<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C.  20549

                                   FORM 10-KSB

(Mark One)
       /X/     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                       SECURITIES EXCHANGE ACT OF 1934

                    For the fiscal year ended December 31, 1997

                                       OR

       / /     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:  0-24554

                     CANTERBURY PARK HOLDING CORPORATION
-------------------------------------------------------------------------------
                 (Name of small business issuer in its charter)

               Minnesota                     41-1775532
     ---------------------------------       ------------------------
     (State or other jurisdiction                 (I.R.S. Employer
     of incorporation or organization)            Identification No.)

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

       Registrant's telephone number, including area code:  (612) 445-7223

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01
                                                            par value
                                                            Redeemable Common
                                                            Stock Purchase
                                                            Warrants Units,
                                                            each Unit consisting
                                                            of one share of
                                                            Common Stock and
                                                            one Redeemable
                                                            Common Stock
                                                            Purchase Warrant.

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

                           YES   x          NO
                               -----           -----

Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.  /X/

The Company's operating revenues for its most recent fiscal year were
$18,202,216.

On March 11, 1998, the Company had 2,998,848 shares of common stock, $.01 par
value, outstanding.

The aggregate market value of the shares of voting stock held by
non-affiliates of the Company (persons other than directors and officers)
computed at the NASDAQ closing price of $2.75 per share on March 11, 1998 was
approximately $3,731,000.

                       DOCUMENTS INCORPORATED BY REFERENCE

The Company's Proxy Statement for its 1998 Annual Meeting of Shareholders, to
be held on June 4, 1998, is incorporated by reference into Part III of this
Form 10-KSB.


<PAGE>

                       CANTERBURY PARK HOLDING CORPORATION
                            FORM 10-KSB ANNUAL REPORT
                      FOR THE YEAR ENDED DECEMBER 31, 1997

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
<S>       <C>                                                              <C>
                                     PART I
ITEM 1.   Description of Business . . . . . . . . . . . . . . . . . . . . .  1
ITEM 2.   Description of Property . . . . . . . . . . . . . . . . . . . . .  8
ITEM 3.   Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 10
ITEM 4.   Submission of Matters to a Vote of Security Holders . . . . . . . 10

                                     PART II

ITEM 5.   Market for Common Equity and Related Stockholder Matters  . . . . 11
ITEM 6.   Management's Discussion and Analysis of Financial Condition
           and Results of Operations  . . . . . . . . . . . . . . . . . . . 12
ITEM 7.   Financial Statements  . . . . . . . . . . . . . . . . . . . . . . 17
ITEM 8.   Changes In and Disagreements With Accountants on Accounting
           and Financial Disclosure . . . . . . . . . . . . . . . . . . . . 30

                                     PART III

ITEM 9.   Directors, Executive Officers, Promoters and Control Persons; Compliance
           With Section 16(a) of the Exchange Act  . . . . . . . . . . . . . 30
ITEM 10.  Executive Compensation . . . . . . . . . . . . . . . . . . . . . . 30
ITEM 11.  Security Ownership of Certain Beneficial Owners and Management . . 30
ITEM 12.  Certain Relationships and Related Transactions . . . . . . . . . . 30
ITEM 13.  Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . 30

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

EXHIBIT INDEX  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

</TABLE>



<PAGE>

Item 1.   DESCRIPTION OF BUSINESS

(a)  BUSINESS DEVELOPMENT

     Canterbury Park Holding Corporation (the "Company") is engaged in the
business of conducting live Thoroughbred and Quarter Horse racing and
pari-mutuel wagering operations related thereto at its facilities in
Shakopee, Minnesota (the "Racetrack"), as well as in conducting
"simulcasting", which is pari-mutuel wagering on races held at out-of-state
racetracks that are televised simultaneously at the Racetrack.  The Company
also derives revenues from related services and activities, such as
concessions, parking, admissions and programs, and from other entertainment
events held at the Racetrack.

     The Company was incorporated under the laws of Minnesota on March 24,
1994 and on March 29, 1994 acquired the Racetrack.  (Further information
regarding prior operations of the Racetrack can be obtained by reference to
the Company's registration statement on Form SB-2 (File No. 33-81262C) under
"Business-History of the Racetrack", which discussion is incorporated herein
by reference.)  On May 6, 1994 the Company commenced simulcasting operations.
In August 1994 the Company conducted a public offering of Units, consisting
of one share of common stock and a warrant to purchase one share of common
stock.  With the proceeds from the public offering the Company retired debt
associated with its acquisition of the Racetrack.  Since May 6, 1994 the
Company has been principally engaged in conducting its year-round
simulcasting operations, five to seven days per week and live horse racing
("live meets") on a seasonal basis, generally from late May to mid-August.
The Company plans 55 days of live racing in 1998.  Live racing in 1998 will
consist of a 24-day mixed meet of Thoroughbred and Quarter Horse racing, a
28-day Thoroughbred only meet, and three days of live harness racing over the
Labor Day weekend.

(b)  BUSINESS OF ISSUER

(i)  RACING OPERATIONS

     The Company's racing operations consist of year-round pari-mutuel
wagering on simulcast horse races ("simulcasting") and live meets held on a
seasonal basis beginning in May and concluding in August.  One or more of
Thoroughbred, Quarter Horse or harness racing is conducted during the live
meet.

     SIMULCASTING.

     Simulcasting is the process by which live horse races held at one
facility (the "host track") are transmitted simultaneously to other locations
that allow patrons at each receiving location (the "guest track") to place
wagers on the race being broadcast.  Monies are collected at the guest track
and the information with respect to the total amount wagered is
electronically transmitted to the host track.  In effect, all of the amounts
wagered at the guest track are combined into the appropriate pools at the
host track with the final odds and payouts determined based upon all the
monies in the pools.

     Throughout the year the Company offers simulcast wagering from
out-of-state racetracks, generally seven days a week.  The Company offers
"full card" simulcast racing (broadcasting of another racetrack's entire
daily live racing program) from a number of racetracks, including Churchill
Downs, Hollywood Park, Santa Anita, Gulfstream Park, Arlington Park and
Sportsman's Park.  In addition, races of national interest, such as the
Kentucky Derby, Preakness Stakes and Breeders' Cup, supplement the regular
simulcast program.  The Company regularly evaluates its agreements with other
racetracks in order to offer the most popular simulcast signals of live horse
racing which is feasible to offer at the Racetrack.

     Under applicable provisions of federal and state law, the Racetrack must
obtain the consent of the organization which represents the owners and
trainers of the breed of horse which predominately races at the Racetrack
with respect to simulcast operations both as a host and guest track.  In
Minnesota such consent must be obtained from the Minnesota Horsemen's
Benevolent and Protective Association (the "MHBPA").

                                       1
<PAGE>

      LIVE RACING.

      The Company conducted its first year of live racing in 1995 by operating
55 days of live horse racing.  The Company hosted a 51-day live meet in 1996
and a 56-day live meet, including three days of live harness racing, in 1997.
The Company plans 55 days of live racing in 1998, consisting of a 24-day
mixed meet of Thoroughbred and Quarter Horse racing, a 28-day Thoroughbred
only meet, and three days of live harness racing over the Labor Day weekend.
Post times on Thursdays and Fridays will be 6:30 pm and 1:00 pm on Saturdays,
Sundays and holidays.

      Currently, Minnesota law requires the Racetrack to schedule a minimum of
125 days of live racing annually, unless the MHBPA agrees to a lesser number
of live racing days.  The MHBPA has agreed to waive the 125-day requirement
for years 1995 through 1998 and allow the Company to run a minimum of 50 days
of live racing each year.  After 1998, no assurance can be given that the
MHBPA will agree to a shorter live meet than the 125-day statutory minimum.

(ii)  SPECIAL EVENTS

      While pari-mutuel horse racing is the Company's principal business, the
Company's facilities are capable of being used for multiple purposes.  In an
effort to more fully utilize the property and to generate additional
revenues, the Company has, in each year of its operations, expanded the use
of the grandstand, grounds and parking lot for special events.

      In 1996 and 1997, a number of non-horseracing events were held,
including snowmobile races, two major arts and crafts shows per year, trade
shows, concerts, motorcycle races, fund raisers, automobile shows and
competitions and private parties.  Lilith Fair, an outdoor music event, came
to Canterbury Park in August of 1997, drawing over 30,000 people to the
Racetrack.  In 1997 Canterbury Park hosted Holiday in Lights during the 1997
holiday season which consisted of a drive-through light display, located in
and around the barn area, and Santa's Village on track level of the
grandstand.

      To date in 1998, the facility has hosted two additional successful
snowmobile races with attendance over 10,000 for each event.  Canterbury Park
maintains a reputation as one of the premier snowmobile racing venues in the
world.  In addition, the Company expects to increase revenues from parking
lot rentals in 1998.

(iii) SOURCES OF REVENUE

      GENERAL.

      The Company's revenues are principally derived from pari-mutuel
wagering. In pari-mutuel wagering, bettors wager against each other in a
pool, rather than against the operator of the facility or with preset odds.
From the total amount wagered or "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 the winning bettors. The takeout constitutes the Racetrack's
primary source of operating revenue. From the takeout, funds are paid to the
State of Minnesota for pari-mutuel taxes, with additional amounts set aside
for purses and for the "Breeders' Fund," which is a fund apportioned by the
Minnesota Racing Commission ("Racing Commission") among various purposes
related to Minnesota's horse breeding and horse racing industries.  The
balance of the takeout remaining after these deductions is commonly referred
to as the "retainage."

      The various forms of pari-mutuel wagering can be divided into two
categories:  straight wagering pools and multiple wagering pools, which are
also referred to as "exotic" wagering pools.  Examples of straight wagers
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 wager
on one specific horse to finish first, second or third).  Examples of exotic
wagers include: "daily double" (a wager in which the bettor selects the
horses that will win two consecutive races); "quinella" (a wager in which the
bettor selects the horses that will finish first and second, in either
order); "exacta" (a wager in which the bettor selects the horses that will
finish first and second, in order); "trifecta" (a wager in which

                                       2
<PAGE>

the bettor selects the horses that will finish first, second and third, in
order); and "pick six" (a wager in which the bettor selects the horses that
will finish first in six consecutive races).

     The amount of takeout earned by the Company depends on where the race is
run and the form of wager (straight or exotic).  Net revenues from
pari-mutuel wagering on live races run at the Racetrack consist of the total
amount wagered, less the amounts paid (i) to winning patrons, (ii) for
purses, (iii) to the Breeders' Fund and (iv) for pari-mutuel taxes to the
State of Minnesota.  Net revenues from pari-mutuel wagering on races being
run at out-of-state racetracks and simulcast to the Racetrack have similar
expenses, but also include a host fee payment to the host track.  The host
fee is calculated as a percentage of monies wagered (generally 2.50% to
4.50%) and is negotiated with the host track and must comply with each host
track's state statute.

     WAGERING ON LIVE RACES.

     The Racing Act establishes the maximum takeout that may be deducted from
the handle.  The takeout percentage on live races depends on the type of
wager. The total maximum takeouts are 17% from straight wagering pools and
23% from exotic wagering pools.  From this takeout, Minnesota law requires
deductions for purses, pari-mutuel taxes and the Breeders' Fund.

