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**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington,D.C.  20549**

 

**FORM 10-K**

 

**(MarkOne)**

 

| **x** | **ANNUAL  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934** |
|-------|------------------------------------------------------------------------------------------------------|

 

**For thefiscal year ended December 31, 2009**

** **

**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 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.) |

 

 

**1100Canterbury Road**

**Shakopee, MN  55379**

(Address ofprincipal executive offices and zip code)

 

Registrant’stelephone number, including area code:  **(952) 445-7223**

 

Securities registered pursuant to Section 12(b) of the Act:

 

| **Common  Stock, $.01 par value** | ** ** | **The  NASDAQ Stock Market LLC**      |
|-----------------------------------|------------|---------------------------------------|
| Title of Each  Class              |       | Name of Exchange  on which Registered |

 

Indicate by check mark ifthe registrant is a well-known seasoned issuer, as defined in Rule 405 ofthe Securities Act.  YES o  NO x

 

Indicate by check mark ifthe registrant is not required to file reports pursuant to Section 13 or Section 15(d) ofthe Act.  YES o  NO x

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days.  YES x   NO o

 

Indicate by checkmark whether the registrant has submitted electronically and posted on itscorporate Web site, if any, every

Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during

the preceding 12 months(or for such shorter period that the registrant was required to submit and postsuch files). Yes o  No o

 

Indicate by checkmark if disclosure of delinquent filers pursuant to Rule 405 of RegulationS-K is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K.   x

 

Indicate by check mark whether the registrant isa large accelerated filer, an accelerated filer, a non-accelerated filer, or asmaller reporting company.  See thedefinitions of “large accelerated filer,” “accelerated filer,” and “smallerreporting company” in Rule 12b-2 of the Exchange Act.

 

| Large  accelerated filer o                     |   | Non-accelerated  filer o     |
|------------------------------------------------|--------|------------------------------|
|                                           |   |                         |
| Accelerated  filer o                           |   | Smaller  reporting company x |
| (Do not check if  a smaller reporting company) |   |                         |

 

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of theAct). YES o  NO x

 

The aggregatemarket value of the shares of voting and non-voting common equity held bynon-affiliates based on the price at which the Company’s common stock was lastsold on the NASDAQ Global Market, on June 30, 2009, the last business dayof the registrant’s most recently completed second fiscal quarter was approximately$15,454,000.

 

On March 18,2010, the Company had 4,033,740 shares of common stock, $.01 par value,outstanding.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

Portions of theCompany’s definitive Proxy Statement for its 2010 Annual Meeting ofShareholders, to be held on June 3, 2010, are incorporated by referenceinto Part III of this Form 10-K.

 

 

 

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CANTERBURY PARK HOLDING CORPORATION

FORM 10-K ANNUAL REPORT

FOR THE YEAR ENDED DECEMBER 31, 2009

 

TABLE OF CONTENTS

 
| ** **     | ** ** | ** **                                                                                                          | ** ** | **Page** |
|----------------|------------|---------------------------------------------------------------------------------------------------------------------|------------|----------|
|           |       | PART I                                                                                                         |       |     |
|           |       |                                                                                                                |       |     |
| ITEM 1.        |       | Business                                                                                                            |       | 3        |
| ITEM 1A.       |       | Risk Factors                                                                                                        |       | 11       |
| ITEM 1B.       |       | Unresolved Staff  Comments                                                                                          |       | 12       |
| ITEM 2.        |       | Properties                                                                                                          |       | 13       |
| ITEM 3.        |       | Legal Proceedings                                                                                                   |       | 14       |
| ITEM 4.        |       | Reserved                                                                                                            |       | 14       |
|           |       |                                                                                                                |       |     |
|           |       | PART II                                                                                                        |       |     |
|           |       |                                                                                                                |       |     |
| ITEM 5.        |       | Market for  Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases  of Equity Securities |       | 15       |
| ITEM 6.        |       | Selected Financial  Data                                                                                            |       | 17       |
| ITEM 7.        |       | Management’s  Discussion and Analysis of Financial Condition and Results of Operation                          |       | 18       |
| ITEM 7A.       |       | Quantitative  and Qualitative Disclosures about Market Risk                                                         |       | 27       |
| ITEM 8.        |       | Financial  Statements and Supplementary Data                                                                        |       | 28       |
| ITEM 9.        |       | Changes In and  Disagreements With Accountants on Accounting and Financial Disclosure                               |       | 48       |
| ITEM 9A(T).    |       | Controls and  Procedures                                                                                            |       | 48       |
| ITEM 9B.       |       | Other Information                                                                                                   |       | 49       |
|           |       |                                                                                                                |       |     |
|           |       | PART III                                                                                                       |       |     |
|           |       |                                                                                                                |       |     |
| ITEM 10.       |       | Directors,  Executive Officers and Corporate Governance                                                             |       | 49       |
| ITEM 11.       |       | Executive  Compensation                                                                                             |       | 49       |
| ITEM 12.       |       | Security  Ownership of Certain Beneficial Owners and Management and Related Stockholder  Matters                    |       | 49       |
| ITEM 13.       |       | Certain  Relationships, Related Transactions and Director Independence                                              |       | 49       |
| ITEM 14.       |       | Principal  Accounting Fees and Services                                                                             |       | 50       |
|           |       |                                                                                                                |       |     |
|           |       | PART IV                                                                                                        |       |     |
|           |       |                                                                                                                |       |     |
| ITEM 15.       |       | Exhibits and  Financial Statement Schedules                                                                         |       | 50       |
|           |       |                                                                                                                |       |     |
| SIGNATURES     |       | 51                                                                                                                  |
|           |       |                                                                                                                |       |     |
| EXHIBIT  INDEX |       | 52                                                                                                                  |
|           |       |                                                                                                                |       |     |
| CERTIFICATIONS |       | 55                                                                                                                  |

 

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**Item1.****  ****BUSINESS**

 

#### ***(a) GeneralDevelopment of the Business***

#### * *

Canterbury Park HoldingCorporation (the “Company”) conducts pari-mutuel wagering operations and hosts “unbanked”card games at its Canterbury Park Racetrack and card room facility (the “Racetrack”)in Shakopee, Minnesota.  The Company’spari-mutuel wagering operations include both wagering on thoroughbred andquarter horse races during live meets at the Racetrack and year-round wageringon races held at out-of-state racetracks that are televised simultaneously atthe Racetrack (“simulcasting”).  Unbankedcard games, in which patrons compete against each other, are hosted in the cardroom at the Racetrack.  The Company alsoderives revenues from related services and activities, such as concessions,parking, advertising, admissions, programs, a recreational vehicle park andfrom other entertainment events held at the Racetrack.

 

TheCompany was incorporated under the laws of Minnesota on March 24, 1994,acquired the Racetrack on March 29, 1994, commenced seven day a weeksimulcast operations on May 6, 1994, and, beginning in May 1995,launched live horse racing and related pari-mutuel wagering on a seasonalbasis, generally from early May to early September.  The Company opened the card room on April 19,2000 with 43 tables and expanded to 50 tables (the maximum permitted by law) in2001.  The ownership and operation of theRacetrack and the card room are significantly regulated by the Minnesota RacingCommission (the “MRC”).

 

TheCompany maintains a website at www.canterburypark.com.  Our annual reports on Form 10-K, ourquarterly reports on Form 10-Q and our periodic reports on Form 8-K(and any amendments to these reports) are available free of charge on ourwebsite.

 

***(b) Financial Information About Segments***

 

TheCompany divides its business into three segments: horse racing, card room andconcessions.  The horse racing segmentrepresents operations related to pari-mutuel wagering on simulcast and livehorse races.  The card room segmentrepresents operations of the card room, and the concessions segment representsfood and beverage services for simulcast and live racing, the card room andduring special events.  Furtherinformation regarding the Company’s business segments is set forth in Note 12of the Notes to Consolidated Financial Statements under Item 8 of this Form 10-K,and such information is incorporated herein by reference.

 

***(c) Narrative Description of Business***

 

**(i)****           ****Horse Racing Operations**

 

The Company’s horseracing operations consist of year-round pari-mutuel wagering on simulcast horseraces (“simulcasting”) and live thoroughbred and quarter horse races (“livemeets”) held on a seasonal basis beginning in May and generally concludingin August or September.

 

*LiveRacing.*

 

In 2009, the Racetrackhosted 62 days of live racing beginning May 15th and concluding August 30th.  The meet included 42 days of mixedthoroughbred and quarter horse racing and 20****daysof thoroughbred only racing.  The 2008live meet was 67 days long, beginning May 3rd and ending September 1st,and consisted of 43 days of mixed thoroughbred and quarter horse racing and 24days of thoroughbred only racing.

 

Currently, Minnesota lawrequires the Company to schedule a minimum of 125 days of live racing annually,unless the Minnesota Horsemen’s Benevolent and Protective Association (the “MHBPA”)agrees to a lesser number of live racing days. Since 1995, the MHBPA has agreed to waive the 125-day requirement andhas allowed the Company to run a live meet of at least 50 days each year.  After 2010, no assurance can be given thatthe MHBPA will agree to a shorter live meet than the 125-day statutoryminimum.  If the MHBPA does not agree toa live meet shorter than 125 days, the Company’s operations could be adverselyimpacted by a 

 

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decrease in the dailypurses, potential reduction in quality of horses, lower attendance, loweroverall handle and increased operating expenses.

 

*Simulcasting.*

 

Simulcasting is theprocess by which live horse races held at one facility (the “host track”) aretransmitted simultaneously to other locations that allow patrons at eachreceiving location (the “guest track”) to place wagers on races transmittedfrom the host track.  Monies are collectedat the guest track and the information with respect to the total amount wageredis electronically transmitted to the host track.  All of the amounts wagered at guest tracksare combined into the appropriate pools at the host track with the final oddsand payouts based upon all the monies in the respective pools.

 

The Company offers “fullcard” simulcast racing (broadcasting of another racetrack’s entire daily liveracing program) from up to 20 racetracks per day, seven days a week, 363 daysper year, including Churchill Downs, Hollywood Park, Santa Anita, GulfstreamPark, Belmont Park and Saratoga Racecourse. In addition, races of national interest, such as the Kentucky Derby, thePreakness Stakes, the Belmont Stakes, and the Breeders’ Cup, supplement theregular simulcast program.  The Companyregularly evaluates its agreements with other racetracks in order to offer themost popular simulcast signals of live horse racing that are feasible.

 

Under applicableprovisions of federal and state law, in order to conduct simulcast operationseither as a host or guest track, the Company must obtain the consent of thestate’s regulatory authority and the organization which represents a majorityof the owners and trainers of the horses who race at the Racetrack.  In Minnesota, such consent must be obtainedfrom the MRC and the MHBPA.

 

**(ii)****          ****Card Room Operations**

 

The card room is open 24hours per day, seven days per week, offering two variations of unbanked cardgames: poker and table games.

 

Poker games, including TexasHold ‘Em, 7-Card Stud and Omaha, with betting limits ranging between $2 and$60, are currently offered in the poker room. A dealer, employed by the Company, regulates the play of the game ateach table and deals the cards but does not participate in play.  In poker games, the Company is allowed todeduct a percentage from the accumulated wagers and impose other charges forhosting the activity but does not have an interest in the outcome of a game.  The Company may add additional prizes, awardsor money to any game for promotional purposes. The Company collects a “rake” of 5-10%, depending on the limit of thegame, of each addition to the “pot” up to a maximum of $5.00 per hand as itscollection revenue.  In addition, pokergames offer progressive jackpots for most games.  In order to fund the jackpot pool, the dealerwithholds $1.00 from each final pot in excess of the $15 minimum.

 

Table games, includingBlackjack, Fortune Pai Gow, Let-It-Ride, Three and Four Card Poker, UltimateTexas Hold ‘Em, and EZ Baccarat are currently offered in the card room.  The Company’s table games are required by lawto be “unbanked.”  “Unbanked” refers to awagering system or game where wagers lost or won in card games are accumulatedinto a player pool liability for purposes of enhancing the total amount paidback to winning players.  The Company mayonly serve as custodian of the player pool, may not have an active interest inany card game and does not recognize amounts that dealers “win” or “lose”during the course of play as revenue. The primary source of card room revenue is a percentage of the wagersreceived from the players as compensation for providing the card room facilityand services, referred to as “collection revenue”.  In addition, several table games offer aprogressive jackpot.  The player has theoption of playing the jackpot and has the opportunity to win some or all of thejackpot amount, depending upon their hand.

 

**(iii)****        ****Special Events**

 

While pari-mutuel horseracing and card room operations are the Company’s principal businesses, theCompany’s facilities are capable of being used for multiple purposes.  In an effort to more fully utilize theproperty and to generate additional revenues, the Company has increasingly usedits grandstand, grounds and parking lot for special events and rentals.  While the use of the Company’s facilities forparticular special events

 

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and purposes varies fromyear to year, the following are among the types of events and purposes forwhich the Company’s facilities have been used: snowmobile races, major arts andcrafts shows, trade shows, concerts, fundraisers, automobile shows and competitions,vehicle and boat storage and private parties.

 

**(iv)****         ****Sources of Revenue**

 

*General.*

 

The Company’s revenuesare principally derived from card room operations, wagering on live andsimulcast horse races and concession sales. For the fiscal year ended December 31, 2009, revenues from cardroom operations represented 50.6% of total revenues, wagering on horse racesgenerated 28.6% of total revenues and concessions revenue represented 13.2% oftotal revenues.

 

*Card Room Operations.*

 

TheCompany receives revenue from its card room, which operates 24 hours per day,seven days per week.  The Companycurrently receives collection revenue from poker and table games tables.  Under Minnesota law, the Company is requiredto pay 10% of the first $6 million of gross card room revenues towards pursesfor live horse racing at the Racetrack. After meeting the $6 million threshold, the Company must pay 14% ofgross card room revenues as purse monies. Of funds allocated for purses, the Company pays 10% of the purse moniesto the State of Minnesota Breeders’ Fund. The remaining 90% of purse monies are divided between thoroughbred(90%), quarter horse (9%) and standardbred (1%) purse funds.

 

*Pari-mutuel wagering — General.*

 

In pari-mutuel wagering,bettors wager against each other in a pool, rather than against the operator ofthe facility or with preset odds.  Fromthe total amount wagered (“handle”), the Minnesota Pari-Mutuel Horse Racing Act(the “Racing Act”) specifies the maximum percentage, referred to as the “takeout,”which may be withheld by the Racetrack, with the balance returned to thewinning bettors.  The takeout constitutesone of the Racetrack’s primary sources of operating revenue.  From the takeout, funds are set aside forpurses and paid to the State of Minnesota for pari-mutuel taxes and theMinnesota Breeders’ Fund (the “MBF”), which is a fund apportioned by the MRCamong various purposes related to Minnesota’s horse breeding and horse racingindustries.  The balance of the takeoutremaining after these deductions is commonly referred to as the “retainage.”

 

The various forms ofpari-mutuel wagering can be divided into two categories: straight wageringpools and multiple wagering pools, which are also referred to as “exotic”wagering pools.  Examples of straightwagers include: “win” (a wager on one specific horse to finish first); “place”(a wager on one specific horse to finish first or second); and “show” (a wageron one specific horse to finish first, second or third).  Examples of exotic wagers include: “dailydouble” (a wager in which the bettor selects the horses that will win twoconsecutive races); “exacta” (a wager in which the bettor selects the horsesthat will finish first and second in a race, in order); “trifecta” (a wager inwhich the bettor selects the horses that will finish first, second and third ina race, in order); and “pick six” (a wager in which the bettor selects thehorses that will finish first in six consecutive races).

 

The amount of takeoutearned by the Company depends on where the race is run and the form of wager(straight or exotic).  Net revenues frompari-mutuel wagering on live races run at the Racetrack consist of the totalamount wagered, less the amounts paid (i) to winning patrons, (ii) forpurses, (iii) to the MBF and (iv) for pari-mutuel taxes to the Stateof Minnesota.  Net revenues frompari-mutuel wagering on races being run at out-of-state racetracks andsimulcast to the Racetrack have similar expenses but also include a host fee paymentto the host track.  The host fee, whichis calculated as a percentage of monies wagered (generally 2.50% to 4.50%), isnegotiated with the host track and must comply with state laws governing thehost track.

 

*Wageringon Live Races.*

 

The Racing Actestablishes the maximum takeout that may be deducted from the handle.  The takeout percentage on live races dependson the type of wager.  The total maximumtakeouts are 17% from straight

 

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wagering pools and 23%from exotic wagering pools.  From thistakeout, Minnesota law requires deductions for purses, pari-mutuel taxes andthe MBF.

 

While the Racing Actprovides that a minimum of 8.4% of the live racing handle is to be paid aspurses to the owners of the horses, the size of the purse is subject to furtheragreement with the horsepersons’ associations. The MBF receives 1% of the handle. The pari-mutuel tax applicable to wagering on all simulcast and liveraces is 6% of takeout in excess of $12 million during the twelve-month periodbeginning July 1 and ending the following June 30.

 

The following table setsforth the percentage distribution of each dollar wagered on live races at theRacetrack, as established by the Racing Act, and the Racetrack’s retainage forthe years ended December 31, 2009 and 2008:

 
| ** **                       | ** ** | **Live Racing** | ** ** |
|----------------------------------|------------|-----------------|------------|
| ** **                       | ** ** | **Straight**    | ** ** | **Exotic** | ** ** |
|                             |       |            |       |   |   |   |   |   |   |
| Returned  to Winning Patrons     |       |            |       | 83.00 | % |   |   | 77.00 | % |
| Purse  (1)                       |       | 8.40            |       |   |   | 8.40 |   |   |   |
| Minnesota  Breeders’ Fund   |       | 1.00            |       |   |   | 1.00 |   |   |   |
| Minnesota  Pari-Mutuel Taxes (2) |       | .00             |       |   |   | .00 |   |   |   |
| Racetrack  Retainage (1)         |       | 7.60            |       |   |   | 13.60 |   |   |   |
| Total  Takeout                   |       |            |       | 17.00 |   |   |   | 23.00 |   |
|                             |       |            |       |   |   |   |   |   |   |
| Total  Handle                    |       |            |       | 100.00 | % |   |   | 100.00 | % |

 

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(1)           Minnesota law provides that the 8.40% purse payment isa minimum.  The actual percentage, ifany, above the minimum is determined between the Racetrack and the MHBPA.  Any additional amounts paid for pursesdecrease the Racetrack’s retainage.

(2)           The current pari-mutuel tax structure exempts the first$12 million of takeout during a statutorily mandated twelve-month period.  The total pari-mutuel tax liability for atwelve-month period will depend upon the total takeout during that period.  There was no pari-mutuel tax liability in2009 and therefore, it is not factored into the above table.

 

*Wageringon Simulcast Races.*

 

The amount of takeoutfrom simulcast wagering is determined by the laws of the state in which thehost track is located.  In addition, theRacing Act establishes a minimum that must be set aside from simulcasting forpurse payments on racing within Minnesota. Different amounts are deducted for purses from the takeout depending onwhether simulcasting occurs during the “Racing Season,” a statutorily defined25-week period beginning in early May each year, or outside of the RacingSeason.  If simulcasting occurs duringthe Racing Season, the amount set aside for purses further depends on whetherthe simulcasting is part of a full racing card that occurs during the part ofthe day that live races are conducted at the Racetrack.  For races that are part of a full simulcastracing card that takes place within the time of live races at the Racetrack,the amount reserved for purse payout is 8.4%. For simulcasting conducted during the Racing Season that does not occurwithin the time period of live races, the purse is equal to 50% of the takeoutremaining after deductions for pari-mutuel taxes, payments to the MBF andpayments to the host racetrack for host track fees.  For simulcasting conducted outside of theRacing Season, the amount that must be contributed to the purses is 25% of thetakeout after deducting pari-mutuel taxes, payments to the MBF and host feepayments to the host racetrack.

 

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Thefollowing table sets forth the approximate percentage distribution of eachdollar wagered for races simulcast at the Racetrack and the Racetrack’sretainage for the years ended December 31, 2009 and 2008:

 
| ** **                       | ** ** | **During Racing Season**       | ** ** | ** **                         | ** ** | ** **                    | ** ** |
|----------------------------------|------------|--------------------------------|------------|------------------------------------|------------|-------------------------------|------------|
| ** **                       | ** ** | **Concurrent with  Live Card** | ** ** | **Not Concurrent with  Live Card** | ** ** | **Outside of Racing  Season** | ** ** |
|                             |       |                           |       |                               |       |                          |       |   |   |   |   |   |   |
| Returned  to Winning Patrons (1) |       |                           |       | 80.50                              | %          |                          |       | 80.50 | % |   |   | 80.50 | % |
| Minnesota  Breeders’ Fund   |       | 1.00                           |       |                               |       | 1.00                          |       |   |   | 1.10 |   |   |   |
| Minnesota  Pari-Mutuel Taxes (2) |       | .00                            |       |                               |       | .00                           |       |   |   | .00 |   |   |   |
| Purse  (3)                       |       | 8.40                           |       |                               |       | 7.35                          |       |   |   | 4.15 |   |   |   |
| Host  Track Fees (4)             |       | 3.80                           |       |                               |       | 3.80                          |       |   |   | 3.80 |   |   |   |
| Racetrack  Retainage (3)         |       | 6.30                           |       |                               |       | 7.35                          |       |   |   | 10.45 |   |   |   |
| Total  Takeout                   |       |                           |       | 19.50                              |       |                          |       | 19.50 |   |   |   | 19.50 |   |
|                             |       |                           |       |                               |       |                          |       |   |   |   |   |   |   |
| Total  Handle                    |       |                           |       | 100.00                             | %          |                          |       | 100.00 | % |   |   | 100.00 | % |

 

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(1)           This amount will depend upon the takeout at the hostracetrack. This percentage is determined by local and state law applicable tothe host track and ranges from 75.0% to 85.0%.

