,821,031 |  
|Card Casino                                            |  |                              | 5,600,802 |      |   | 4,937,408 |  
|Concessions                                            |  |                              | 723,121   |      |   | 739,898   |  
|Other                                                  |  |                              | 337,509   |      |   | 322,012   |  
|Total Revenues                                         |  |                              | 8,345,182 |      |   | 7,820,349 |  
|Less: Promotional Allowances                           |  |                              | (37,372   | )    |   | (31,736   | )
|Net Revenues                                           |  |                              | 8,307,810 |      |   | 7,788,613 |  
|                                                       |  |                              |           |      |   |           |  
|OPERATING EXPENSES:                                    |  |                              |           |      |   |           |  
|Purse expense                                          |  |                              | 805,907   |      |   | 772,624   |  
|Minnesota Breeders Fund                               |  |                              | 142,988   |      |   | 142,927   |  
|Other pari-mutuel expenses                             |  |                              | 305,526   |      |   | 319,073   |  
|Salaries and benefits                                  |  |                              | 3,710,602 |      |   | 3,840,716 |  
|Cost of sales                                          |  |                              | 464,627   |      |   | 484,080   |  
|Depreciation                                           |  |                              | 460,500   |      |   | 491,700   |  
|Loss on disposal of assets                             |  |                              | -         |      |   | 909,540   |  
|Utilities                                              |  |                              | 234,538   |      |   | 243,925   |  
|Advertising and marketing                              |  |                              | 102,548   |      |   | 162,791   |  
|Other operating expenses                               |  |                              | 1,443,606 |      |   | 1,210,931 |  
|                                                       |  |                              | 7,670,842 |      |   | 8,578,307 |  
|                                                       |  |                              |           |      |   |           |  
|INCOME (LOSS) FROM OPERATIONS                          |  |                              | 636,968   |      |   | (789,694  | )
|                                                       |  |                              |           |      |   |           |  
|NONOPERATING REVENUES (EXPENSES):                      |  |                              |           |      |   |           |  
|Interest expense                                       |  |                              | (6        | )    |   | (1,282    | )
|Other, net                                             |  |                              | 1,359     |      |   | 4,535     |  
|                                                       |  |                              | 1,353     |      |   | 3,253     |  
|                                                       |  |                              |           |      |   |           |  
|INCOME (LOSS) BEFORE INCOME TAXES                      |  |                              | 638,321   |      |   | (786,441  | )
|INCOME TAX (EXPENSE) BENEFIT (Note 1)                  |  |                              | (427,766  | )    |   | 146,800   |  
|                                                       |  |                              |           |      |   |           |  
|NET INCOME (LOSS)                                      |  | $                            | 210,555   |      | $ | (639,641  | )
|                                                       |  |                              |           |      |   |           |  
|                                                       |  |                              |           |      |   |           |  
|WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING   |  |                              | 4,055,399 |      |   | 4,032,629 |  
|                                                       |  |                              |           |      |   |           |  
|WEIGHTED AVERAGE NUMBER OF DILUTIVE SHARES OUTSTANDING |  |                              | 4,113,651 |      |   | 4,032,629 |  
|                                                       |  |                              |           |      |   |           |  
|BASIC NET INCOME (LOSS) PER COMMON SHARE (Note 1)      |  | $                            | .05       |      | $ | (.16      | )
|                                                       |  |                              |           |      |   |           |  
|DILUTED NET INCOME (LOSS) PER COMMON SHARE (Note 1)    |  | $                            | .05       |      | $ | (.16      | )

See notes to condensed
consolidated financial statements.

4

---



Table of Contents

|                                                    
|----------------------------------------------------
|CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES
|CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS     
|PERIODS
 ENDED MARCH 31, 2011 AND 2010 (Unaudited)  

|                                                                                          |  |                              |           |      |   |           |  
|----------------------------------------------------------------------------------------- |  | ---------------------------- | --------- | ---- | - | --------- | -
|                                                                                          |  | Three Months Ended March 31, |          
|                                                                                          |  | 2011                         |           | 2010 |  
|Operating Activities:                                                                     |  |                              |           |      |   |           |  
|Net income (loss)                                                                         |  | $                            | 210,555   |      | $ | (639,641  | )
|Adjustments to reconcile net income (loss) to net cash provided by
 operating activities: |  |                              |           |      |   |           |  
|Depreciation                                                                              |  |                              | 460,500   |      |   | 491,700   |  
|Loss on disposal of assets                                                                |  |                              | -         |      |   | 909,540   |  
|Stock-based compensation expense                                                          |  |                              | 55,508    |      |   | 37,422    |  
|Increase (decrease) in deferred income tax liability                                      |  |                              | 316,500   |      |   | (472,492  | )
|Tax benefit from exercise of stock options                                                |  |                              | 7,100     |      |   | -         |  
|Changes in operating assets and liabilities:                                              |  |                              |           |      |   |           |  
|Increase
 in restricted cash                                                              |  |                              | (32,299   | )    |   | (272,312  | )
|Increase
 in accounts receivable                                                          |  |                              | (74,508   | )    |   | (129,993  | )
|Decrease
 (increase) in other current assets                                              |  |                              | 78,218    |      |   | (89,575   | )
|Decrease
 in income taxes receivable                                                      |  |                              | 97,066    |      |   | 298,150   |  
|Increase
 in accounts payable and accrued wages and payroll taxes                         |  |                              | 146,755   |      |   | 540,777   |  
|Increase
 in Card Casino accruals                                                         |  |                              | 263,456   |      |   | 277,366   |  
|Increase
 in accrued property taxes                                                       |  |                              | 147,300   |      |   | 131,325   |  
|Increase
 in payable to horsepersons                                                      |  |                              | 24,043    |      |   | 39,214    |  
|(Decrease)
 increase in due to MHBPA                                                      |  |                              | (44,826   | )    |   | 113,158   |  
|Net cash provided by operating activities                                                 |  |                              | 1,655,368 |      |   | 1,234,639 |  
|                                                                                          |  |                              |           |      |   |           |  
|Investing Activities:                                                                     |  |                              |           |      |   |           |  
|Additions to buildings and equipment                                                      |  |                              | (62,725   | )    |   | (821,448  | )
|Proceeds from sale of investments                                                         |  |                              | -         |      |   | 26,517    |  
|Purchase of investments                                                                   |  |                              | (100,000  | )    |   | -         |  
|Net cash used in investing activities                                                     |  |                              | (162,725  | )    |   | (794,931  | )
|                                                                                          |  |                              |           |      |   |           |  
|Financing Activities                                                                      |  |                              |           |      |   |           |  
|Proceeds from issuance of common stock                                                    |  |                              | 24,066    |      |   | 9,999     |  
|Tax benefit from exercise of stock options                                                |  |                              | 7,100     |      |   | -         |  
|Net cash provided by financing activities                                                 |  |                              | 31,166    |      |   | 9,999     |  
|Net increase in cash                                                                      |  |                              | 1,523,809 |      |   | 449,707   |  
|                                                                                         
|Cash at beginning of period                                                               |  |                              | 5,451,462 |      |   | 4,741,197 |  
|Cash at end of period                                                                     |  | $                            | 6,975,271 |      | $ | 5,190,904 |  
|                                                                                          |  |                              |           |      |   |           |  
|Supplemental disclosure of noncash investing activities:                                  |  |                              |           |      |   |           |  
|Additions to buildings and equipment funded through accounts payable                      |  | $                            | 66,951    |      | $ | 820,669   |  
|                                                                                          |  |                              |           |      |   |           |  
|Proceeds from issuance of common stock funded through shares swapped                      |  | $                            | 165,625   |      | $ | 251,530   |  
|                                                                                          |  |                              |           |      |   |           |  
|Supplemental disclosure of cash flow information:                                         |  |                              |           |      |   |           |  
|Income taxes paid, net of refunds                                                         |  | $                            | -         |      | $ | 33,000    |  

See notes to condensed
consolidated financial statements.