     While the Racing Act provides that a minimum of 8.4% of the live racing
handle is to be paid as purses to the owners of the horses, the size of the
purse is subject to further agreement with the horsepersons' associations.
The Breeders' Fund receives 1% of the handle.  As of July 1, 1996 the
pari-mutuel tax applicable to wagering on all live races is 6% of takeout in
excess of $12 million during the twelve month period beginning July 1 and
ending the following June 30.  This pari-mutuel tax structure became
effective July 1, 1996 and continues through July 1, 1999.  Assuming no
additional legislation, the pari-mutuel tax rate will return to 6% of takeout
(as it had been prior to July 1, 1996) effective July 1, 1999.

     The following table sets forth the percentage distribution of each
dollar wagered on live races at the Racetrack, as established by the Racing
Act, and the Racetrack's retainage:

<TABLE>
<CAPTION>
                                                                       Live Racing
                                                                       -----------
                                                           Straight                     Exotic
                                                           --------                     ------
<S>                                           <C>          <C>         <C>              <C>

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)             .10                       .14
    Racetrack Retainage (1)                    7.50                     13.46

Total Takeout                                                17.00                      23.00
                                                            ------                     ------

Total Handle                                                100.00%                    100.00%
                                                            ------                     ------
                                                            ------                     ------
</TABLE>

-------------------

(1)  Minnesota law provides that the 8.40% purse payment is a minimum.  The
     actual percentage, if any, above the minimum is determined between the
     Racetrack and the MHBPA.  Any additional amounts paid for purses decrease
     the Racetrack's retainage.
(2)  This amount assumes the pari-mutuel tax structure in effect as of July 1,
     1996 (which exempts the first $12 million of takeout during a statutorily
     mandated twelve-month period).  This amount will depend upon the total
     takeout during the twelve-month period, which is estimated to be $13.1
     million.


                                       3

<PAGE>

WAGERING ON SIMULCAST RACES.

     The amount of takeout from simulcast wagering is determined by the laws
of the state in which the host track is located.  In addition, the Racing Act
established a minimum that must be set aside from simulcasting for purse
payments on racing within Minnesota.  Different amounts are deducted for
purses from the takeout depending on whether simulcasting occurs during the
"Racing Season," a statutorily defined 25 week period beginning in early May
each year, or outside of the Racing Season.  If simulcasting occurs during
the Racing Season, the amount set aside for purses further depends on whether
the simulcasting is part of a full racing card that occurs during the part of
the day that live races are conducted at the Racetrack.  For races that are
part of a full simulcast racing 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 occur within
the time period of live races, the purse is equal to 50% of the takeout
remaining after deductions for pari-mutuel taxes, payments to the Breeders'
Fund and payments to the host racetrack for host track fees.  For
simulcasting conducted outside of the Racing Season, the amount that must be
contributed to the purses is 25% of the takeout after deducting an 8% expense
factor, pari-mutuel taxes, payments to the Breeders' Fund and host fee
payments to the host racetrack.

     The following table sets forth the approximate percentage distribution
of each dollar wagered for races simulcast at the Racetrack and the
Racetrack's retainage:

<TABLE>
<CAPTION>
                                                   During Racing Season
                                                   --------------------

                                                                    Not Concurrent
                                     Concurrent with                     with                Outside of
                                        Live Card                     Live Card             Racing Season
                                     ---------------                --------------          -------------
<S>                                  <C>                            <C>                     <C>
Returned to Winning Patrons (1)                80.50%                        80.50%                 80.50%
    Minnesota Breeders' Fund         1.00%                          1.10%                   1.10%
    Minnesota Pari-Mutuel Taxes (2)   .12                            .12                     .12
    Purse (3)                        8.40                           7.39                    1.70
    Host Track Fees (4)              3.50                           3.50                    3.50
    Racetrack Retainage (3)          6.48                           7.39                   13.08
Total Takeout                                  19.50                         19.50                  19.50
                                     ---------------                --------------          -------------

Total Handle                                  100.00%                       100.00%                100.00%
                                     ---------------                --------------          -------------
                                     ---------------                --------------          -------------

</TABLE>

-------------------

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

(2)  This amount assumes the pari-mutuel tax structure in effect as of July 1,
     1996 (which exempts the first $12 million of takeout during a statutorily
     mandated twelve-month period).  This amount will depend upon the total
     takeout during the twelve-month period, which is estimated to be $13.1
     million.

(3)  Although Minnesota law specifies a minimum, the actual percentage is
     determined by agreement between the Racetrack and the MHBPA.  Any
     additional amounts paid for purses reduce the Racetrack's retainage.

(4)  Payments to the host track generally range from 2.5% to 4.5% of total
     handle, subject to negotiation with each host track.  For purposes of this
     table, the host track fee is assumed to be 3.5%.


                                       4

<PAGE>

     OTHER REVENUE

     The Company also derives revenue from other activities such as
admissions and parking fees, as well as from the sale of food and beverage,
programs, and other racing publications.  The Company offers advertising
signage space similar to that appearing at many sports stadiums and
advertising space is sold in the printed live racing program.  Finally,
additional revenues are derived from use of the facilities for events such as
concerts, holiday displays, trade and craft shows, snowmobile racing,
business meetings, private parties, horse expositions and sales, boat and
automobile storage, community events, and rental of the parking lot for
various automobile activities and vehicle storage.

(iv) COMPETITION

     The Company competes with other forms of gaming in the State of
Minnesota, particularly Native American casino-style gambling located
throughout the State of Minnesota, including a large casino located
approximately three miles from the Racetrack.  In addition, the Company
competes against charitable gambling (bingo and pulltabs) and various state
lottery products.  Finally, the Company competes with a greyhound racetrack
located approximately 40 miles from the Racetrack at the eastern end of the
Minneapolis-Saint Paul metropolitan area. This greyhound track offers
wagering on live and simulcast dog racing, as well as wagering on
simulcasting of Thoroughbred horse racing.

     The Racetrack also competes with other forms of entertainment in the
Minneapolis-Saint Paul metropolitan area, including a wide range of live and
televised professional and collegiate sporting events.  Finally, live horse
racing competes with a wide variety of summer attractions, including
amusements parks, sporting events and other local activities.

     The Company competes with racetracks located throughout the United
States in securing the better quality horses to run at the Racetrack.
Attracting the owners and trainers of better quality horses is largely
influenced by the ability to offer large purses.  By reducing the number of
racing days and utilizing purse monies derived from simulcast and live race
wagering, the Company was able to offer purses during its 1995 and1996 live
racing seasons which were comparable to most other midwestern racetracks.
However, in 1997 the Company experienced increased competition for better
quality horses from a racetrack located near Des Moines, Iowa which offered
substantially larger purses than the Company in 1997.  This increased
competition from the Des Moines racetrack is expected to continue in the
foreseeable future.

(v)  MARKETING

     The Company's primary market is the seven county Minneapolis-Saint Paul
metropolitan area which in 1990 contained approximately 1.7 million people 18
years and older.

     To support its primary business of pari-mutuel horse racing, the Company
maintains yearr-round marketing efforts which are focused on maintaining the
loyalty of live and simulcast patrons and attracting new customers.  Using
newspapers, television, other print media, radio and direct mail, the Company
concentrates its marketing efforts on communicating the excitement of
wagering on high caliber horse racing from around the country.  In addition
to its regular advertising program, the Company conducts numerous special
promotions and Open Houses to increase simulcast patronage.

     The 1997 and 1996 advertising campaigns utilized primarily print and
radio advertising to promote live racing by highlighting the attractive,
park-like atmosphere of Canterbury Park, promoting activities for the entire
family, as well as the fun and excitement of live horse racing.  In addition,
the development of a customer data base enabled the Company to effectively
utilize direct mail advertising in 1997.


                                       5
<PAGE>

        Because wagering on horse racing is more complex than many other
forms of gaming, such as slot machines or the various lottery products, the
Company continues to develop and conduct various educational programs, such
as tours of the Racetrack, wagering classes and contests that it believes
will make the sport of horse racing and pari-mutuel wagering more
understandable to the general public.

(vi)    REGULATION

        GENERAL.

        The ownership and operation of a horse racetrack in Minnesota is
subject to significant regulation by the Racing Commission under the Racing
Act and the rules adopted by the Racing Commission.  The Racing Act provides
for the allocation of each wagering pool to winning bettors, the racetrack,
purses, the State of Minnesota and the Breeders' Fund and empowers the Racing
Commission to license and regulate substantially all aspects of horse racing
in the State. The Racing Commission, among other things, grants operating
licenses to racetracks after an application process and public hearings,
licenses all employees of a racetrack, jockeys, trainers, veterinarians and
other participants, regulates the transfer of ownership interests in
licenses, allocates live race days and simulcast-only race days, approves
race programs, regulates the conduct of races, sets specifications for the
racing ovals, animal facilities, employee quarters and public areas of
racetracks, regulates the types of wagers on horse races and approves
significant contractual arrangements with racetracks, including management
agreements, simulcast arrangements, totalizator contracts and concessionaire
agreements.  Decisions by the Racing Commission in regard to any one or more
of the foregoing matters could adversely affect the Company's operations.

        A federal statute, the Interstate Horse Racing Act of 1978, also
provides that a racetrack must obtain the consent of the group representing
the majority of the horsepersons (owners and trainers) of the horses racing
at the racetrack, and the consent of the state agency regulating the
racetrack, in order to transmit simulcast signals of its live races or to
receive and use simulcast signals from other racetracks.  The Company has
obtained the consent of the MHBPA for receiving and sending simulcasting
signals.

        ISSUANCE OF CLASS A AND CLASS B LICENSES TO THE COMPANY.

        The Racing Commission issued a Class A License to the Company on
April 27, 1994.  The Class A License allows the Company to own and operate
the Racetrack. The Class A License is effective until revoked or suspended by
the Racing Commission, or relinquished by the licensee.  The fee for a Class
A License is $10,000 per calendar year.

        The Racing Commission issued a Class B License to the Company on
April 27, 1994.  The Class B License allows the Company to sponsor and manage
horse racing on which pari-mutuel wagering is conducted at its Class A
licensed racetrack and on other horse races run at out-of-state locations as
authorized by the Racing Commission.  The Class B License is renewable each
year by the Racing Commission after a public hearing (if required by the
Racing Commission).  The Company's Class B License was renewed for the 1998
season in December 1997.  The fee for a Class B License is $100 for each
assigned race day on which live racing is actually conducted and $50 for each
day on which simulcasting is authorized and actually takes place.

        LIMITATION ON THE NUMBER OF CLASS A AND CLASS B LICENSES.

        Pursuant to the Racing Act, so long as the Racetrack maintains its
Class A License, no other Class A License may be issued in the seven county
metropolitan area (the counties of Hennepin, Ramsey, Washington, Scott,
Dakota, Anoka and Carver), except the Racing Commission may issue an
additional Class A License within the seven county metropolitan area,
provided that the additional license may only be issued for a facility which,
among other conditions, is located more than 20 miles from the Racetrack,
contains a track no larger than five-eighths of a mile in circumference, and
is used exclusively for Standardbred (harness) racing.  Therefore, as long as
the Company holds the Class A License, only the Company may own and operate a
racetrack in the seven county metropolitan area where Thoroughbred horses and
Quarter Horses may be raced.

                                      6
<PAGE>

        LIMITATION ON OWNERSHIP AND MANAGEMENT OF AN ENTITY WHICH HOLDS A
CLASS A LICENSE AND/OR CLASS B LICENSE.

