The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help the reader understandCanterbury Park Holding Corporation , our operations, our financial results and financial condition and our present business environment. This MD&A is provided as a supplement to, and should be read in conjunction with, our condensed consolidated financial statements and the accompanying notes to the financial statements (the "Notes"). Overview:Canterbury Park Holding Corporation (the "Company," "we," "our," or "us") conducts pari-mutuel wagering operations and hosts "unbanked" card games at itsCanterbury Park Racetrack and Card Casino facility (the "Racetrack") inShakopee, Minnesota , which is approximately 25 miles southwest of downtownMinneapolis . The Racetrack is the only facility in theState of Minnesota that offers live pari-mutuel thoroughbred and quarter horse racing. The Company's pari-mutuel wagering operations include both wagering on thoroughbred and quarter horse races during live meets at the Racetrack each year from May through September, and year-round wagering on races held at out-of-state racetracks that are televised simultaneously at the Racetrack ("simulcasting"). Unbanked card games, in which patrons compete against each other, are hosted in theCard Casino at the Racetrack.The Card Casino typically operates 24 hours a day, seven days a week.The Card Casino offers both poker and table games at up to 80 tables. The Company also derives revenues from related services and activities, such as concessions, parking, advertising signage, publication sales, and from other entertainment events and activities held at the Racetrack. COVID-19 Pandemic: InJanuary 2020 , an outbreak of a respiratory illness caused by a new strain of coronavirus was identified. The disease has since spread rapidly across the world, causing theWorld Health Organization to declare the outbreak a pandemic (the "COVID-19 Pandemic") onMarch 12, 2020 . Since that time, governments and businesses have taken measures to limit the impact of the COVID-19 Pandemic, including the issuance of shelter-in-place orders, social distancing measures, travel bans and restrictions, and business shutdowns. OnMarch 16, 2020 , the Company announced that, based on the advice ofMinnesota state and regulatory bodies, it was temporarily suspending allCard Casino , simulcast, and special events operations at Canterbury Park in response to concerns about the COVID-19 Pandemic. Canterbury Park determined this voluntary suspension of activities was in the best interest of the health and safety of its guests and team members and would provide the Company an opportunity to review and update operational best practices and strategies based on what was currently known about this public health situation and future developments. OnJune 10, 2020 , the Company reopened and resumed simulcast, live racing, and food and beverage operations. The Company also resumed table games and poker operations in the Company'sCard Casino onJune 15, 2020 andJuly 9, 2020 , respectively. These reopenings were done in compliance withMinnesota state guidelines on capacity limitations. OnNovember 18, 2020 ,Minnesota state and regulatory bodies issued an executive order requiring closure of places of public accommodation as a measure to slow the spread of COVID-19. As a result, the Company temporarily suspended allCard Casino , simulcast, and food and beverage operations fromNovember 21, 2020 throughJanuary 10, 2021 . In connection with reopening our pari-mutuel, food and beverage, andCard Casino operations, we adhered to social distancing requirements, which included reduced seating at table games and poker and capacity limitations to followMinnesota state guidelines. EffectiveMay 28, 2021 , all capacity limits, restrictions on large gatherings, and other restrictions, which had been implemented in response to the impact of the COVID-19 Pandemic, were lifted and our Racetrack began operating operated under pre-pandemic guidelines. OurCard Casino also began operating without capacity restrictions effectiveMay 28, 2021 , but we maintained and intend to maintain certain operational changes and improvements initiated in 2020 in response to the COVID-19 Pandemic. 18 -------------------------------------------------------------------------------- The disruptions arising from the COVID-19 Pandemic had a significant impact on the Company's financial condition and operations during the three and nine months endedSeptember 30, 2020 . The COVID-19 Pandemic also had a negative impact on the Company's financial condition and operations for the first half of 2021, although to a much lesser extent than 2020. However, the Company's revenues began to recover in both the 2021 second and third quarters. The strong recovery we have experienced in the second and third quarters of 2021 have been a result of increased consumer confidence, reduction in capacity restrictions, and faster than anticipated vaccine roll-outs, as well as the success of initiatives begun during the COVID-19 Pandemic to increase attendance at live racing and other events, enhance the player experience, and recruit higher value players. Although the Company has currently appeared to recover from the effects of the COVID-19 Pandemic, the pandemic has caused other global issues that could have a future adverse effect on the Company. Specifically, these issues relate to supply chain issues and labor shortages, which have had a negative impact on the global economy and likely will continue to have an impact in the near future. Additionally, the spread of any new COVID-19 variants could also have an adverse effect on the Company's financial condition and results. As the impact of the COVID-19 Pandemic on the economy and our operations evolves, we will continue to assess the impact on the Company and respond accordingly.