5

---



Table of Contents

|                                                    
|----------------------------------------------------
|CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARIES
|NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|PERIODS
 ENDED MARCH 31, 2011 AND 2010 (Unaudited)  

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | The accompanying unaudited
 condensed consolidated financial statements have been prepared pursuant to
 the rules and regulations of the Securities and Exchange Commission and in
 the opinion of management, contain all adjustments necessary to present
 fairly, in accordance with accounting principles generally accepted in the
 United States of America (GAAP), the financial position of Canterbury Park
 Holding Corporation as of March 31, 2011 and December 31, 2010; the results
 of its operations and its cash flows for the three months ended March 31,
 2011 and 2010. The condensed consolidated balance sheet as of December 31,
 2010 was derived from the audited financial statements. All adjustments are
 of a normal, recurring nature, except as otherwise disclosed. Results for an
 interim period are not necessarily indicative of results for a full year.                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | The complete summary of
 significant accounting policies is included in the notes to consolidated
 financial statements under Item 8 in the 2010 Annual Report on Form 10-K.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|1. | SUMMARY OF SIGNIFICANT
 ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | Business  Canterbury Park Holding Corporation (the
 Company) was incorporated under the laws of Minnesota and acquired land and
 buildings to conduct pari-mutuel horse racing operations (the Racetrack) in
 March 1994. The Racetrack is located in Shakopee, Minnesota, approximately 25
 miles southwest of downtown Minneapolis. In May 1994, we commenced year-round
 horse racing simulcast operations and hosted the first annual live race meet
 during the summer of 1995. Our live racing operations are a seasonal business
 as we host live race meets each year from May until early September. We earn
 additional pari-mutuel revenue by televising our live racing to out-of-state
 racetracks around the country. Canterbury Parks Card Casino operates 24
 hours a day, seven days a week and is limited by Minnesota State law to a
 maximum of 50 tables. The Card Casino currently offers a variety of poker and
 table games. Our three largest sources of revenues, Card Casino operations,
 pari-mutuel operations and concessions sales, generate cash revenues. We also
 derive revenues from related services and activities, such as advertising,
 parking and publication sales and from other entertainment events and
 activities held at the Racetrack.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | Revenue
 Recognition Our
 revenues are derived primarily from the operations of a Card Casino,
 pari-mutuel wagering on simulcast and live horse races, concession sales, and
 related activities. Collection revenue from Card Casino operations, a set
 percentage of wagers, is recognized at the time that the wagering process is
 complete. Pari-mutuel revenues are recognized upon occurrence of the live
 race that is presented for wagering and after that live race is made official
 by the respective states racing regulatory body. Revenues related to
 concession and publication sales and parking and admission fees are
 recognized as revenue when the service has been performed or the product has
 been delivered. All sales taxes are presented on a net basis and are excluded
 from revenue.                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | Estimates  The preparation of the consolidated financial
 statements in conformity with accounting principles generally accepted in the
 United States of America requires management to make estimates and
 assumptions that affect the reported amounts of assets and liabilities and
 disclosure of contingent assets and liabilities at the date of the
 consolidated financial statements and the reported amounts of revenues and
 expenses during the reporting period. Actual results could differ from these
 estimates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | Unrestricted
 Cash  Cash includes
 all investments with original maturities of three months or less or which are
 readily convertible into known amounts of cash and are not legally
 restricted. Accounts at each institution are insured by the Federal Deposit
 Insurance Corporation up to $250,000. The Company has not experienced any
 losses in such accounts and believes it is not exposed to any significant
 credit risk on cash.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

6

---



Table of Contents

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Restricted
 Cash  Restricted
 cash represents refundable deposits and amounts due to horsemen for purses,
 stakes and awards, and amounts accumulated in card game progressive jackpot
 pools, the player pool and poker promotional fund to be used to repay card
 players in the form of promotions, giveaways, prizes, or by other means.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Uncashed
 Winning Tickets The
 Company records a liability for winning tickets upon the completion of a
 race. As winning tickets are redeemed, this liability is reduced for the
 respective cash payment. We recognize revenue associated with the uncashed
 winning tickets when the likelihood of the redemption of the winning ticket
 is remote.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Promotional
 Allowances The
 Company offers certain promotional allowances at no charge to patrons who
 participate in our player rewards program. The retail value of these
 promotional items is shown as a deduction from total revenues on the
 Companys consolidated statements of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Due to
 Minnesota Horsemens Benevolent and Protective Association, Inc. (MHBPA)  The Minnesota Pari-mutuel Horse Racing
 Act specifies that the Company is required to segregate a portion of funds
 (recorded as purse expense in the statements of operations), received from
 card room operations and wagering on simulcast and live horse races, for
 future payment as purses for live horse races or other uses of the
 horsepersons associations. Pursuant to an agreement with the MHBPA, the
 Company transferred into a trust account or paid directly to the MHBPA,
 approximately $825,000 and $675,000 for the three-month periods ending March
 31, 2011 and 2010, respectively, related to thoroughbred races. Minnesota
 Statutes specify that amounts transferred into the trust account are the
 property of the trust and not of the Company.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Impairment
 of Long-Lived Assets Management of the Company periodically reviews the carrying value of
 property and equipment for potential impairment by comparing the carrying
 value of these assets with their related expected future net cash flows.
 Should the sum of the related expected future net cash flows be less than the
 carrying value, management will determine whether an impairment loss should
 be recognized. An impairment loss would be measured by the amount by which
 the carrying value of the asset exceeds the fair value of the asset. To date,
 management has determined that no impairment of these assets exists.                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Land,
 Buildings, and Equipment  Land, buildings, equipment, and building improvements are
 capitalized at a level of $1,000 or greater and are recorded at cost. Repair
 and maintenance costs are charged to operations when incurred. Furniture,
 fixtures, and equipment are depreciated using the straight-line method over
 estimated useful lives ranging from 5  7 years, while buildings are
 depreciated over 15  39 years. Building improvements are amortized using the
 straight-line method over the useful life of the assets.                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Card
 Casino Accruals 
 Minnesota law allows the Company to collect amounts from patrons to fund
 progressive jackpot pools in the Card Casino. These amounts, along with
 amounts earned by the player pool, promotional pools and the outstanding chip
 liability, are accrued as short-term liabilities at each balance sheet date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Income
 Taxes Income taxes
 are accounted for under the asset and liability method. Deferred tax assets
 and liabilities are recognized for the estimated future tax consequences
 attributable to differences between the financial statement carrying amounts
 of existing assets and liabilities and their respective tax bases. Deferred
 tax assets and liabilities are measured using enacted tax rates in effect for
 the year in which those temporary differences are expected to reverse. The
 effective income tax rate for 2011 is higher than the statutory rate
 primarily due to non-deductible lobbying expenses relating to the Companys
 effort to obtain electronic gaming devices at the Racetrack.                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Interest and penalties
 associated with uncertain income tax positions are presented in income tax
 expense. During the three months ended March 31, 2011 and 2010, we did not
 recognize any expense related to interest and penalties. Additionally, we do
 not have any amounts accrued at March 31, 2011 for the payment of interest
 and penalties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