        The Racing Act requires prior Racing Commission approval of all
officers, directors, 5% shareholders, or other persons having a present or
future direct or indirect financial or management interest in any person
applying for a Class A and Class B license, and if a change of ownership of
more than 5% of the licensee's shares is made after an application is filed
or the license issued, the applicant or licensee must notify the Racing
Commission of the changes within five days of this occurrence and provide the
information required by the Racing Act.

        LOCAL REGULATION.

        The Racetrack is subject to state and local laws, regulations,
ordinances and other provisions affecting zoning and other matters which may
have the effect of restricting the uses to which the Company's land and other
assets may be used.  The Canterbury Park property was originally zoned
"Racetrack District," but the City of Shakopee has revised its zoning
ordinances and as of January 1, 1995 has zoned the Company's property as
"Major Recreation Zone." The Company believes such rezoning has not adversely
affected the current uses of the Racetrack and believes the rezoning will not
adversely affect the Racetrack in the future.  Also, any development of the
Racetrack site will, among other things, be subject to applicable zoning
ordinances and require approval by the City of Shakopee and other authorities
and there can be no assurance such approvals will be obtained.

(vii)   EMPLOYEES

        At March 11, 1998, the Company had approximately 55 full-time
employees and 150 part-time employees.  When the Company commences live
racing in May 1998, the Company expects to employ approximately 120
additional full-time seasonal employees and approximately 450 additional
part-time seasonal employees.  The Company's management believes its employee
relations are good.

(viii)  EXECUTIVE OFFICERS

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

<TABLE>
<CAPTION>

Name                     Age       Position with Company
----                     ---       ---------------------
<S>                      <C>       <C>

Randall D. Sampson       39        Chief Executive Officer, President,
                                   Chief Financial Officer, and General Manager

Michael J. Garin         42        Vice President of Hospitality

Troy J. Mertens          30        Vice President of Mutuels and Simulcasting

Mark A. Erickson         41        Vice President of Facilities

</TABLE>

-------------------

        Randall D. Sampson has been CEO, President and Chief Financial
Officer since the formation of the Company in March 1994 and General Manager
since September 1995.  Mr. Sampson has served as President of Sampson Racing,
Inc. since 1989 and managed the Thoroughbred racing and breeding operations
of the Curtis Sampson family.  Mr. Sampson has been active in horse racing
industry associations, serving on the Board of Directors of the Minnesota
Thoroughbred Association from 1989 to 1993, and as Treasurer in 1990 to 1991
and its President in 1992.  Mr. Sampson has also been a member of the
Minnesota Horsemen's Benevolent and Protective Association serving as Vice
President of the organization from 1993 to 1994.  Mr. Sampson served on the
1992 Governor's Commission on Canterbury Downs and was a member of the
Minnesota Racing Commission Breeders' Fund Advisory Board from 1991 to 1997.
He also serves as a director of the Thoroughbred Racing

                                       7

<PAGE>

Association of North America. Mr. Sampson is the son of Curtis A. Sampson,
the Company's Chairman of the Board who is a holder of approximately 35% of
the Company's common stock.

        Michael J. Garin has been Vice President of Hospitality since May of
1997. He had served as President of Canterbury Park Concessions, Inc. since
April of 1994.  From September 1993 to April 1994, Mr. Garin was employed as
Food and Beverage Supervisor of Little Six, Inc.  During March 1992 to
September 1993 he served as a Training Program District Manager for Arby's.

        Troy J. Mertens has been Vice President of Mutuels and Simulcasting
since May 1997, was Director of Mutuel and Simulcast Operations from April
1994 through April 1997, and Assistant General Manager from September 1995
until April 1997.  Previously, he worked for the prior owners of the
Racetrack as a mutuel teller, mutuels supervisor, assistant to the Mutuels
Manager and an operations accountant.

        Mark A. Erickson has served as Vice President of Facilities since May
1997. He was the Director of Facilities from April 1994 until April 1997.
From May 1992 until employment with the Racetrack, Mr. Erickson served as
Maintenance Supervisor for the Mall of America in Bloomington, Minnesota.

ITEM 2. DESCRIPTION OF PROPERTY

        GENERAL.

        The Racetrack, which is operated under the name "Canterbury Park," is
a modern facility, generally comparable to other major racetracks located
throughout the country.  The Racetrack has an average patron capacity of
approximately 10,000 within the enclosed grandstand and a maximum patron
capacity of approximately 30,000 including the outside areas around the
grandstand.  The grandstand and most public outdoor areas contain numerous
pari-mutuel windows, odds information boards, video monitors, concessions
stands and other amenities.  The audio/visual system includes over 600
television monitors with most areas providing multi-screen viewing of the
races.

        The Racetrack is located approximately 25 miles southwest of downtown
Minneapolis.  The area immediately surrounding the Racetrack consists
primarily of partially developed industrial park and farm land.  However, the
Racetrack is in reasonable proximity to a number of major entertainment
destinations including:  Valleyfair, an amusement park about two miles from
the Racetrack which annually attracts approximately one million visitors
during the spring and summer; the Renaissance Festival, a seven-weekend late
summer attraction attracting approximately 315,000 visitors, located about
five miles from the Racetrack; and Mystic Lake Casino, located about three
miles from the Racetrack, which draws approximately 4.5 million patrons
annually.  Approximately 20 miles from the Racetrack is the Mall of America,
the largest enclosed shopping mall in the United States, which attracts
approximately 40 million visitors per year.

        RACING SURFACES.

        The racing surfaces consist of a one-mile oval dirt/limestone track
and a 7/8 mile oval turf track.  The dirt track is lighted for night racing.
The dirt track includes a mile and one-quarter front stretch chute, a 6-1/2
furlong backstretch chute and a quarter horse chute.

        GRANDSTAND.

        The grandstand is a modern, air-conditioned, enclosed structure of
approximately 275,000 square feet with a variety of facilities on six
levels. The Lower Level contains space for support functions such as jockey
quarters, administrative offices, Racing Commission offices, the mutuels
department, concession and maintenance offices, first aid, mechanical and
electrical rooms. The Track Level includes mutuels windows, restrooms, a
variety of concession stands and other services.  A large area of the track
level is used as a simulcast center during live racing and is utilized for
banquets and other events during the off-season.  The Mezzanine Level
contains 1,320


                                       8

<PAGE>

fixed seats in a glass-enclosed, air-conditioned area and  an additional
3,000 seats located outside.  In addition to the seats, the Mezzanine Level
contains mutuel windows, restrooms, concession stands and other guest
facilities.  The Kitchen Level is an intermediate level located between the
Mezzanine and Clubhouse floors; it contains a full-service kitchen which can
support a full dining menu for the track-side dining terraces on the
Clubhouse Level and to prepare food for the other concession areas.  The
Clubhouse Level is a multi-purpose area serving as a simulcast center during
wagering sessions on televised races, as well as a full-service dining area
during the live racing season.  The Clubhouse Level includes 325 trackside
tables, each equipped with a television set, with a total seating capacity of
1,200 patrons and an additional 1,000 seats are located in lounges located
throughout the area.  An additional feature of the Clubhouse Level is a
special club area which includes 225 dining seats, a party room and a large
bar and lounge.  The Press Box/Officials' Level is located in the roof
trusses over the Clubhouse and contains work areas for the press, racing
officials, closed-circuit television, photo-finish and the track announcer.
In addition, the grandstand was structurally built to accommodate skyboxes
under the Press Box/Officials' Level, although none have yet been
constructed. Escalators and elevators are available to move patrons among the
various levels within the grandstand.

        OTHER VIEWING AREAS.

        In addition to the grandstand, patrons can watch races from the
following outdoor areas:  the apron, or standee ramp, between the grandstand
and the racetrack and a large picnic area immediately north of the
grandstand.  These areas have concession stands and mutuel windows nearby.

        GROUNDS; SADDLING PADDOCK AREA.

        The grounds surrounding the grandstand are extensively landscaped.
Located near the main entrance behind the grandstand is a European-style
paddock area where patrons can observe the jockey mounting and the post
parade.

        BARN AND BACKSIDE FACILITIES.

        The stable area consists of 33 barns with a total of approximately
1,650 stalls.  In the stable area, there are 216 dormitory rooms for the
grooms and others working at the Racetrack.  The stable area also contains a
combination racing office and cafeteria/recreation building for stable
personnel, two blacksmith buildings and space for a future veterinarian
hospital.

        PARKING.

        Approximately 7,500 paved parking spaces are available for patron and
employee automobiles at the Racetrack, including parking spaces that are
reserved for physically challenged patrons.  The Racetrack also has unpaved
areas available for overflow parking for approximately 5,000 additional
automobiles.  Areas are also reserved for bus parking.

        INSURANCE.

        The Company maintains insurance on its facilities in amounts it
believes are sufficient.

        OTHER PROPERTIES.

        Approximately 80 acres of the 355 acres owned by the Company are not
necessary for racing operations.  This property, adjacent to the Racetrack,
is undeveloped and could be sold in whole or in part, depending upon future
opportunities.  The 355 acres includes 30 acres of undeveloped land adjacent
to Canterbury Park which was purchased on August 18, 1997, for investment or
future development.  The Company regularly evaluates other business
activities and development opportunities that would maximize the use of the
real estate surrounding the Racetrack and which would complement the
Company's primary business of horse racing.


                                       9

<PAGE>

ITEM 3. LEGAL PROCEEDINGS

        Not Applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

        Not Applicable.


                                       10

<PAGE>

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(a)     MARKET INFORMATION

        The Company's Common Stock, Warrants and Units (each Unit consisting
of one share of common stock and one warrant to purchase one share of common
stock) are traded on the NASDAQ system under the symbols TRAK, TRAKW and
TRAKU, respectively.  The table set forth below indicates the high and low
trade prices for the Units, Common Stock and Warrants for the years ended
December 31, 1997 and 1996.  These prices indicate interdealer prices without
retail markup, markdowns or commissions.

<TABLE>
<CAPTION>
                                               1997                       1996
                                       -------------------        -------------------
                                        High          Low          High          Low
                                       -----         -----        -----         -----

<S>                                    <C>           <C>          <C>           <C>
Units
-----

First Quarter                         $ 4 5/8       $ 2          $ 2 7/8       $ 1 1/2
Second Quarter                          6             2 3/8        3 3/4         2
Third Quarter                           4 5/8         2 3/4        3 3/4         2 1/2
Fourth Quarter                          6 1/2         2 3/4        2 3/4         2 1/16

Common Stock
------------

First Quarter                           4 1/2         2 3/16       2 5/8         1 3/8
Second Quarter                          5 7/8         2 1/2        3 3/8         1 1/8
Third Quarter                           4 3/4         3 3/8        3 1/4         2 1/4
Fourth Quarter                          7             2 3/4        2 5/8         2

Warrants
--------

First Quarter                           13/16         1/16         3/8           1/16
Second Quarter                          1             1/4          9/16          1/4
Third Quarter                           5/8           1/4          1/4           1/4
Fourth Quarter                          1 1/2         17/64        1/4           1/16
</TABLE>


(b)     HOLDERS

        At March 11, 1998, the Company had 350 holders of record of its
common stock.  In addition, on that date a depository company held
approximately 1,346,868 shares as nominees for an undetermined number of
additional beneficial holders.