(2)           The current pari-mutuel tax structure exempts thefirst $12 million of takeout during a statutorily mandated twelve-monthperiod.  The total pari-mutuel taxliability for a twelve-month period will depend upon the total takeout duringthat period.  There was no pari-mutueltax liability in 2009 and therefore, it is not factored into the above graph.

(3)           Although Minnesota law specifies purse percentages,the actual percentage is determined by agreement between the Racetrack and theMHBPA.  For the year ended December 31,2008, the MHBPA allowed a 1.3% expense deduction, and in 2009, the expensededuction allowed was 1.6%.  No expensededuction is expected for 2010.

(4)           Payments to the host track generally range from 3.0%to 4.5% of total handle, subject to negotiation with each host track.  For purposes of this table, the host trackfee is assumed to be 3.8%.

 

##### *ConcessionsRevenue.*

##### * *

The Company earns revenuefrom food and beverage sales in its restaurant, group catering areas andnumerous concession stands located throughout the facility.  Food and beverage sales are offered duringlive and simulcast racing in the card room and during special events.

 

##### *OtherRevenue.*

##### * *

The Company generatescash revenues from the receipt of admission and reserved seating charges,preferred and valet parking and the sales of various daily pari-mutuelpublications.  Additional revenues arederived from the operation of an RV Park during the summer months and the useof the Racetrack facilities year-round for special events such as concerts,trade and craft shows, snowmobile racing, business meetings, private parties,horse expositions and sales, boat and automobile storage and communityevents.  The Company also generatesrevenue from providing advertising signage space, similar to that appearing atmany sports stadiums, and leasing excess parking lot space for variousautomotive activities and vehicle storage.

 

**(v)****          ****Competition**

 

From 1994 through 2004,the Company was the only racetrack licensed to operate in the State of Minnesota.  In January 2005, the MRC granted alicense to the North Metro Harness Initiative, LLC (“NMHI”) to construct andoperate a harness racetrack in Columbus Township, Anoka County, MN.  Columbus Township is approximately 50 milesfrom Canterbury Park.  This licenseauthorized NMHI to engage in pari-mutuel wagering on live and simulcast racingfor standardbred (harness) horses.  NMHIcommenced operations as Running Aces Harness Park (“Running Aces”) in April 2008.  In addition, on completing a 50-day live meetas required by Minnesota law, the MRC granted Running Aces a license to operatea card room, and Running Aces began card room operations in competition withthe Company in June 2008.

 

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The Company also competeswith other forms of gaming, principally casino-style gambling including slots,table games, and poker offered at numerous tribal casinos located throughoutthe State of Minnesota.  In particular,the largest casino in Minnesota is located approximately four miles from theRacetrack.  More recently, unbanked cardgames have also become available at some tribal casinos.  The Company also faces increasing competitionfrom offshore and out-of-state simulcast operations offering Internet andtelephone account home wagering systems to Minnesota residents, althoughMinnesota regulatory authorities consider such wagering to be illegal.

 

The Company furthercompetes with other forms of entertainment in the Minneapolis-Saint Paulmetropolitan area, including a wide range of live and televised professionaland collegiate sporting events.  Inaddition, live horse racing competes with a wide variety of summer attractions,including amusements parks, sporting events and other local activities.

 

The Company competes withracetracks located throughout the United States in securing horses to run atthe Racetrack.  Attracting owners andtrainers is largely dependent on the ability to offer large purses.  The Company experiences significantcompetition for horses from racetracks located near Des Moines, Iowa andChicago, Illinois, both of which offer substantially larger purses than the Company.  This competition is expected to continue forthe foreseeable future.

 

**(vi)****         ****Regulation**

 

*General.*

 

The ownership andoperation of the Racetrack in Minnesota is subject to significant regulation bythe MRC under the Racing Act and the rules adopted by the MRC.  The Racing Act governs the allocation of eachwagering pool to winning bettors, the Racetrack, purses, pari-mutuel taxes andthe MBF and empowers the MRC to license and regulate substantially all aspectsof horse racing in the State.  The MRC,among other things, grants operating licenses to racetracks after anapplication process and public hearings, licenses all employees of a racetrack,jockeys, trainers, veterinarians and other participants, regulates the transferof ownership interests in licenses, allocates live race days and simulcast-onlyrace days, approves race programs, regulates the conduct of races, setsspecifications for the racing ovals, animal facilities, employee quarters andpublic areas of racetracks, regulates the types of wagers on horse races, andapproves significant contractual arrangements with racetracks, includingmanagement agreements, simulcast arrangements, totalizator contracts andconcessionaire agreements.

 

A federal statute, theInterstate Horse Racing Act of 1978, also provides that a racetrack must obtainthe consent of the group representing the horsepersons (owners and trainers)racing the breed of horses that race a majority of the time at the racetrack,and the consent of the state agency regulating the racetrack, in order totransmit simulcast signals of its live races or to receive and use simulcastsignals from other racetracks.  TheCompany has obtained the consent of the MHBPA and MRC for receiving and sendingsimulcast signals.

 

*Issuanceof Class A and Class B Licenses to the Company.*

 

The Company holds a Class ALicense, issued by the MRC, which allows the Company to own and operate theRacetrack.  The Class A License iseffective until revoked, suspended by the MRC or relinquished by thelicensee.  Currently, the fee for a Class ALicense is $253,000 per fiscal year.

 

The Company also holds a Class BLicense, issued by the MRC, that allows the Company to sponsor and manage horseracing on which pari-mutuel wagering is conducted at its Class A licensedracetrack and on other horse races run at out-of-state locations as authorizedby the MRC.  The Class B License isrenewable each year by the MRC after a public hearing (if required by theMRC).  Currently, the fee for the Class BLicense is $500 for each assigned race day on which live racing is actuallyconducted and $100 for each day on which simulcasting is authorized andactually takes place.

 

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*Limitationon the Number of Class A and Class B Licenses.*

 

Pursuant to the RacingAct, so long as the Racetrack maintains its Class A License, no other Class ALicense may be issued to operate a racetrack in the seven-county metropolitanarea (the counties of Hennepin, Ramsey, Washington, Scott, Dakota, Anoka andCarver), except the MRC may issue an additional Class A License within theseven-county metropolitan area, provided that the additional license may onlybe issued for a facility which, among other conditions, is located more than 20miles from the Racetrack, contains a track no larger than five-eighths of amile in circumference, and is used exclusively for standardbred (harness)racing.  An additional Class Alicense was issued to Running Aces on January 20, 2005 (see “Competition”above).  However, as long as the Companyholds its Class A License, only the Company may own and operate aracetrack in the seven county metropolitan area where thoroughbred horses andquarter horses may be raced.

 

*Limitationon Ownership and Management of an Entity, which holds a Class A Licenseand/or Class B License.*

 

The Racing Act requiresprior MRC approval of all officers, directors, 5% shareholders or other personshaving a present or future direct or indirect financial or management interestin any person applying for a Class A and Class B license, and if achange of ownership of more than 5% of the licensee’s shares is made after anapplication is filed or the license issued, the applicant or licensee mustnotify the MRC of the changes within five days of this occurrence and providethe information required by the Racing Act.

 

*Card Room Regulation.*

 

TheMRC is also authorized by law to regulate card room operations, and the lawrequires that the Company reimburse the MRC for its actual costs, includingpersonnel costs, of regulating the card room. For fiscal years ended December 31, 2009, and 2008, the Companypaid $150,000 and $116,000, respectively, to the MRC as reimbursement for costsof regulating card room operations.

 

TheMRC issued an additional Class B License to the Company on January 19,2000 that authorizes the Company to host unbanked card games.  The Class B License is renewable eachyear by the MRC after a public hearing (if required by the MRC).  Currently, the Class B License Fee of$10,000 per calendar year is included in the Class A License Fee of$253,000 per calendar year.

 

*LocalRegulation.*

 

The Company’s operationsare subject to state and local laws, regulations, ordinances and otherprovisions affecting zoning, public health and other matters which may have theeffect of restricting the uses to which the Company’s land and other assets maybe used.  Also, any development of theRacetrack site is, among other things, subject to applicable zoning ordinancesand requires approval by the City of Shakopee and other authorities, and therecan be no assurance such approvals would be obtained if any development wasundertaken.

 

**(vii)****       ****Legislation**

 

As discussed in ourprevious filings with the SEC, the Company has supported over the past severalyears, and is currently supporting in the 2010 session of the MinnesotaLegislature, legislation that would authorize slot machines and other games atthe Racetrack (referred to as a “Racino”). Based on the success of several Racinos in other states, we continue tobelieve that if a Racino was authorized at the Racetrack on similar terms tolegislation approved in other states, it would enhance horse racing withincreased purses, provide growth and development opportunities for the Company,and provide significant new tax revenues for state and local governments.

 

Theeffort to obtain legislative authority for initiatives favorable to the Companyhas required, and will continue to require, substantial expenditures.   Due to the inherent uncertainty of theoutcome of legislative activities, there can be no assurance that any billsfavorable to the Company’s interests will be enacted into law, and it ispossible bills adverse to the Company could be enacted.

 

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**(viii)****      ****Marketing**

 

The Company’s primarymarket is the seven-county Minneapolis-Saint Paul metropolitan area plus thetwo counties to the south of the Racetrack. Current demographic information indicates that approximately 2.2 millionadults age 18 and older reside within the primary market.  The City of Shakopee, located in thesouthwestern portion of the metropolitan area, is one of the fastest growingcommunities in the region, and Scott County is one of the fastest growingcounties in the country.

 

To support itspari-mutuel horse racing and card room businesses, the Company conductsyear-round marketing efforts to maintain the loyalty of live racing andsimulcast patrons and attract new racing and card room customers.  The Company utilizes newspapers andtelevision advertising, the Internet, other print media, radio and direct mail.  Often, the Company combines its marketing effortsto communicate the excitement of both wagering on horse racing and cardplaying.  In addition to its regularadvertising program, the Company conducts numerous special promotions andhandicapping contests to increase simulcast patronage and maintains successfulpari-mutuel player and card room player rewards programs.  In addition, the development and maintenanceof a customer database over the past several years has enabled the Company toeffectively utilize direct mail advertising.

 

Because wagering on horseracing and playing poker and table games are more complex than many other formsof gaming, such as slot machines or various lottery products, the Companycontinues to develop and conduct various educational programs, such ascomplimentary poker and table games lessons, tours of the Racetrack, wageringand handicapping classes and contests that it believes will make pari-mutuelwagering on horse racing and card playing more understandable to the generalpublic.

 

**(ix)****         ****Employees**

 

At March 25, 2010, theCompany had 269 full-time employees and 246 part-time employees.  On a seasonal basis, the Company addsapproximately 120 full-time and 250 part-time employees for live racingoperations from early May until early September.  The Company’s management believes itsemployee relations are good.

 

**(x)****          ****Executive Officers**

 

The executive officers ofthe Company, their ages and their positions with the Company are as follows:

 
| **Name**           | ** ** | **Age** | ** ** | **Position with Company**                                    |
|--------------------|------------|---------|------------|--------------------------------------------------------------|
|               |       |    |       |                                                         |
| Randall D. Sampson |       | 51      |       | President, CEO and General  Manager                          |
|               |       |    |       |                                                         |
| David C. Hansen    |       | 53      |       | Vice President of  Finance, CFO and Secretary                |
|               |       |    |       |                                                         |
| Mark A. Erickson   |       | 53      |       | Vice President of  Facilities                                |
|               |       |    |       |                                                         |
| Michael J. Garin   |       | 54      |       | Vice President of  Non-Gaming Operations and Asst. Secretary |

 

Randall D. Sampson hasbeen President and Chief Executive Officer since the formation of the Companyin March 1994 and General Manager since September 1995.  He has been active in horse industryassociations, currently serving as Vice President and Director of theThoroughbred Racetracks of America and is a past President of the MinnesotaThoroughbred Association.  Mr. Sampsonalso currently serves as a director of Communications Systems, Inc.(NASDAQ:JCS), a manufacturer of telecommunications and data communicationsproducts based in Hector, Minnesota.  Mr. Sampsonis the son of Curtis A. Sampson, the Company’s Chairman of the Board and thebeneficial owner of approximately 22% of the Company’s common stock.

 

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DavidC. Hansen joined the Company in July 2001 as Vice President of Finance andChief Financial Officer.  From 2000 to2001, Mr. Hansen served as Director of Accounting for Prairie MeadowsRacetrack and Casino in Altoona, IA, one of the nation’s first Racinooperations.  He served as Controller andlater Director of Finance at Treasure Island Resort & Casino, in RedWing, MN, from 1993 until 2000.  Mr. Hansenearned his CPA certification in 1983.  Mr. Hansenis a member of the Minnesota Society of Certified Public Accountants, theHospitality Financial and Technology Professionals Association, and theFinancial Executives International.

 

Mark A. Erickson has beenVice President of Facilities since May 1997, serving as the Racetrack’sDirector of Facilities since April 1994. From 1992 to 1994, Mr. Erickson served as Maintenance Supervisorfor the Mall of America, supervising the interior maintenance for one of the largestshopping malls in North America.  Mr. Ericksonwas Master Electrician for Canterbury Downs from 1986 to 1992, supervising theinstallation and maintenance of all electrical equipment.

 

Michael J. Garin wasrecently named Vice President of Non-Gaming Operations in October 2009.  Prior thereto, Mr. Garin served as theVice President of Hospitality since May of 1997.  He also previously served as President ofCanterbury Park Concessions, Inc. from September 1995 to May of1997.  From 1993 to 1994, Mr. Garinserved as Food & Beverage Supervisor for Little Six, Inc., one ofthe largest tribal casino operations in the country.  Mr. Garin was President of MMR Vending, Inc.,a regional vending company, from 1988 to 1992. Prior to 1988, he was a Regional Director at General Mills RestaurantGroup overseeing seven restaurants in three states.  Since 2007, Mr. Garin has served on theBoard of Directors for the Minnesota Restaurant Association.

 

**Item1A.  RISK FACTORS**

 

The Company is subject torisk factors that may affect our operating results.  Such risk factors include, but are notlimited to, the matters discussed below as well as the additional risksdiscussed under Forward Looking Statements on page 27 of this Form 10-Kfor additional risks to which the Company is exposed.

 

*We facesignificant competition from other gaming operations that could have a materialadverse effect on our operations.*

 

We face intensecompetition in our market, particularly competition from tribal casinos.  Such facilities have the advantage of beingexempt from certain state and federal taxes and state regulation of indoorsmoking.  We also compete with illegalInternet wagering on horse races, other forms of gambling, other forms ofentertainment and other racetracks throughout the country as previouslydiscussed under *Competition*above.

 

In early 2005, the MRCgranted a license to NMHI to construct and operate a harness racetrack inColumbus Township, Anoka County, MN, which is approximately 50 miles from theRacetrack.  This license authorized NMHIto engage in pari-mutuel wagering on live and simulcast racing for standardbred(harness) horses.  This racetrack openedin April of 2008 as Running Aces Harness Park (“Running Aces”).  In addition, Running Aces began card roomoperations in June of 2008.

 

We expect competition forour existing and future operations to increase both from Running Aces andexisting tribal casinos.  In addition,several of our tribal gaming competitors have substantially larger marketing andfinancial resources than we do.  We areunable to predict with any certainty the effects of existing and futurecompetition on our operating results.

 

*Adownturn in general economic conditions can adversely affect our results ofoperations.*

 

Consumer demand forentertainment is particularly sensitive to downturns in the economy and thecorresponding impact on discretionary spending on leisure activities.  Changes in discretionary consumer spending orconsumer preferences could be driven by factors such as perceived or actualgeneral economic conditions including housing prices and the availability ofcredit; high energy, fuel and food costs; the increased cost of travel; thepotential for bank failures; the weakening job market; perceived or actualdisposable consumer income and wealth; fears of recession and changes inconsumer confidence in the economy; or fears of war and future acts ofterrorism.  These factors could reduceconsumer demand for the leisure activities we offer, thus imposing practicallimits on pricing and harming our operations. Our revenues and profitability have 

 

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been adversely affectedby these factors during the last two years and are likely to be adverselyaffected in 2010.

 

*We aresubject to extensive regulation from gaming authorities that could adverselyaffect us.*

 

The ownership andoperation of our Racetrack and card room are subject to significant regulationby the MRC under the Racing Act and the rules adopted by the MRC.  The MRC has the authority to impose increasesin the Class A and Class B license fees.  In addition, State law requires that wereimburse the MRC for its actual costs of regulating the card room, includingpersonnel costs.  Increases in theselicensing and regulatory costs could adversely affect our results ofoperations.

 

Decisions by the MRC inregard to any one or more of the following matters could also adversely affectthe Company’s operations: the granting of operating licenses to Canterbury Parkand other racetracks after an application process and public hearings; thelicensing of all employees of a racetrack, jockeys, trainers, veterinarians andother participants; regulating the transfer of ownership interests in licenses;allocating live race days and simulcast-only race days; approving raceprograms; regulating the conduct of races; setting specifications for theracing ovals, animal facilities, employee quarters and public areas ofracetracks; changes to the types of wagers on horse races; and approval ofsignificant contractual agreements.

 

*We aresubject to changes in the laws that govern our business, including thepossibility of an increase in gaming taxes, which would increase our costs, andchanges in other laws may adversely affect our ability to compete.*

 

Our operations andoversight by the MRC are ultimately subject to the laws of Minnesota and thereexists the risk that these laws may be amended in ways adverse to ouroperations.  In particular, we arerequired to pay taxes and fees in addition to normal federal, state and localincome taxes, and such taxes and fees are subject to increase at any time.  From time to time, state and locallegislators and officials have proposed changes in tax laws, or in theadministration of laws affecting our industry, such as the allocation of eachwagering pool to winning bettors, the Racetrack, purses and the MBF.  In addition, poor economic conditions couldintensify the efforts of state and local governments to raise revenues throughincreases in gaming taxes.  It is notpossible to determine with certainty the likelihood of changes in tax laws orin the administration of such laws.  Suchchanges, if adopted, could have a material adverse effect on our operations.

 

We are also subject tolaws in Minnesota that affect businesses generally.  It ispossible, as a result of the legislative process, that legislation directly orindirectly adverse to the Company may be enacted into law.

 

*We Depend on Key Personnel.*

 

Our future success willdepend largely on the skills, efforts and motivation of Randall D. Sampson, ourPresident and Chief Executive Officer, and other executive officers and keypersonnel, on whom we are highly dependent. Our inability to retain keypersonnel could have a material, adverse impact on our business, financialcondition and results of operations.

 

*Energyand fuel price increases may adversely affect our costs of operations and ourrevenues.*

 

Our facility usessignificant amounts of electricity, natural gas and other forms of energy.  Increases in the cost of electricity ornatural gas negatively affect our results of operations.  In addition, energy and fuel price increasescould negatively impact our operations by reducing disposable income ofpotential customers and decreasing visitation to our facility.

 

**Item1B.  UNRESOLVED STAFF COMMENTS**

 

*NotApplicable.*

 

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**Item 2.  PROPERTIES**

 

*General.*

 

The Company’s facilities,which are owned and operated under the name “Canterbury Park,” are a moderncomplex of buildings and grounds, generally comparable to other majorracetracks located throughout the country. The Racetrack’s grandstand has a patron capacity of approximately 10,000within enclosed areas and a maximum patron capacity of over 30,000 includingoutside areas around the grandstand.  Thegrandstand and most public outdoor areas contain numerous pari-mutuel windows,odds information boards, video monitors, concessions stands and otheramenities.  The audio/visual systemincludes over 600 television monitors with most areas providing multi-screenviewing of the races.

 

The Racetrack is locatedapproximately 25 miles southwest of downtown Minneapolis.  The area immediately surrounding theRacetrack consists of commercial and industrial buildings, farmland andresidential areas.  The Racetrack is inreasonable proximity to a number of major entertainment destinationsincluding:  Valleyfair, an amusement parkabout two miles from the Racetrack which annually attracts approximately morethan one million visitors during the spring and summer; the RenaissanceFestival, a seven-weekend late summer annual event attracting approximately300,000 visitors, located about five miles from the Racetrack; and Mystic LakeCasino, located about four miles from the Racetrack, which draws approximately5.2 million patrons annually.  The Mall ofAmerica, the largest enclosed shopping mall in the United States, whichattracts more than 40 million visitors per year, is approximately 17 miles fromthe Racetrack.