7

---



Table of Contents

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | Net
 Income (Loss) Per Share Basic net income (loss) per common share is based on the weighted
 average number of common shares outstanding during each period. The weighted
 average number of common shares outstanding for the three month period ended
 March 31, 2011 was 4,055,399. The weighted average number of common shares
 outstanding for the three month period ended March 31, 2010 was 4,032,629.
 Diluted net income per common share takes into effect the dilutive effect of
 potential common shares outstanding. The Companys potential common shares
 outstanding are stock options. After considering the dilutive effect of stock
 options outstanding, the weighted average shares used to calculate diluted
 earnings per share for the three month period ended March 31, 2011 was
 4,113,651. The weighted average shares used to calculate diluted earnings per
 share for the three month period ended March 31, 2010 was 4,032,629. Weighted
 average shares of 2,871 were considered anti-dilutive and excluded from the
 computation of common equivalent shares for the three months ended March 31,
 2010, as the Company reported a net loss for that period.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | Recent
 Accounting Pronouncements In January 2010, the FASB issued Accounting Standards Update No.
 2010-06 (ASU 2010-06)  Fair Value Measurements and Disclosures. ASU
 2010-06 amends Accounting Standards Codification (ASC) 820-10, Fair Value
 Measurements and Disclosures, and requires new disclosures surrounding
 certain fair value measurements. ASU 2010-06 was effective for the first
 interim or annual reporting period beginning on or after December 15, 2009,
 except for certain disclosures about purchases, sales, issuances and
 settlements in the rollforward of activity in Level 3 fair value
 measurements, which are effective for the first interim and annual reporting
 periods beginning on or after December 15, 2010. The adoption of ASU 2010-06
 did not have a material effect on the Companys consolidated financial
 statements.                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | In April 2010, the FASB
 issued Accounting Standards Update No. 2010-16 (ASU 2010-16)
 EntertainmentCasinos (Topic 924): Accruals for Casino Jackpot Liabilities.
 ASU 2010-16 codifies the consensus reached in Emerging Issues Task Force
 Issue No. 09-F, Casino Base Jackpot Liabilities. ASU 2010-16 amends the ASC
 to clarify that an entity should not accrue jackpot liabilities, or portions
 thereof, before a jackpot is won if the entity can avoid paying the jackpot.
 Jackpots should be accrued and charged to revenue when an entity has the
 obligation to pay the jackpot. The guidance in this ASU applies to both base
 and progressive jackpots. The amendments in this ASU are effective for fiscal
 years, and interim periods within those fiscal years, beginning on or after
 December 15, 2010. The amendments should be applied by recording a
 cumulative-effect adjustment to opening retained earnings in the period of
 adoption. The adoption of ASU 2010-16 did not have a material effect on the
 Companys consolidated financial statements.                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|2. | STOCK-BASED COMPENSATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | Stock based compensation is
 recorded at fair value as of the date of grant and included in the salaries
 and benefits expense line item on the consolidated statements of operations
 and amounted to $55,508 and $37,422 during the three months ended March 31,
 2011 and 2010, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | Each non-employee member of
 the Board of Directors receives an annual recurring grant of 3,000
 non-qualified stock options on the first business day in February. On
 February 1, 2011, 15,000 options were granted to the five non-employee board
 members with an exercise price per share equal to the market price on the
 date of grant of $13.30. The stock options vested over a six-month period and
 expire in ten years. The compensation cost associated with this grant of
 Board of Directors options is $93,750 and will be recognized as expense over
 the six-month vesting period. On February 1, 2010, 15,000 options were granted
 to the five non-employee board members with an exercise price per share equal
 to the market price on the date of grant of $7.05.                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | In addition, on February
 25, 2010, 86,500 incentive stock options were granted to employees with an
 exercise price per share equal to the market price on the date of grant of
 $8.28. The stock options vest over a 42-month period and expire in ten years.
 The compensation cost associated with this grant of employee options
 is $282,355 to be recognized as expense over the 42-month vesting period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

8

---



Table of Contents

| |                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------
| | The number
of shares that may be issued pursuant to options granted and the weighted
average fair value during the periods presented were:

|                       |  |                    |        |                             |  |       |      |                             |  |  |         |  |  |   |      |  | 
|---------------------- |  | ------------------ | ------ | --------------------------- |  | ----- | ---- | --------------------------- |  |  | ------- |  |  | - | ---- |  | 
|                       |  | Three Months Ended |       
|                       |  | March 31, 2011     |        | March 31, 2010              | 
|                       |  | Grant              |        | Weighted
Average
Fair Value |  | Grant |      | Weighted
Average
Fair Value | 
|                       |  |                    |        |                             |  |       |      |                             |  |  |         |  |  |   |      |  | 
|Board stock
options    |  |                    | 15,000 |                             |  | $     | 6.25 |                             |  |  | 15,000  |  |  | $ | 3.03 |  | 
|Employee
stock options |  |                    | -      |                             |  |       | -    |                             |  |  | 86,500  |  |  | $ | 3.79 |  | 
|                       |  |                    |        |                             |  |       |      |                             |  |  |         |  |  |   |      |  | 
|Total
options          |  |                    | 15,000 |                             |  |       |      |                             |  |  | 101,500 |  |  |   |      |  | 

| |                                                                                                                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The fair
value of stock options granted under the Companys 1994 Stock Plan during the
first three months of 2011 and 2010 were estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions and results:

|                                          |  |      |        |      |  |   |         |  | 
|----------------------------------------- |  | ---- | ------ | ---- |  | - | ------- |  | 
|                                          |  | 2011 |        | 2010 | 
|Dividend yield                            |  |      | 0.00%  |      |  |   | 0.00%   |  | 
|Weighted-average volatility               |  |      | 50%    |      |  |   | 43%     |  | 
|Risk-free interest rate                   |  |      | 2.02%  |      |  |   | 2.66%   |  | 
|Expected term of stock options in years   |  |      | 5.5    |      |  |   | 6.0     |  | 
|Fair value of stock options on grant date |  | $    | 93,750 |      |  | $ | 327,805 |  | 

| |                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------
| | A summary of
stock option activity as of March 31, 2011 and changes during the three
months then ended is presented below:

|                               |  |                  |  |                                 |   |                                             |  |                                 |       |  |  |           |  |  |   |           |  | 
|------------------------------ |  | ---------------- |  | ------------------------------- | - | ------------------------------------------- |  | ------------------------------- | ----- |  |  | --------- |  |  | - | --------- |  | 
|Stock
Options                  |  | Number of
Shares |  | Weighted
Average
Exercise
Price |   | Weighted
Average
Remaining
Contractual
Term |  | Aggregate
Grant Date
Fair Value |      
|                               |  |                  |  |                                 |   |                                             |  |                                 |       |  |  |           |  |  |   |           |  | 
|Outstanding
at January 1, 2011 |  |                  |  | 368,437                         |   |                                             |  | $                               | 9.21  |  |  |           |  |  |   |           |  | 
|                               |  |                  |  |                                 |   |                                             |  |                                 |       |  |  |           |  |  |   |           |  | 
|Granted                        |  |                  |  | 15,000                          |   |                                             |  |                                 | 13.30 |  |  |           |  |  |   |           |  | 
|Exercised                      |  |                  |  | (28,622                         | ) |                                             |  |                                 | 6.63  |  |  |           |  |  |   |           |  | 
|Expired/Forfeited              |  |                  |  | (1,250                          | ) |                                             |  |                                 | 7.37  |  |  |           |  |  |   |           |  | 
|                              
|                               |  |                  |  |                                 |   |                                             |  |                                 |       |  |  |           |  |  |   |           |  | 
|Outstanding
at March 31, 2011  |  |                  |  | 353,565                         |   |                                             |  | $                               | 9.59  |  |  | 6.5 Years |  |  | $ | 3,392,380 |  | 
|                               |  |                  |  |                                 |   |                                             |  |                                 |       |  |  |           |  |  |   |           |  | 
|Exercisable
at March 31, 2011  |  |                  |  | 236,190                         |   |                                             |  | $                               | 10.32 |  |  | 5.5 Years |  |  | $ | 2,437,555 |  | 