Operations Review for the Three and Nine Months Ended
Revenues: Total net revenues for the three months endedSeptember 30, 2021 were$21,347,000 , an increase of$8,047,000 , or 60.5%, compared to total net revenues of$13,300,000 for the three months endedSeptember 30, 2020 . Total net revenues for the nine months endedSeptember 30, 2021 were$46,445,000 , an increase of$19,428,000 , or 71.9% compared to net revenues of$27,017,000 for the nine months endedSeptember 30, 2020 . These increases consist of increases in pari-mutuel,Card Casino , food and beverage, and other revenues as a result of increased visitation as COVID-19 Pandemic restrictions have been lifted, and social distancing measures and operating capacity limitations have ceased. See below for a further discussion of our sources of revenues. Pari-Mutuel Revenue: Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Simulcast $ 964,000$ 1,056,000 $ 3,059,000 $ 2,290,000 Live racing 1,091,000 600,000 1,663,000 723,000 Guest fees 1,897,000 2,108,000 3,222,000 2,665,000 Other revenue 349,000 420,000 1,055,000 1,223,000 Total Pari-Mutuel Revenue$ 4,301,000 $ 4,184,000 $ 8,999,000 $ 6,901,000 Total pari-mutuel revenue increased$116,000 and$2,098,000 for the three and nine months endedSeptember 30, 2021 , respectively, compared to the same periods in 2020. For the 2021 third quarter, the increase in revenue compared to the prior year is related to live racing revenues due to increased business levels as we recover from the effects of the COVID-19 Pandemic described above, as well as the fact our 2020 live racing season operated at a limited capacity. The is partially offset by lower guest fee revenue due to decreased out of state handle and lower simulcast and other revenue. For the nine months endedSeptember 30, 2021 , the increase in revenue compared to the same period in 2020 is due to increased business levels, including the fact we returned to normalized operations and full capacity starting in the second quarter 2021 as compared to the closure of our operations fromMarch 16, 2020 untilJune 10, 2020 and operating our live racing season at a limited capacity upon reopening.Card Casino Revenue : Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Poker Games$ 1,998,000 $ 1,291,000 $ 5,058,000 $ 2,949,000 Table Games 7,414,000 5,331,000 19,624,000 11,156,000 Total Collection Revenue 9,412,000 6,622,000 24,682,000 14,105,000 Other Poker Revenue 562,000 245,000 1,330,000 729,000 Other Table Games Revenue 478,000 325,000 1,195,000 714,000Total Card Casino Revenue $ 10,452,000 $
7,192,000$ 27,207,000 $ 15,548,000 19
-------------------------------------------------------------------------------- The primary source ofCard Casino revenue is a percentage of the wagers received from players as compensation for providing theCard Casino facility and services, which is referred to as "collection revenue." Other Poker Revenue and Other Table Games Revenue presented above includes fees collected for the administration of tournaments and the poker jackpot and amounts earned as reimbursement of the administrative costs of maintaining table games jackpot funds, respectively. As indicated by the table above, totalCard Casino revenue increased$3,261,000 , or 45.3%, and$11,659,000 , or 75.0%, for the three and nine months endedSeptember 30, 2021 , respectively, compared to the same periods in 2020. These increases are due to increased visitation as our business recovers from the effects of the COVID-19 Pandemic described above, as well as increased table games drop from the successful marketing efforts to recruit higher value players. When the Company reopened its table games operations onJune 15, 2020 , this included reduced seating at table games and capacity limitations to followMinnesota state guidelines. The Company did not resume poker operations untilJuly 2020 . OurCard Casino also began operating without capacity restrictions effectiveMay 28, 2021 , but we maintained and intend to maintain certain operational changes and improvements, which we believe is preferred by players and is contributing to increased revenue and margins. Food and Beverage Revenue: Food and beverage revenue increased$2,613,000 , or 303.3%, and$3,028,000 , or 144.7%, for the three and nine months endedSeptember 30, 2021 , respectively, compared to the same periods in 2020. These increases are due to increased visitation as our business recovers from the effects of the COVID-19 Pandemic described above. Furthermore, the increases are due to being