 

*RacingSurfaces.*

 

The racing surfacesconsist of a one-mile oval dirt/limestone track and a 7/8 mile oval turfcourse.  The dirt track includes a mileand one-quarter front stretch chute, a 6-1/2 furlong backstretch chute and a3-1⁄2 furlong chute and is lighted for night racing.

 

*Grandstand.*

 

The grandstand is amodern, air-conditioned enclosed structure of approximately 275,000 square feetwith a variety of facilities on six levels. The lower level contains space for support functions such as jockeyquarters, administrative offices, Racing Commission offices, first aid,mechanical and electrical rooms.  Thetrack level includes pari-mutuel windows, restrooms, a variety of concessionstands and other services as well as the card room, which occupies 22,000square feet on the track level.  Themezzanine level contains 1,320 fixed seats in a glass-enclosed, air-conditionedarea and an additional 3,000 seats located outside.  In addition to the seats, the mezzanine levelcontains pari-mutuel windows, restrooms, concession stands and other guestfacilities.  A portion of the mezzaninelevel is currently being used as a simulcast center during live racing, and forbanquets and other events during the off-season.  The kitchen level is an intermediate levellocated between the mezzanine and clubhouse floors.  It contains a full-service kitchen which supportsa full dining menu for the track-side dining terraces on the clubhouse leveland food preparation for the other concession areas.  The clubhouse level is a multi-purpose areaserving as a simulcast center during wagering sessions on televised races, aswell as a full-service dining area during the live racing season.  The clubhouse level includes 325 tracksidetables, each equipped with a television set, with a total seating capacity of1,200 patrons and an additional 1,000 seats are located in lounges locatedthroughout the area.  The press box andofficials’ level is located in the roof trusses over the clubhouse and containswork areas for the press, racing officials, closed-circuit television, photofinish and the track announcer.  Inaddition, the grandstand was structurally built to accommodate skyboxes underthe press box/officials’ level, although none have yet been constructed.  Escalators and elevators are available tomove patrons among the various levels within the grandstand.

 

*Barn andBackside Facilities.*

 

The stable area consistsof 33 barns with a total of approximately 1,650 stalls.  In the stable area, there are 216 dormitoryrooms for the grooms and others working at the Racetrack.  The stable area also contains a combinationracing office and cafeteria/recreation building for stable personnel, twoblacksmith buildings and a one half-mile training track.

 

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*Parking.*

 

Approximately 7,500 pavedparking spaces are available for patron and employee automobiles at theRacetrack, including parking spaces that are reserved for handicappedpatrons.  The Racetrack also has unpavedareas available for overflow parking for approximately 5,000 additionalautomobiles.  Areas are also reserved forbus parking.

 

*RVPark.*

 

The Company owns andoperates a recreational vehicle (RV) park, located two miles from the Racetrackin Shakopee, Minnesota on approximately 29 acres adjacent to the MinnesotaRiver.  The RV Park has 68 independentsites and 40 dependent sites, an indoor swimming pool, laundry facilities, gameroom and mini store.  In 2010, thisproperty is being leased to an unaffiliated party, and it is expected thelessee will operate the RV Park similar to how it has been operated in thepast, with sites being rented to horsemen participating in Canterbury’s racingoperations, seasonal employees and the general public.

 

*UndevelopedLand.*

 

Approximately 100 acresof the 380 acres owned by the Company are not necessary for currentoperations.  This property could be soldin whole or in part, depending upon future opportunities.  The Company regularly evaluates otherbusiness activities and development opportunities that would maximize the useof the real estate surrounding the Racetrack and which would complement theCompany’s primary businesses of horse racing and card room operations.  In June 2008, the Company announced thatit had entered into a letter of intent with RED Development, LLC, a Kansas Citybased retail developer, to be its exclusive partner in a proposed retail andentertainment development on part of the Company’s property.  Although the Company has remained incommunication with RED Development, due to the prolonged economic recession,the project was put on hold as retailers curbed their expansion efforts.

 

*Use ofProperites.*

 

All three Company’soperating segments are housed in the Grandstand and use the parkingfacilities.  The racing surfaces, barns,and backside facilities are used exclusively by the Horse Racing segment.

 

**Item3.  LEGAL PROCEEDINGS**

 

There are no materiallegal proceedings pending against the Company. From time to time, the Company is party to ordinary and routinelitigation incidental to our business. We do not expect the outcome of any such litigation pending at this timeto have a material adverse effect on our consolidated financial position orresults of operations.

 

**Item 4.  (REMOVED AND RESERVED)**

 

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**PART II**

 

**Item 5.  MARKETFOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUERPURCHASES OF EQUITY SECURITIES**

 

**(a)****          ****MARKET INFORMATION**

 

The Company’s commonstock trades on the NASDAQ Global Market under the symbol CPHC.  Prior to August 26, 2008, it traded onthe American Stock Exchange under the symbol ECP.  The table set forth below indicates the highand low sale prices for the Common Stock in the quarterly periods ending December 31,2009 and 2008.

 
| ** **      | ** ** | **2009** | ** ** | **2008** | ** ** |
|-----------------|------------|----------|------------|----------|------------|
| ** **      | ** ** | **High** | ** ** | **Low**  | ** ** | **High** | ** ** | **Low** | ** ** |
| Common  Stock   |       |     |       |     |       |   |   |   |   |
|            |       |     |       |     |       |   |   |   |   |
| First  Quarter  |       | $        | 7.43       |     | $          | 5.35 |   | $ | 12.05 |   | $ | 9.35 |   |
| Second  Quarter |       | 7.32     |       | 5.83     |       | 11.20 |   | 8.10 |   |
| Third  Quarter  |       | 7.49     |       | 6.02     |       | 10.35 |   | 8.00 |   |
| Fourth  Quarter |       | 7.59     |       | 6.03     |       | 8.99 |   | 5.75 |   |
|                 |            |          |            |          |            |  |  |  |  |  |  |  |  |

 

**(b)****          ****HOLDERS**

 

At March 11, 2010,the Company had 809 holders of record of its common stock.  In addition, on that date, a depositorycompany held approximately 2,607,000 shares as nominee for an estimated 1,631beneficial holders.

 

**(c)****          ****DIVIDENDS**

 

The Company paid specialcash dividends on its common stock of $.25 per share on July 11,2008.  No special dividend was declaredin 2009.

 

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**(d)****          ****SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS**

 

Thefollowing table sets forth information as of December 31, 2009 regardingour equity compensation plans:

 

Securities Authorized for Issuance Under Equity Compensation Plans

 
| **Plan  Category (1)**                                           | ** ** | **(a)  Number of shares of  common stock to be  issued upon exercise of  outstanding options,  warrants and rights** | ** ** | **(b)  Weighted-average  exercise price of  outstanding options,  warrants and rights** | ** ** | **(c)  Number of shares of  common stock  remaining available  for future issuance  under equity  compensation plans  (excluding shares in  column (a))** | ** ** |
|------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
|                                                             |       |                                                                                                                 |       |                                                                                    |       |                                                                                                                                                      |       |
| Equity  compensation plans approved by security holders:         |       |                                                                                                                 |       |                                                                                    |       |                                                                                                                                                      |       |
| 1994  Stock Plan                                                 |       | 403,244                                                                                                              |       | $                                                                                       | 10.15      |                                                                                                                                                      | 255,500    |   |
| 1995  Employee Stock Purchase Plan                               |       | —                                                                                                               |       | —                                                                                  |       | 111,672                                                                                                                                                   |       |
|                                                             |       |                                                                                                                 |       |                                                                                    |       |                                                                                                                                                      |       |
| Equity  compensation plans not approved by security holders:     |       |                                                                                                                 |       |                                                                                    |       |                                                                                                                                                      |       |
| Stock  Option Plan for Non-Employee Consultants and Advisors (2) |       | —                                                                                                               |       | —                                                                                  |       | 172,500                                                                                                                                                   |       |
|                                                             |       |                                                                                                                 |       |                                                                                    |       |                                                                                                                                                      |       |
| Total                                                            |       | 403,244                                                                                                              |       |                                                                                    |       | 539,672                                                                                                                                                   |       |
|                                                                  |            |                                                                                                                      |            |                                                                                         |            |                                                                                                                                                           |            |  |

 

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(1) TheCompany does not have individual compensation arrangements involving thegranting of options, warrants, rights or restricted stock.

 

(2) Adopted by theCompany’s Board of Directors in 1997, the purpose of the Stock Option Plan for Non-EmployeeConsultants and Advisors is to attract and retain the services of experiencedand knowledgeable non-employee consultants and advisors to assist in projectshaving strategic significance for the Company, to provide an alternative formof cash compensation to such persons and to provide such persons with theopportunity to participate in the Company’s long term progress and success.

 

**(h)****         ****PURCHASES OF EQUITY SECURITIES BY THE ISSUER**

 

On January 16,2008, the Company announced that its Board of Directors had authorized aprogram to repurchase up to an additional 250,000 shares of the Company’scommon stock pursuant to Exchange Act Rule 12b-18 in open markettransactions, block purchases of privately negotiated transactions.  During the fiscal year 2009, the Company didnot repurchase any shares of common stock. As of December 31, 2009, there are 33,457 shares that the Companymay buy back as a result of this repurchase program.

 

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**Item 6.  SELECTED FINANCIAL DATA**

 

The following table setsforth selected consolidated financial data for each of the five fiscal yearsended December 31, 2009.  Theoperating and balance sheet data for the years ended and as of December 31,2009, 2008, 2007, 2006, and 2005 are derived from our audited consolidatedfinancial statements.  The followinginformation should be read in conjunction with “Management’s Discussion andAnalysis of Financial Condition and Results of Operations” and with ourconsolidated financial statements and the related notes thereto includedelsewhere in this report.

 

(In thousands except forper share amounts)

 
| ** **                        | ** ** | **Year Ended December 31** | ** ** |
|-----------------------------------|------------|---------------------------------|------------|
| **OPERATING DATA**                | ** ** | **2009**                        | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
|                              |       |                            |       |   |   |   |   |   |   |   |   |
| Net  Revenues                     |       | $                               | 39,589     |   | $ | 46,025 |   | $ | 52,880 |   | $ | 55,840 |   | $ | 54,920 |   |
|                              |       |                            |       |   |   |   |   |   |   |   |   |
| Operating  Expenses               |       | 39,363                          |       | 45,310 |   | 48,723 |   | 50,660 |   | 49,474 |   |
|                              |       |                            |       |   |   |   |   |   |   |   |   |
| Income  Before Income Tax Expense |       | 261                             |       | 823 |   | 4,486 |   | 5,459 |   | 5,565 |   |
|                              |       |                            |       |   |   |   |   |   |   |   |   |
| Income  Tax Expense               |       | (200                            | )          | (385 | ) | (1,865 | ) | (2,334 | ) | (2,512 | ) |
|                              |       |                            |       |   |   |   |   |   |   |   |   |
| Net  Income                       |       | $                               | 61         |   | $ | 438 |   | $ | 2,621 |   | $ | 3,125 |   | $ | 3,053 |   |
|                              |       |                            |       |   |   |   |   |   |   |   |   |
| Basic  Net Income per Share       |       | $                               | .02        |   | $ | .11 |   | $ | .65 |   | $ | .78 |   | $ | .78 |   |
| Diluted  Net Income per Share     |       | .02                             |       | .11 |   | .62 |   | .74 |   | .73 |   |
| Dividends  per Share              |       | .00                             |       | .25 |   | .25 |   | .25 |   | .25 |   |
|                              |       |                            |       |   |   |   |   |   |   |   |   |
| Cash  Flow from Operations        |       | $                               | 1,931      |   | $ | 1,649 |   | $ | 4,608 |   | $ | 5,973 |   | $ | 4,714 |   |

 
| ** **                                       | ** ** | **At  December 31** | ** ** |
|--------------------------------------------------|------------|--------------------------|------------|
| **BALANCE SHEET DATA**                           | ** ** | **2009**                 | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
|                                             | ** ** | ** **               | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Land,  Buildings & Equipment, Net       |       | $                        | 23,850     |   | $ | 24,932 |   | $ | 25,038 |   | $ | 24,904 |   | $ | 22,694 |   |
|                                             |       |                     |       |   |   |   |   |   |   |   |   |
| Total  Assets                                    |       | 31,752                   |       | 32,244 |   | 36,106 |   | 34,351 |   | 31,440 |   |
|                                             |       |                     |       |   |   |   |   |   |   |   |   |
| Stockholders’  Equity                       |       | 27,302                   |       | 26,681 |   | 28,578 |   | 26,860 |   | 24,358 |   |
|                                             |       |                     |       |   |   |   |   |   |   |   |   |
| Number  of Common Shares Outstanding at Year End |       | 4,022                    |       | 3,938 |   | 4,084 |   | 4,051 |   | 3,960 |   |
|                                                  |            |                          |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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**Item****7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

The following Management’sDiscussion 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 consolidated financial statementsand the accompanying notes to the financial statements (the “Notes”).  Our actual results could differ materiallyfrom those anticipated in the forward-looking statements included in thisdiscussion as a result of certain factors, including, but not limited to, thosediscussed in “Risk Factors” and “Forward-Looking Statements” included elsewherein this Annual Report.

 

**STRATEGICOVERVIEW**

 

Canterbury Park HoldingCorporation was incorporated under the laws of Minnesota and acquired land andbuildings to conduct pari-mutuel horse racing operations in March 1994.  The Racetrack is located in Shakopee,Minnesota, approximately 25 miles southwest of downtown Minneapolis.  In May 1994, we commenced year-roundpari-mutuel simulcast wagering operations and during the summer of 1995, wehosted the first annual live race meet. Our live racing operations are a seasonal business as we host live racemeets each year from May until late summer.  We earn additional pari-mutuel revenue bytelevising our live racing to out-of-state racetracks around the country.  We also derive revenues from related servicesand activities, such as advertising, admissions, parking and publication salesand from other entertainment events and activities held at the Racetrack.

 

In April 2000, weopened Canterbury Park’s card room.  Thecard room operates 24 hours a day, seven days a week and is limited byMinnesota State law to a maximum of 50 tables. The card room currently offers a mix of both poker and table games up tothis State maximum table limit.

 

Our three largestsources of revenues, card room operations, pari-mutuel operations andconcessions sales, generate cash revenues. Consequently, the Company is highly liquid and has not utilized its lineof credit in over six years.

 
| **Financial Performance Summary** | ** ** | **2009** | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
|-----------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
|                              |       |     |       |     |       |     |       |     |       |     |       |
| Net  Revenues                     |       | $        | 39,589     |     | $          | 46,025   |       | $        | 52,880     |     | $          | 55,840 |   | $ | 54,920 |   |
|                              |       |     |       |     |       |     |       |     |       |     |       |
| Operating  Expenses               |       | 39,363   |       | 45,310   |       | 48,723   |       | 50,660   |       | 49,474   |       |
|                              |       |     |       |     |       |     |       |     |       |     |       |
| Income  Before Income Tax Expense |       | 261      |       | 823      |       | 4,486    |       | 5,459    |       | 5,565    |       |
|                              |       |     |       |     |       |     |       |     |       |     |       |
| Income  Tax Expense               |       | (200     | )          | (385     | )          | (1,865   | )          | (2,334   | )          | (2,512   | )          |
|                              |       |     |       |     |       |     |       |     |       |     |       |
| Net  Income                       |       | $        | 61         |     | $          | 438      |       | $        | 2,621      |     | $          | 3,125 |   | $ | 3,053 |   |

 

The primary strengths ofCanterbury Park are our dedicated and capable staff, our first-class facilitiesand 380-acre property and the legal authority to offer our unique gamingproducts in our market area.

 

Our managementteam has extensive knowledge of the horse racing and card businesses and ourstaff has demonstrated a commitment to our customers.  We continue to implement improvements to our comprehensive customer satisfactionmeasurement and enhancement program.  Our management team has a good relationshipwith our workforce and is able to retain qualified personnel as demonstrated byour low turnover rate.

 

Our facilities are modernby racetrack industry standards, and we have invested heavily in the past fewyears to update and upgrade them to meet the needs of our customers andhorsemen.  Our 380-acre property with aprime location on the edge of the Minneapolis — St. Paul metropolitan area inone of the fastest-growing counties in Minnesota provides us with greatlong-term growth and development opportunities. Our Board of 

 

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Directors is engaged inan evaluation of the highest and best potential uses of our underutilizedland.  Our long-term strategic directionis to enhance the character of our property as a unique gaming andentertainment destination.

 

We have a strongcommitment to live racing and have been particularly successful in attractingnew customers and providing a quality live racing experience for our horseracing fans as well as the horsemen who enter their horses in live races atCanterbury Park.  The success of the cardroom has greatly enhanced our ability to offer a more competitive pursestructure for live racing and has allowed us to make significant improvementsto our Grandstand and the backside stabling and training facilities.  As a result, we have been near capacity forhorses stabled at Canterbury Park during our recent live race meets.

 

We continue to believethat our best option for long-term growth is to gain authority under Minnesotalaw to offer additional gaming options,which would enhance horse racing with increased purses, provide growth anddevelopment opportunities and produce significant new tax revenues for stateand local governments.  The effort toobtain legislative authority for these initiatives has required, and will continueto require, substantial expenditures. Due to the inherent uncertainty of the outcome of legislativeactivities, there can be no assurance that any bills favorable to the Company’sinterests will be enacted into law, and it is possible, as a result of thelegislative process, that legislation directly or indirectly adverse to theCompany may be enacted into law.

 

**CURRENTDEVELOPMENTS**

 

In January 2010, theCompany began an extensive remodeling project in our card room.  As a result, the card room was moved to atemporary location on the mezzanine level on January 25, 2010.  The Company plans to reopen the card room inits original location in April 2010. The remodeling project is being conducted to redesign and enhancevirtually every aspect of the room, including the décor, entrance, location ofthe bathrooms, and even the chairs.  Webelieve our customers will find that the remodel will greatly enhance theirgaming experience, which will result in increased revenues.

 

**CRITICAL ACCOUNTING POLICIES AND ESTIMATES**

 

Thepreparation of consolidated financial statements in conformity with generallyaccepted accounting principles in the United States of America requiresmanagement to make estimates and assumptions that affect the reported amountsof assets and liabilities and disclosure of contingent assets and liabilitiesat the date of the consolidated financial statements and the reported amountsof revenues and expenses during the reporting period.  We base our assumptions, estimates andjudgments on historical experience, current trends and other factors thatmanagement believes to be relevant at the time the consolidated financialstatements are prepared.  On a regularbasis, management reviews the accounting policies, assumptions, estimates andjudgments to ensure that our financial statements are presented fairly and inaccordance with generally accepted accounting principles.  However, because future events and theireffects cannot be determined with certainty, actual results could differ fromour assumptions and estimates, and such differences could be material.

 

Oursignificant accounting policies are included in Note 1 to our consolidatedfinancial statements.  We believe thefollowing critical accounting policies affect our more significant judgmentsand estimates used in the preparation of our consolidated financial statements:

 

*Propertyand Equipment -*Wehave significant capital invested in our property and equipment, whichrepresents approximately 75.1% of our total assets at December 31,2009.  We utilize our judgment in variousways including: determining whether an expenditure is considered a maintenanceexpense or a capital asset; determining the estimated useful lives of assets;and determining if or when an asset has been impaired.  Management periodically reviews the carryingvalue of property and equipment for potential impairment by comparing thecarrying value of these assets with their related expected future net cashflows.  Should the sum of the relatedexpected future net cash flows be less than the carrying value, we will determinewhether an impairment loss should be recognized.  An impairment loss would be measured by theamount by which the carrying value of the asset exceeds the fair value of theasset.  To date, we have determined thatno impairment of these assets exists.

 

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* *

*StockBased Employee Compensation* — ASC 718, Compensation — Stock Compensation (“ASC718”), requires recognition of employee services provided in exchange for ashare-based payment based on the grant date fair market value.  We utilize our judgment in determining theassumptions used to determine the fair value of options granted using aBlack-Scholes model.

 

##### ***NEW ACCOUNTING PRONOUNCEMENTS***

##### * *

InJune 2009, the Financial Accounting Standards Board, (“FASB”) issuedAccounting Standards Codification (“ASC”) 105, *GenerallyAccepted Accounting Principles*(“ASC 105”).  ASC 105establishes the FASB Accounting Standards Codification (“Codification”) as thesource of authoritative accounting principles recognized by the FASB to beapplied by nongovernment entities in the preparation of financial statements inconformity with GAAP.  Rules and interpretive releases of the SECunder authority of federal securities law are also sources of authoritativeGAAP for SEC registrants.  References to FASB guidance throughout thisdocument have been updated for the Codification.

 

TheCompany adopted an update to ASC 805 — *Business Combinations*(“ASC805”) on January 1, 2009.  ASC 805 establishes principlesand requirements for how the acquirer of a business recognizes and measures inits financial statements the identifiable assets acquired, the liabilitiesassumed, and any noncontrolling interest in the acquiree.  The statement also provides guidance forrecognizing and measuring the goodwill acquired in the business combination anddetermines what information to disclose to enable users of the financialstatements to evaluate the nature and financial effects of the businesscombination. This update had no material impact on the Company’s financialposition, results of operations or cash flows.