9

---



Table of Contents

| |                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------
| | A summary of
stock option activity as of March 31, 2010 and changes during the three
months then ended is presented below:

|                               |  |                  |  |                                 |   |                                             |  |                                 |         |  |  |           |  |  |  |            |  | 
|------------------------------ |  | ---------------- |  | ------------------------------- | - | ------------------------------------------- |  | ------------------------------- | ------- |  |  | --------- |  |  |  | ---------- |  | 
|Stock
Options                  |  | Number of
Shares |  | Weighted
Average
Exercise
Price |   | Weighted
Average
Remaining
Contractual
Term |  | Aggregate
Grant Date
Fair Value |        
|                               |  |                  |  |                                 |   |                                             |  |                                 |         |  |  |           |  |  |  |            |  | 
|Outstanding
at January 1, 2010 |  |                  |  | 403,244                         |   |                                             |  |                                 | $10.15  |  |  |           |  |  |  |            |  | 
|                               |  |                  |  |                                 |   |                                             |  |                                 |         |  |  |           |  |  |  |            |  | 
|Granted                        |  |                  |  | 101,500                         |   |                                             |  |                                 | 8.10    |  |  |           |  |  |  |            |  | 
|Exercised                      |  |                  |  | (46,494                         | ) |                                             |  |                                 | 5.63    |  |  |           |  |  |  |            |  | 
|Expired/Forfeited              |  |                  |  | (12,500                         | ) |                                             |  |                                 | 16.75   |  |  |           |  |  |  |            |  | 
|                              
|                               |  |                  |  |                                 |   |                                             |  |                                 |         |  |  |           |  |  |  |            |  | 
|Outstanding
at March 31, 2010  |  |                  |  | 445,750                         |   |                                             |  |                                 | $  9.97 |  |  | 5.8 Years |  |  |  | $4,443,725 |  | 
|                               |  |                  |  |                                 |   |                                             |  |                                 |         |  |  |           |  |  |  |            |  | 
|Exercisable
at March 31, 2010  |  |                  |  | 280,500                         |   |                                             |  |                                 | $11.55  |  |  | 3.6 Years |  |  |  | $3,239,255 |  | 

|   |                                                                                                                                                                                                                                                                                                         
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | Employee Stock Ownership Plan  Prior to
2008, the Company contributed shares of its common stock to its Employee
Stock Ownership Plan (ESOP). However, no contributions have been made from
January 1, 2008 to date, and the Company has not taken any action to
reinstate contributions to the ESOP.
|   |                                                                                                                                                                                                                                                                                                         
|3. | EARNINGS PER
SHARE COMPUTATIONS                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                         
|   | The following
is a reconciliation of the numerator and denominator of the earnings per
common share computations for the periods ending March 31, 2011 and 2010:                                                                                                                                        

|                                                                                         |  |                |   |                |  |  |  |   |           |   | 
|---------------------------------------------------------------------------------------- |  | -------------- | - | -------------- |  |  |  | - | --------- | - | 
|                                                                                         |  | March 31,
2011 |   | March 31,
2010 | 
|                                                                                         |  |                |   |                |  |  |  |   |           |   | 
|Net income (loss) (numerator) amounts used for
basic and diluted per share computations: |  |                | $ | 210,555        |  |  |  | $ | (639,641  | ) | 
|                                                                                         |  |                |   |                |  |  |  |   |           |   | 
|Weighted average shares (denominator) of common
stock outstanding:                       |  |                |   |                |  |  |  |   |           |   | 
|Basic                                                                                    |  |                |   | 4,055,399      |  |  |  |   | 4,032,629 |   | 
|Plus dilutive effect of stock options                                                    |  |                |   | 58,252         |  |  |  |   |          |   | 
|Diluted                                                                                  |  |                |   | 4,113,651      |  |  |  |   | 4,032,629 |   | 
|                                                                                        
|Net income (loss) per common share:                                                      |  |                |   |                |  |  |  |   |           |   | 
|Basic                                                                                    |  |                | $ | .05            |  |  |  | $ | (.16      | ) | 
|Diluted                                                                                  |  |                |   | .05            |  |  |  |   | (.16      | ) | 

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4. | FAIR VALUE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | Assets and
liabilities recorded at fair value are disclosed using a three-level
hierarchy. The classification of assets and liabilities within the hierarchy
is based on whether the inputs to the valuation methodology used for
measurement are observable or unobservable. Observable inputs reflect
market-derived or market-based information obtained from independent sources
while unobservable inputs reflect the Companys estimates about market data.
The three levels of inputs that may be used to measure fair value are
described below:
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | Level 1  Quoted prices in active markets
for identical assets or liabilities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

10

---



Table of Contents

| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Level 2  Observable inputs other than Level
1 prices such as quoted prices for similar assets or liabilities; quoted
prices in markets that are not active; or other inputs that are observable or
can be corroborated by observable market data for substantially the full term
of the assets or liabilities.
| |                                                                                                                                                                                                                                                                                                                
| | Level 3  Unobservable inputs that are
supported by little or no market activity and that are significant to the
fair value of the assets or liabilities.                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                
| | The Company
utilizes the market approach to measure fair value for its financial assets
and liabilities. The market approach uses prices and other relevant
information generated by market transactions involving identical or
comparable assets or liabilities.                                              
| |                                                                                                                                                                                                                                                                                                                
| | The Company
had no assets or liabilities measured at fair value on a recurring basis at
December 31, 2010.                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                
| | Assets and
liabilities measured at fair value on a recurring basis at March 31, 2011 are
summarized below:                                                                                                                                                                                                     

|                                                 |  |                                              |         |         |   |         |  |         |         |  |   |   | 
|------------------------------------------------ |  | -------------------------------------------- | ------- | ------- | - | ------- |  | ------- | ------- |  | - | - | 
|                                                 |  | Fair Value Measurements as of
March 31, 2011 |        
|                                                 |  | Total                                        |         | Level 1 |   | Level 2 |  | Level 3 |        
|Description                                      |  |                                              |         |         |   |         |  |         |        
|Short-term
investments (Certificates of Deposit) |  | $                                            | 100,000 |         | $ | -       |  | $       | 100,000 |  | $ | - | 
|Total                                            |  | $                                            | 100,000 |         | $ | -       |  | $       | 100,000 |  | $ | - | 

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|5. | GENERAL
CREDIT AGREEMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | The Company
has a general credit agreement with Bremer Bank, which provides a revolving
credit line of up to $3,000,000. On May 8, 2011, the Company signed an
amendment with Bremer Bank extending the expiration date from May 8, 2011 to
May 6, 2012, while keeping previous provisions intact. The Company had no
borrowings under this credit line at March 31, 2011 and December 31, 2010.
The credit agreement contains certain covenants requiring the Company to
maintain certain financial ratios. The Company was in compliance with these
requirements as of March 31, 2011. The Company believes that unrestricted
funds available in its cash accounts, funds available under this line of
credit, along with funds generated from operations, will be sufficient to
satisfy its liquidity and capital resource requirements during 2011.                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|6. | OPERATING
SEGMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | During the
first three months of 2011 and 2010, the Company had three reportable
operating segments: horse racing, Card Casino, and concessions. The horse
racing segment primarily represents simulcast and live horse racing
operations. The Card Casino segment primarily represents operations of
Canterbury Parks Card Casino, and the concessions segment primarily
represents food and beverage operations provided during simulcast and live
racing, in the Card Casino, and during special events. The Companys
reportable operating segments are strategic business units that offer
different products and services. They are managed separately because the
segments differ in the nature of the products and services provided as well
as processes to produce those products and services. The Minnesota Racing
Commission regulates the horse racing and Card Casino segments.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | The
accounting policies of the operating segments are the same as those described
in the summary of significant accounting policies in the 2010 Annual Report
on Form 10-K.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | Depreciation,
interest expense and income taxes are allocated to the segments but no
allocation is made to concessions for shared facilities. However, the
concessions segment pays approximately 25% of gross revenues earned on live
racing and special event days to the horse racing segment for use of the
facilities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