(c)     DIVIDENDS

        The Company has not paid any dividends on its common stock and does
not anticipate paying any in the foreseeable future.


                                       11
<PAGE>

ITEM 6  MANAGEMENT'S DISCUSSION AND ANALYSIS

GENERAL

        Canterbury Park Holding Corporation (the "Company") owns and operates
Canterbury Park (the "Racetrack"), the only pari-mutuel horse racing facility
in the State of Minnesota.  The Company's revenues for the years ended
December 31, 1997 and 1996 were derived primarily from pari-mutuel take-out
on races simulcast year-round to Canterbury Park from racetracks throughout
the country, and on live Thoroughbred and Quarter Horse races at the
Racetrack.  During 1997 and 1996 the Company conducted 358 and 312 days of
simulcast racing, respectively.  The Company hosted 56 and 55 day live race
meets in 1997 and 1996, respectively.  These live race meets commenced in the
month of May and concluded in August.  In 1997, the Company hosted three days
of live harness racing over the Labor Day weekend.  During these live race
meets, the Company earns additional pari-mutuel revenue from sending the
signal for its races to out-of-state racetracks around the country.  In
addition to pari-mutuel revenues, the Company generates revenues from
admissions, parking, program sales, concession sales, special events,
advertising and other sources.

        On April 11, 1996, legislation became effective in Minnesota which,
beginning July 1, 1996, exempted the first $12 million of pari-mutuel revenue
from the 6% pari-mutuel tax.  The legislation is effective until July 1, 1999
and benefits the horsepersons' purse fund as well as the Company during a
statutorily mandated twelve month period, beginning July 1 and ending the
following June 30.  Effective July 1, 1996, pari-mutuel taxes have been
estimated for the 12 month period from July 1 through June 30, and an
estimated annual effective tax rate has been applied to pari-mutuel
commission revenues generated during the twelve month period.

        The legislation referred to above also provides that winning
pari-mutuel tickets which are not cashed within one year of the end of the
respective race meet will become the property of the Company.  The
legislation is effective through December 31, 1999 after which uncashed
winning tickets will again be remitted to the State of Minnesota.  The
Company is recording revenue associated with the uncashed winning tickets at
the time, based on historical experience, that management can reasonably
estimate the amount of additional winning tickets from a race meet that will
be presented for payment.  For the twelve months ended December 31, 1997 and
December 31, 1996, total uncashed winning ticket revenue included in
pari-mutuel revenues totalled approximately $333,000 and $180,000,
respectively.

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31,
1996

        In 1997, the Company, with the full cooperation of the horsepersons'
organizations, successfully completed its third live racing meet featuring an
entertaining and competitive stable of horses and jockey colony.  Net income
for the year ended December 31, 1997 was $135,788, compared to net income of
$71,149 for the year ended December 31, 1996.  This improvement in operations
was accomplished primarily due to the legislation enacted in 1996 which was
in effect for all of fiscal year 1997.  Pari-mutuel tax expense decreased to
$51,177 in 1997 compared to $421,787 in 1996 and 799,316 in 1995.  Revenues
related to unclaimed tickets increased to $333,290 in 1997 compared to
unclaimed ticket revenue of $179,867 in 1996.  This legislation, however,
also benefits the horsepersons' purse funds which receive a higher percentage
of pari-mutuel take-out and resulted in an increase in the Company's
statutory purse expense of approximately $240,000 in 1997 compared to
$122,000 in 1996.

        Offsetting the benefits of the 1996 legislation were expenses for
legislative activities in 1997.  Expense levels in 1997 for legislative
activity were much higher than a normal year due to the Company's efforts to
obtain legislative approval for a casino at the Racetrack which would
generate revenues to help finance a new major league baseball stadium in
Minnesota.  During fiscal year 1997 the Company incurred lobbying and
communication expenses of $257,000 and charged an additional $150,000 to
operations, including $86,000 of noncash expense resulting from the issuance
of stock options to consultants, to develop financial, design and market
feasibility studies related to the casino concept. While this  proposal did
not receive legislative authorization in 1997, the Company is continuing to
pursue legislative options in 1998 which would be in the long term interests
of the Company and the Racetrack.

                                       12
<PAGE>

The following table summarizes operating data for the years ended December 31,
1997 and December 31, 1996:

SUMMARY OF OPERATING DATA:

<TABLE>
<CAPTION>
                                                      YEAR                         YEAR
                                                      ENDED                        ENDED
                                                 DECEMBER 31, 1997           DECEMBER 31, 1996
<S>                                              <C>                         <C>
      RACING DAYS
         Simulcast only days                               302                         261
         Live and simulcast days                            56                          51
                                                 -----------------           -----------------
                               TOTAL RACING DAYS           358                         312

       ATTENDANCE
         Simulcast only days                           130,000                     132,000
         Live and simulcast days                       191,000                     192,000
                                                 -----------------           -----------------
                               TOTAL ATTENDANCE        321,000                     324,000

       ON-TRACK HANDLE
          Simulcast only days                    $  42,182,000               $  42,136,000
          Live and simulcast days
              Live racing                           11,321,000                  12,251,000
              Simulcast racing                      12,494,000                  10,396,000
       OUT-OF-STATE LIVE HANDLE                     12,635,000                   9,895,000
                                                 -----------------           -----------------
                               TOTAL HANDLE      $  78,632,000               $  74,678,000

       AVERAGE DAILY ATTENDANCE
          Simulcast only days                              430                         506
          Live and simulcast days                        3,403                       3,765

       ON-TRACK PER CAPITA WAGERING
          Simulcast only days                    $         324               $         319
          Live and simulcast days                          125                         118

       ON-TRACK AVERAGE DAILY HANDLE
          Simulcast only days                    $     139,675               $     161,441
          Live and simulcast days                      425,268                     444,059
</TABLE>

        Total operating revenues for the years ended December 31, 1997 and
December 31, 1996 were $18,202,216 and $17,371,005, respectively.

        Total  pari-mutuel revenues increased 4.0% to $14,023,668 in 1997
from $13,487,640 in 1996.  Pari-mutuel revenues derived from simulcasting
increased 5.1% to approximately $10,940,000 from approximately $10,407,000 in
1996.  This change was consistent with the change in simulcast handle, which
increased to $54,676,000 in 1997, compared to $52,532,000 in 1996.

        On-track wagering on live races at the Racetrack decreased by
approximately $ 930,000, or 7.6%, to approximately $11,321,000 in 1997, from
approximately $12,251,000 in 1996.  Consequently, pari-mutuel revenue from
these live races decreased by 8.7% to $2.4 million in 1997 from approximately
$2.6 million in 1996.  While on-track average daily handle decreased to
$425,268 in 1997 from $444,059 in 1996, the on-track per capita wagering
increased on simulcast only days and on days when both live and simulcast
racing were conducted.

                                       13

<PAGE>

     Pari-mutuel revenue from simulcasting the Racetrack's live races to out-of-
state racetracks totalled $360,253 in 1997 compared to $282,670 in 1996.  The
Racetrack receives amounts ranging from 2.50% to 3.00% of amounts wagered at
out-of-state racetracks as a "Guest fee".  The handle wagered at out-of-state
racetracks increased to  $12.6 million in 1997, compared to $9.9 million wagered
out of-state in 1996.

     Revenues earned related to uncashed winning tickets were approximately
$333,000 in 1997 compared to $180,000 in 1996.  Uncashed winning tickets were
remitted to the State of Minnesota until April 11, 1996, the date the
legislation became effective.

     Concession, admission and parking revenues were higher during the twelve
months ended December 31, 1997 compared to the twelve months ended December 31,
1996, despite a slight decrease in attendance from horse racing, due to higher
overall attendance from events other than horse racing.  The Lilith Fair outdoor
concert in August 1997, with attendance of over 30,000 patrons, contributed
approximately $130,000 to concession revenues.  Holiday in Lights in November
and December 1997 drew an additional 23,000 patrons to the Racetrack and
contributed to both admission and concession revenues.

     Publication revenues decreased during fiscal year 1997 compared to fiscal
year 1996 due to a change in the simulcast program content and pricing structure
to benefit late day arrivals.

     Other revenues have increased by 16% due primarily to facility rental
revenues generated by special events and other parking lot rental agreements.

     Total operating expenses increased 4.8% to $17,898,019 in 1997 from
$17,084,033 in 1996.  The increased costs are primarily related to increased
costs of legislative activities in 1997 as previously discussed.  Salary and
benefit costs increased by 7.9% in 1997 compared to 1996.  Approximately 1.0% of
the increase is attributable to higher costs of employee benefits.  The
remainder is due primarily to additional full-time employees in 1997 resulting
partially from an increased number of special events in the current year.

     Minnesota law requires the Company to segregate a portion of funds received
from wagering on simulcast and live horse races for future payment as purses for
live horse races or other uses of  Minnesota's horsepersons' associations.  This
purse expense is one of the Company's largest single expense items.   The
minimum percentage required by law to be set aside for purses from simulcasting
varies substantially depending on the time of year the simulcasting is
conducted.  For the 25-week period beginning in early May, which is the
statutorily established "Racing Season," 50% of net pari-mutuel revenue, before
deducting for purses, is allocated to a fund for the payment of purses during
the live meet.  For the remaining 27 weeks of the racing year, November through
April, funds accumulate at the rate of 25% of net pari-mutuel revenue, before
deducting for purses, but after deducting an 8% expense factor.  Purse expense
as a percentage of the Company's pari-mutuel commission and breakage revenues
increased slightly to 27.7% for the year ended 1997, from 26.8% for the year
ended December 31, 1996.  The increase in this percentage is attributed to two
factors.  First, the reduction in the pari-mutuel tax, which became effective
July 1, 1996, also benefitted the horsepersons' associations.  As a result of
this legislation the Racetrack allocated more funds for purses related to
simulcast races from other racetracks.  Second, in 1997 the Racetrack paid
approximately $131,000 to the Minnesota Horsemen's Benevolent and Protective
Association (the "MHBPA") for purses on live races simulcast to out-of-state
racetracks, compared to $87,000 for 1996.  In general, pursuant to the agreement
with the MHBPA, 50% of the net earnings from import races during the 1997 and
1996 live meets were paid to the MHBPA.  Net earnings are defined as guest fees
received, less the costs of sending the simulcast signal ("uplinking").

     Amounts paid to the Minnesota Breeders' Fund are a function of on-track
handle and the increase is consistent with the increase in total on-track
handle.  Host track fees decreased slightly to 3.44% of simulcast handle in 1997
compared to 3.49% in 1996.  The host fee is calculated as a percentage of monies
wagered on out-of-state racetracks (generally 2.50% to 4.50%) and is negotiated
with each host track.  The Racetrack received simulcast signals from over 40
race meets in 1996 and added an additional 10 different out-of-state race meets
during 1997.

                                       14

<PAGE>

     Pari-mutuel taxes decreased $370,610, or 87.9%, to $51,177 for the year
ended December 31, 1997 compared to $421,787 for the year ended December 31,
1996.  This decrease is attributed to the legislation enacted in the State of
Minnesota on April 11, 1996  and effective July 1, 1996.  Effective July 1,
1996, pari-mutuel taxes have been estimated for the 12 month period from July 1
through June 30, and an estimated annual effective tax rate has been applied to
pari-mutuel commission revenues generated during the twelve month period.