 

**The Company adopted an update to ASC820 — *Fair Value Measurement and Disclosures* (“ASC820”) January 1, 2009 for non-financial assets.  ASC 820 definesfair value, establishes a framework for measuring fair value, and expandsdisclosures about fair value measurement.  ASC 820 also emphasizesthat fair value is a market-based measurement, not an entity-specificmeasurement, and sets out a fair value hierarchy with the highest prioritybeing quoted prices in active markets.  Under ASC 820, fair valuemeasurements are disclosed by level within that hierarchy.  TheCompany adopted ASC 820 for the fiscal year beginning January 1, 2008 forfinancial assets.  The adoption of ASC820 and the update had no material impact on the Company’s financialposition, results of operations, or cash flows.

 

The Companyadopted an update to ASC 855 — *Subsequent Events*(“ASC 855”) on April 1, 2009.  ASC 855 provides guidance on whena subsequent event should be recognized in the financial statements. Subsequentevents that provide additional evidence about conditions that existed at thedate of the balance sheet should be recognized at the balance sheet date.  Subsequent events that provide evidence aboutconditions that arose after the balance sheet date but before financialstatements are issued, or are available to be issued, are not required to berecognized.  The date through whichsubsequent events have been evaluated must be disclosed as well as whether itis the date the financial statements were issued or the date the financialstatements were available to be issued. For non-recognized subsequent events which should be disclosed to keepthe financial statements from being misleading, the nature of the event and anestimate of its financial effect, or a statement that such an estimate cannotbe made, should be disclosed. The standard is effective for interim or annualperiods ending after June 15, 2009. The adoption of ASC 855 and the update had no material impact on theCompany’s financial position, results of operations, or cash flows.

 

**CONTINGENCIES**

 

Inconnection with the purchase of the Racetrack, the Company entered into an EarnOut Promissory Note dated March 29, 1994. In accordance with the Earn OutNote, if (i) off-track betting becomes legally permissible in the State ofMinnesota and (ii) we begin to conduct off-track betting with respect toor in connection with its operations, we will be required to pay to the IMRFund, L.P. the greater of $700,000 per operating year as defined, or 20% of thenet pretax profit as defined, for each of five operating years.  At this time, we believe that the likelihoodthat these two conditions will be met and that we will be required to pay theseamounts is remote.  At the date (if any)that these two conditions are met, the five minimum payments will be discountedback to their present value and the sum of those discounted payments will becapitalized as part of the purchase price in accordance with generally acceptedaccounting principles.  The purchaseprice will be 

 

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further increased ifpayments become due under the “20% of Net Pretax Profit” calculation.  The first payment is to be made 90 days afterthe end of the third operating year in which off-track betting is conducted byus.  Remaining payments would be madewithin 90 days of the end of each of the next four operating years.

 

TheCompany is periodically involved in various claims and legal actions arising inthe normal course of business. Management believes that the resolution of any pending claims and legalactions at December 31, 2009 and as of the date of this report will nothave a material impact on the consolidated financial statements.

 

**OPERATIONSREVIEW**

 

###### ***YEARENDED DECEMBER 31, 2009 COMPARED TO YEAR ENDED DECEMBER 31, 2008***

###### * *

The following table setsforth a reconciliation of net income, a GAAP financial measure, to EBITDA, anon-GAAP measure, for the periods ended December 31, 2009 and 2008:

 
| ** **                                | ** ** | **Dec. 31,  2009** | ** ** | **Dec. 31,  2008** | ** ** |
|-------------------------------------------|------------|-------------------------|------------|-------------------------|------------|
| Net income                                |       | $                       | 60,970     |                    | $          | 438,180 |   |
| Interest income, net of  interest expense |       | (35,583                 | )          | (107,773                | )          |
| Income tax expense                        |       | 199,800                 |       | 384,700                 |       |
| Depreciation                              |       | 2,094,174               |       | 2,141,023               |       |
| EBITDA                                    |       | $                       | 2,319,361  |                    | $          | 2,856,130 |   |

 

EBITDA representsearnings before interest income, income tax expense, and depreciation andamortization.  EBITDA is not a measure ofperformance or liquidity calculated in accordance with generally acceptedaccounting principles (“GAAP”), and should not be considered an alternative to,or more meaningful than, net income as an indicator of our operatingperformance, or cash flows from operating activities as a measure ofliquidity.  EBITDA has been presented asa supplemental disclosure because it is a widely used measure of performanceand basis for valuation of companies in our industry.  Moreover, other companies that provide EBITDAinformation may calculate EBITDA differently than we do.

 

EBITDA decreased slightlyas a percentage of net revenues to 5.9% for the year ended December 31,2009 compared to 6.2% for the year ended December, 2008.

 

Totalnet operating revenues for the year ended December 31, 2009 were $39.6million, a decrease of $6,436,824, or 14.0%, compared to total operatingrevenues of $46.0 million for the year ended December 31, 2008.  Total card room revenues decreased 16.7%,pari-mutuel revenues decreased 14.7% and concession revenues decreased 11.4% infiscal 2009 compared to fiscal 2008.  Discussions of pari-mutuel and card room revenues follow.

 

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**SUMMARYOF PARI-MUTUEL OPERATING DATA:**

 
| ** **                              | ** ** | **Year Ended  Dec. 31, 2009** | ** ** | **Year Ended  Dec. 31, 2008** | ** ** |
|-----------------------------------------|------------|------------------------------------|------------|------------------------------------|------------|
| **Racing Days**                         | ** ** | ** **                         | ** ** | ** **                         | ** ** |
| Simulcast  only days                    |       | 301                                |       | 297                                |       |
| Live  and simulcast days                |       | 62                                 |       | 67                                 |       |
| **Total Racing Days**                   |       | 363                                |       | 364                                |       |
| **On-Track Handle**                     |       |                               |       |                               |       |
| Simulcast  handle on non-live race days |       | $                                  | 27,934,000 |                               | $          | 31,924,000 |   |
| Simulcast  handle on live race days     |       | 10,482,000                         |       | 14,001,000                         |       |
| Total  simulcast handle                 |       | 38,416,000                         |       | 45,925,000                         |       |
|                                    |       |                               |       |                               |       |
| Live  racing handle                     |       | 12,181,000                         |       | 13,848,000                         |       |
| **Total On-Track Handle**               |       | 50,597,000                         |       | 59,773,000                         |       |
|                                    |       |                               |       |                               |       |
| **Out-of-state Live Handle**            |       | 13,712,000                         |       | 19,790,000                         |       |
| **Total Handle**                        |       | $                                  | 64,309,000 |                               | $          | 79,563,000 |   |
| **On-Track Average Daily Handle**       |       |                               |       |                               |       |
| Simulcast  only days                    |       | $                                  | 93,000     |                               | $          | 107,000 |   |
| Live  and simulcast days                |       | 366,000                            |       | 416,000                            |       |

 

Pari-mutuel revenuesinclude commission and breakage revenues on live on-track and simulcast racing,fees received from out-of-state racetracks for wagering on our live races andproceeds from uncashed winning tickets. Pari-mutuel revenues decreased to $11.4 million in 2009 from $13.3million in 2008, primarily reflecting a decrease in simulcast and on-track liveracing handle in 2009 compared to 2008.

 

Total handle wagered onsimulcast races in 2009 decreased $7,509,000, or 16.4%, compared to 2008.  The decrease is attributable to the severerecession and economic uncertainty that has adversely impacted discretionaryspending on entertainment.  Theseconditions, which began in 2008, have continued to erode revenues throughoutthe fiscal year 2009.  In addition, theCompany now faces direct pari-mutuel competition from Running Aces Harness Park(“Running Aces”), a harness track that opened in Anoka County in April 2008.  The Company also believes that an increasingnumber of Minnesota residents are unlawfully wagering on horse races by meansof the Internet.

 

On-track live handledecreased by $1,667,000, or 12.0%, for the 2009 live meet compared to the livemeet in 2008.  The decrease is partiallydue to the Company conducting 81 fewer races during 2009.  Also, the economic recession has adverselyimpacted discretionary spending on entertainment, which has also adverselyaffected on-track handle.

 

Wagering at out-of-statetracks on races conducted at the Racetrack during the 2009 live meet decreased$6,078,000, or 30.7%, compared to the 2008 meet primarily due to the severerecession and economic uncertainty prevailing throughout the country.  In addition, the Company conducted 81 fewerraces during 2009, which led to a decrease in out-of-state handle.

 

Revenuesrecognized on proceeds from winning pari-mutuel tickets which were notpresented for payment within one year of the end of the respective race meetsdecreased approximately $62,000 in 2009 compared to 2008, primarily due toreduced amounts wagered on simulcast horse races.

 

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| **SUMMARY  OF CARD ROOM REVENUES:** | ** ** | **Year Ended********Dec. 31, 2009** | ** ** | **Year Ended********Dec. 31, 2008** | ** ** |
|-------------------------------------|------------|------------------------------------------|------------|------------------------------------------|------------|
|                                |       |                                     |       |                                     |       |
| Poker  Games                        |       | $                                        | 11,520,000 |                                     | $          | 15,610,000 |   |
| Table  Games                        |       | 6,930,000                                |       | 7,459,000                                |       |
| Total  Collection Revenue           |       | 18,450,000                               |       | 23,069,000                               |       |
|                                |       |                                     |       |                                     |       |
| Other  Revenue                      |       | 1,708,000                                |       | 1,134,000                                |       |
|                                |       |                                     |       |                                     |       |
| Total  Card Room Revenue       |       | $                                        | 20,158,000 |                                     | $          | 24,203,000 |   |
|                                |       |                                     |       |                                     |       |
| Number  of Days Offered             |       | 364                                      |       | 364                                      |       |
| Average  Revenue per Day            |       | $                                        | 55,400     |                                     | $          | 66,500 |   |

 

The primary source ofcard room revenue is a percentage of the wagers received from the players ascompensation for providing the card room facility and services, referred to as “collectionrevenue”.  Other Revenue presented aboveincludes fees collected for the administration of tournaments and amountsearned as reimbursement for the administrative costs of maintaining the jackpotfunds.  Card room revenues represent50.9% and 52.5% of net revenues for 2009 and 2008, respectively.

 

Thecard room is divided into two areas, the poker area and the table gamesarea.  The average daily collectionamount per game is dependent upon the number of tables utilized to offer thegame.  Patron demand determines thenumber of tables to be used for a specific game.

 

Totalcard room revenue decreased $4,045,000, or 16.7%, compared to 2008.  The decrease in card room revenue is dueprimarily to the decrease in poker revenue of $4,090,000, or 26.2%, in 2009over 2008.  The decrease is attributableto the economic recession that has adversely impacted discretionary spending onentertainment.  The economic recession,which began in 2008, has continued to erode revenues throughout 2009.  In addition, the Company now faces directcard room competition from Running Aces, who began their card room operationson June 30, 2008.  The Companybelieves patronage at Running Aces card room has had a material adverse effecton the Company’s card room revenue.

 

We expect thatcompetition from Running Aces, illegal Internet wagering, wagering at tribalcasinos will continue to put pressure on card room operating revenues in futureperiods.  As a result, we continue tosearch for opportunities to make Canterbury Park the most attractivealternative when our customers want to wager on card games.

 

Concession revenuesdecreased $682,000, or 11.4%, compared to 2008. The decrease is primarily attributable to the decrease in simulcast andcard room patronage.  Additionally, therewere five less live race days in 2009, resulting in decreased concessionsrevenues.

 

Otherrevenue increased $211,000, or 7.7%, to $2,952,000 in fiscal year 2009 comparedto 2008.  The increase in 2009 was dueprimarily to an increase in special events that were held at thefacilities.  Promotional allowancesdecreased $36,000, or 15.9%, to $192,000 in 2009, also as a result of decreasedpatronage of the card room.

 

**OPERATING EXPENSES**

 

Total operating expensesdecreased approximately $5,947,000, or 13.1%, to $39,363,000 in 2009, from$45,310,000 in 2008 primarily due to decreases in purses and other pari-mutuelexpenses, as well as reductions in several expense areas, including salariesand benefits and utilities.  See belowfor a detailed quantification of each of these items.  Total operating expenses as a percentage ofnet revenues increased slightly to 99.4% from 98.4% in 2008.  We experienced a considerable decrease inpari-mutuel and card room revenues in 2009. 

 

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As a result, despitedecreases in variable expenses, such as salaries and benefits, and purseexpenses, operating expenses became a larger percentage of total revenues.

 

Totalpurse expense decreased $1,418,000, or 19.5%, in 2009 compared to 2008 aspresented in the table below.  Asdiscussed in greater detail in Item 1(c) (iv) above, Minnesota lawrequires us to allocate a portion of funds received from betting in the cardroom and wagering on simulcast and live horse races for future payment aspurses for live horse races or other authorized uses.  While most of these funds are paid into thepurse funds for thoroughbred, quarter horse and standardbred races, Minnesotalaw requires that a portion of funds allocated for purses be paid into theMBF.  A description of how the purseexpense was derived from these three sources and allocated for purse expenseand to the MBF is presented below.  Thedecline in card room revenues in 2009 compared to 2008 resulted in thedecreases in card room purse and MBF expense shown in the table below.  Total purse expense associated with simulcastracing decreased in 2009 compared to 2008 is primarily due to lower wageringlevels, while purse expense associated with live racing decreased primarily dueto conducting 81 fewer races during 2009, which further resulted in decreasedon-track handle.

 
| ** **        | ** ** | **Purse Expense** | ** ** | **Minnesota Breeders’ Fund  Expense** | ** ** |
|-------------------|------------|-------------------|------------|--------------------------------------------|------------|
| ** **        | ** ** | **2009**          | ** ** | **2008**                                   | ** ** | **2009** | ** ** | **2008** | ** ** |
|              |       |              |       |                                       |       |   |   |   |   |
| Card  Room        |       | $                 | 2,324,000  |                                       | $          | 3,168,000 |   | $ | 258,000 |   | $ | 360,000 |   |
|              |       |              |       |                                       |       |   |   |   |   |
| Simulcast  Racing |       | 2,183,000         |       | 2,578,000                                  |       | 429,000 |   | 510,000 |   |
|              |       |              |       |                                       |       |   |   |   |   |
| Live  Racing      |       | 1,347,000         |       | 1,526,000                                  |       | 122,000 |   | 138,000 |   |
|              |       |              |       |                                       |       |   |   |   |   |
| Total             |       | $                 | 5,854,000  |                                       | $          | 7,272,000 |   | $ | 809,000 |   | $ | 1,008,000 |   |

 

UnderMinnesota law, the Company is required to pay 10% of the first $6 million ofgross card room revenues towards purses for live horse racing at theRacetrack.  After meeting the $6 millionthreshold, the Company must pay 14% of gross card room revenues as pursemonies.  Of funds allocated for purses,the amounts paid are allocated 90% to the purse funds and 10% to the MBF.

 

Theamounts paid to the purse fund for simulcast racing differ depending uponwhether the simulcast wagering occurs during the “Racing Season,” a statutorilydefined 25-week period beginning in early May each year, or outside of theRacing Season.  We paid an average of5.68% of handle to the purse fund in 2009, compared to 5.61% in 2008.  We pay 5.50% of pari-mutuel simulcastcommission revenues to the MBF; consequently, lower revenues result in lowerMBF expense.

 

Wealso experienced a reduction in host fees of $241,000, or 13.3%, in 2009compared to 2008 due to lower wagering experienced in 2009 compared to 2008.

 

Salaryand benefit expenses decreased by $2,930,000, or 14.6%, for the twelve monthsended December 31, 2009 compared to the twelve months ended December 31,2008.  The decrease in salaries andbenefits expense is primarily attributable to savings achieved through areduction-in-force that occurred in October of 2008.  Additionally, the suspension of the bonusprogram, contributions to the Company’s Employee Stock Ownership Plan (ESOP),and 401(k) match contributions, as reported in prior filings, havecontinued to provide cost savings.  Tofurther contain costs, the Company implemented a wage freeze program in 2009.

 

Utilities expensedecreased $329,000, or 23.3%, in 2009 primarily due to efficiencies provided bya new building management system and decreased prices for utilities.

 

Advertisingand marketing expenses declined $163,000, or 10.9%, in 2009 primarily due tolower advertising agency and related fees resulting from increased use ofinternal resources.

 

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Net other incomedecreased $72,000, or 67.0%, in 2009 compared to 2008.  This decrease is primarily attributable to a$80,000 decrease in interest income on our primary bank account balance during2009.

 

Income tax expenseas a percentage of pre-tax income increased to 76.6% for the year ended December 31,2009 from 46.8% for the year ended December 31, 2008.  The increase is primarily attributable to areduced level of income before taxes while non-deductible lobbying expenses in2009 remained relatively consistent with 2008.

 

Net incomedecreased $377,000, or 86.1%, to $61,000 for the year ended December 31,2009 compared to $438,000 for the year ended December 31, 2008, reflectingsubstantially reduced revenues which were not fully matched by reducedexpenses.

 

**LIQUIDITYAND CAPITAL RESOURCES**

 

At December 31,2009, we had unrestricted cash and cash equivalents of $4.7 million compared to$3.7 million at December 31, 2008. This $1.0 million increase consists of $1.9 million net cash provided byoperating activities and $0.4 million net cash provided by financingactivities, offset by $1.3 million net cash used in investing activities.  In addition, as of December 31, 2009, wehad $3.0 million of capacity under a commercial revolving credit line as partof a general credit and security agreement with Bremer Bank that will expire onJune 30, 2010.  The Company plans torenew this credit line before it expires. We had no borrowings under the credit line in 2009 or 2008.

 

Our three largest sourcesof revenue, pari-mutuel wagering, card room operations and concessions, are allbased on cash transactions. Consequently, we have significant inflows of cash on a daily basis.  We designate cash balances which will berequired to satisfy certain short-term liabilities such as progressivejackpots, the player pool and amounts due horsemen for purses and awards as “restricted”as a separate balance sheet item.

 

The Company’s table gamesare required by law to be “unbanked”.  “Unbanked”refers to a wagering system or game where wagers “lost” or “won” by the hostare accumulated into a player pool liability for purposes of enhancing thetotal amount paid back to players in any other card game.  The Company may only serve as custodian ofthe player pool.  It may not have anactive interest in any card game and does not recognize net “wins” or “losses”as revenue.  The Company is required toreturn accumulated player pool funds to the players through giveaways,promotional items, prizes or by other means. The player pool liability was approximately $156,000 at December 31,2009 compared to $294,000 at December 31, 2008.

 

The card room offersprogressive jackpots for poker games. Amounts collected for these jackpot funds are accrued as liabilitiesuntil paid to winners.  At December 31,2009, accrued jackpot funds totaled approximately $486,000 compared to $636,000at December 31, 2008.  The MRCregulates the operation of the player pool and progressive jackpot pools.  These liabilities have the potential forsignificant fluctuation on a daily basis.

 

All games in the cardroom are played using chips.  The valueof chips issued and outstanding, referred to as the “outstanding chipliability,” was approximately $191,000 at December 31, 2009, compared to$189,000 at December 31, 2008.  Thisliability has the potential for significant fluctuation on a daily basisdepending upon the demand for chip redemptions and sales.

 

Oursecond largest individual operating expense item is purse expense.  Pursuant to an agreement with the MHBPA, wetransferred into a trust account or paid directly to the MHBPA approximately$5,525,000 and $6,534,000 in purse funds for the years ended December 31,2009 and 2008, respectively.  MinnesotaStatutes specify that amounts transferred into trust are the property of thetrust and not the Company.  Unpaid pursefund obligations due the MHBPA were $35,422 and $48,251 at December 31,2009 and 2008, respectively.  Theweighted average interest rates on any purses accrued but not transferred intothe trust were 4.50% on both December 31, 2009 and 2008.

 

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TheCompany believes that unrestricted funds available in its cash accounts,amounts available under the general credit and security agreement, along withfunds generated from operations, will be sufficient to satisfy its liquidityand capital resource requirements for regular operations for the foreseeablefuture.

 

*CASHFLOWS FROM OPERATING ACTIVITIES*

 

Netcash provided by operations during the year ended December 31, 2009 was$1,930,905, which resulted primarily from net income of $60,970 anddepreciation of $2,094,174, offset by a decrease in card room accruals of$513,830.  The decrease in card roomaccruals was primarily as a result of there being more days accrued in 2008 forthe dealer tips.

 

Netcash provided by operations during the year ended December 31, 2008 was$1,648,538, which resulted primarily from net income of $438,180, depreciationof $2,141,023, and a decrease in restricted cash of $771,340, offset by adecrease in accounts payable and accrued wages and payroll taxes of $846,969and a decrease in card room accruals of $724,583.  The decrease in restricted cash and card roomaccruals was primarily as a result of an increase in player promotions thatwere offered in 2008.