11

---



Table of Contents

| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | The following tables provide information about the Companys operating segments (in 000s):

|                                                                                  |  |                                   |   |             |   |             |  |       |       |   |  |  |   |        |   |  |  |   |        |   | 
|--------------------------------------------------------------------------------- |  | --------------------------------- | - | ----------- | - | ----------- |  | ----- | ----- | - |  |  | - | ------ | - |  |  | - | ------ | - | 
|                                                                                  |  | Three Months Ended March 31, 2011 |  
|                                                                                  |  | Horse Racing                      |   | Card
Casino |   | Concessions |  | Total |      
|                                                                                  |  |                                   |   |             |   |             |  |       |      
|Net revenues from external customers                                              |  |                                   | $ | 1,982       |   |             |  | $     | 5,601 |   |  |  | $ | 725    |   |  |  | $ | 8,308  |   | 
|Intersegment revenues                                                             |  |                                   |   | 25          |   |             |  |       | -     |   |  |  |   | 318    |   |  |  |   | 343    |   | 
|Net interest income                                                               |  |                                   |   | 1           |   |             |  |       | -     |   |  |  |   | -      |   |  |  |   | 1      |   | 
|Depreciation                                                                      |  |                                   |   | 286         |   |             |  |       | 135   |   |  |  |   | 40     |   |  |  |   | 461    |   | 
|Segment loss (income) before income taxes                                         |  |                                   |   | (75         | ) |             |  |       | 773   |   |  |  |   | (1     | ) |  |  |   | 697    |   | 
|Segment Assets                                                                    |  |                                   | $ | 29,745      |   |             |  | $     | 3,448 |   |  |  | $ | 10,474 |   |  |  | $ | 43,667 |   | 
|                                                                                  |  |                                   |   |             |   |             |  |       |       |   |  |  |   |        |   |  |  |   |        |   | 
|                                                                                  |  |                                   |   |             |   |             |  |       |       |   |  |  |   |        |   |  |  |   |        |   | 
|                                                                                  |  | Three Months Ended March 31, 2010 |  
|                                                                                  |  | Horse
Racing                      |   | Card
Casino |   | Concessions |  | Total |      
|                                                                                  |  |                                   |   |             |   |             |  |       |      
|Net revenues from external customers                                              |  |                                   | $ | 2,111       |   |             |  | $     | 4,938 |   |  |  | $ | 740    |   |  |  | $ | 7,789  |   | 
|Intersegment revenues                                                             |  |                                   |   | 60          |   |             |  |       | -     |   |  |  |   | 304    |   |  |  |   | 364    |   | 
|Net interest income                                                               |  |                                   |   | 3           |   |             |  |       | -     |   |  |  |   | -      |   |  |  |   | 3      |   | 
|Depreciation                                                                      |  |                                   |   | 294         |   |             |  |       | 158   |   |  |  |   | 40     |   |  |  |   | 492    |   | 
|Segment loss before income taxes                                                  |  |                                   |   | (139        | ) |             |  |       | (589  | ) |  |  |   | (108   | ) |  |  |   | (836   | ) | 
|Segment (loss) income before income taxes and one-time loss on
disposal of assets |  |                                   |   | (139        | ) |             |  |       | 321   |   |  |  |   | (108   | ) |  |  |   | 74     |   | 
|                                                                                  |  |                                   |   |             |   |             |  |       |       |   |  |  |   |        |   |  |  |   |        |   | 
|                                                                                  |  | At December 31, 2010              |  
|                                                                                  |  |                                   |   |             |   |             |  |       |      
|Segment Assets                                                                    |  |                                   | $ | 28,446      |   |             |  | $     | 3,566 |   |  |  | $ | 10,353 |   |  |  | $ | 42,365 |   | 

| |                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | The
following are reconciliations of reportable segment revenue, income before
income taxes, and assets, to the Companys consolidated totals (in 000s):

|                                                              |  |                              |        |                   |  |   |        |   | 
|------------------------------------------------------------- |  | ---------------------------- | ------ | ----------------- |  | - | ------ | - | 
|                                                              |  | Three Months Ended March 31, |       
|                                                              |  | 2011                         |        | 2010              | 
|Revenues                                                      |  |                              |        |                   |  |   |        |   | 
|Total net revenue for reportable segments                     |  | $                            | 8,651  |                   |  | $ | 8,153  |   | 
|Elimination of intersegment revenues                          |  |                              | (343   | )                 |  |   | (364   | ) | 
|Total consolidated net revenues                               |  | $                            | 8,308  |                   |  | $ | 7,789  |   | 
|                                                              |  |                              |        |                   |  |   |        |   | 
|Income (loss) before income taxes                             |  |                              |        |                   |  |   |        |   | 
|Total segment income (loss) before income
taxes               |  | $                            | 697    |                   |  | $ | (836   | ) | 
|Elimination of intersegment (income) loss
before income taxes |  |                              | (59    | )                 |  |   | 50     |   | 
|Total consolidated income (loss) before
income taxes          |  | $                            | 638    |                   |  | $ | (786   | ) | 
|                                                              |  |                              |        |                   |  |   |        |   | 
|                                                              |  | March 31,
2011               |        | December 31,
2010 | 
|Assets                                                        |  |                              |        |                   | 
|Total assets for reportable segments                          |  | $                            | 43,667 |                   |  | $ | 42,365 |   | 
|Elimination of intercompany receivables                       |  |                              | (9,848 | )                 |  |   | (9,717 | ) | 
|Total consolidated assets                                     |  | $                            | 33,819 |                   |  | $ | 32,648 |   | 

12

---



Table of Contents

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|7. | COMMITMENTS
AND CONTINGENCIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | In
accordance with an Earn Out Note, given to the prior owner of the Racetrack
as part of the consideration paid by the Company to acquire the Racetrack in
1994, if (i) off-track betting becomes legally permissible in the State of
Minnesota and (ii) the Company begins to conduct 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, as defined for each of five
operating years. At this time, management believes that the likelihood that
these two conditions will be met, and that the Company will be required to
pay these amounts is remote. At the date (if any) that these two conditions
are met, the five minimum payments will be discounted back to their present
value and the sum of those discounted payments will be capitalized as part of
the purchase price in accordance with generally accepted accounting
principles. The purchase price will be further increased if payments become
due under the 20% of Net Pretax Profit calculation. The first payment is to
be made 90 days after the end of the third operating year in which off-track
betting is conducted by the Company. Remaining payments would be made within
90 days of the end of each of the next four operating years.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The Company
periodically is subject to claims or involved in legal proceedings arising in
the normal course of business. At March 31, 2011, management believes that
the resolution of any pending claims or legal proceedings will not have a
material impact on the consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|8. | LOSS ON
DISPOSAL OF ASSETS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | In January 2010, and in
accordance with Minnesota Statute 240, the Company obtained approval from the
MRC to remodel its existing card room. Construction and architectural
contracts with various firms were signed shortly thereafter, and the card
room was moved to a temporary location on the mezzanine level on January 25,
2010. The Company used cash on hand to fund the project and avoided drawing
on its line of credit. As part of the remodeling project, the Company
disposed of assets during the first quarter of 2010 with an original cost of
$2,354,619 and associated accumulated depreciation of $1,445,079, resulting
in a loss on disposal of $909,540. The remodeling project was completed
during the second quarter of 2010 and on April 14, 2010, Canterbury Park
opened its new Card Casino.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

13

---



Table of Contents

|        |                                                                                          | 
|------- | ---------------------------------------------------------------------------------------- | 
|ITEM 2: | 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 and our present business
environment. This MD&A is provided as a supplement to  and should be read
in conjunction with  our condensed consolidated financial statements and the
accompanying notes to the financial statements (the Notes).