     Advertising and marketing costs were 9.8% lower in 1997 due to increased
focus on expense control in this area.  A patron database developed during the
1996 and 1995 live race meets allowed the Racetrack to efficiently and
effectively contact patrons via direct mail in 1997, reducing the need for mass
media advertising.

     Interest expense relates primarily to amounts due to Mr. Curtis Sampson,
the Company's Chairman of the Board and a 35% shareholder, under a line of
credit agreement and to amounts due to the MHBPA for purses.  The average daily
balance of amounts due under the line of credit were approximately $1,190,000
and $1,855,000 for the years ended December 31, 1997 and December 31, 1996,
respectively.  The weighted average rate of interest on the line of credit was
9.42% and 10.45% for 1997 and 1996, respectively.  The contractual rate of
interest on the line of credit changed from prime rate plus 2% at the beginning
of 1997 to the base prime rate in August of 1997.  The average daily balance of
amounts due to the MHBPA were approximately $662,000 and $473,000, for the years
ended December 31, 1997 and 1996, respectively.  The weighted average rate of
interest on the amounts due to the MHBPA was 8.17% and 8.27% for 1997 and 1996,
respectively.  The interest rate on the line of credit and the MHBPA liability
was 8.50% at December 31, 1997.

LIQUIDITY AND CAPITAL RESOURCES:

     During the year ended December 31, 1997, cash provided by operating
activities was $1,233,910, which resulted principally from net income of
$135,788, depreciation and amortization of $856,982, an increase in payable to
horsepersons of $163,941 and an increase in accounts payable and accrued
expenses of $130,802.  During the year ended December 31, 1996, cash provided by
operating activities was $977,941, which resulted principally from net income of
$71,149, depreciation and amortization of $811,509, and an increase in accounts
receivable and other current assets of $51,094.

     Cash provided by financing activities was $116,785 for the year ended
December 31, 1997, which represents the net proceeds on the Company's line of
credit with its majority shareholder of $42,188 and the proceeds of $74,597
from the issuance of common stock due to the exercise of stock options and to
the issuance of common stock pursuant to the Company's employee stock
purchase plan. During 1996, cash used in financing activities was $774,787,
which was the net amount of payments on the company's line of credit with its
majority shareholder of $817,555 offset by proceeds of $42,768 from the
issuance of common stock due primarily to the exercise of options.  For
fiscal 1997, net cash used in investing activities was $1,283,582 which
consisted of $935,141 for the acquisition of a 30 acre tract of undeveloped
land adjacent to the Racetrack, $395,355 for capital expenditures, primarily
consisting of equipment and building improvements, partially offset by
proceeds from the sale of equipment of $47,344.   For fiscal 1996, net cash
used in investing activities was $362,584 for capital expenditures, partially
offset by  proceeds from the sale of equipment of $67,530.  The Company
estimates that it will spend approximately $400,000 for capital expenditures
during fiscal year 1998.

     Minnesota law requires the Company to segregate a portion of funds
(recorded as statutory purses in the statement of operations), received from
wagering on simulcast and live horse races, for future payment as purses for
live horse races or other uses of the horsepersons' associations.  Pursuant to
an agreement with the MHBPA, the Company has transferred into a trust account or
paid directly to the MHBPA, approximately $3,287,000 and $3,164,000 for the
years ended December 31, 1997 and 1996, respectively, related to thoroughbred
races.   Minnesota Statutes specify that amounts transferred into the trust
account are the property of the trust and not of the Company.  The amounts due
the MHBPA were $709,573 and $553,190 at December 31, 1997 and 1996,
respectively, and are guaranteed by the Company's Chairman of the Board.  The
interest rates on any statutory purses accrued but not transferred into the
trust were 8.50% and 8.25% at December 31, 1997 and 1996, respectively.

                                       15

<PAGE>

     The Company believes that the cash to be generated from operations,
together with funds available under its $3,000,000 line of credit with the
Company's Chairman of the Board, will be sufficient to satisfy its liquidity and
capital resource requirements for the next twelve months.  The Company
anticipates that it will pay down a portion of the borrowings under the line of
credit with funds generated from operations and borrow additional amounts under
the line of credit as funds are needed for working capital purposes.  The
Company is also negotiating a credit facility from a traditional lender to
replace the line of credit with Mr. Sampson.  Mr. Sampson has advised the
Company that if it is unable to obtain a credit facility from a traditional
lender, then he will keep his line of credit in place through at least March 31,
1999.  As of March 11, 1998, borrowings under the line of credit had been
reduced to approximately $1,067,000.

     Cash flows provided from operations in 1998 are anticipated to be
consistent with cash flows provided by operations in 1997.

OPERATING PLAN:

     In 1997 the Company was successful in conducting its third live race meet
in three years.  The Company competes with racetracks located throughout the
United States in securing the better quality horses to run at the Racetrack.
Attracting the owners and trainers of better quality horses is largely
influenced by the ability to offer large purses.  By reducing the number of
racing days and utilizing purse monies from simulcasting and live race wagering,
the Company continues to offer purses during its live racing season which were
comparable to most other midwestern racetracks.  However, the Company
experienced increased competition for better quality horses from a racetrack
located near Des Moines, Iowa  which offered substantially larger purses than
the Company in 1997.

     The Company plans a live race meet in 1998 which will consist of a 24-day
mixed meet of Thoroughbred and Quarter Horse racing, a 28-day Thoroughbred only
meet, and three days of live harness racing over Labor Day weekend.

     The Company's ability to operate profitably in 1998 will largely depend on
its ability to maintain levels of attendance and wagering handle for live and
simulcast racing at levels similar to 1997.  The Company will also need to
maintain operating expenses, including legislative related expenses, at levels
similar to 1997.  In addition, the Company plans to continue its emphasis on
special events and maximizing the potential of the entire facility year-round.

FACTORS AFFECTING FUTURE PERFORMANCE:

     The Company is in the process of initiating formal communications with its
significant suppliers to determine the extent to which the Company's interface
systems are vulnerable to those third parties' failure to remediate their own
Year 2000 issue.  There can be no guarantee that the systems of other companies
on which the Company's systems rely will be timely converted and would not have
an adverse effect on the Company's systems.  The Company reviewed its internal
computer applications for vulnerability to the Year 2000 issue.  Software
products deemed to be susceptible to corruption are under evaluation for
conversion or replacement in the year 1999 or earlier.  These applications are
not considered critical to the Company's daily operations and costs to convert
or replace the software are not expected to be material.

     From time to time, in reports filed with the Securities and Exchange
Commission, in press releases, and in other communications to shareholders or
the investing public, the Company may comment on anticipated future financial
performance.  Such forward looking statements, including statements contained in
this Report on Form 10-KSB, are subject to risks and uncertainties which may
adversely affect future financial performance, including, but not limited to,
fluctuations in attendance at the Racetrack, changes in the level of wagering by
patrons, legislative and regulatory changes, the impact of wagering products
introduced by competitors, higher than expected expenses, and other risks
applicable to the horse racing industry generally.

                                       16
<PAGE>

CHANGES IN ACCOUNTING STANDARDS

     The Financial Accounting Standards Board ("FASB") has issued SFAS No. 130,
"Reporting Comprehensive Income".  This statement establishes standards for
reporting and presenting comprehensive income and its components in the
financial statements.  SFAS No. 130 is effective for fiscal years beginning
after December 15, 1997.  Reclassification of financial statements for earlier
periods provided for comparative purposes is required.  Management is currently
evaluating the impact of this pronouncement.

     The FASB has also issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information".  This statement establishes standards for
the way public enterprises report information about operating segments in annual
financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports to
shareholders.  It also establishes standards for related disclosures about
products and services, geographic areas and major customers.  SFAS No. 131 is
effective for fiscal years beginning after December 15, 1997.  Financial
statement disclosures from prior periods are required to be restated.
Management is currently evaluating the impact of this pronouncement.






ITEM 7.   FINANCIAL STATEMENTS

     The following financial statements of the Company are set forth on pages 18
through 29 of the Form 10-KSB:

<TABLE>
<CAPTION>
                                                                          Page
                                                                          ----
<S>                                                                       <C>

Independent Auditors' Report  . . . . . . . . . . . . . . . . . . . . .    18

Consolidated Balance Sheets as of December 31, 1997 and 1996  . . . . .    19

Consolidated Statements of Operations for the years ended December 31,
1997 and December 31, 1996. . . . . . . . . . . . . . . . . . . . . . .    20

Consolidated Statements of Changes in Stockholders' Equity for the
years ended December 31, 1997 and December 31, 1996 . . . . . . . . . .    21

Consolidated Statements of Cash Flows for the years ended December 31,
1997 and December 31, 1996. . . . . . . . . . . . . . . . . . . . . . .    22

Notes to Consolidated Financial Statements for the years ended
December 31, 1997 and December 31, 1996   . . . . . . . . . . . . . . .    23
</TABLE>





                                       17

<PAGE>

INDEPENDENT AUDITORS' REPORT

Board of Directors
Canterbury Park Holding Corporation
Shakopee, Minnesota

We have audited the accompanying consolidated balance sheets of Canterbury Park
Holding Corporation and subsidiary (the Company) as of December 31, 1997 and
1996 and the related consolidated statements of operations, stockholders'
equity, and cash flows for the years then ended.  These consolidated financial
statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements.  An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.  We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Canterbury Park
Holding Corporation and subsidiary as of December 31, 1997 and 1996 and the
results of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.



February 27, 1998
Minneapolis, Minnesota


                                       18

<PAGE>

CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                              1997                  1996
<S>                                                           <C>                   <C>
   ASSETS

   CURRENT ASSETS:
        Cash                                             $   364,214    $   296,671
        Accounts receivable                                  185,468        186,834
        Inventory                                             76,657         72,731
        Deposits                                              20,000         20,000
        Prepaid expenses                                     106,381         81,367
                                                         -----------    -----------
             Total current assets                            752,720        657,603

   PROPERTY AND EQUIPMENT, net  (Note 2)                   9,061,205      8,631,754

   INTANGIBLE ASSETS, net of accumulated
        amortization of $14,875 and $9,925,
        respectively                                           9,494         12,775
                                                         -----------    -----------
                                                         $ 9,823,419    $ 9,302,132
                                                         -----------    -----------
                                                         -----------    -----------

   LIABILITIES AND STOCKHOLDERS' EQUITY

   CURRENT LIABILITIES:
        Accounts payable                                 $   715,062    $   623,930
        Accrued wages and payroll taxes                      200,942        161,272
        Accrued interest                                     103,184        149,387
        Advance from shareholder (Note 6)                  1,651,942      1,609,754
        Accrued property taxes                               305,032        370,916
        Payable to horsepersons (Note 1)                     724,496        560,555
                                                         -----------    -----------
             Total current liabilities                     3,700,658      3,475,814

   COMMITMENTS AND CONTINGENCIES (Notes 7 and 8)

   STOCKHOLDERS' EQUITY (Note 4):
        Common stock, $.01 par value,
             10,000,000 shares authorized,
             2,998,848 and 2,961,382,
             respectively, shares issued and
             outstanding                                      29,989         29,614
        Additional paid-in capital                         8,061,875      7,879,551
        Unearned compensation                                (22,044)
        Accumulated deficit                               (1,947,059)    (2,082,847)
                                                         -----------    -----------
             Total stockholders' equity                    6,122,761      5,826,318
                                                         -----------    -----------
                                                         $ 9,823,419    $ 9,302,132
                                                         -----------    -----------
                                                         -----------    -----------
</TABLE>

See notes to consolidated financial statements.