able to host large scale events, including a three-day music festival and seven-show concert series in the 2021 third quarter, as well as the fact the Company's entire 2020 live racing season consisted of limited crowds due to capacity constraints. As noted above, all capacity limits which had been implemented as a response to the COVID-19 Pandemic were lifted onMay 28, 2021 . Other Revenue: Other revenue increased$2,057,000 , or 193.7%, and$2,643,000 , or 106.8%, for the three and nine months endedSeptember 30, 2021 , respectively, compared to the same periods in 2020. These increases are due to the reversal of the effects of the COVID-19 Pandemic described above, as well as hosting a three-day music festival and seven-show concert series in the 2021 third quarter. For the nine months endedSeptember 30, 2021 , the Company received$515,000 of COVID-19 relief grants that the Company recorded as other revenue in the 2021 first quarter. Operating Expenses: Total operating expenses increased$4,716,000 , or 38.5%, and$9,819,000 , or 34.9%, for the three and nine months endedSeptember 30, 2021 , respectively, compared to the same periods in 2020. These increases reflect an increase in the majority of the Company's operating expenses, primarily as a result of return to normalization of operations in the three and nine months endedSeptember 30, 2021 as compared to the prior year temporary suspension of operations fromMarch 16, 2020 throughJune 9, 2020 and the limitations placed on operations upon reopening. The following paragraphs provide further detail regarding certain operating expenses. Purse expense increased$517,000 , or 21.6%, and$2,252,000 , or 55.0%, for the three and nine months endedSeptember 30, 2021 , respectively, compared to the same periods in 2020. The increases are due to increases in pari-mutuel andCard Casino revenues. Salaries and benefits increased$950,000 , or 17.4%, and$3,134,000 , or 24.3%, for the three and nine months endedSeptember 30, 2021 , respectively, compared to the same periods in 2020. The increases are due to an increase in the number of personnel to support our resumption of normalized operations in the three and nine months endedSeptember 30, 2021 as well as the fact that the majority of employees were placed on an unpaid furlough during the temporary shutdown of operations in 2020.
Cost of food and beverage sales increased
20
-------------------------------------------------------------------------------- Advertising and marketing increased$987,000 , or 908.5%, and$1,195,000 , or 361.2%, for the three and nine months endedSeptember 30, 2021 , respectively, compared to the same periods in 2020. The increase is primarily attributable to the increased expenditures that are funded by payments received under the CMA for joint marketing, as well as an increase in advertising and marketing spend to support our resumption of normalized operations in the three and nine months endedSeptember 30, 2021 . Other operating expenses increased$792,000 , or 69.2%, and$818,000 , or 28.0%, for the three and nine months endedSeptember 30, 2021 , respectively, compared to the same periods in 2020. The increases are primarily attributable to the expenses associated with the three-day musical festival and seven-show concert series held in the 2021 third quarter, as well as a return to a more normalized live racing season in 2021.
During the 2021 second quarter, the Company recorded a gain on sale of land of
During the 2020 third quarter, the Company recorded a gain on transfer of land of$2,275,000 as a result of transferring land to the Doran Canterbury II and Canterbury DBSV joint ventures. The Company recorded a provision for income taxes of$1,123,000 and$1,138,000 for the three months endedSeptember 30, 2021 and 2020, respectively. The Company recorded a provision for income taxes of$2,133,000 and$70,000 for the nine months endedSeptember 30, 2021 and 2020, respectively. We record our quarterly provision for income taxes based on our estimated annual effective tax rate for the year. The increase in our tax expense for the three and nine months endedSeptember 30, 2021 is due to an increase in income before taxes from operations. Our effective tax rate was 28.9% and 29.2% for the three and nine months endedSeptember 30, 2021 . Our effective tax rate was 38.1% and 7.1% for the three and nine months endedSeptember 30, 2020 . The 2020 effective tax rates were impacted by benefits realized from the 2019 NOL carrybacks calculated in the 2020 tax provision.