Overview:

Canterbury
Park Holding Corporation (the Company) owns and operates the Canterbury Park
Racetrack and Card Casino in Shakopee, Minnesota (the Racetrack). The primary
businesses of the Company are simulcast and live pari-mutuel horse racing,
hosting unbanked card games, and food and beverage operations.

The
Racetrack is the only pari-mutuel thoroughbred and quarter horse racing
facility in the State of Minnesota. The Racetrack earns revenues from
pari-mutuel take-out on races simulcast year-round to Canterbury Park from
racetracks throughout the country and from live race meets featuring
thoroughbred and quarter horse racing. Live race meets commence in the month of
May and conclude in early September. During live race meets, the Company
televises its races to out-of-state racetracks around the country, and earns
additional pari-mutuel revenue on wagers placed on its races at the
out-of-state racetracks.

The
Card Casino at Canterbury Park hosts unbanked card games in which players
compete against each other and not against the house. The Card Casino is open
twenty-four hours a day, seven days a week. Under Minnesota law, the Company is
required to pay up to 14% of the gross Card Casino revenues to the Racetracks
purse fund and the State of Minnesota Breeders Fund.

The
Company also generates revenues from other activities such as parking and
admission fees and from the sale of food and beverage, programs and other
racing publications, and corporate sponsorships. Additional revenues are
derived from the use of the Racetrack facilities for special events such as
concerts, craft shows and other motocross racing.

Operations Review for
theThreeMonths Ended
March 31, 2011 and March 31, 2010:

The
following table sets forth a reconciliation of net income, a GAAP financial
measure, to EBITDA and Adjusted EBITDA (each defined below), which are non-GAAP
measures, for the periods ended March 31, 2011 and 2010:

|                                      |  |                 |           |                 |   |          |  
|------------------------------------- |  | --------------- | --------- | --------------- | - | -------- | -
|                                      |  | March 31,
 2011 |           | March 31,
 2010 |  
|Net income (loss)                     |  | $               | 210,555   |                 | $ | (639,641 | )
|Other income, net of interest expense |  |                 | (1,353    | )               |   | (3,253   | )
|Income tax expense (benefit)          |  |                 | 427,766   |                 |   | (146,800 | )
|Depreciation                          |  |                 | 460,500   |                 |   | 491,700  |  
|EBITDA                                |  | $               | 1,097,468 |                 | $ | (297,994 | )
|Loss on disposal of assets            |  |                 | -         |                 |   | 909,540  |  
|Adjusted EBITDA                       |  | $               | 1,097,468 |                 | $ | 611,546  |  

EBITDA
represents earnings before interest income, income tax expense, and
depreciation and amortization. EBITDA is not a measure of performance or
liquidity calculated in accordance with generally accepted accounting
principles (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. EBITDA has been
presented as a supplemental disclosure because it is a widely used measure of
performance and basis for valuation of companies in our industry. Moreover,
other companies that provide EBITDA information may calculate EBITDA
differently than we do. Adjusted EBITDA represents EBITDA plus material,
one-time non-cash expenses. During the quarter ended March 31, 2010, this
represented the expense incurred in disposing of assets in connection with the
renovation of our card room.

14

---



Table of Contents

Adjusted
EBITDA as a percentage of net revenues was 13.2% for the first quarter ended
March 31, 2011 compared to 7.9% for the first quarter ended March 31, 2010.
This change was due to the increase in net income and related income tax
expense which was greater than our increase in net revenue.

Total
net revenues increased $519,197, or 6.7%, during the three months ended March
31, 2011 compared to the three months ended March 31, 2010. The increase is
primarily attributable to an increase in Card Casino revenue of 13.4% that was
somewhat offset by a decrease in pari-mutuel revenue of 7.5%. See below for a
further discussion of revenue.

Summary of Pari-mutuel Data:

|                           |  |                              |           |      |   |           | 
|-------------------------- |  | ---------------------------- | --------- | ---- | - | --------- | 
|                           |  | Three Months Ended March 31, |          
|                           |  | 2011                         |           | 2010 |  
|Simulcast
 racing days     |  |                              | 90        |      |   | 90        | 
|                           |  |                              |           |      |   |           | 
|On-track
 simulcast handle |  | $                            | 7,539,000 |      | $ | 8,172,000 | 
|                           |  |                              |           |      |   |           | 
|Average
 daily handle      |  | $                            | 83,800    |      | $ | 90,800    | 

Pari-mutuel
revenue decreased $137,281, or 7.5%, in the three-month period ended March 31,
2011 compared to the same period in 2010. Total handle was approximately $7.5
million, or 7.7%, lower than total handle of $8.2 million during the same
quarter a year ago. The decrease is primarily attributable to inclement weather
during the first quarter of 2011. Minnesota experienced one of the snowiest
winters on record which discouraged customers from coming to the track and
wagering. Similar harsh weather in other parts of the United States caused the
cancellation of a significant number of races at racetracks simulcasting their
signal to our racetrack. Finally, the Company believes that the sluggish
economic recovery and an increasing number of Minnesota residents unlawfully
wagering on horse races over the Internet adversely affected pari-mutuel
revenues.

Summary of Card Casino Data:

|                          |  |                              |           |      |   |           | 
|------------------------- |  | ---------------------------- | --------- | ---- | - | --------- | 
|                          |  | Three Months Ended March 31, |          
|                          |  | 2011                         |           | 2010 |  
|                         
|Poker Games               |  | $                            | 2,603,000 |      | $ | 2,758,000 | 
|Table Games               |  |                              | 2,476,000 |      |   | 1,761,000 | 
|Total Collection Revenue  |  |                              | 5,079,000 |      |   | 4,519,000 | 
|                          |  |                              |           |      |   |           | 
|Other Revenue             |  |                              | 522,000   |      |   | 418,000   | 
|Total Card Casino Revenue |  | $                            | 5,601,000 |      | $ | 4,937,000 | 
|                          |  |                              |           |      |   |           | 
|Number of Days Offered    |  |                              | 90        |      |   | 90        | 
|Average Revenue per Day   |  | $                            | 62,000    |      | $ | 55,000    | 

Total
Card Casino revenue increased $663,394, or 13.4%, for the first three months of
2011 compared to the same period in 2010. The primary source of Card Casino
revenue is a percentage of the wagers received from the players as compensation
for providing the card room facility and services, referred to as the
collection revenue. Other revenue includes fees collected for the
administration of tournaments, and amounts earned as reimbursement of the
administrative costs of maintaining jackpot funds. Poker collection revenue
decreased $154,884, or 5.6%, compared to the first quarter of 2010. The Company
believes that the decrease is largely attributable to the sluggish economic
recovery that has adversely impacted discretionary spending on entertainment,
an increasing number of Minnesota residents unlawfully wagering on poker over
the Internet, and harsh winter weather in the first quarter. Despite the
sluggish economic conditions and harsh weather noted above, table games
collection revenue increased $715,268, or 40.6%, compared to the first three
months of 2010. The Company believes its new Card Casino, which provides both
an exciting and inviting atmosphere, has sparked an increase in table games
card play by patrons. Total Card Casino revenues represented 67.4% and 63.4% of
net revenues for the three-month periods ended March 31, 2011 and 2010,
respectively.