 

#### *CASH FLOWS FROMINVESTING ACTIVITIES*

#### * *

Cash used in investingactivities for the year ended December 31, 2009 of $1,340,178 resultedprimarily from upgrades to our grandstand for approximately and the purchase ofequipment for our backside operations. In addition, in 2009, the Company purchased investments of $500,000 thatwill mature at various dates in 2010 and 2011. Regarding the extensive remodeling project to the card room that beganin January 2010, the Company anticipates using cash on hand to fund theproject and to avoid drawing on its line of credit.

 

Cash used in investingactivities for the year ended December 31, 2008 of $2,332,048 resultedprimarily from the purchase of a building management system and upgrades to thegrandstand building and card room.  Inaddition, in 2008, the Company purchased short-term investments of $200,000that will mature at various dates in 2009.

 

###### *CASH FLOWS FROM FINANCING ACTIVITIES*

###### * *

Cashprovided by financing activities was $404,739 for the year ended December 31,2009 compared to cash used in financing activities of $2,621,148 for the yearended December 31, 2008. The 2009 cash inflow resulted solely fromproceeds of $404,739 received upon the issuance of common stock due to theexercise of stock options and shares of common stock purchased by employeespursuant to our Employee Stock Purchase Plan.

 

Cashused in financing activities was $2,621,148 for the year ended December 31,2008.  The 2008 net cash outflowsresulted primarily from a $.25 per share cash dividend totaling $1,007,173 paidin July 2008.  In addition,throughout 2008 and pursuant to a Stock Repurchase Plan approved in January 2008,the Company repurchased 216,543 shares of common stock at an average price of$8.71 per share for a total cost of $1,886,034. These outflows were partially offset by proceeds of $250,324 receivedupon the issuance of common stock due to the exercise of stock options andshares of common stock purchased by employees pursuant to our Employee StockPurchase Plan and the related excess tax benefit of $21,735.

 

**OFF-BALANCE SHEET ARRANGEMENTS**

 

TheCompany currently has no off-balance sheet arrangements and has no intent toenter into any such agreements in the near future.

 

**COMMITMENTSAND CONTRACTUAL OBLIGATIONS**

 

In March 2008, the Company enteredinto a six-year totalizator service agreement with Scientific Games Inc.  Pursuant to the agreement, Scientific Gamesprovides totalizator equipment and computer programs which record and processall wagers and calculate odds and payoffs. In October 2008, the Company entered into a

 

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four-yearservice agreement to outsource its information technology (IT) function.  Amounts charged to operations under theseagreements for the years ended December 31,2009 and 2008 were approximately $644,000 and $377,000, respectively.

 

The Company has entered into operating leases for rental of officeequipment, equipment to print certain publications, and track equipment tomaintain the Racetrack.  Amounts chargedto operations under these agreements for the years ended December 31, 2009and 2008 were approximately $142,000 and $85,000, respectively.  All such leases expire on or before September 30,2013.

 

Since December 31,2009, there have been no material changes outside the ordinary course ofbusiness to our contractual obligations as set forth above.   As of December 31, 2009, we had noborrowings pursuant to our line of credit and were not party to capital leaseobligations, significant purchase obligations or other long-term obligations.

 

**FORWARD-LOOKINGSTATEMENTS**

 

From time to time, inreports filed with the Securities and Exchange Commission, in press releases,and in other communications to shareholders or the investing public, we maymake forward-looking statements concerning possible or anticipated futurefinancial performance, prospective business activities or plans which aretypically preceded by words such as “believes,” “expects,” “anticipates,” “intends”or similar expressions.  For suchforward-looking statements, we claim the protection of the safe harbor forforward-looking statements contained in federal securities laws.  Shareholders and the investing public shouldunderstand that such forward-looking statements are subject to risks anduncertainties which could affect our actual results and cause actual results todiffer materially from those indicated in the forward-looking statements.  Such risks and uncertainties include, but arenot limited to: material fluctuations in attendance at the Racetrack, materialchanges in the level of wagering by patrons, decline in interest in theunbanked card games offered at the card room, competition from other venuesoffering unbanked card games, or other forms of wagering, competition fromother sports and entertainment options, costs associated with our efforts toobtain legislative authority for additional gaming options, increases incompensation and employee benefit costs, increases in the percentage ofrevenues allocated for purse fund payments, higher than expected expenserelated to new marketing initiatives, the impact of wagering products andtechnologies introduced by competitors, legislative and regulatory decisionsand changes, the general health of the gaming sector, and other factors thatare beyond our ability to control or predict.

 

**Item7A.  QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK**

 

Canterbury Park is notrequired to provide the information requested by this Item as it qualifies as asmaller reporting company.

 

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**Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**

 

(a)           Financial Statements

 

Thefollowing financial statements of the Company are set forth on pages 29through 47 of the Form 10-K:

 
| ** **                                                                                                           | ** ** | **Page** |
|----------------------------------------------------------------------------------------------------------------------|------------|----------|
|                                                                                                                 |       |     |
| Report  of Independent Registered Public Accounting Firm                                                             |       | 29       |
|                                                                                                                 |       |     |
| Report  of Independent Registered Public Accounting Firm                                                             |       | 30       |
|                                                                                                                 |       |     |
| Consolidated  Balance Sheets as of December 31, 2009 and 2008                                                   |       | 31       |
|                                                                                                                 |       |     |
| Consolidated Statements of Operations for the years  ended December 31, 2009 and 2008                           |       | 32       |
|                                                                                                                 |       |     |
| Consolidated Statements of Changes in Stockholders’  Equity for the years ended December 31, 2009 and 2008 |       | 33       |
|                                                                                                                 |       |     |
| Consolidated Statements of Cash Flows for the years  ended December 31, 2009 and 2008                           |       | 34       |
|                                                                                                                 |       |     |
| Notes to Consolidated Financial Statements for the  years ended December 31, 2009 and 2008                      |       | 35       |

 

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**REPORT OFINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

 

Board of Directors andStockholders

Canterbury Park HoldingCorporation

 

We have audited theaccompanying consolidated balance sheet of Canterbury Park Holding Corporation(a Minnesota corporation) as of December 31, 2009, and the relatedconsolidated statements of operations, stockholders’ equity, and cash flows forthe year ended December 31, 2009. These financial statements are the responsibility of the Company’smanagement.  Our responsibility is toexpress an opinion on these financial statements based on our audit.

 

Weconducted our audit in accordance with the standards of the Public CompanyAccounting Oversight Board (United States).  Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement.  The Company isnot required to have, nor were we engaged to perform, an audit of its internalcontrol over financial reporting.  Our audit included consideration ofinternal control over financial reporting as a basis for designing auditprocedures that are appropriate in the circumstances, but not for the purposeof expressing an opinion on the effectiveness of the Company’s internal controlover financial reporting.  Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements, assessing the accountingprinciples used and significant estimates made by management, as well asevaluating the overall financial statement presentation.  We believe thatour audit provides a reasonable basis for our opinion.

 

In ouropinion, the consolidated financial statements referred to above presentfairly, in all material respects, the financial position of Canterbury ParkHolding Corporation as of December 31, 2009, and the results of theiroperations and their cash flows for the year then ended, in conformity withaccounting principles generally accepted in the United States of America.

 

 

Grant Thornton LLP

 

 
| /s/ Grant Thornton LLP |   |
|------------------------|--------|
| Minneapolis, Minnesota |   |
| March 31, 2010    |   |

 

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**REPORT OFINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

 

To the Board of Directorsand Stockholders of

Canterbury Park HoldingCorporation

Shakopee, Minnesota

 

We have audited theaccompanying consolidated balance sheet of Canterbury Park Holding Corporationand subsidies (the “Company”) as of December 31, 2008, and the relatedconsolidated statements of operations, stockholders’ equity, and cash flows forthe period ended December 31, 2008. These consolidated financial statements are the responsibility of theCompany’s management.  Our responsibilityis to express an opinion on the financial statements based on our audit.

 

Weconducted our audit in accordance with the standards of the Public CompanyAccounting Oversight Board (United States).  Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement.  The Company isnot required to have, nor were we engaged to perform, an audit of its internalcontrol over financial reporting.  Our audit included consideration ofinternal control over financial reporting as a basis for designing auditprocedures that are appropriate in the circumstances, but not for the purposeof expressing an opinion on the effectiveness of the Company’s internal controlover financial reporting.  Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements, assessing the accountingprinciples used and significant estimates made by management, as well asevaluating the overall financial statement presentation.  We believe thatour audit provides a reasonable basis for our opinion.

 

In ouropinion, such consolidated financial statements present fairly, in all materialrespects, the financial position of Canterbury Park Holding Corporation andsubsidies as of December 31, 2008, and the results of their operations andtheir cash flows for the period ended December 31, 2008, in conformitywith accounting principles generally accepted in the United States of America.

 

 

Deloitte &Touche LLP

 

 
| /s/ Deloitte &  Touche LLP |   |
|-------------------------------------|--------|
| Minneapolis, Minnesota              |   |
| March 31, 2009                 |   |

 

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**CANTERBURY PARK HOLDINGCORPORATION AND SUBSIDIARIES**

 

**CONSOLIDATEDBALANCE SHEETS**

**DECEMBER31, 2009 AND 2008**

 
| ** **                                                                                                                         | ** ** | **2009**   | ** ** | **2008**     | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------|------------|------------|------------|--------------|------------|
|                                                                                                                               |       |       |       |         |       |
| **ASSETS**                                                                                                                         |       |       |       |         |       |
|                                                                                                                               |       |       |       |         |       |
| CURRENT  ASSETS                                                                                                                    |       |       |       |         |       |
| Cash                                                                                                                               |       | $          | 4,741,197  |         | $          | 3,745,731 |   |
| Restricted  cash                                                                                                                   |       | 949,994    |       | 1,261,292    |       |
| Short-term  investments (Note 3)                                                                                                   |       | 365,894    |       | 312,995      |       |
| Accounts  receivable, net of allowance of $6,500 and $10,000, respectively                                                         |       | 405,192    |       | 475,576      |       |
| Inventory                                                                                                                          |       | 178,512    |       | 213,682      |       |
| Prepaid  expenses                                                                                                                  |       | 465,084    |       | 429,859      |       |
| Income  taxes receivable                                                                                                           |       | 168,979    |       | 566,436      |       |
| Deferred  income taxes (Note 4)                                                                                                    |       | 296,500    |       | 286,200      |       |
| Due  from Minnesota horsemen associations                                                                                          |       | 32,353     |       |  — |       |
| Total  current assets                                                                                                              |       | 7,603,705  |       | 7,291,771    |       |
|                                                                                                                               |       |       |       |         |       |
| LONG-TERM  ASSETS                                                                                                                  |       |       |       |         |       |
| Deposits                                                                                                                           |       | 20,000     |       | 20,000       |       |
| Deferred  income taxes (Note 4)                                                                                                    |       | 28,850     |       | —       |       |
| Long-term  investments (Note 3)                                                                                                    |       | 250,000    |       | —       |       |
| Land,  buildings and equipment, net (Note 2)                                                                                       |       | 23,849,672 |       | 24,931,900   |       |
|                                                                                                                               |       |       |       |         |       |
|                                                                                                                               |       | $          | 31,752,227 |         | $          | 32,243,671 |   |
|                                                                                                                               |       |       |       |         |       |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                      |       |       |       |         |       |
|                                                                                                                               |       |       |       |         |       |
| CURRENT  LIABILITIES                                                                                                               |       |       |       |         |       |
| Accounts  payable                                                                                                                  |       | $          | 2,061,658  |         | $          | 1,852,253 |   |
| Card  room accruals                                                                                                                |       | 1,175,383  |       | 1,689,213    |       |
| Accrued  wages and payroll taxes                                                                                                   |       | 635,182    |       | 1,189,088    |       |
| Due  to MHBPA (Note 1)                                                                                                             |       | 35,422     |       | 48,251       |       |
| Accrued  property taxes                                                                                                            |       | 511,136    |       | 513,816      |       |
| Payable  to horsepersons                                                                                                           |       | 31,444     |       | 95,217       |       |
| Total  current liabilities                                                                                                         |       | 4,450,225  |       | 5,387,838    |       |
|                                                                                                                               |       |       |       |         |       |
| DEFERRED  INCOME TAXES (Note 4)                                                                                                    |       | —     |       | 174,400      |       |
|                                                                                                                               |       |       |       |         |       |
| COMMITMENTS  AND CONTINGENCIES (Notes 9 and 10)                                                                                    |       | —     |       | —       |       |
|                                                                                                                               |       |       |       |         |       |
| STOCKHOLDERS’  EQUITY (Notes 5 and 6)                                                                                         |       |       |       |         |       |
| Common  stock, $.01 par value, 10,000,000 shares authorized, 4,021,702 and 3,938,021,  respectively, shares issued and outstanding |       | 40,217     |       | 39,380       |       |
| Additional  paid-in capital                                                                                                        |       | 15,648,200 |       | 15,089,438   |       |
| Retained  earnings                                                                                                                 |       | 11,613,585 |       | 11,552,615   |       |
| Total  stockholders’ equity                                                                                                   |       | 27,302,002 |       | 26,681,433   |       |
|                                                                                                                               |       |       |       |         |       |
|                                                                                                                               |       | $          | 31,752,227 |         | $          | 32,243,671 |   |

 

See notes to consolidatedfinancial statements.

 

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**CANTERBURY PARK HOLDINGCORPORATION AND SUBSIDIARIES**

 

**CONSOLIDATEDSTATEMENTS OF OPERATIONS**

**YEARS ENDED DECEMBER 31, 2009 AND2008**

 
| ** **                                              | ** ** | **2009**   | ** ** | **2008**   | ** ** |
|---------------------------------------------------------|------------|------------|------------|------------|------------|
|                                                    |       |       |       |       |       |
| OPERATING  REVENUES:                                    |       |       |       |       |       |
| Pari-mutuel                                             |       | $          | 11,384,656 |       | $          | 13,342,050 |   |
| Card  room                                              |       | 20,158,313 |       | 24,202,920 |       |
| Concessions                                             |       | 5,285,922  |       | 5,968,317  |       |
| Other                                                   |       | 2,952,128  |       | 2,740,976  |       |
| Total  Revenues                                         |       | 39,781,019 |       | 46,254,263 |       |
| Less:  Promotional allowances                           |       | (192,436   | )          | (228,856   | )          |
| Net  Revenues                                           |       | 39,588,583 |       | 46,025,407 |       |
|                                                    |       |       |       |       |       |
| OPERATING  EXPENSES:                                    |       |       |       |       |       |
| Purses                                                  |       | 5,853,656  |       | 7,271,833  |       |
| Minnesota  Breeders’ Fund                          |       | 809,405    |       | 1,008,396  |       |
| Other  pari-mutuel expenses                             |       | 1,570,032  |       | 1,825,255  |       |
| Salaries  and benefits                                  |       | 17,135,676 |       | 20,065,914 |       |
| Cost  of concession and other sales                     |       | 2,937,619  |       | 3,318,263  |       |
| Depreciation                                            |       | 2,094,174  |       | 2,141,023  |       |
| Utilities                                               |       | 1,083,850  |       | 1,413,165  |       |
| Advertising  and marketing                              |       | 1,330,485  |       | 1,493,401  |       |
| Other                                                   |       | 6,548,499  |       | 6,773,050  |       |
| Total  Operating Expenses                               |       | 39,363,396 |       | 45,310,300 |       |
|                                                    |       |       |       |       |       |
| INCOME  FROM OPERATIONS                                 |       | 225,187    |       | 715,107    |       |
|                                                    |       |       |       |       |       |
| OTHER  (EXPENSE) INCOME:                                |       |       |       |       |       |
| Interest  expense                                       |       | (4,589     | )          | (12,389    | )          |
| Interest  income                                        |       | 40,172     |       | 120,162    |       |
| Net  Other Income                                       |       | 35,583     |       | 107,773    |       |
|                                                    |       |       |       |       |       |
| INCOME  BEFORE INCOME TAX EXPENSE                       |       | 260,770    |       | 822,880    |       |
|                                                    |       |       |       |       |       |
| Income  tax expense (Note 4)                            |       | (199,800   | )          | (384,700   | )          |
|                                                    |       |       |       |       |       |
| NET  INCOME                                             |       | $          | 60,970     |       | $          | 438,180 |   |
|                                                    |       |       |       |       |       |
| WEIGHTED  AVERAGE NUMBER OF COMMON SHARES OUTSTANDING   |       | 3,958,294  |       | 3,983,359  |       |
|                                                    |       |       |       |       |       |
| WEIGHTED  AVERAGE NUMBER OF DILUTIVE SHARES OUTSTANDING |       | 3,983,657  |       | 4,046,107  |       |
|                                                    |       |       |       |       |       |
| BASIC  NET INCOME PER COMMON SHARE (Note 7)             |       | $          | .02        |       | $          | .11 |   |
|                                                    |       |       |       |       |       |
| DILUTED  NET INCOME PER COMMON SHARE (Note 7)           |       | $          | .02        |       | $          | .11 |   |

 

See notes to consolidatedfinancial statements.

 

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**CANTERBURY PARK HOLDINGCORPORATION AND SUBSIDIARIES**

 

**CONSOLIDATEDSTATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY**

**YEARS ENDED DECEMBER 31, 2009 AND2008**

 
| ** **                                         | ** ** | **Number  of Shares** | ** ** | **Common   Stock** | ** ** | **Additional  Paid-in   Capital** | ** ** | **Retained  Earnings** | ** ** | **Total**  | ** ** |
|----------------------------------------------------|------------|-----------------------|------------|--------------------|------------|-----------------------------------|------------|------------------------|------------|------------|------------|
|                                               |       |                  |       |               |       |                              |       |                   |       |       |       |
| ***Balance at December 31, 2007***            |       | 4,084,087             |       | $                  | 40,841     |                              | $          | 15,395,778             |       | $          | 13,141,470 |   | $ | 28,578,089 |   |
|                                               |       |                  |       |               |       |                              |       |                   |       |       |       |
| Cash  dividend paid                                |       | —                |       | —             |       | —                            |       | (1,007,173             | )          | (1,007,173 | )          |
| Exercise  of stock options                         |       | 60,098                |       | 601                |       | 200,987                           |       | —                 |       | 201,588    |       |
| Stock-based  compensation                          |       | —                |       | —             |       | 145,541                           |       | —                 |       | 145,541    |       |
| Tax  benefit of stock option exercises             |       | —                |       | —             |       | 52,505                            |       | —                 |       | 52,505     |       |
| Common  stock repurchase                           |       | (216,543              | )          | (2,166             | )          | (864,006                          | )          | (1,019,862             | )          | (1,886,034 | )          |
| Shares  issued under Employee Stock Purchase Plan  |       | 5,879                 |       | 59                 |       | 48,678                            |       | —                 |       | 48,737     |       |
| Shares  issued under Employee Stock Ownership Plan |       | 10,000                |       | 100                |       | 109,900                           |       | —                 |       | 110,000    |       |
| Forfeited  restricted shares                       |       | (5,500                | )          | (55                | )          | 55                                |       | —                 |       |       |       |
| Net  income                                        |       | —                |       | —             |       | —                            |       | 438,180                |       | 438,180    |       |
| *** ***                                       |       |                  |       |               |       |                              |       |                   |       |       |       |
| ***Balance at December 31, 2008***            |       | 3,938,021             |       | $                  | 39,380     |                              | $          | 15,089,438             |       | $          | 11,552,615 |   | $ | 26,681,433 |   |
|                                               |       |                  |       |               |       |                              |       |                   |       |       |       |
| Exercise  of stock options                         |       | 79,837                |       | 798                |       | 376,918                           |       | —                 |       | 377,716    |       |
| Stock-based  compensation                          |       | —                |       | —             |       | 138,966                           |       | —                 |       | 138,966    |       |
| Tax  benefit of stock option exercises             |       | —                |       | —             |       | 15,893                            |       | —                 |       | 15,893     |       |
| Shares  issued under Employee Stock Purchase Plan  |       | 3,844                 |       | 39                 |       | 26,985                            |       | —                 |       | 27,024     |       |
| Net  income                                        |       | —                |       | —             |       | —                            |       | 60,970                 |       | 60,970     |       |
|                                               |       |                  |       |               |       |                              |       |                   |       |       |       |
| ***Balance at December 31, 2009***            |       | 4,021,702             |       | $                  | 40,217     |                              | $          | 15,648,200             |       | $          | 11,613,585 |   | $ | 27,302,002 |   |

 

See notes to consolidatedfinancial statements.