                                       19

<PAGE>

CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997 AND 1996
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                         1997              1996
<S>                                                <C>                <C>
     OPERATING REVENUES:
          Pari-mutuel                              $ 14,023,668       $ 13,487,640
          Concessions                                 2,421,538          2,138,896
          Admissions and parking                        602,215            581,304
          Publications                                  759,657            823,818
          Other operating revenue                       395,138            339,347
                                                   ------------       ------------
                                                     18,202,216         17,371,005

     OPERATING EXPENSES:
          Pari-mutuel expenses:
               Statutory purses                       3,689,747          3,483,674
               Host track fees                        1,880,779          1,825,999
               Pari-mutuel taxes                         51,177            421,787
               Minnesota Breeders' Fund                 696,459            679,404
          Salaries and benefits                       4,321,476          4,004,104
          Cost of sales related to concessions          721,146            636,231
          Cost of sales related to publications         856,472            913,331
          Depreciation and amortization                 856,982            811,509
          Repairs, maintenance and supplies             443,851            402,753
          Property taxes                                309,764            369,824
          Advertising and marketing                     873,855            968,375
          Utilities                                     671,228            648,514
          Other operating expenses                    2,525,083          1,918,528
                                                   ------------       ------------
                                                     17,898,019         17,084,033
     NONOPERATING (EXPENSES) REVENUES:
          Interest expense (Note 6)                    (166,252)          (228,355)
          Other, net                                      6,243             12,532
                                                   ------------       ------------
                                                       (160,009)          (215,823)
                                                   ------------       ------------
     INCOME BEFORE INCOME TAX EXPENSE                   144,188             71,149
          Income tax expense (Note 3)                    (8,400)
                                                   ------------       ------------
     NET INCOME                                    $    135,788        $    71,149
                                                   ------------       ------------
                                                   ------------       ------------
     WEIGHTED AVERAGE NUMBER OF COMMON
        SHARES OUTSTANDING                            2,976,961          2,949,392
                                                   ------------       ------------
                                                   ------------       ------------

     BASIC NET INCOME PER COMMON SHARE             $        .05       $        .02
          (Note 5)                                 ------------       ------------
                                                   ------------       ------------

     DILUTED NET INCOME PER COMMON                 $        .04       $       .02
          SHARE (Note 5)                           ------------       ------------
                                                   ------------       ------------
</TABLE>

See notes to consolidated financial statements.

                                     20
<PAGE>

CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
                                                                      Additional     Unearned
                                          Number         Common        Paid-in        Compen-      Accumulated
                                        of Shares        Stock         Capital        sation         Deficit         Total
                                      ------------   ------------   ------------   ------------   ------------   ------------
<S>                                   <C>            <C>            <C>            <C>            <C>            <C>
BALANCE,  DECEMBER 31, 1995              2,939,271   $     29,393   $  7,837,004                  $ (2,153,996)  $  5,712,401

Exercise of stock options                   15,000            150         27,975                                       28,125

Exercise of stock warrants                     100              1            487                                          488

Shares issued under Employee
    Stock Purchase Plan                      7,011             70         14,085                                       14,155

Net income                                                                                              71,149         71,149
                                      ------------   ------------   ------------                  ------------   ------------

BALANCE,  DECEMBER  31, 1996             2,961,382         29,614      7,879,551                    (2,082,847)     5,826,318

Exercise of stock options                   22,500            225         42,494                                       42,719

Issuance of compensatory
    stock options                                                        108,102   $    (22,044)                       86,058
Shares issued under Employee
    Stock Purchase Plan                     14,966            150         31,728                                       31,878

Net income                                                                                             135,788        135,788
                                      ------------   ------------   ------------   ------------   ------------   ------------
BALANCE,  DECEMBER 31, 1997              2,998,848   $     29,989   $  8,061,875   $    (22,044)  $ (1,947,059)  $  6,122,761
                                      ------------   ------------   ------------   ------------   ------------   ------------
                                      ------------   ------------   ------------   ------------   ------------   ------------
</TABLE>



See notes to consolidated financial statements.



                                          21
<PAGE>

CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND  1996

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
                                                                                    1997                1996
<S>                                                                             <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                                   $  135,788          $   71,149
   Adjustments to reconcile net income to net cash
     provided by operations:
       Depreciation and amortization                                               856,982             811,509
       Stock options issued for consulting services                                 86,058
       Decrease in accounts receivable                                               1,366              51,094
       (Increase) decrease in other current assets                                 (28,940)             24,156
       Increase (decrease) in accounts payable
          and accrued expenses                                                     130,802             (31,650)
       (Decrease) Increase in accrued interest                                     (46,203)             40,047
       Decrease in accrued property taxes                                          (65,884)            (15,208)
       Increase in payable to horsepersons                                         163,941              26,844
                                                                                ----------          ----------
          Net cash provided by operations                                        1,233,910             977,941

CASH FLOWS FROM INVESTING ACTIVITIES:
   Additions to property and equipment and other assets                           (395,355)           (362,584)
   Additions to land                                                              (935,141)
   Proceeds from sale of equipment                                                  47,344              67,530
                                                                                ----------          ----------
     Net cash used in investing activities                                      (1,283,152)           (295,054)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from issuance of common stock                                           74,597              42,768
   Net proceeds from (payments on) advance from shareholder                         42,188            (817,555)
                                                                                ----------          ----------
     Net cash provided by (used in) financing activities                           116,785            (774,787)
                                                                                ----------          ----------

NET INCREASE (DECREASE) IN CASH                                                     67,543             (91,900)

CASH AT BEGINNING OF YEAR                                                          296,671             388,571
                                                                                ----------          ----------

CASH AT END OF YEAR                                                             $  364,214          $  296,671
                                                                                ----------          ----------
                                                                                ----------          ----------

INTEREST PAID                                                                   $  212,450          $  188,308
                                                                                ----------          ----------
                                                                                ----------          ----------
</TABLE>


See notes to consolidated financial statements.


                                          22
<PAGE>

CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND  1996
--------------------------------------------------------------------------------

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     BUSINESS - Canterbury Park Holding Corporation (the Company) was
     incorporated on March 24, 1994.  On March 29, 1994 the Company acquired all
     the outstanding securities 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 the acquisition was
     accounted for under the purchase method of accounting whereby the acquired
     assets and liabilities have been recorded at the Company's cost.  The
     primary asset of JRI was Canterbury Downs Racetrack and the 325 acres of
     surrounding land.

     On May 20, 1994, the Company adopted a plan of Reorganization pursuant to
     which the sole shareholder of Canterbury Park Concessions, Inc. (CPC), and
     majority shareholder of the Company, agreed to exchange his shares of CPC
     stock for 198,888 shares of the Company's common stock concurrent with the
     closing of a public offering.  Pursuant to the Plan of Reorganization, CPC
     became a wholly owned subsidiary of the Company in August 1994 when the
     Company completed the initial public offering of its common stock.  This
     reorganization was treated in a manner similar to a pooling of interests.
     Net proceeds received by the Company from the public offering were
     approximately $4,847,000 which, along with additional borrowings under the
     Company's line of credit with the majority shareholder, were used to pay
     off the remaining notes payable from the acquisition of JRI.

     The consolidated financial statements include the accounts of the Company
     and CPC after elimination of intercompany accounts and transactions.

     OPERATIONS  - The Company's revenues are derived primarily from pari-mutuel
     wagering on simulcast and live horse races.

     BASIS OF ACCOUNTING - The consolidated financial statements have been
     prepared assuming that the Company will continue in existence.  This
     contemplates the realization of assets and settlement of obligations in the
     ordinary course of business.  The Company has incurred cumulative operating
     losses of approximately $1,947,000, and has a working capital deficit of
     approximately $2,948,000 at December 31, 1997.  During 1997 and 1996, the
     Company hosted a number of special events in addition to horse racing in an
     effort to increase its cash flows and attain profitability.  These
     additional events, combined with the benefit to the Company of legislative
     changes referred to below, have allowed the Company to achieve
     profitability in 1996 and 1997.  Management continues to pursue legislation
     for additional potential sources of revenue and is also pursuing more
     traditional bank financing.  Management believes that funds available under
     its line of credit, or any other line of credit which replaces it, along
     with funds generated from operations, will be sufficient to satisfy its
     liquidity and capital resource requirements during 1998.  If the line of
     credit is not replaced, the Company's majority shareholder has agreed not
     to terminate the line of credit prior to March 31, 1999.

     ESTIMATES - The preparation of the consolidated financial statements in
     conformity with generally accepted accounting principles requires
     management to make estimates and assumptions that affect the reported
     amounts of assets and liabilities and disclosure of contingent assets and
     liabilities at the date of the consolidated financial statements and the
     reported amounts of revenues and expenses during the reporting period.
     Actual results could differ from these estimates.

     DEPRECIATION - Property and equipment are depreciated on a straight-line
     basis over the estimated useful lives of the assets, generally 5 to 39
     years.


                                          23
<PAGE>

     INTANGIBLE ASSETS - Intangible assets consist of organization and trademark
     costs and are amortized on a straight-line basis over 60 months.

     UNCASHED WINNING TICKETS  -  On April 11, 1996, legislation became
     effective in Minnesota whereby winning pari-mutuel tickets which are not
     cashed within one year of the end of the respective race meet will become
     the property of the Company.  The legislation is effective through December
     31, 1999 after which uncashed winning tickets will again be remitted to the
     State of Minnesota.  The Company will record revenue associated with the
     uncashed winning tickets at the time that, based on historical experience,
     management can reasonably estimate the amount of additional winning tickets
     from a race meet that will be presented for payment.  In 1997, the Company
     continued to refine its estimation process based on its additional
     historical experience.  As a result, the Company recorded additional
     revenues of $55,794 in 1997 based on the revised estimation process.

     PARI-MUTUEL TAXES  -  The legislation referred to above also provides that,
     beginning July 1, 1996, the first $12 million of pari-mutuel revenue would
     be exempt from the 6% pari-mutuel tax.  The legislation is effective until
     July 1, 1999 and benefits the horsepersons' purse fund as well as the
     Company.  Effective July 1, 1996, pari-mutuel taxes have been estimated for
     each 12 month period from July 1 through June 30, and an estimated annual
     effective tax rate has been applied to all pari-mutuel commission and
     breakage revenues.

     PAYABLE TO HORSEPERSONS - The Minnesota Pari-Mutuel Horse Racing Act
     specifies that the Company is required to segregate a portion of funds
     (recorded as statutory purses in the statements of operations), received
     from wagering on simulcast and live horse races, for future payment as
     purses for live horse races or other uses of the horsepersons'
     associations.  Pursuant to an agreement with the MHBPA, the Company has
     transferred into a trust account or paid directly to the MHBPA,
     approximately $3,287,000 and $3,164,000 for the years ended December 31,
     1997 and 1996, respectively, related to Thoroughbred races.  Amounts due to
     the MHBPA are guaranteed by the Chairman of the Board.  Minnesota Statutes
     specify that amounts transferred into the trust account are the property of
     the trust and not of the Company.  The interest rates on any statutory
     purses accrued but not transferred into the trust were 8.50% and 8.25% at
     December 31, 1997 and 1996, respectively.