The Company recorded net income of
EBITDA To supplement our financial statements, we also provide investors with information about our EBITDA and Adjusted EBITDA, each of which is a non-GAAP measure, which excludes certain items from net income, a GAAP measure. We define EBITDA as earnings before interest, income tax expense, and depreciation and amortization. We also compute Adjusted EBITDA, which reflects additional adjustments to Net Income to eliminate unusual or non-recurring items, as well as items relating to our real estate development operations and we believe the exclusion of these items allows for better comparability of our performance between periods. For the three and nine months endedSeptember 30, 2021 , Adjusted EBITDA excluded gain on sale/transfer of land, loss on disposal of assets, depreciation, amortization, and interest expense related to equity investments, as well as$515,000 of COVID-19 relief grants included in other revenue. Neither EBITDA nor adjusted EBITDA is a measure of performance calculated in accordance with GAAP and should not be considered an alternative to, or more meaningful than, net income as an indicator of our operating performance. EBITDA is presented as a supplemental disclosure because it is a widely used measure of performance and a basis for valuation of companies in our industry. Moreover, other companies that provide EBITDA information may calculate EBITDA differently than we do. 21 -------------------------------------------------------------------------------- The following table sets forth a reconciliation of net income, a GAAP financial measure, to EBITDA and to adjusted EBITDA (defined above) which are non-GAAP financial measures, for the three and nine months endedSeptember 30, 2021 and 2020: Summary of EBITDA Data Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 NET INCOME$ 2,757,398 $
1,849,012
(180,357 ) (168,552 ) (524,757 ) (501,600 ) Income tax expense 1,123,209 1,137,997 2,133,030 70,498 Depreciation 730,164 655,003 2,113,917 2,065,496 EBITDA 4,430,414 3,473,460 8,900,165 2,557,430 Gain on sale/transfer of land - (2,275,458 ) (263,581 ) (2,275,458 ) Loss on disposal of assets - 13,407 - 13,407 Depreciation and amortization related to equity investments 496,512 - 1,283,858 - Interest expense related to equity investments 248,727 - 705,793 - Other revenue, COVID-19 relief grants - - (515,000 ) - ADJUSTED EBITDA$ 5,175,652 $ 1,211,409 $ 10,111,235 $ 295,379 Adjusted EBITDA increased$3,964,000 and$9,816,000 for the three and nine months endedSeptember 30, 2021 as compared to the same periods in 2020. These increases are due to increased visitation as COVID-19 Pandemic restrictions have been lifted and social distancing measures and operating capacity limitations have ceased. The increases are also due to increased operational efficiencies that have been implemented since the COVID-19 Pandemic. For the three months endedSeptember 30, 2021 , Adjusted EBITDA as a percentage of net revenue was 24.2%. For the nine months endedSeptember 30, 2021 , Adjusted EBITDA as a percentage of net revenue, excluding$515,000 other revenue from COVID-19 relief grants, was 22.0%. Contingencies: The Company entered into a Cooperative Marketing Agreement (the "CMA") with theShakopee Mdewakanton Sioux Community , which became effective onMarch 4, 2012 , and was amended in the respective first quarters of 2015, 2016, 2017, 2018, andJune 2020 and will expireDecember 31, 2022 . The CMA contains specific covenants that, if breached, would trigger an obligation to repay a specified amount related to these covenants. At this time, management believes that the likelihood that the breach of a covenant would occur and that the Company would be required to pay the specified amount related to a covenant is remote. The Company continues to analyze the feasibility of various options related to the development of our underutilized land. The Company may incur substantial costs during the feasibility and predevelopment process, but the Company believes available funds are sufficient to cover the near-term costs. See Liquidity and Capital Resources for more information on liquidity and capital resource requirements. 22
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Liquidity and Capital Resources:
The Company has a general credit and security agreement with a financial institution, which provides a revolving credit line up to$10,000,000 and allows for letters of credit in the aggregate amount of up to$2,000,000 to be issued under the credit agreement. As ofSeptember 30, 2021 , the bank had issued a$1,250,000 letter of credit on behalf of the Company and therefore, the Company has an available credit line up to$8,750,000 . The line of credit is collateralized by all receivables, inventory, equipment, and general intangibles of the Company. The line of credit also includes collateral in the form of a Mortgage, Security Agreement, Fixture Financing Statement and Assignment of Leases and Rents. As ofSeptember 30, 2021 , the outstanding balance on the line of credit was$0 . As ofSeptember 30, 2021 , the Company was in compliance with the financial covenants of the general credit and security agreement. The Company's cash, cash equivalents, and restricted cash balance atSeptember 