 

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**CANTERBURY PARK HOLDINGCORPORATION AND SUBSIDIARIES**

 

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

**YEARSENDED DECEMBER 31, 2009 AND 2008**

 
| ** **                                                                  | ** ** | **2009**   | ** ** | **2008**   | ** ** |
|-----------------------------------------------------------------------------|------------|------------|------------|------------|------------|
| **Operating Activities:**                                                   | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net  income                                                                 |       | $          | 60,970     |       | $          | 438,180 |   |
| Adjustments  to reconcile net income to net cash provided by operations:    |       |       |       |       |       |
| Depreciation                                                                |       | 2,094,174  |       | 2,141,023  |       |
| Stock—based  compensation expense                                      |       | 138,966    |       | 145,541    |       |
| Excess  tax benefit from exercise of stock options                          |       | —     |       | (21,735    | )          |
| Loss  on sale of land, buildings & equipment                       |       | 5,092      |       | 1,986      |       |
| Tax  benefit of stock option exercises                                      |       | 15,893     |       | 52,505     |       |
| Deferred  income taxes                                                      |       | (213,550   | )          | (152,300   | )          |
| Changes  in operating assets and liabilities:                               |       |       |       |       |       |
| Decrease  in accounts receivable                                            |       | 70,384     |       | 274,206    |       |
| Decrease  in restricted cash                                                |       | 311,298    |       | 771,340    |       |
| Increase  in other current assets                                           |       | (55        | )          | (20,390    | )          |
| Decrease  (increase) in income taxes receivable                             |       | 397,457    |       | (350,842   | )          |
| Decrease  in accounts payable and accrued wages & payroll taxes    |       | (324,259   | )          | (846,969   | )          |
| Decrease  in card room accruals                                             |       | (513,830   | )          | (724,583   | )          |
| Decrease  in accrued interest                                               |       | —     |       | (5,196     | )          |
| (Decrease)  increase in accrued property taxes                              |       | (2,680     | )          | 22,186     |       |
| Decrease  in payable to horsepersons                                        |       | (63,773    | )          | (67,714    | )          |
| Decrease  in due to MHBPA                                                   |       | (45,182    | )          | (8,700     | )          |
| Net  cash provided by operations                                            |       | 1,930,905  |       | 1,648,538  |       |
|                                                                        |       |       |       |       |       |
| **Investing Activities:**                                                   | ** ** | ** ** | ** ** | ** ** | ** ** |
| Additions  to land, buildings and equipment                                 |       | (1,037,279 | )          | (2,103,977 | )          |
| Proceeds  from sale of equipment                                            |       | —     |       | 4,236      |       |
| Proceeds  from sale of investments                                          |       | 342,116    |       | 80,687     |       |
| Purchase  of investments                                                    |       | (645,015   | )          | (312,994   | )          |
| Net  cash used in investing activities                                      |       | (1,340,178 | )          | (2,332,048 | )          |
|                                                                        |       |       |       |       |       |
| **Financing Activities:**                                                   | ** ** | ** ** | ** ** | ** ** | ** ** |
| Proceeds  from issuance of common stock                                     |       | 404,739    |       | 250,324    |       |
| Common  stock repurchase                                                    |       | —     |       | (1,886,034 | )          |
| Cash  dividend to shareholders                                              |       | —     |       | (1,007,173 | )          |
| Excess  tax benefit from exercise of stock options                          |       | —     |       | 21,735     |       |
| Net  cash provided by (used in) financing activities                        |       | 404,739    |       | (2,621,148 | )          |
|                                                                        |       |       |       |       |       |
| Net  increase (decrease) in cash                                            |       | 995,466    |       | (3,304,658 | )          |
|                                                                        |       |       |       |       |       |
| Cash  at beginning of year                                                  |       | 3,745,731  |       | 7,050,389  |       |
|                                                                        |       |       |       |       |       |
| Cash  at end of year                                                        |       | $          | 4,741,197  |       | $          | 3,745,731 |   |
|                                                                        |       |       |       |       |       |
| **Non-cash investing and financing activities:**                            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Additions  to land, buildings and equipment funded through accounts payable |       | $          | 11,487     |       | $          | 31,729 |   |
| Non-cash  exercise of stock options                                         |       | $          | 15,880     |       | $          | 20,000 |   |
| **Supplemental disclosure of cash flow information:**                       | ** ** | ** ** | ** ** | ** ** | ** ** |
| Income  taxes paid, net of refunds                                          |       | $          | —     |       | $          | 775,000 |   |

 

See notes to consolidatedfinancial statements.

 

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**CANTERBURY PARK HOLDINGCORPORATION AND SUBSIDIARIES**

 

**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS**

**YEARS ENDED DECEMBER 31, 2009 AND2008**

 

1.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

*Business* — Canterbury Park Holding Corporationwas incorporated on March 24, 1994. On March 29, 1994, the Company acquired all the outstandingsecurities of Jacobs Realty, Inc. (JRI) from Irwin Jacobs and IMR Fund,L.P. (an investment fund for various pension plans and trusts).  JRI was merged into the Company, and theacquisition was accounted for under the purchase method of accounting wherebythe acquired assets and liabilities have been recorded at the Company’scost.  The primary asset of JRI wasCanterbury Downs Racetrack and the 325 acres of surrounding land.

 

On May 20,1994, the Company adopted a plan of Reorganization pursuant to which the soleshareholder of Canterbury Park Concessions, Inc. (CPC), and majorityshareholder of the Company, agreed to exchange his shares of CPC stock for198,888 shares of the Company’s common stock concurrent with the closing of apublic offering.  Pursuant to the Plan ofReorganization, CPC became a wholly owned subsidiary of the Company in August 1994when the Company completed the initial public offering of its commonstock.  This reorganization was treatedin a manner similar to a pooling of interests. Net proceeds received by the Company from the public offering wereapproximately $4,847,000, which along with additional borrowings under theCompany’s line of credit with the majority shareholder, were used to pay offthe remaining notes payable from the acquisition of JRI.

 

The consolidatedfinancial statements include the accounts of the Company, CPC and ShakopeeValley RV Park Acquisition Company, LLC after elimination of intercompanyaccounts and transactions.

 

*Presentation—*TheConsolidated Statement of Operations, Consolidated Statement of Changes inStockholders’ Equity, and Consolidated Statement of Cash Flows from theprior-period have been conformed to the 2009 presentation.  Thispresentation change and certain reclassifications in the footnotes had noeffect on net income, earnings per share, or stockholders’ equity.

 

*RevenueRecognition —*Our revenues are derived primarily from the operations ofa card room, pari-mutuel wagering on simulcast and live horse races, concessionsales, and related activities. Collection revenue from card room operations, a set percentage ofwagers, is recognized at the time that the wagering process is complete.  Pari-mutuel revenues are recognized uponoccurrence of the live race that is presented for wagering and after that liverace is made official by the respective state’s racing regulatory body.  Revenues related to concession andpublication sales and parking and admission fees are recognized as revenue whenthe service has been performed or the product has been delivered.

 

*Estimates* — The preparation of the consolidatedfinancial statements in conformity with accounting principles generallyaccepted in the United States of America requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the consolidatedfinancial statements and the reported amounts of revenues and expenses duringthe reporting period.  Actual resultscould differ from these estimates.

 

*RestrictedCash* — Restrictedcash represents refundable deposits and amounts due to horsemen for purses,stakes and awards, and amounts accumulated in card game progressive jackpotpools, the Player Pool and Poker Promotional Fund to be used to repay cardplayers in the form of promotions, giveaways, prizes, or by other means.

 

*UncashedWinning Tickets —*TheCompany records a liability for winning tickets upon the completion of arace.  As winning tickets are redeemed,this liability is reduced for the respective cash payment.  

 

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We recognizerevenue associated with the uncashed winning tickets when the likelihood of theredemption of the winning ticket is remote.

 

*Promotional Allowances —*The Companyoffers certain promotional allowances at no charge to patrons who participatein our player rewards program.  Theretail value of these promotional items is shown as a deduction from totalrevenues on the Company’s consolidated statements of operations.

 

*Due toMinnesota Horsemen’s Benevolent and Protective Association, Inc. (“MHBPA”)* — The Minnesota Pari-Mutuel Horse RacingAct specifies that the Company is required to segregate a portion of funds(recorded as purse expense in the statements of operations), received from cardroom operations and wagering on simulcast and live horse races, for futurepayment as purses for live horse races or other uses of the horsepersons’associations.  Pursuant to an agreementwith the MHBPA, the Company has transferred into a trust account or paiddirectly to the MHBPA, approximately $5,525,000 and $6,534,000 for the yearsended December 31, 2009 and 2008, respectively, related to thoroughbredraces.  Minnesota Statutes specify thatamounts transferred into the trust account are the property of the trust andnot of the Company.  The interest rate onany purses accrued but not transferred into the trust was 4.50% on both December 31,2009 and December 31, 2008.

 

*Impairmentof Long-Lived Assets —*Management of the Company periodically reviews the carrying value ofproperty and equipment for potential impairment by comparing the carrying valueof these assets with their related expected future net cash flows.  Should the sum of the related expected futurenet cash flows be less than the carrying value, management will determinewhether an impairment loss should be recognized.  An impairment loss would be measured by theamount by which the carrying value of the asset exceeds the fair value of theasset.  To date, management hasdetermined that no impairment of these assets exists.

 

*Land,Buildings, and Equipment* — Land, buildings, equipment, and building improvements arecapitalized at a level of $1,000 or greater and are recorded at cost.  Repair and maintenance costs are charged tooperations when incurred.  Furniture,fixtures, and equipment are depreciated using the straight-line method overestimated useful lives ranging from 5 — 7 years, while buildings aredepreciated over 15 — 39 years.  Buildingimprovements are amortized using the straight-line method over the useful lifeof the assets.

 

# *CardRoom Accruals —*Minnesota law allowsthe Company to collect amounts from patrons to fund progressive jackpot poolsin the card room.  These amounts, alongwith amounts earned by the player pool, promotional pools and the outstandingchip liability, are accrued as short-term liabilities at each balance sheetdate.

# * *

*IncomeTaxes* — Incometaxes are accounted for under the asset and liability method.  Deferred tax assets and liabilities arerecognized for the estimated future tax consequences attributable todifferences between the financial statement carrying amounts of existing assetsand liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax ratesin effect for the year in which those temporary differences are expected toreverse.

 

We have adopted theprovisions of ASC 740, *Income Taxes*(“ASC740”).  ASC 740 clarifies the accountingfor uncertainty in income taxes recognized in an enterprise’s financialstatements and also prescribes a recognition threshold and measurementattribute for the financial statement recognition and measurement of a taxposition taken or expected to be taken in a tax return. Additionally, ASC 740provides guidance on derecognition, classification, interest and penalties,accounting in interim periods, disclosure and transition.  The adoption of ASC 740 had no effect on theamounts previously recognized for income taxes.

 

Interestand penalties associated with uncertain income tax positions are presented inincome tax expense. During the twelve monthsended December 31, 2009, we have not recognized expense for 

 

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interest and penaltiesand do not have any amounts accrued at December 31, 2009 and December 31,2008 respectively, for the payment of interest and penalties.

 

*NetIncome Per Share* —Basic net income per common share is based on the weighted average number ofcommon shares outstanding during each year. Diluted net income per common share takes into effect the dilutiveeffect of potential common shares outstanding. The Company’s only potential common shares outstanding are stock optionsand shares of unvested restricted stock.

 

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

 

*RecentAccounting Pronouncements —*In June 2009, the FinancialAccounting Standards Board, (“FASB”) issued Accounting Standards Codification (“ASC”)105, *Generally Accepted AccountingPrinciples*(“ASC 105”).  ASC 105 establishes the FASBAccounting Standards Codification (“Codification”) as the source ofauthoritative accounting principles recognized by the FASB to be applied bynongovernment entities in the preparation of financial statements in conformitywith GAAP.  Rules and interpretive releases of the SEC underauthority of federal securities law are also sources of authoritative GAAP forSEC registrants.  References to FASB guidance throughout this documenthave been updated for the Codification.

 

The Company adopted anupdate to ASC 805 — *Business Combinations*(“ASC805”) on January 1, 2009.  ASC 805 establishes principlesand requirements for how the acquirer of a business recognizes and measures inits financial statements the identifiable assets acquired, the liabilitiesassumed, and any noncontrolling interest in the acquiree.  The statement also provides guidance forrecognizing and measuring the goodwill acquired in the business combination anddetermines what information to disclose to enable users of the financialstatements to evaluate the nature and financial effects of the businesscombination. This update had no material impact on the Company’s financialposition, results of operations or cash flows.

 

The Companyadopted an update to ASC 820 — *Fair Value Measurement andDisclosures* (“ASC 820”) January 1, 2009 for non-financialassets.  ASC 820 defines fair value, establishes a framework formeasuring fair value, and expands disclosures about fair valuemeasurement.  ASC 820 also emphasizes that fair value is amarket-based measurement, not an entity-specific measurement, and sets out afair value hierarchy with the highest priority being quoted prices in activemarkets.  Under ASC 820, fair value measurements are disclosed bylevel within that hierarchy.  The Company adopted ASC 820 for thefiscal year beginning January 1, 2008 for financial assets.  The adoption of ASC 820 and the updatehad no material impact on the Company’s financial position, results ofoperations, or cash flows.

 

The Companyadopted an update to ASC 855 — *Subsequent Events*(“ASC 855”) on April 1, 2009.  ASC 855 provides guidance on whena subsequent event should be recognized in the financial statements. Subsequentevents that provide additional evidence about conditions that existed at thedate of the balance sheet should be recognized at the balance sheet date.  Subsequent events that provide evidence aboutconditions that arose after the balance sheet date but before financialstatements are issued, or are available to be issued, are not required to berecognized.  The date through whichsubsequent events have been evaluated must be disclosed as well as whether itis the date the financial statements were issued or the date the financialstatements were available to be issued. For non-recognized subsequent events which should be disclosed to keepthe financial statements from being misleading, the nature of the event and anestimate of its financial effect, or a statement that such an estimate cannotbe made, should be disclosed. The standard is effective for interim or annualperiods ending after June 15, 2009. The adoption of ASC 855 and the update had no material impact on theCompany’s financial position, results of operations, or cash flows.

 

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*StockBased Employee Compensation* — ASC 718, Compensation — Stock Compensation (“ASC718”), requires recognition of employee services provided in exchange for ashare-based payment based on the grant date fair market value.

 

ASC 718 requires the use of a fair value based measurement method whengranting stock options.  The Company selected the Black-Scholesmethod to measure the compensation cost for stock options.  The Black-Scholes method requires the use ofsignificant assumptions to estimate the fair value of the stock option awards.  The expected term of both the board ofdirector and key employee options was calculated using the simplifiedmethod.  The expected volatility wascalculated primarily with reliance on historical volatility rates.  TheCompany assumed a dividend yield equivalent to historical dividend rates overthe vesting period.  The risk-free rateutilized in the Black-Scholes calculations was the U.S. Constant MaturityTreasury Security for the period equivalent to the term of the option.

 

The fair value ofoptions granted under the 1994 Stock Plan during 2009 and 2008 was estimated onthe date of grant using the Black-Scholes option-pricing model with thefollowing weighted average assumptions and results:

 
| ** **                           | ** ** | **2009** | ** ** | **2008** | ** ** |
|--------------------------------------|------------|----------|------------|----------|------------|
| Dividend  yield                      |       | 4.12     | %          | 2.20     | %          |
| Expected  volatility                 |       | 26       | %          | 15       | %          |
| Risk-free  interest rate             |       | 2.93     | %          | 3.62     | %          |
| Expected  term of options in years   |       | 6.3      |       | 7.3      |       |
| Fair  value of options on grant date |       | $        | 111,455    |     | $          | 29,700 |   |
|                                      |            |          |            |          |            |  |  |

 

For moreinformation on our stock-based compensation plans, see Note 6.

 

2.              LAND, BUILDINGS AND EQUIPMENT

 

Land, buildingsand equipment, at cost, consists of the following at December 31:

 
| ** **                           | ** ** | **2009**    | ** ** | **2008**    | ** ** |
|--------------------------------------|------------|-------------|------------|-------------|------------|
|                                 |       |        |       |        |       |
| Land                                 |       | $           | 6,673,076  |        | $          | 6,673,076 |   |
| Buildings  and building improvements |       | 20,006,176  |       | 19,668,994  |       |
| Furniture  and equipment             |       | 15,794,200  |       | 15,206,430  |       |
|                                 |       | 42,473,452  |       | 41,548,500  |       |
| Accumulated  depreciation            |       | (18,623,780 | )          | (16,616,600 | )          |
|                                 |       | $           | 23,849,672 |        | $          | 24,931,900 |   |

 

3.              FAIR VALUE

 

ASC 820 definesfair value as the exchange price that would be received for an asset or paid totransfer a liability (an exit price) in the principal or most advantageousmarket for the asset or liability in an orderly transaction between marketparticipants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entityto maximize the use of observable inputs and minimize the use of unobservableinputs when measuring fair value.

 

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The standarddescribes three levels of inputs that may be used to measure fair value:

 

*Level1* — Quoted pricesin active markets for identical assets or liabilities.

 

*Level2* — Observableinputs other than Level 1 prices such as quoted prices for similar assets orliabilities; quoted prices in markets that are not active; or other inputs thatare observable or can be corroborated by observable market data forsubstantially the full term of the assets or liabilities.

 

*Level3* — Unobservableinputs that are supported by little or no market activity and that aresignificant to the fair value of the assets or liabilities.

 

The Company utilizes themarket approach to measure fair value for its financial assets andliabilities.  The market approach uses prices and other relevantinformation generated by market transactions involving identical or comparableassets or liabilities.

 

Assets and liabilitiesmeasured at fair value on a recurring basis for December 31, 2009 and December 31,2008 are summarized below:

 
| ** **                                        | ** ** | **Fair Value Measurements as of  December 31, 2009** | ** ** |
|---------------------------------------------------|------------|-----------------------------------------------------------|------------|
| **Description**                                   | ** ** | **Total**                                                 | ** ** | **Level 1** | ** ** | **Level 2** | ** ** | **Level 3** | ** ** |
|                                              |       |                                                      |       |   |   |   |   |   |   |
| Short-term  investments (Certificates of Deposit) |       | $                                                         | 365,894    |   | $ | — |   | $ | 365,894 |   | $ | — |   |
| Long-term  investments (Certificates of Deposit)  |       | $                                                         | 250,000    |   | $ | — |   | $ | 250,000 |   | $ | — |   |
| Total                                             |       | $                                                         | 615,894    |   | $ | — |   | $ | 615,894 |   | $ | — |   |

 
| ** **                                        | ** ** | **Fair Value Measurements as of  December 31, 2008** | ** ** |
|---------------------------------------------------|------------|-----------------------------------------------------------|------------|
| **Description**                                   | ** ** | **Total**                                                 | ** ** | **Level 1** | ** ** | **Level 2** | ** ** | **Level 3** | ** ** |
|                                              |       |                                                      |       |   |   |   |   |   |   |
| Short-term  investments (Certificates of Deposit) |       | $                                                         | 312,995    |   | $ | — |   | $ | 312,995 |   | $ | — |   |
| Total                                             |       | $                                                         | 312,995    |   | $ | — |   | $ | 312,995 |   | $ | — |   |

 

4.     INCOME TAXES

 

A reconciliationbetween income taxes computed at the statutory federal income tax rate and theeffective tax rate is as follows:

 
| ** **                                      | ** ** | **2009** | ** ** | **2008** | ** ** |
|-------------------------------------------------|------------|----------|------------|----------|------------|
|                                            |       |     |       |     |       |
| Federal  tax expense computed at statutory rate |       | $        | 88,700     |     | $          | 279,800 |   |
| Nondeductible  lobbying expense                 |       | 54,300   |       | 34,900   |       |
| State  expense, net of federal impact           |       | 28,800   |       | 61,500   |       |
| Other                                           |       | 28,000   |       | 8,500    |       |
|                                            |       | $        | 199,800    |     | $          | 384,700 |   |

 

Income tax expensefor the years ended December 31, 2009 and 2008 consists of the following:

 
| ** **                   | ** ** | **2009** | ** ** | **2008** | ** ** |
|------------------------------|------------|----------|------------|----------|------------|
| Current                      |       |     |       |     |       |
| Federal                      |       | $        | 304,000    |     | $          | 418,500 |   |
| State                        |       | 109,350  |       | 118,500  |       |
|                         |       | 413,350  |       | 537,000  |       |
| Deferred,  primarily Federal |       | (213,550 | )          | (152,300 | )          |
|                         |       | $        | 199,800    |     | $          | 384,700 |   |

 

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Current and longterm temporary differences and tax carryforwards at December 31 are asfollows:

 
| ** **                      | ** ** | **2009** | ** ** | **2008** | ** ** |
|---------------------------------|------------|----------|------------|----------|------------|
| Current                         |       |     |       |     |       |
| Vacation  accrual               |       | $        | 99,400     |     | $          | 105,400 |   |
| Player  rewards program accrual |       | 173,400  |       | 157,800  |       |
| Other                           |       | 23,700   |       | 23,000   |       |
| Net  current deferred tax asset |       | $        | 296,500    |     | $          | 286,200 |   |

 
| ** **                                       | ** ** | **2009** | ** ** | **2008** | ** ** |
|--------------------------------------------------|------------|----------|------------|----------|------------|
| Long-Term                                        |       |     |       |     |       |
| Tax  depreciation greater than book depreciation |       | $        | (166,700   | )        | $          | (313,100 | ) |
| Deferred  gain on sale of land                   |       | (104,000 | )          | (104,000 | )          |
| Stock  options                                   |       | 263,900  |       | 216,900  |       |
| Other                                            |       | 35,650   |       | 25,800   |       |
| Net  long-term deferred tax asset (liability)    |       | $        | 28,850     |     | $          | (174,400 | ) |

 

We have adopted theprovisions of ASC 740, *Income Taxes*(“ASC740”).  ASC 740 clarifies the accountingfor uncertainty in income taxes recognized in an enterprise’s financialstatements and also prescribes a recognition threshold and measurementattribute for the financial statement recognition and measurement of a taxposition taken or expected to be taken in a tax return. Additionally, ASC 740provides guidance on derecognition, classification, interest and penalties,accounting in interim periods, disclosure and transition.  The adoption of ASC 740 had no effect on theamounts previously recognized for income taxes.