15

---



Table of Contents

Concession
revenues remained relatively unchanged compared to the first quarter of 2010,
decreasing $16,777, or 2.3%, for the quarter ended March 31, 2011.

Total
operating expenses in the first quarter of 2011 decreased by $907,465, or
10.6%, compared to the three-month period ended March 31, 2010. See below for a
further discussion of operating expenses.

Summary of Purse and Breeders Fund Expense:

|                 |  |                              |         |                                    |   |         |  |      |         |  |   |         | 
|---------------- |  | ---------------------------- | ------- | ---------------------------------- | - | ------- |  | ---- | ------- |  | - | ------- | 
|                 |  | Purse Expense                |         | Minnesota Breeders Fund 
 Expense |  
|                 |  | Three Months Ended March 31, |         | Three Months Ended March 31,       |  
|                 |  | 2011                         |         | 2010                               |   | 2011    |  | 2010 |        
|                
|Card Casino      |  | $                            | 504,072 |                                    | $ | 444,367 |  | $    | 56,008  |  | $ | 49,374  | 
|                 |  |                              |         |                                    |   |         |  |      |         |  |   |         | 
|Simulcast Racing |  |                              | 301,835 |                                    |   | 328,257 |  |      | 86,980  |  |   | 93,553  | 
|                
|Total            |  | $                            | 805,907 |                                    | $ | 772,624 |  | $    | 142,988 |  | $ | 142,927 | 

Total
expense for statutory purses and the Minnesota Breeders Fund remained
relatively flat at approximately $949,000 for the quarter ended March 31, 2011
compared to $916,000 for the quarter ended March 31, 2010.

Salary
and benefit costs decreased $130,114, or 3.4%, compared to the first quarter of
2010. The decrease is primarily due to the fact that increased Card Casino
wages were more than offset by reductions in administration and concessions
labor. Advertising and marketing costs decreased $60,243, or 37.0%, compared to
the first quarter of 2010 primarily as a result of increased advertising
expenses leading up to the reopening of the Card Casino in April of 2010.

A
loss on disposal of assets in the amount of $909,540 was recorded during the
first three months of 2010 and related primarily to the remodeling of our
existing card room. There was no loss on disposal of assets during the
three-month period ended March 31, 2011.

Other
operating expenses increased $232,675 compared to the first quarter of 2010.
The increase is primarily due to increased expenditures in support of
legislation that would authorize electronic gaming devices at the Racetrack.

Income
before income taxes was $638,321, for the three months ended March 31, 2011
compared to loss before income taxes of $786,441 for the three months ended
March 31, 2010. Income tax expense was $427,766 for the first quarter of 2011
compared to income tax benefit of $146,800 for the first quarter of 2010,
resulting in net income of $210,555 and a net loss of $639,641 for 2011 and
2010, respectively. The effective income tax rate for 2011 is higher than the
statutory rate primarily due to non-deductible lobbying expenses relating to
the Companys effort to obtain electronic gaming devices at the Racetrack.

16

---



Table of Contents

Contingencies:

There
have been no material changes in the contingencies reported under Item 7 in our
Annual Report on Form 10-K for our year ended December 31, 2010 and such
information is incorporated herein by reference.

Liquidity and Capital Resources:

Cash
provided by operating activities for the three months ended March 31, 2011 was
$1,655,368 and was due to several factors. First, the Company reported net
income of $210,555. Additionally, the Company recorded depreciation of $460,500.
Card Casino accruals also increased $263,456, which was primarily due to the
increase in our player pool related to increased table game activity. A final
factor contributing to the net cash provided by operating activities for the
first quarter of 2011 was the increase in deferred income tax liability of
$316,500. Cash provided by operating activities for the three months ended
March 31, 2010 was $1,234,639 and resulted principally from a net loss of
$639,641 that was more than offset by a one-time loss on disposal of assets in
the amount of $909,540 relating to the remodel of our card room. Additionally,
depreciation of $491,700 and an increase in accounts payable, accrued wages and
payroll taxes of $540,777, which was also due to the remodel of our card room,
contributed to the net cash provided by operating activities for the first
quarter of 2010.

Net
cash used in investing activities for the first quarter of 2011 of $162,725 was
used primarily for the purchase of short-term investments. Net cash used in
investing activities for the first quarter of 2010 of $794,931 was used
primarily for the remodeling of our card room.

Net
cash provided by financing activities during the first three months of 2011
consisted of proceeds received upon the exercise of stock options of $24,066
and the related tax benefit of $7,100 from the exercise of those options. Net
cash provided by financing activities during the first three months of 2010
consisted solely of proceeds received upon the exercise of stock options of
$9,999.

The Company
has a general credit agreement with Bremer Bank, which provides a revolving
credit line of up to $3,000,000 until May 6, 2012 with interest at the prime
rate but not less than 4.5% per annum. The Company had no borrowings under the
line of credit at March 31, 2011 or December 31, 2010. This credit agreement
contains covenants requiring the Company to maintain certain financial ratios.
The Company was in compliance with these requirements at all times throughout
the quarter ended March 31, 2011.

Unrestricted
cash balances at March 31, 2011 were $6,975,271 compared to $5,451,462 at
December 31, 2010. The Company believes that funds available in its cash
accounts, amounts available under the general credit and security agreement,
along with funds generated from operations, will be sufficient to satisfy its
liquidity and capital resource requirements during 2011 for regular operations.

Critical Accounting Policies and Estimates:

The
preparation of consolidated financial statements in conformity with generally
accepted accounting principles in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the consolidated financial statements and the reported amounts
of revenues and expenses during the reporting period. We base our assumptions,
estimates and judgments on historical experience, current trends and other
factors that management believes to be relevant at the time the consolidated
financial statements are prepared. On a regular basis, management reviews the
accounting policies, assumptions, estimates and judgments to ensure that our
financial statements are presented fairly and in accordance with generally
accepted accounting principles. However, because future events and their
effects cannot be determined with certainty, actual results could differ from
our assumptions and estimates, and such differences could be material.

17

---



Table of Contents

Our
significant accounting policies are included in Note 1 to our consolidated
financial statements in our 2010 Annual Report on Form 10-K. We believe the
following critical accounting policies affect our more significant judgments
and estimates used in the preparation of our consolidated financial statements.

Property
and Equipment -We have significant capital invested in our property and equipment,
which represents approximately 69.8% of our total assets at March 31, 2011. We
utilize our judgment in various ways including: determining whether an
expenditure is considered a maintenance expense or a capital asset; determining
the estimated useful lives of assets; and determining if or when an asset has
been impaired or has been disposed. Management periodically reviews the
carrying value of property and equipment for potential impairment by comparing
the carrying value of these assets with their related expected future net cash
flows. Should the sum of the related expected future net cash flows be less
than the carrying value, we will determine whether an impairment loss should be
recognized. An impairment loss would be measured by the amount by which the
carrying value of the asset exceeds the fair value of the asset. To date, we
have determined that no impairment of these assets exists.

Stock
Based Employee Compensation  ASC 718, Compensation 
Stock Compensation (ASC 718), requires recognition of employee services
provided in exchange for a share-based payment based on the grant date fair
market value. We utilize our judgment in determining the assumptions used to
determine the fair value of options granted using a Black-Scholes model.