     SHORT-TERM BORROWINGS - The weighted average interest rates on short-term
     borrowings at December 31, 1997 and 1996 are 8.50% and 9.74%, respectively.
     The weighted average rates for 1997 and 1996 were 8.97% and 10.00%,
     respectively.

     INCOME TAXES - Prior to the completion of the Company's initial public
     offering of its common stock, the Company was taxed as a "small business
     corporation" under Subchapter S of the Internal Revenue Code.  As a result,
     any income tax liability or benefit was being passed through to the
     individual shareholders and no income taxes payable or income tax expenses
     were recorded in the consolidated financial statements.  Simultaneous with
     the Company's completion of the public offering of its common stock, the
     Company's Subchapter S election was terminated.  A portion of the losses
     accumulated prior to the public offering is not available to offset future
     earnings.  The Company currently accounts for income taxes in accordance
     with Statement of Financial Accounting Standards (SFAS) No. 109, ACCOUNTING
     FOR INCOME TAXES.

     NET INCOME PER SHARE - Effective December 15, 1997, the Company adopted the
     provisions of Statement of Financial Accounting Standards No. 128 "Earnings
     per Share".  The Statement requires the Company to present its net income
     per share in basic and diluted forms and to restate net income per share
     from prior periods to conform with the new statement.  Basic net income
     per common share is based on the weighted average number of common shares
     outstanding during each year.  Diluted net income  per common share takes
     into effect the dilutive effect of potential common shares outstanding.
     The Company's only potential common shares outstanding are stock options
     and warrants.

     IMPAIRMENT OF LONG-LIVED ASSETS - Management of the Company periodically
     reviews the carrying value of property and equipment for potential
     impairment by comparing the carrying value of these assets with their


                                          24
<PAGE>

     related expected future net cash flows.  Should the sum of the related
     expected future net cash flows be less than the carrying value, management
     will determine whether an impairment loss should be recognized.  An
     impairment loss would be measured by the amount by which the carrying value
     of the asset exceeds the fair value of the asset.  To date, management has
     determined that no impairment of these assets exists.

2.   PROPERTY AND EQUIPMENT

     Property and equipment consists of the following at December 31:

<TABLE>
<CAPTION>
                                                                1997                1996
     <S>                                                  <C>                 <C>
     Land                                                 $  3,648,851        $  2,713,710
     Buildings and building improvements                     2,829,762           2,754,502
     Furniture and equipment                                 5,392,330           5,145,010
                                                          ------------        ------------
                                                            11,870,943          10,613,222
     Accumulated depreciation                               (2,809,738)         (1,981,468)
                                                          ------------        ------------
                                                          $  9,061,205        $  8,631,754
                                                          ------------        ------------
                                                          ------------        ------------
</TABLE>

3.   INCOME TAXES

     A reconciliation between income taxes computed at the statutory federal
     income tax rate and the effective tax rate is as follows:

<TABLE>
<CAPTION>
                                                                1997                1996
     <S>                                                  <C>                 <C>
     Federal tax expense computed at statutory rate       $     50,000        $     25,000
     Decrease in valuation allowance                          (155,000)            (41,000)
     Nondeductible lobbying expense                             90,000              12,000
     State expense, net of federal impact                       24,000               6,000
     Other                                                        (600)             (2,000)
                                                          ------------        ------------
                                                          $      8,400        $          -
                                                          ------------        ------------
                                                          ------------        ------------
</TABLE>

     Temporary differences, tax carryforwards and the valuation allowance at
     December 31 are as follows:

<TABLE>
<CAPTION>
                                                                1997                1996
     <S>                                                  <C>                 <C>
     Operating loss carryforward                          $    491,000        $    683,000
     Tax depreciation greater than book depreciation          (247,000)           (272,000)
     Organizational and start-up costs                          31,000              54,000
     Repairs capitalized                                        13,000              17,000
     Other                                                      59,000              20,000
     Valuation allowance                                      (347,000)           (502,000)
                                                          ------------        ------------
                                                          $          -        $          -
                                                          ------------        ------------
                                                          ------------        ------------
</TABLE>

     The benefit of deferred tax assets has been offset by a valuation allowance
     at December 31, 1997 and 1996 because future realization is uncertain.  At
     December 31, 1997, the Company has federal income tax net operating loss
     carryforwards of approximately $1,185,000 which expire in years 2009
     through 2011.


                                          25
<PAGE>

4.   STOCKHOLDERS' EQUITY

     EMPLOYEE STOCK PURCHASE PLAN:

     On April 3, 1995, the Board of Directors adopted the 1995 Employee Stock
     Purchase Plan.  The plan, which is open to all employees of the Company
     working more than 15 hours per week, commenced on April 15, 1995 and will
     continue for ten years.  The plan consists of one-year phases.  The phases
     commence on October 1 of each year.  Under the terms of the plan, employees
     may set aside a portion of their payroll earnings to purchase shares of the
     Company's common stock at the lower of 85% of the fair market value of the
     shares on the commencement date of each phase or 85% of the fair market
     value on the termination date of each phase.  The plan provides for the
     sale of up to 100,000 shares.  The plan issued 14,966 and 7,011 shares in
     1997 and 1996, respectively.

     STOCK OPTIONS:

     The Company has a stock option plan (the Stock Option Plan) which provides
     for the granting of awards in the form of stock options, restricted stock,
     stock appreciation rights, and deferred stock to key employees and
     nonemployees, including directors of and consultants to the Company and any
     subsidiary, to purchase up to a maximum of 500,000 shares of common stock.
     Options that are granted under the plan may be either options that qualify
     as "incentive stock options" within the meaning of Section 422 of the
     Internal Revenue Code of 1986, as amended (Incentive Stock Options), or
     those that do not qualify as Incentive Stock Options (Non-Qualified Stock
     Options).  The plan is administered by the Board of Directors, or a
     committee designated by the Board, which determines the persons who are to
     receive awards under the plan, the type of award to be granted, the number
     of shares subject to each award and, if an option, the exercise price of
     each option.  The plan also provides for formula grants of Non-Qualified
     Stock Options to nonemployee directors of the Company.

     Stock option activity related to the Plan during the years ended December
     31, 1997 and 1996 is summarized below:

<TABLE>
<CAPTION>
                                                              1997                                   1996
                                              ----------------------------------      ----------------------------------
                                                                     Weighted                                Weighted
                                                   Shares             Average             Shares              Average
                                                                  Exercise Price                          Exercise Price
                                              --------------      --------------      --------------      --------------
     <S>                                      <C>                 <C>                 <C>                 <C>
     Outstanding at beginning of year                184,000      $         2.58             117,000      $         2.90

     Granted                                         102,000                2.12              85,000                1.98
     Exercised                                       (21,500)               1.85             (15,000)               1.88
     Canceled                                         (1,000)               2.06              (3,000)               1.75
                                              --------------      --------------      --------------      --------------

     Outstanding at end of year                      263,500      $         2.47             184,000      $         2.58
                                              --------------      --------------      --------------      --------------
                                              --------------      --------------      --------------      --------------

     Options exercisable at end of year              221,750      $         2.54             155,000      $         2.74
                                              --------------      --------------      --------------      --------------
                                              --------------      --------------      --------------      --------------
</TABLE>

     In addition to options granted under the plan, in June 1994 the Company
     issued options to purchase 73,000 shares of common stock to certain
     individuals who were instrumental in assisting the Company commence
     operations.  The 72,000 options currently outstanding are exercisable at
     $3.00 per share and expire in August 1999.


                                          26
<PAGE>

In 1997, the Company issued an option to purchase 50,000 shares of common stock
at an exercise price of $3.75 per share, for consulting services.  The option
was valued at $88,176, of which $66,132 was recognized in the 1997 statement of
operations.  The option expires March 31, 2000.

The Company also issued an option to purchase 12,500 shares of common stock at
an exercise price of $3.25 per share, to a Board member for consulting services.
The option was valued at $19,926, all of which was recognized in the 1997
statement of operations, and expires in 21 months.

In 1994, the Chairman of the Board was granted an option (which expires in May
1998) to purchase 51,825 shares at $2.64 per share.

At December 31, 1997, the weighted average remaining contractual life of all
options was 63 months, and the range of exercise prices was $1.75 to $4.00.

In 1996, the Company adopted Statement of Financial Accounting Standards No. 123
(SFAS 123), "Accounting for Stock-Based Compensation."  As permitted by SFAS
123, the Company has elected to continue following the guidance of APB 25 for
measurement and recognition of stock-based transactions with employees.  No
compensation cost has been recognized for stock options issued under the Stock
Option Plan because the exercise price of all options granted was at least equal
to the fair value of the common stock at the date of grant.  If compensation
cost for the Company's stock option and employee stock purchase plans had been
determined based on the fair value at the grant dates, consistent with the
method provided in SFAS 123, the Company's net income (loss) and earnings (loss)
per share would have been as follows:

<TABLE>
<CAPTION>
                                                 1997                1996
                                             ----------          ----------
<S>                                          <C>                 <C>
Net Income (Loss):
    As reported                              $  135,788          $   71,149
    Pro forma                                   (71,022)            (43,622)

Basic Earnings (Loss) Per Share:
    As reported                              $      .05          $      .02
    Pro forma                                      (.02)               (.01)

Diluted Earnings (Loss) Per Share:
    As reported                              $      .04          $      .02
    Pro forma                                      (.02)               (.01)
</TABLE>

The fair value of options granted under the Stock Option Plan during 1997 and
1996 were estimated on the date of grant using the Black-Scholes option-pricing
model with the following  weighted average assumptions and results:

<TABLE>
<CAPTION>
                                                 1997                1996
                                             ----------          ----------
<S>                                          <C>                 <C>
Dividend yield                                     None                None
Expected volatility                                 85%                 88%
Risk-free interest rate                           6.56%               5.86%
Expected life of option                         120 mo.             120 mo.
Fair value of options on grant date          $  214,931          $  130,722
</TABLE>


                                          27
<PAGE>

     WARRANTS:

     In 1994, the Company issued warrants to purchase 400,000 shares of common
     stock to the Company's founders in consideration for services performed.
     The warrants expire in August 1998 and are exercisable at $4.00 per share.
     Also, there are currently outstanding warrants to purchase 1,437,300 shares
     of common stock related to the initial public offering which are
     exercisable at $4.88 per share and expire in August 1998.

     In addition to the above, the Company's selling agents have a warrant to
     purchase 125,000 units (each unit consisting of one share of common stock
     and one warrant to purchase one share of common stock) at an exercise price
     of $4.80 per unit which expires in August 1998.

     The Company's Articles of Incorporation provide that the Company may
     redeem, at fair market value, securities held by any person or entity whose
     status as a security holder, in the opinion of the Board of Directors of
     the Company, may result in the disapproval, modification, or nonrenewal of
     any contract or the loss or nonreinstatement from any governmental agency
     of any license or franchise held by the Company or any of its subsidiaries,
     which license or franchise is conditioned upon some or all of the holders
     of capital stock meeting certain criteria.