 

Interestand penalties associated with uncertain income tax positions are presented inincome tax expense. During the twelve monthsended December 31, 2009, we have not recognized expense for interest andpenalties and do not have any amounts accrued at December 31, 2009 and December 31,2008 respectively, for the payment of interest and penalties.

 

The Company is subjectto U.S. and Minnesota taxation.  TheCompany’s tax year for 2007 is subject to examination by the taxauthorities.  With few exceptions, theCompany is no longer subject to US federal, state, local or foreignexaminations by tax authorities for years before 2007.

 

5.     STOCKHOLDERS’ EQUITY

 

*StockOptions:*

 

The Company’s 1994Stock Plan (the “Plan”) provides for the granting of awards in the form ofstock options, restricted stock, stock appreciation rights, and deferred stockto key employees and non-employees, including directors of and consultants tothe Company and any subsidiary, to purchase up to a maximum of 1,450,000 sharesof common stock.  Options that aregranted under the Plan may be either options that qualify as “incentive stockoptions” within the meaning of Section 422 of the Internal Revenue Code of1986, as amended (Incentive Stock Options), or those that do not qualify asIncentive Stock Options (Non-Qualified Stock Options).  The Plan is administered by the Board ofDirectors which determines the persons who are to receive awards under thePlan, the type of award to be granted, the number of shares subject to eachaward and, if an option, the exercise price of each option.  The Plan also provides for formula grants ofNon-Qualified Stock Options to non-employee directors of the Company.

 

The Plan provides that payment of the exercise price may be made in theform of unrestricted shares of common stock already owned by the optionee.  The Company calculates the fair market valueof unrestricted shares as the average of the high and low sales prices on thedate of exercise.  See Note 6 below forfurther information regarding options granted under the Plan.

 

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*EmployeeStock Purchase Plan:*

 

On April 3,1995, the Board of Directors adopted an Employee Stock Purchase Plan (the “ESPP”).  The ESPP is open to all employees of theCompany working more than 15 hours per week. The ESPP consists of one-year phases. The phases commence on October 1 of each year and under the termsof the plan, employees are allowed to set aside a portion of their payrollearnings to purchase shares of the Company’s common stock.  The purchase price is 95% of the fair marketvalue of the shares on the termination date of the phase.  The plan provides for the sale of up to350,000 shares.  The plan issued 3,844and 5,879 shares in 2009 and 2008, respectively.  The ESPP has issued a total of 238,328 sharessince the inception.

 

*401(k) Plan:*

 

On June 1,1998 the Company established a defined contribution savings plan for employeeswho had completed one year of service, as defined in the Plan document.  The defined contribution savings plan allowsfor employee compensation deferral contributions under Section 401(k) ofthe Internal Revenue Code and discretionary contributions by the Company.  Employer contributions charged to operationsin 2009 and 2008 were approximately $28,000 and $275,000, respectively.  In January 2009, the Company suspendedits employer contributions for fiscal 2009.

 

*EmployeeStock Ownership Plan:*

 

In December 2004,the Company’s Board of Directors approved an Employee Stock Ownership Plan (the“ESOP”) effective for calendar years beginning January 1, 2004.  All eligible employees of the Companyparticipate in the ESOP after completing one full calendar year ofservice.  Contributions to the ESOP aredetermined by the Board of Directors and can be made in cash or shares of theCompany’s common stock.  Annualcontributions are allocated to each participant based on compensation and vestin accordance with a six year graded vesting schedule.  Compensation expense for the ESOP isdetermined based on the average fair value of shares on the date the Companycommits to the contribution to the ESOP. For the purposes of earnings per share, ESOP shares are included inweighted-average common shares outstanding at year-end as the shares arecommitted to be contributed on that date. On February 12, 2008, the Company committed to contribute 10,000shares of the Company’s common stock valued at $109,900.  The shares were issued in March 2008 andwere allocated to the accounts of eligible employees based upon their 2007compensation during the first quarter of 2008. On October 24, 2008, the Company suspended its ESOP contributionfor fiscal 2008.  As of the date of thisfiling, the Company had taken no further action regarding possiblere-introduction of the contribution.

 

*StockRepurchase Plan:*

 

On January 16,2008, the Company announced that its Board of Directors had authorized therepurchase of up to an additional 250,000 shares of the Company’s common stockpursuant to Exchange Act Rule 12b-18. During 2008, the Company repurchased 216,543 shares of common stock atan average price of $8.71 for an aggregate purchase price of $1,886,034.  The Company did not repurchase any shares in2009.

 

6.     STOCK BASED COMPENSATION

 

The Plan, anequity based compensation plan, provides for the granting of awards in the formof stock options, restricted stock, stock appreciation rights, and deferredstock to key employees and non-employees, including directors of andconsultants to the Company and any subsidiary, for up to a maximum of 1,450,000shares of common stock.

 

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Stock optionactivity related to the Plan during the years ended December 31, 2009 and2008 is summarized below:

 
| ** **                          | ** ** | **2009**   | ** ** | **2008**                                  | ** ** |
|-------------------------------------|------------|------------|------------|-------------------------------------------|------------|
| ** **                          | ** ** | **Shares** | ** ** | **Weighted   Average   Exercise   Price** | ** ** | **Shares** | ** ** | **Weighted   Average   Exercise   Price** | ** ** |
|                                |       |       |       |                                      |       |   |   |   |   |
| Outstanding  at beginning of year   |       | 470,000    |       | $                                         | 11.12      |   | 605,900 |   | $ | 11.00 |   |
|                                |       |       |       |                                      |       |   |   |   |   |
| Granted                             |       | 115,000    |       | 6.09                                      |       | 15,000 |   | 11.35 |   |
| Exercised                           |       | (82,506    | )          | 4.58                                      |       | (61,900 | ) | 3.58 |   |
| Expired/Forfeited                   |       | (99,250    | )          | 14.52                                     |       | (89,000 | ) | 15.71 |   |
|                                |       |       |       |                                      |       |   |   |   |   |
| Outstanding  at end of year         |       | 403,244    |       | $                                         | 10.15      |   | 470,000 |   | $ | 11.12 |   |
|                                |       |       |       |                                      |       |   |   |   |   |
| Options  exercisable at end of year |       | 335,744    |       | $                                         | 10.89      |   | 462,500 |   | $ | 11.07 |   |

 

The grant-datefair value of options outstanding and exercisable at December 31, 2009 and2008 was $1,712,000 and $2,508,000, respectively.  The weighted average remaining contractualterm of these options is 3.2 and 2.2 years, respectively.

 

Theweighted-average grant-date fair value of options granted during the years 2009and 2008 was $113,863 and $29,700, respectively.  The total fair value of options exercisedduring the years ended December 31, 2009 and 2008 was $247,000 and$155,000, respectively.

 

The followingtable summarizes information concerning all options outstanding and optionsexercisable as of December 31, 2009:

 
| **Range  of Exercise Price** | ** ** | **Options  Outstanding** | ** ** | **Weighted  Average  Remaining  Contractual  Life in Years** | ** ** | **Weighted  Average   Exercise   Price** | ** ** | **Options   Exercisable** | ** ** | **Weighted   Average   Exercise Price** | ** ** |
|------------------------------|------------|--------------------------|------------|--------------------------------------------------------------|------------|------------------------------------------|------------|---------------------------|------------|-----------------------------------------|------------|
| $ 5.00 — 7.50      |       | 221,244                  |       | 4.8                                                          |       | $                                        | 6.23       |                      | 157,494    |                                    | $          | 6.32 |   |
| $ 7.51 — 11.25     |       | 14,500                   |       | 0.8                                                          |       | $                                        | 9.83       |                      | 14,500     |                                    | $          | 9.83 |   |
| $ 11.26 — 16.50    |       | 75,000                   |       | 6.1                                                          |       | $                                        | 13.56      |                      | 71,250     |                                    | $          | 11.51 |   |
| $ 16.51 — 17.25    |       | 92,500                   |       | 1.6                                                          |       | $                                        | 16.81      |                      | 92,500     |                                    | $          | 16.81 |   |
| Total                        |       | 403,244                  |       | 4.2                                                          |       | $                                        | 10.15      |                      | 335,744    |                                    | $          | 10.89 |   |

 

*Boardof Director Grants*

 

Each non-employeemember of the Board of Directors receives an annual recurring grant of 3,000non-qualified stock options.  On February 1,2009 and February 1, 2008, 15,000 options were granted to the five boardmembers with an exercise price equal to the market price on the date of grantof $6.66 and $11.35, respectively.  Thestock options vest over a six-month period and expire in ten years.   Thecompensation cost associated with the Board of Director options of $18,900 and$29,700 was recognized as expense over the six-month vesting period in 2009 and2008, respectively.

 

*2006 Employee Stock OptionGrant*

 

On February 9, 2006, 15,000 employeestock options were granted.  Thecompensation cost associated with the employee stock option grant in 2006 isbeing recognized ratably over the four-year vesting period.  The compensation cost related to these employee optionawards included in salaries and benefits expense for 2009 and 2008 was $5,146and $11,578, respectively.  As of December 31,

 

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2009, there was$386 of total unrecognized compensation cost related to these stock optionswhich is expected to be recognized in 2010.

 

*2006 Restricted Stock Grant*

 

Also on February 9,2006, 41,000 shares of restricted stock were granted to executiveemployees.  The restricted stock cliffvests in four years from the date of granting. There was no activity during 2009. In 2008, 5,500 shares were forfeited. On December 31, 2009 there are 35,000 shares outstanding with aweighted average grant date fair value of $14.55.

 

Upon granting,compensation cost associated with the restricted stock grant was calculated asthe market price on the date of grant of $14.55 for the 41,000 shares (reducedby estimated forfeitures) of $589,275. In 2008, as forfeited shares had exceeded original estimatedforfeitures, a new forfeiture rate was calculated.  As a result of this new calculation, thetotal estimated compensation cost for the restricted stock grant is $487,425.  In accordance with the modified prospectivemethod, the compensation cost related to these awards included in salaries andbenefits expense for the years ended December 31, 2009 and 2008 was$97,290 and $104,263, respectively.  Asof December 31, 2009, there was $3,510 of total unrecognized compensationcost related to restricted stock compensation arrangements granted under thePlan which is expected to be recognized in 2010.

 

*2009Employee Stock Option Grant*

 

In addition, on April 23,2009, 100,000 options were granted to employees with an exercise price equal tothe market price on the date of grant of $6.00. The stock options vest over a 42-month period and expire in ten years.  The compensation cost associated with thisgrant of employee options is $92,555 to be recognized as expense over the42-month vesting period.  Thecompensation cost related to these employee option awards included in salariesand benefits expense for 2009 was $17,630. As of December 31, 2009, there was $74,925 of total unrecognizedcompensation cost related to these stock options which is expected to berecognized over 2.8 years.  The totalincome tax benefit recognized in the income statement for stock-basedcompensation arrangements was $16,000 and $53,000 for 2009 and 2008,respectively.

 

7.     EARNINGS PER SHARE COMPUTATIONS

 

The following is areconciliation of the numerator and denominator of the earnings per commonshare computations:

 
| ** **                                                                         | ** ** | **2009**  | ** ** | **2008**  | ** ** |
|------------------------------------------------------------------------------------|------------|-----------|------------|-----------|------------|
|                                                                               |       |      |       |      |       |
| Net  income (numerator) amounts used for basic and diluted per share computations: |       | $         | 60,970     |      | $          | 438,180 |   |
|                                                                               |       |      |       |      |       |
| Weighted  average shares (denominator) of common stock outstanding:                |       |      |       |      |       |
| Basic                                                                              |       | 3,958,294 |       | 3,983,359 |       |
| Plus  dilutive effect of stock options                                             |       | 25,363    |       | 62,748    |       |
| Diluted                                                                            |       | 3,983,657 |       | 4,046,107 |       |
|                                                                               |       |      |       |      |       |
| Net  income per common share:                                                      |       |      |       |      |       |
| Basic                                                                              |       | $         | .02        |      | $          | .11 |   |
| Diluted                                                                            |       | .02       |       | .11       |       |

 

Options to purchase264,250 shares of common stock at an average of $11.86 per share wereoutstanding at December 31, 2009 but were not included in the computationof diluted EPS because the options’ exercise price was greater than the averagemarket price of the common shares.

 

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Options to purchase 337,500 shares ofcommon stock at an average of $13.29 per share were outstanding at December 31,2008 but were not included in the computation of diluted EPS because theoptions’ exercise price was greater than the average market price of the commonshares.

 

8.     LINES OF CREDIT

 

The Company has ageneral credit agreement with Bremer Bank, which provides a revolving creditline.  On September 30, 2009, theCompany signed an amendment with Bremer Bank extending the expiration date fromSeptember 30, 2009 to June 30, 2010 and adjusting the credit linefrom $5,000,000 to $3,000,000.  TheCompany had no borrowings under this credit line during 2009 and 2008.  The credit agreement contains certaincovenants requiring the Company to maintain certain financial ratios.  The Company was in compliance with theserequirements as of December 31, 2009. The Company plans to renew this credit line before it expires.  Management believes that funds availableunder this line of credit, along with funds generated from card room andsimulcast operations, will be sufficient to satisfy its liquidity and capitalresource requirements during 2010.

 

9.     OPERATING LEASES AND COMMITMENTS

 

# *PurchaseObligations*

# * *

In March 2008, theCompany entered into a six-year totalizator service agreement with ScientificGames Inc.  Pursuant to the agreement,Scientific Games provides totalizator equipment and computer programs whichrecord and process all wagers and calculate odds and payoffs.  In October 2008, the Company enteredinto a four-year service agreement to outsource its information technology (IT)function.  Amounts charged to operationsunder these agreements for the years ended December 31, 2009 and 2008 were approximately $644,000 and $377,000,respectively.

 

*OperatingLease Obligations*

 

The Company hasentered into operating leases for rental of office equipment, equipment toprint certain publications, and track equipment to maintain the Racetrack.  Amounts charged to operations under theseagreements for the years ended December 31, 2009 and 2008 wereapproximately $142,000 and $85,000, respectively.  All such leases expire on or before September 30,2013.  Future lease payment obligationsunder these leases are provided in the table below.

 

*FUTUREMINIMUM LEASE PAYMENTS*

 

The following tablereflects our future minimum lease payments as of December 31, 2009:

 
| ** **                       | ** ** | **Payments Due by Period** | ** ** |
|----------------------------------|------------|-------------------------------------------|------------|
| **Lease  Obligation**            | ** ** | **TOTAL**                                 | ** ** | **2010** | ** ** | **2011** | ** ** | **2012** | ** ** | **2013** | ** ** |
|                             |       |                                      |       |   |   |   |   |   |   |   |   |
| Operating  Lease Obligations (1) |       | $                                         | 253,500    |   | $ | 130,500 |   | $ | 66,900 |   | $ | 34,800 |   | $ | 21,300 |   |
|                                  |            |                                           |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

----

(1)         Includesoperating lease obligations for general office and printing equipment rental.

 

10.  CONTINGENCIES

 

In connection withthe purchase of the Racetrack (Note 1), the Company entered into an Earn OutPromissory Note dated March 29, 1994. In accordance with the Earn Out Note, if (i) off-track bettingbecomes legally permissible in the State of Minnesota and (ii) the Companybegins to conduct off-track betting with respect to or in connection with itsoperations, the Company will be required to pay to the IMR Fund, L.P. thegreater of $700,000 per operating year, as defined, or 20% of the net pretax 

 

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profit, as definedfor each of five operating years.  Atthis time, management believes that the likelihood that these two conditionswill be met, and that the Company will be required to pay these amounts isremote.  At the date (if any) that thesetwo conditions are met, the five minimum payments will be discounted back totheir present value and the sum of those discounted payments will becapitalized as part of the purchase price in accordance with generally acceptedaccounting principles.  The purchaseprice will be further increased if payments become due under the “20% of NetPretax Profit” calculation.  The firstpayment is to be made 90 days after the end of the third operating year inwhich off-track betting is conducted by the Company.  Remaining payments would be made within 90days of the end of each of the next four operating years.

 

The Company isperiodically involved in various claims and legal actions arising in the normalcourse of business.  Management believesthat the resolution of any pending claims and legal actions at December 31,2009 and as of the date of this report will not have a material impact on theconsolidated financial statements.

 

The Company hascommitted to payment of statutory distributions under a $500,000 bond issued tothe Minnesota Racing Commission.

 

11.  RELATED-PARTY TRANSACTIONS

 

The Company paid atotal of $50,100 in both 2009 and 2008 to the Chair and Vice Chair of theCompany in consideration for the services they provided pursuant to consultingagreements.  In addition, anothernon-employee Board member received $12,000 in both 2009 and 2008 for servicesregarding the Company’s strategic planning matters.

 

12.  OPERATING SEGMENTS

 

The Company hasthree reportable operating segments: horse racing, card room, and concessions.  The horse racing segment includes simulcastand live horse racing operations, the card room segment includes operations ofCanterbury Park’s card room, and the concessions segment provides concessionsduring simulcast and live racing, in the card room and during specialevents.  The Company’s reportableoperating segments are strategic business units that offer different productsand services.  They are managedseparately because the segments differ in the nature of the products andservices provided, as well as processes to produce those products andservices.  The horse racing and card roomsegments are regulated by the Minnesota Racing Commission.

 

Depreciation,interest expense and income taxes are allocated to the segments but noallocation is made to concessions for shared facilities.  However, the concessions segment paidapproximately 25% of gross revenues on live racing and special event days tothe horse racing segment for use of the facilities in 2009 and 2008.

 

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The following tablesprovide information about the Company’s operating segments (in 000’s):

 
| ** **                                 | ** ** | **Year Ended December 31, 2009** | ** ** |
|--------------------------------------------|------------|---------------------------------------|------------|
| ** **                                 | ** ** | **Horse Racing**                      | ** ** | **Card Room** | ** ** | **Concessions** | ** ** | **Total** | ** ** |
|                                       |       |                                  |       |   |   |   |   |   |   |
| Net  revenues from external customers      |       | $                                     | 14,136     |   | $ | 20,158 |   | $ | 5,295 |   | $ | 39,589 |   |
|                                       |       |                                  |       |   |   |   |   |   |   |
| Intersegment  revenues                     |       | 569                                   |       | — |   | 1,412 |   | 1,981 |   |
|                                       |       |                                  |       |   |   |   |   |   |   |
| Net  interest income                       |       | 36                                    |       | — |   | — |   | 36 |   |
|                                       |       |                                  |       |   |   |   |   |   |   |
| Depreciation                               |       | 1,289                                 |       | 644 |   | 161 |   | 2,094 |   |
|                                       |       |                                  |       |   |   |   |   |   |   |
| Segment  (loss) income before income taxes |       | (1,684                                | )          | 2,207 |   | 734 |   | 1,257 |   |
|                                       |       |                                  |       |   |   |   |   |   |   |
| Segment  Assets                            |       | $                                     | 28,279     |   | $ | 2,841 |   | $ | 9,636 |   | $ | 40,756 |   |

 
| ** **                                 | ** ** | **Year Ended December 31, 2008** | ** ** |
|--------------------------------------------|------------|---------------------------------------|------------|
| ** **                                 | ** ** | **Horse Racing**                      | ** ** | **Card Room** | ** ** | **Concessions** | ** ** | **Total** | ** ** |
|                                       |       |                                  |       |   |   |   |   |   |   |
| Net  revenues from external customers      |       | $                                     | 15,830     |   | $ | 24,203 |   | $ | 5,992 |   | $ | 46,025 |   |
|                                       |       |                                  |       |   |   |   |   |   |   |
| Intersegment  revenues                     |       | 703                                   |       | — |   | 1,745 |   | 2,448 |   |
|                                       |       |                                  |       |   |   |   |   |   |   |
| Net  interest income (expense)             |       | 108                                   |       | — |   | — |   | 108 |   |
|                                       |       |                                  |       |   |   |   |   |   |   |
| Depreciation                               |       | 1,389                                 |       | 591 |   | 161 |   | 2,141 |   |
|                                       |       |                                  |       |   |   |   |   |   |   |
| Segment  (loss) income before income taxes |       | (1,588                                | )          | 2,708 |   | 787 |   | 1,907 |   |
|                                       |       |                                  |       |   |   |   |   |   |   |
| Segment  Assets                            |       | $                                     | 28,050     |   | $ | 3,346 |   | $ | 8,710 |   | $ | 40,106 |   |

 

Included in horseracing segment revenues for the years ended December 31, 2009 and 2008 isapproximately $390,000 and $277,000, respectively, for rental of the racingfacility for special events and storage.