30, 2021 was$13,726,000 compared to$4,472,000 as ofDecember 31, 2020 . The Company believes that unrestricted funds available in its cash accounts, amounts available under its revolving line of credit, along with funds generated from operations and future land sales, will be sufficient to satisfy its liquidity and capital resource requirements for regular operations, as well as its planned development expenses for the next twelve months. However, if the Company engages in any additional significant real estate development or strategic growth or diversification transactions, additional financing would more than likely be required and the Company may seek this additional financing through joint venture arrangements, through incurring debt, or through an equity financing, or a combination of any of these. Operating Activities Net cash provided by operating activities for the nine months endedSeptember 30, 2021 was$10,453,000 , primarily as a result of the following: The Company reported net income of$5,178,000 , depreciation of$2,114,000 , a loss from equity investment of$1,964,000 , and stock-based compensation and 401(k) match totaling$797,000 . The Company also experienced an increase in income taxes receivable of$1,265,000 , offset by a decrease in payables to horsepersons of$1,337,000 due to timing. Net cash used in operating activities for the nine months endedSeptember 30, 2020 was$680,000 primarily as a result of the following: The Company reported net income of$923,000 , depreciation of$2,065,000 , loss from equity investment of$661,000 , and stock-based compensation and 401(k) match totaling$566,000 . Cash used in operations was reduced by a gain on transfer of land of$2,275,000 . The Company also experienced an increase in accounts receivable of$1,295,000 due to timing. Investing Activities Net cash used in investing activities for the first nine months of 2021 was$1,254,000 , primarily due to additions to property, plant, and equipment, additions for TIF eligible improvements, and an increase in related party receivables. This is partially offset by proceeds received from the sale of land. Net cash used in investing activities for the first nine months of 2020 was$56,000 , primarily for additions to property, plant, and equipment and additions for TIF eligible improvements. This was partially offset by a decrease in related party receivables. Financing Activities
Net cash provided by financing activities during the first nine months of 2021
was
In
Critical Accounting Policies and Estimates:
The preparation of consolidated financial statements in accordance with accounting principles generally accepted inthe United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. We base our assumptions, estimates, and judgments on historical experience, current trends, and other factors that management believes to be relevant at the time the consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates, and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material. 23 -------------------------------------------------------------------------------- Our significant accounting policies are included in Note 2 to our consolidated financial statements in our 2020 Annual Report on Form 10-K. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements. Property and Equipment - We have significant capital invested in our property and equipment, which represents 44.5% of our total assets atSeptember 30, 2021 . We use our judgment in various ways including: determining whether an expenditure is considered a maintenance expense or a capital asset; determining the estimated useful lives of assets; and determining if or when an asset has been impaired or has been disposed. Management periodically reviews the carrying value of property and equipment for potential impairment by comparing the carrying value of these assets with their related expected undiscounted future net cash flows. If the sum of the related expected future net cash flows is less than the carrying value, management would determine how much of an impairment loss would be measured by the amount by which the carrying value of the asset exceeds the fair value of the asset. We have determined that no impairment of these assets exists atSeptember 30, 2021 . Stock-Based Compensation - Accounting guidance requires measurement of services provided in exchange for a share-based payment based on the grant date fair market value. We use our judgment in determining the assumptions used to determine the fair value of equity instruments granted using a Black-Scholes model. The Company also has historically granted Long Term Incentive Awards under the Long Term Incentive Plan (the "LTI Plan") under which Company executive officers and other senior executives have had the opportunity to receive a payout of shares of the Company's common stock at the end of a three-year period. Management must make a number of assumptions to estimate future results to determine the compensation expense of the LTI Plan. As a result of the COVID-19 Pandemic, the Company has temporarily suspended its LTI Plan until there is more certainty about the Company's future operations. Currently, awards are outstanding under the LTI Plan only for the three-year period endingDecember 31, 2021 .