5.   EARNINGS PER SHARE

<TABLE>
<CAPTION>
                                             Year Ended December 31, 1997                 Year Ended December 31,1996
                                      ------------------------------------------   ------------------------------------------
                                           Income        Shares       Per Share        Income         Shares       Per Share
                                        (Numerator)  (Denominator)      Amount       (Numerator)  (Denominator)      Amount
                                      ------------   ------------   ------------   ------------   ------------   ------------
<S>                                   <C>            <C>            <C>            <C>            <C>            <C>
Net Income                            $    135,788                                 $     71,149
                                      ------------                                 ------------
                                      ------------                                 ------------

BASIC EPS
Income available
  to common
  stockholders                             135,788      2,976,961   $        .05         71,149      2,949,392   $        .02
                                      ------------                  ------------   ------------                  ------------
                                      ------------                  ------------   ------------                  ------------

EFFECT OF DILUTIVE
SECURITIES
Stock options                                             114,932                                       37,906
                                                     ------------                                 ------------
DILUTED EPS
Income available
  to common stock-
  holders                             $    135,788      3,091,893   $        .04   $     71,149      2,987,298   $        .02
                                      ------------   ------------   ------------   ------------   ------------   ------------
                                      ------------   ------------   ------------   ------------   ------------   ------------
</TABLE>


     Options to purchase 103,000 shares of common stock at a weighted average
     exercise price of $3.88 per share were outstanding during 1997 but were not
     included in the computation of diluted EPS because the options' exercise
     prices were greater than the average market price of the common shares.
     The options which expire in an average of 43 months were still outstanding
     at the end of year 1997.  In addition, 1,962,300 warrants were excluded
     because the weighted average exercise price of $4.70 was greater than the
     average market price of the common shares.  The warrants expire in August
     1998.

                                          28
<PAGE>

6.   LINE OF CREDIT

     At December 31, 1997 and 1996, the Company had a $3,000,000 line of credit
     arrangement with the Chairman of the Board, of which $1,651,942 and
     $1,609,754, respectively, were outstanding.  The interest rate for
     borrowings under the line of credit is the prime rate at December 31, 1997.
     The line of credit may be canceled on 90 days notice.  Interest charged to
     operations under this line of credit was approximately $112,000 and
     $194,000 for the periods ended December 31, 1997 and 1996, respectively.

7.   OPERATING LEASES AND COMMITMENTS

     The Company leased certain copying equipment under an operating lease which
     required monthly payments of $5,500.  This lease expired in May 1996.
     Rental expense charged to operations was approximately $27,500 for the year
     ended December 31, 1996.

     In addition, the Company entered into a five-year totalizator services
     agreement with Autotote Systems, Inc. (Autotote) in May 1994.  Pursuant to
     the agreement, Autotote provides totalizator equipment and computer
     programs which record and process all wagers and calculate the odds and
     payoffs.  For such services, Autotote receives a fee of approximately .35%
     of the gross monies wagered.  Amounts charged to operations under this
     agreement for the years ended December 31, 1997 and 1996 were approximately
     $311,000 and $291,000, respectively.  During the 1997 and1996 live race
     meets, Autotote provided uplink services which enabled the Company to
     simulcast horse races held at Canterbury Park to out-of-state racetracks.
     These services resulted in an amount charged to operations in 1997 and 1996
     of approximately $95,000 and $102,000, respectively.  A director of the
     Company is the regional sales manager of Autotote.

8.   CONTINGENCIES

     In connection with the purchase of JRI (note 1), the company entered into
     an Earn Out Promissory Note dated March 29, 1994. In accordance with the
     Earn Out Note if (i) off-track betting becomes legally permissible in the
     State of Minnesota and (ii) the Company begins to conduct off-track betting
     with respect to or in connection with its operations, the Company will be
     required to pay to the IMR Fund, L.P. the greater of $700,000 per operating
     year, as defined, or 20% of the net pretax profit, as defined for each of
     five operating years.  At the date (if any) that these two conditions are
     met, the five minimum payments will be discounted back to their present
     value and the sum of those discounted payments will be recorded as an
     increase to the purchase price.  The purchase price will be further
     increased if payments become due under the "20% of Net Pretax Profit"
     calculation.  The first payment is to be made 90 days after the end of the
     third operating year in which off-track betting is conducted by the
     Company.  Remaining payments would be made within 90 days of the end of
     each of the next four operating years.

9.   RELATED-PARTY TRANSACTIONS

     The president/director and two other directors have guaranteed performance
     by the Company under a $500,000 bond issued to the Minnesota Racing
     Commission.

     In 1997 and 1996, the Company paid $50,000 and $40,000, respectively, to a
     Board member for advertising and marketing services provided to the
     Company.  This Board member was also granted 12,500 stock options (refer to
     Note 4).


                                          29
<PAGE>

ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

          Not Applicable.


                                       PART III

ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
          COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

          Information required under this item with respect to the directors
          will be set forth in a section captioned "Election of Directors"
          in the Company's Proxy Statement for the Annual Meeting of
          Shareholders to be held on June 4, 1998 (the "1998 Proxy
          Statement"), a definitive copy of which will be filed with the
          Commission within 120 days of the close of the 1997 fiscal year,
          which information is incorporated herein by reference.  Information
          regarding executive officers is presented under Item 1 herein.

ITEM 10.  EXECUTIVE COMPENSATION

          Information required under this item will be set forth in a section
          entitled "Executive Compensation" in the Company's 1998 Proxy
          Statement which information is incorporated herein by reference.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

          Information required under this item will be set forth in a section
          entitled "Shareholdings of Principal Shareholders and Management"
          in the Company's 1998 Proxy Statement which information is
          incorporated herein by reference.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

          Information required under this item will be set forth in a section
          entitled "Certain Transactions" in the Company's 1998 Proxy Statement
          which information is incorporated herein by reference.

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

(a)       EXHIBITS.  See Exhibit Index at page 32 which is incorporated herein
          by reference.  Exhibits that cover management contracts or
          compensatory plans or arrangements are marked with an asterisk (*) on
          the Exhibit Index.

(b)       REPORTS ON FORM 8-K.  No reports on Form 8-K were filed during the
          fourth quarter of 1997.


                                          30
<PAGE>


                                      SIGNATURES
                                      ----------

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Dated:  March 24, 1998                  CANTERBURY PARK HOLDING CORPORATION


                                   By   /s/ Randall D. Sampson
                                        ----------------------------------------
                                        Randall D. Sampson
                                        President and Chief Executive Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the date set forth above.

                                  POWER OF ATTORNEY

     Each person whose signature appears below constitutes and appoints CURTIS
A. SAMPSON, DALE H. SCHENIAN and RANDALL D. SAMPSON as his true and lawful
attorneys-in-fact and agents, 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 sign any or all amendments to this Annual Report on Form 10-KSB
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, each acting alone, full power and authority
to do and perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and purposes as he might
or could do in person, hereby ratifying and confirming all said attorneys-in-
fact and agents, each acting alone, or his substitute or substitutes, may
lawfully do or cause to be done by virtue thereof.

<TABLE>
<CAPTION>

     Signature                               Title                         Date
     ---------                               -----                         ----
<S>                                     <C>                           <C>
/s/ Curtis A. Sampson                   Chairman of the Board         March 24, 1998
------------------------------
Curtis A. Sampson


/s/ Dale H. Schenian                    Director; Vice Chairman       March 24, 1998
------------------------------
Dale H. Schenian


/s/ Randall D. Sampson                  Chief Executive Officer,      March 24, 1998
------------------------------          President*, General Manager,
Randall D. Sampson                      Treasurer and Director


/s/ Brian C. Barenscheer                Director                      March 24, 1998
------------------------------
Brian C. Barenscheer


/s/ Gibson Carothers                    Director                      March 24, 1998
------------------------------
Gibson Carothers


/s/ Terence McWilliams                  Director                      March 24, 1998
------------------------------
Terance McWilliams


/s/ Carin Offerman                      Director                      March 24, 1998
------------------------------
Carin Offerman
</TABLE>

*Chief Financial Officer and Chief Accounting Officer.

                                          31
<PAGE>

                  CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARY

                                   Exhibit Index To
                   Form 10-KSB for the Year Ended December 31, 1997

<TABLE>
<CAPTION>

Regulation S-B                                                                  Location in Consecutive Numbering
Exhibit Table                                                                   System as Filed with the Securities
 Reference          Title of Document                                           and Exchange Commission
--------------      -------------------------------------------------------     ----------------------------------------------------
<S>                 <C>                                                         <C>
    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.

    4.1             Warrant Agreement between the Company and the               Filed as Exhibit 4.1 to the SB-2 Registration
                    Warrant Agent                                               Statement and incorporated herein by reference.

   10.1             Plan of Reorganization dated as of May 20, 1994             Filed as Exhibit 10.1 to the SB-2 Registration
                    between Canterbury Park Holding Corporation and             Statement and incorporated herein by reference.
                    Canterbury Park Concessions, Inc.

   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               Filed as Exhibit 10.3 to the SB-2 Registration
                    Horsemen's Benevolent and Protective Association, Inc.      Statement and incorporated herein by reference.
                    to Minnesota Racing Commission waiving 125 day
                    racing minimum

   10.4             Totalizator Services Agreement dated May 2, 1994            Filed as Exhibit 10.4 to the SB-2 Registration
                    between Autotote Systems, Inc. and Canterbury Park          Statement and incorporated herein by reference.
                    Holding Corporation.

   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.
</TABLE>

*  Denotes an exhibit that covers management contracts or compensatory plans or
arrangements.

                                          32
<PAGE>

<TABLE>
<CAPTION>

Regulation S-B                                                                  Location in Consecutive Numbering
Exhibit Table                                                                   System as Filed with the Securities
 Reference          Title of Document                                           and Exchange Commission
--------------      -------------------------------------------------------     ----------------------------------------------------
<S>                 <C>                                                         <C>
   10.7             Curtis A. Sampson Guaranty to HRA                           Filed as Exhibit 10.7 to the SB-2 Registration
                                                                                Statement and incorporated herein by reference.

   10.8             Form of Founders' Warrants                                  Filed as Exhibit 10.8 to the SB-2 Registration
                                                                                Statement and incorporated herein by reference.

   10.9             Curtis A. Sampson Warrant                                   Filed as Exhibit 10.9 to the SB-2 Registration
                                                                                Statement and incorporated herein by reference.

  10.10             Line of Credit Agreement dated as of June 17, 1994          Filed as Exhibit 10.10 to the SB-2 Registration
                    between Canterbury Park Holding Corporation and             Statement and incorporated herein by reference.
                    Curtis A. Sampson

  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.

  10.12             Compensatory Employee and Advisor Stock Plan                Filed as Exhibit 4.2 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.

  10.13             Stock Option Plan for Non-Employee Consultants              Filed as Exhibit 4.3 to the Registration Statement
                    and Advisors                                                on Form S-8 of the Company filed on August 28, 1997
                                                                                (File No. 333-34509) and incorporated herein by
                                                                                reference.

     21             Subsidiary of the Registrant                                Filed herewith at page 34.

     23             Independent Auditors' Consent                               Filed herewith at page 35.

     24             Power of Attorney                                           Included in signature page at page 31.
</TABLE>

The exhibits referred to in this Exhibit will be supplied to a shareholder at a
charge of $.25 per page upon written request directed to Canterbury Park Holding
Corporation at the executive offices of the Company.


                                          33