 

The following arereconciliations of reportable segment revenue, income before income taxes, andassets, to the Company’s consolidated totals (in 000’s):

 
| ** **                                              | ** ** | **2009** | ** ** | **2008** | ** ** |
|---------------------------------------------------------|------------|----------|------------|----------|------------|
| Revenues                                                |       |     |       |     |       |
| Net  revenues for reportable segments                   |       | $        | 41,570     |     | $          | 48,473 |   |
| Elimination  of intersegment revenues                   |       | (1,981   | )          | (2,448   | )          |
| Total  consolidated net revenues                        |       | $        | 39,589     |     | $          | 46,025 |   |
|                                                    |       |     |       |     |       |
| Income  before income taxes                             |       |     |       |     |       |
| Total  segment income before income taxes               |       | $        | 1,257      |     | $          | 1,907 |   |
| Elimination  of intersegment income before income taxes |       | (996     | )          | (1,084   | )          |
| Total  consolidated income before income taxes          |       | $        | 261        |     | $          | 823 |   |

 
| ** **                               | ** ** | **December 31, 2009** | ** ** | **December 31, 2008** | ** ** |
|------------------------------------------|------------|----------------------------|------------|----------------------------|------------|
| Assets                                   |       |                       |       |                       |       |
| Total  asset for reportable segments     |       | $                          | 40,756     |                       | $          | 40,106 |   |
| Elimination  of intercompany receivables |       | (9,004                     | )          | (7,862                     | )          |
| Total  consolidated assets               |       | $                          | 31,752     |                       | $          | 32,244 |   |

 

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13.**  **SUPPLEMENTARYFINANCIAL INFORMATION (UNAUDITED)

 
| ** **                         | ** ** | **2009 Quarter Ended:** | ** ** |
|------------------------------------|------------|-------------------------|------------|
| ** **                         | ** ** | **March 31**       | ** ** | **June 30** | ** ** | **September 30** | ** ** | **December 31** | ** ** |
|                               |       |                    |       |   |   |   |   |   |   |
| Net  revenues                      |       | $                       | 8,195,176  |   | $ | 11,160,254 |   | $ | 12,150,722 |   | $ | 8,082,431 |   |
|                               |       |                    |       |   |   |   |   |   |   |
| Operating  expenses                |       | 7,616,689               |       | 11,454,971 |   | 12,111,495 |   | 8,180,241 |   |
|                               |       |                    |       |   |   |   |   |   |   |
| Net  income (loss)                 |       | 316,774                 |       | (173,099 | ) | 16,395 |   | (99,100 | ) |
|                               |       |                    |       |   |   |   |   |   |   |
| Basic  earnings (loss) per share   |       | .08                     |       | (.04 | ) | .00 |   | (.02 | ) |
|                               |       |                    |       |   |   |   |   |   |   |
| Diluted  earnings (loss) per share |       | .08                     |       | (.04 | ) | .00 |   | (.02 | ) |
|                                    |            |                         |            |  |  |  |  |  |  |  |  |  |  |

** **
| ** **                         | ** ** | **2008 Quarter Ended:** | ** ** |
|------------------------------------|------------|-------------------------|------------|
| ** **                         | ** ** | **March 31**       | ** ** | **June 30** | ** ** | **September 30** | ** ** | **December 31** | ** ** |
|                               |       |                    |       |   |   |   |   |   |   |
| Net  revenues                      |       | $                       | 10,200,063 |   | $ | 13,804,893 |   | $ | 13,236,420 |   | $ | 8,784,031 |   |
|                               |       |                    |       |   |   |   |   |   |   |
| Operating  expenses                |       | 9,389,870               |       | 13,880,334 |   | 13,280,862 |   | 8,759,234 |   |
|                               |       |                    |       |   |   |   |   |   |   |
| Net  income                        |       | 498,880                 |       | (35,419 | ) | (40,795 | ) | 15,514 |   |
|                               |       |                    |       |   |   |   |   |   |   |
| Basic  earnings (loss) per share   |       | .12                     |       | (.01 | ) | (.01 | ) | .00 |   |
|                               |       |                    |       |   |   |   |   |   |   |
| Diluted  earnings (loss) per share |       | .12                     |       | (.01 | ) | (.01 | ) | .00 |   |
|                                    |            |                         |            |  |  |  |  |  |  |  |  |  |  |

 

14.   SUBSEQUENT EVENT

 

In January 2010,and in accordance with the Racing Act, the Company obtained approval from theMRC to remodel the card room. Construction and architectural contracts with various firms were signedshortly thereafter, and the card room was moved to a temporary location on themezzanine level on January 25, 2010. The Company anticipates using cash on hand to fund the project and toavoid drawing on its line of credit.  Aspart of the remodel, the Company plans to dispose of assets during the firstquarter of 2010 with a net book value between $850,000 and $1,050,000.  The remodeling project is expected to becomplete in April 2010.  This chargewill be taken in the first quarter of 2010 and will adversely affect netincome.

 

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**Item 9.    CHANGESIN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE**

 

Not Applicable.

 

**Item9A(T). CONTROLS AND PROCEDURES**

 

(a)               Evaluation of Disclosure Controlsand Procedures:

 

The Company’s Chief Executive Officer,Randall D. Sampson, and Chief Financial Officer, David C. Hansen, have reviewedthe Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b) asof the end of the period covered by this report.  Based upon this review, these officers haveconcluded that the Company’s disclosure controls and procedures are effectiveto ensure that information required to be disclosed in the reports that theCompany files under the Exchange Act is recorded, processed, summarized andreported within the time periods specified in the rules and forms of theSEC and that the disclosure controls are also effective to ensure thatinformation required to be disclosed in the Company’s Exchange Act reports isaccumulated and communicated to management, including the chief executiveofficer and chief financial officer, to allow timely decisions regardingrequired disclosure.

 

(b)                                           Management’sannual report on internal control over financial reporting:

 

Managementis responsible for establishing and maintaining an adequate system of internalcontrol over financial reporting of the Company.  This system is designed to provide reasonableassurance regarding the reliability of financial reporting and the preparationof financial statements for external purposes in accordance with accountingprinciples generally accepted in the United States of America.

 

TheCompany’s internal control over financial reporting (as such term is defined inRule 13a-15(f) under the Securities Exchange Act of 1934) includesthose policies and procedures that (i) pertain to the maintenance ofrecords that, in reasonable detail, accurately and fairly reflect thetransactions and dispositions of the assets of the Company; (ii) providereasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally acceptedaccounting principles, and that receipts and expenditures of the Company arebeing made only in accordance with authorizations of management and directorsof the Company; (iii) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of theCompany’s assets that could have a material effect on the financial statements.

 

Becauseof its inherent limitations, internal control over financial reporting can onlyprovide reasonable assurance and may not prevent or detect misstatements.  Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls maybecome inadequate because of changes in conditions, or that the degree ofcompliance with the policies or procedures may deteriorate.

 

Managementconducted an evaluation of the effectiveness of the system of internal controlover financial reporting as of December 31, 2009.  In making this evaluation, management usedthe criteria set forth by the Committee of Sponsoring Organizations of theTreadway Commission (COSO) in *InternalControl — Integrated Framework. *Basedon management’s evaluation and those criteria, management concluded that theCompany’s system of internal control over financial reporting was effective asof December 31, 2009.

 

Thisannual report does not include an attestation report of the company’sregistered public accounting firm regarding internal control over financialreporting.  Management’s report was notsubject to attestation by the Company’s registered public accounting firmpursuant to rules of 

 

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theSecurities and Exchange Commission that permit the Company to provide onlymanagement’s report in this annual report.

 

(c)                                            Changes in Internal Control OverFinancial Reporting:

 

There has been nochange in our internal control over financial reporting (as defined in Rules 13a-15(f) underthe Securities Exchange Act of 1934) that occurred during our fiscal quarterended December 31, 2009, that have materially affected, or is reasonablylikely to materially affect, our internal control over financial reporting.

 

**Item9B.  OTHER INFORMATION**

 

Not Applicable.

 

**PART III**

** **

**Item 10.****             ****DIRECTORS, EXECUTIVE OFFICERS ANDCORPORATE GOVERNANCE**

 

Information Incorporated by Reference.

 

Informationrequired under Item 401 (except as noted below), 405, 406, and 407 (c) (3),(d) (4), and (d) (5) of Regulation S-K to the extent applicableto the Company will be set forth in the Company’s Proxy Statement for theAnnual Meeting of Shareholders to be held on June 3, 2010 (the “2010 ProxyStatement”), a definitive copy of which will be filed with the Commissionwithin 120 days of the close of the 2008 fiscal year, which information isincorporated herein by reference. Information required under Item 402 of Regulation S-K regardingexecutive officers is presented under Item 1(c)(x) herein.

 

Code of Ethics

 

The Company has adopted a code of ethics applicable toall employees of and consultants to the Company.  A copy of the Code of Conduct can be obtainedfree of charge upon written request directed to the Company’s Secretary at theexecutive offices of the Company.

 

** Item 11.    EXECUTIVECOMPENSATION**

 

Information required under Item 402 of Regulation S-Kto the extent applicable to the Company will be set forth in the Company’s 2010Proxy Statement which information is incorporated herein by reference.

 

**Item 12.****             ****SECURITY OWNERSHIP OF CERTAINBENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS**

 

Informationrequired under Item 201(d) and 403 of Regulation S-K to the extentapplicable to the Company will be set forth in the Company’s 2010 ProxyStatement which information is incorporated herein by reference.

 

**Item 13.****             ****CERTAIN RELATIONSHIPS, RELATEDTRANSACTIONS, AND DIRECTOR INDEPENDENCE**

 

Information, if any, required by Item 404 ofRegulation S-K to the extent applicable to the Company will be set forth in theCompany’s 2010 Proxy Statement which information is incorporated herein byreference.

 

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**Item 14.     PRINCIPALACCOUNTING FEES AND SERVICES**

 

Information required by Item 14 of this Form 10-Kand Item 9(e) of Schedule 14A will be set forth in a section entitled “TheCompany’s Auditors” in the Company’s 2010 Proxy statement which information isincorporated herein by reference.

 

**PART IV**

 

**Item 15.     EXHIBITS AND FINANCIAL STATEMENT SCHEDULES**

 

(a).                         Thefollowing Consolidated Financial Statements of Canterbury Park HoldingCorporation and subsidiaries are included in Part II, Item 8 pages 29-47:

 

Reports of IndependentRegistered Public Accounting Firms

 

Consolidated BalanceSheets as of December 31, 2009 and 2008

 

ConsolidatedStatements of Operations for the years ended December 31, 2009 and 2008

 

ConsolidatedStatements of Changes in Stockholders’ Equity for the years ended December 31,2009 and 2008

 

ConsolidatedStatements of Cash Flows for the years ended December 31, 2009 and 2008

 

Notes to ConsolidatedFinancial statements

 

(b).                        The exhibitslisted on the “Exhibits Index” on pages 52 & 53 are filed withthis Form 10-K or incorporated by reference in this report.

 

(c).                   No financialstatement schedules are required by Item 8 and Item 15(c) of Form 10-K.

 

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**SIGNATURES**

 

Pursuant to therequirements of Section 13 or 15(d) of the Securities Exchange Act of1934, the registrant has duly caused this report to be signed on its behalf bythe undersigned, thereunto duly authorized.

 
| Dated: March 31,  2010 | CANTERBURY PARK HOLDING  CORPORATION |
|-----------------------------|--------------------------------------|
|                        |                                 |
|                        | By                                   | /s/  Randall D. Sampson |
|                        |                                 | Randall  D. Sampson |
|                        |                                 | President  and Chief Executive Officer |

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the following persons onbehalf of the Registrant and in the capacities and the dates indicated havesigned this report below.

 

**Power of Attorney**

 

Each person whosesignature appears below constitutes and appoints CURTIS A. SAMPSON, DALE H.SCHENIAN and RANDALL D. SAMPSON as his true and lawful attorneys-in-fact andagents, each acting alone, with full power of substitution and resubstitution,for him and in his name, place and stead, in any and all capacities, to signany of all amendments to this Annual Report on Form 10-K and to file thesame, with all exhibits thereto, and other documents in connection therewith,with the Securities and Exchange Commission, granting unto said attorneys-in-factand agents, each acting alone, full power and authority to do and perform eachand every act and thing requisite and necessary to be done in and about thepremises, as fully to all intents and purposes as he might or could do inperson, hereby ratifying and confirming all said attorneys-in-fact and agents,each acting alone, or his substitute or substitutes, may lawfully do or causeto be done by virtue thereof.

 
| **Signature**           | ** ** | **Title**                                                                    | ** ** | **Date**            |
|-------------------------|------------|------------------------------------------------------------------------------|------------|---------------------|
|                    |       |                                                                         |       |                |
| /s/  Curtis A. Sampson  |       | Chairman of the Board                                                        |       | March 31, 2010 |
| Curtis  A. Sampson      |       |                                                                         |       |                |
|                    |       |                                                                         |       |                |
|                    |       |                                                                         |       |                |
| /s/  Dale H. Schenian   |       | Director; Vice Chairman                                                      |       | March 31, 2010 |
| Dale  H. Schenian       |       |                                                                         |       |                |
|                    |       |                                                                         |       |                |
|                    |       |                                                                         |       |                |
| /s/  Randall D. Sampson |       | Chief Executive  Officer, President, General Manager, Treasurer and Director |       | March 31, 2010 |
| Randall  D. Sampson     |       |                                                                         |       |
|                    |       |                                                                         |       |
|                    |       |                                                                         |       |                |
| /s/  David C. Hansen    |       | Chief Financial  Officer*                                                    |       | March 31, 2010 |
| David  C. Hansen        |       |                                                                         |       |                |
|                    |       |                                                                         |       |                |
|                    |       |                                                                         |       |                |
| /s/  Patrick R. Cruzen  |       | Director                                                                     |       | March 31, 2010 |
| Patrick  R. Cruzen      |       |                                                                         |       |                |
|                    |       |                                                                         |       |                |
|                    |       |                                                                         |       |                |
| /s/  Carin J. Offerman  |       | Director                                                                     |       | March 31, 2010 |
| Carin  J. Offerman      |       |                                                                         |       |                |
|                    |       |                                                                         |       |                |
|                    |       |                                                                         |       |                |
| /s/  Burton F. Dahlberg |       | Director                                                                     |       | March 31, 2010 |
| Burton  F. Dahlberg     |       |                                                                         |       |                |

 

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* PrincipalAccounting Officer

 

51

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Table ofContents

 

CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARY

 

Exhibit Index To

Form 10-K for the Year Ended December 31,2009

 
| **Regulation  S-B   Exhibit Table   Reference** | ** ** | **Title of Document**                                                                                                                                                                | ** ** | **Location in Consecutive Numbering   System as Filed with the Securities   and Exchange Commission**                                                                                              |
|------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                 |       |                                                                                                                                                                                 |       |                                                                                                                                                                                               |
| 3.1                                                  |       | Articles of  Incorporation, as amended.                                                                                                                                              |       | Filed as  Exhibit 3.1 to the Forms SB-2 Registration Statement of the Company,  File No. 33-81262C, (the “SB-2 Registration Statement”) and incorporated  herein by reference. |
|                                                 |       |                                                                                                                                                                                 |       |                                                                                                                                                                                               |
| 3.2                                                  |       | Bylaws, as amended                                                                                                                                                                   |       | Filed as  Exhibit 3.2 to the SB-2 Registration Statement and incorporated herein  by reference.                                                                                               |
|                                                 |       |                                                                                                                                                                                 |       |                                                                                                                                                                                               |
| 10.1                                                 |       | Plan of Reorganization  dated as of May 20, 1994 between Canterbury Park Holding Corporation and  Canterbury Park Concessions, Inc.                                        |       | Filed as  Exhibit 10.1 to the SB-2 Registration Statement and incorporated herein  by reference.                                                                                              |
|                                                 |       |                                                                                                                                                                                 |       |                                                                                                                                                                                               |
| 10.2                                                 |       | Restated Stock Purchase  Agreement                                                                                                                                                   |       | Filed as  Exhibit 10.2 to the SB-2 Registration Statement and incorporated herein  by reference.                                                                                              |
|                                                 |       |                                                                                                                                                                                 |       |                                                                                                                                                                                               |
| 10.3                                                 |       | Letter dated  April 4, 1994 from the Minnesota Horsemen’s Benevolent and Protective  Association, Inc. to Minnesota Racing Commission waiving 125 day racing  minimum |       | Filed as  Exhibit 10.3 to the SB-2 Registration Statement and incorporated herein  by reference.                                                                                              |
|                                                 |       |                                                                                                                                                                                 |       |                                                                                                                                                                                               |
| 10.5                                                 |       | Stock Option Plan, as  amended*                                                                                                                                                      |       | Filed as  Exhibit 4.1 to the Registration Statement on Form S-8 of the  Company filed on August 28, 1997 (File No. 333-34509) and  incorporated herein by reference.           |
|                                                 |       |                                                                                                                                                                                 |       |                                                                                                                                                                                               |
| 10.6                                                 |       | Form of  Non-qualified Stock Option Agreement                                                                                                                                   |       | Filed as  Exhibit 10.6 to the SB-2 Registration Statement and incorporated herein  by reference.                                                                                              |

 

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*  Denotes an exhibit that covers managementcontracts or compensatory plans or arrangements.

 

52

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Table of Contents

 
| **Regulation  S-B  Exhibit Table   Reference** | ** ** | **Title of Document**                                                                                                                                                                                                                                                                        | ** ** | **Location in Consecutive Numbering   System as Filed with the Securities   and Exchange Commission**                                                                                    |
|-----------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                |       |                                                                                                                                                                                                                                                                                         |       |                                                                                                                                                                                     |
| 10.7                                                |       | Curtis A. Sampson  Guaranty to HRA                                                                                                                                                                                                                                                           |       | Filed as  Exhibit 10.7 to the SB-2 Registration Statement and incorporated herein  by reference.                                                                                    |
|                                                |       |                                                                                                                                                                                                                                                                                         |       |                                                                                                                                                                                     |
| 10.10                                               |       | General Credit and  Security Agreement dated as of June 3, 1998 between Canterbury Park  Holding Corporation and Bremer Bank N.A. (previously First American Bank,  N.A.) This exhibit 10.10 replaces exhibit 10.10 filed previously as an  exhibit to the SB-2 Registration Statement. |       | Filed as  Exhibit 10.10 to the Form 10-KSB for the fiscal year ended  December 31, 1998.                                                                                  |
|                                                |       |                                                                                                                                                                                                                                                                                         |       |                                                                                                                                                                                     |
| 10.11                                               |       | Stock Purchase Savings  Plan                                                                                                                                                                                                                                                                 |       | Filed as  Exhibit 10.11 to Form 10-KSB for the fiscal year ended  December 31, 1997 and incorporated herein by reference.                                                 |
|                                                |       |                                                                                                                                                                                                                                                                                         |       |                                                                                                                                                                                     |
| 10.13                                               |       | Stock Option Plan for  Non-Employee Consultants and Advisors                                                                                                                                                                                                                                 |       | Filed as  Exhibit 4.3 to the Registration Statement on Form S-8 of the  Company filed on August 28, 1997 (File No. 333-34509) and  incorporated herein by reference. |
|                                                |       |                                                                                                                                                                                                                                                                                         |       |                                                                                                                                                                                     |
| 21                                                  |       | Subsidiaries of the  Registrant                                                                                                                                                                                                                                                              |       | Filed herewith.                                                                                                                                                                          |
|                                                |       |                                                                                                                                                                                                                                                                                         |       |                                                                                                                                                                                     |
| 23.1                                                |       | Consent of Independent  Registered Public Accounting Firm                                                                                                                                                                                                                                    |       | Filed herewith.                                                                                                                                                                          |
|                                                |       |                                                                                                                                                                                                                                                                                         |       |                                                                                                                                                                                     |
| 23.2                                                |       | Consent of Independent  Registered Public Accounting Firm                                                                                                                                                                                                                                    |       | Filed herewith.                                                                                                                                                                          |
|                                                |       |                                                                                                                                                                                                                                                                                         |       |                                                                                                                                                                                     |
| 24                                                  |       | Power of Attorney                                                                                                                                                                                                                                                                            |       | Included in signature  page at page 50.                                                                                                                                        |
|                                                |       |                                                                                                                                                                                                                                                                                         |       |                                                                                                                                                                                     |
| 31.1                                                |       | Certification of the  Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley  Act 0f 2002                                                                                                                                                                                |       | Filed herewith.                                                                                                                                                                          |
|                                                |       |                                                                                                                                                                                                                                                                                         |       |                                                                                                                                                                                     |
| 31.2                                                |       | Certification of the  Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002                                                                                                                                                                                |       | Filed herewith.                                                                                                                                                                          |
|                                                |       |                                                                                                                                                                                                                                                                                         |       |                                                                                                                                                                                     |
| 32                                                  |       | Certification pursuant  to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                |       | Filed herewith.                                                                                                                                                                          |

 

The exhibitsreferred to in this Exhibit will be supplied to a shareholder at a chargeof $.25 per page upon written request directed to Canterbury Park HoldingCorporation at the executive offices of the Company.

 

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