Commitments and Contractual Obligations:

There have
been no material changes in our outstanding commitments and contractual
obligations since those reported at December 31, 2010.

Legislation:

The Company
is supporting legislation introduced in the 2011 session of the Minnesota
Legislature that would authorize slot machines and other video lottery
terminals to be operated at the Racetrack (referred to as a Racino). Based on
the success of Racinos in several other states, we continue to believe that if
a Racino was authorized at the Racetrack on similar terms to legislation
approved in other states, it would stimulate economic growth in the horse
racing and related agriculture businesses in Minnesota, provide growth and
development opportunities that would add jobs at the Racetrack and surrounding
community, and provide new revenues for state and local governments facing
significant deficit issues. This bill mentioned above, as of the date of this
report, is pending further action in the Minnesota Legislature.

The Companys efforts to obtain legislative
approval for a Racino have required, and will continue to require, substantial
expenditures. Due to the inherent uncertainty of the outcome of legislative
activities, there can be no assurance that any bills favorable to the Companys
interests will be enacted into law, and it is possible bills adverse to the
Company could be enacted.

Forward-Looking
Statements:

From
time to time, in reports filed with the Securities and Exchange Commission, in
press releases, and in other communications to shareholders or the investing
public, the Company may make forward-looking statements concerning possible or
anticipated future financial performance, business activities or plans which
are typically preceded by the words believes, expects, anticipates,
intends or similar expressions. For such forward-looking statements, the
Company claims the protection of the safe harbor for forward-looking statements
contained in federal securities laws. Shareholders and the investing public should
understand that such forward-looking statements are subject to risks and
uncertainties which could cause actual performance, activities or plans to
differ significantly from those indicated in the forward-looking statements.
Such risks and uncertainties include, but are not limited to: fluctuations in
attendance at the Racetrack, material changes in the level of wagering by
patrons, decline in interest in the unbanked card games offered in the Card
Casino, legislative and regulatory changes, the impact of wagering products and
technologies introduced by competitors; increases in the percentage of revenues
allocated for purse fund payments; increase in compensation and employee
benefit costs; the economic health of the gaming sector; higher than expected
expense related to new marketing initiatives; and other factors discussed under
Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2010
and in the Companys other filings with the Securities and Exchange Commission.

18

---



Table of Contents

|                                                                                                                                    |                                                           
|----------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------
|ITEM 3:                                                                                                                             | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|                                                                                                                                    |                                                           
|Canterbury
 Park is not required to provide the information requested by this Item as it
 qualifies as a smaller reporting company.
|                                                                                                                                    |                                                           
|ITEM 4:                                                                                                                             | CONTROLS AND PROCEDURES                                   

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Evaluation of Disclosure Controls and Procedures:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | The
 Companys Chief Executive Officer, Randall D. Sampson, and Chief Financial
 Officer, David C. Hansen, have reviewed the Companys disclosure controls and
 procedures pursuant to Exchange Act Rule 13a-15(b) as of the end of the
 period covered by this report. Based upon this review, these officers have
 concluded that the Companys disclosure controls and procedures are effective
 to ensure that information required to be disclosed in the reports that the
 Company files under the Exchange Act is recorded, processed, summarized and
 reported within the time periods specified in the rules and forms of the SEC
 and is accumulated and communicated to management, including the chief
 executive officer and chief financial officer, to allow timely decisions
 regarding required disclosure.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(b) | Changes in Internal Control Over Financial
Reporting:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | There has
 been no change in our internal control over financial reporting (as defined
 in Rules 13a-15(f) under the Securities Exchange Act of 1934) that occurred
 during our fiscal quarter ended March 31, 2011 that have materially affected,
 or is reasonably likely to materially affect, our internal control over
 financial reporting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

19

---



Table of Contents

PART IIOTHER INFORMATION

|         |                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                  
|-------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item 1.  | Legal Proceedings                                                                                                                                                                                                                 
|         |                                                                                                                                                                                                                                   
|         | Not Applicable.                                                                                                                                                                                                                   
|         |                                                                                                                                                                                                                                   
|Item 1A. | Risk Factors                                                                                                                                                                                                                      
|         |                                                                                                                                                                                                                                   
|         | There have
 been no material changes to the Risk Factors reported under Item 1A in the
 Form 10-K for the year ended December 31, 2010, and the statement of risk
 factors presented therein are incorporated by reference herein.
|         |                                                                                                                                                                                                                                   
|Item 2.  | Unregistered
 Sales of Equity Securities
 and Use of Proceeds                                                                                                                                                                     
|         |                                                                                                                                                                                                                                   
|         | (a)                                                                                                                                                                                                                                | Not Applicable.                                                                                                                                                                                                                                                                                                                                                                                                  
|         | (b)                                                                                                                                                                                                                                | Not Applicable.                                                                                                                                                                                                                                                                                                                                                                                                  
|         | (c)                                                                                                                                                                                                                                | On January
 16, 2008, the Company announced that its Board of Directors had authorized a
 program to repurchase up to an additional 250,000 shares of the Companys
 common stock. During the first quarter of 2011, the Company did not
 repurchase any shares of common stock. As of March 31, 2011, there are 33,457
 shares at maximum that the Company may buy back as a result of this
 repurchase program.
|         |                                                                                                                                                                                                                                   
|Item 3.  | Defaults Upon Senior Securities                                                                                                                                                                                                   
|         |                                                                                                                                                                                                                                   
|         | Not Applicable.                                                                                                                                                                                                                   
|         |                                                                                                                                                                                                                                   
|Item 4.  | Removed and Reserved                                                                                                                                                                                                              
|         |                                                                                                                                                                                                                                   
|Item 5.  | Other Information                                                                                                                                                                                                                 
|         |                                                                                                                                                                                                                                   
|         | Not Applicable.                                                                                                                                                                                                                   
|         |                                                                                                                                                                                                                                   
|Item 6.  | Exhibits                                                                                                                                                                                                                          

| |     |                                             |                                                                                                                                                                                                                  
| | --- | ------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | The following exhibits are included herein:
| |     |                                             |                                                                                                                                                                                                                  
| |     | 11                                          | Statement re computation of per share earnings  See Net Income Per
 Share under Note 1 of Notes to Condensed Consolidated Financial Statements
 under Part 1, Item 1, which is incorporated herein by reference.
| |     |                                             |                                                                                                                                                                                                                  
| |     | 31.1                                        | Certification of Chief Executive Officer pursuant to Section 302 of
 the Sarbanes-Oxley Act of 2002 (rules 13a-14 and 15d-14 of the Exchange Act).                                                               
| |     |                                             |                                                                                                                                                                                                                  
| |     | 31.2                                        | Certification of Chief Financial Officer pursuant to Section 302 of
 the Sarbanes-Oxley Act of 2002 (rules 13a-14 and 15d-14 of the Exchange Act).                                                               
| |     |                                             |                                                                                                                                                                                                                  
| |     | 32                                          | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of
 2002 (18 U.S.C. 1350).                                                                                                                      

20

---



Table of Contents

SIGNATURES

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

|                    |                                            
|------------------- | -------------------------------------------
|                    | Canterbury Park Holding Corporation        
|                    |                                            
|Dated: May 16, 2011 | /s/ Randall D. Sampson                     
|                    | Randall D. Sampson,                        
|                    | President, and Chief Executive Officer     
|                    |                                            
|Dated: May 16, 2011 | /s/ David C. Hansen                        
|                    | David C. Hansen,                           
|                    | Vice President, and Chief Financial Officer

21

---