Commitments and Contractual Obligations:
The Company entered into the CMA with the SMSC onJune 4, 2012 , that was amended inJanuary 2015 , 2016, 2017,March 2018 , andJune 2020 and expiresDecember 31, 2022 . See "Cooperative Marketing Agreement" below.
Cooperative Marketing Agreement:
OnJune 4, 2012 , the Company entered into the CMA with the SMSC. The primary purpose of the CMA is to increase purses paid during live horse racing at Canterbury Park's Racetrack in order to strengthenMinnesota's thoroughbred and quarter horse industry. Under the CMA, as amended, this is achieved through "Purse Enhancement Payments to Horsemen" paid directly to the MHBPA. These payments have no direct impact on the Company's consolidated financial statements or operations. Because the Company conducted a more limited 2020 live race meet due to the COVID-19 Pandemic, the Company and SMSC entered into the Fifth Amendment Agreement ("Fifth Amendment") to the CMA effectiveJune 8, 2020 . Under the Fifth Amendment, the SMSC agreed to provide up to$5,620,000 for the annual purse enhancement for the year 2020. The annual purse enhancement that the SMSC is obligated to pay under the CMA for 2021 and 2022 was not changed and remains at$7,380,000 per year.
Under the CMA, as amended, SMSC also agreed to make "Marketing Payments" to the Company relating to joint marketing efforts for the mutual benefit of the Company and SMSC, including signage, joint promotions, player benefits, and events.
As noted above and affirmed in the Fifth Amendment, SMSC is obligated to make an
annual purse enhancement of
The amounts earned from the marketing payments are recorded as a component of other revenue and the related expenses are recorded as a component of advertising and marketing expense and depreciation in the Company's condensed consolidated statements of operations. For the three and nine months endedSeptember 30, 2021 , the Company recorded$1,003,000 and$1,415,000 in other revenue, respectively, incurred$962,000 and$1,326,000 in advertising and marketing expense, respectively, and incurred$41,000 and$89,000 in depreciation, respectively, related to the SMSC marketing funds. For the three and nine months endedSeptember 30, 2020 , the Company recorded$490,000 and$811,000 in other revenue, respectively, incurred$449,000 and$694,000 in advertising and marketing expense, respectively, and incurred$41,000 and$117,000 in depreciation, respectively, related to the SMSC marketing funds. 24
-------------------------------------------------------------------------------- Under the CMA, the Company has agreed for the 10-year term of the CMA expiringDecember 31, 2022 that it will not promote or lobby theMinnesota legislature for expanded gambling authority and will support the SMSC's lobbying efforts against expanding gambling authority. Redevelopment Agreement: As mentioned above in Note 8 of Notes to Financial Statements, onAugust 10, 2018 , theCity of Shakopee , theCity of Shakopee Economic Development Authority , and the Company entered into a Redevelopment Agreement in connection with aTax Increment Financing District ("TIF District ") that the City had approved inApril 2018 . Under the Redevelopment Agreement, the Company has agreed to undertake a number of specific infrastructure improvements within theTIF District , including the development of public streets, utilities, sidewalks, and other public infrastructure and theCity of Shakopee agreed that a portion of the tax revenue generated from the developed property will be paid to the Company to reimburse it for its expense in constructing these improvements. The Company expects to finance its improvements under the Redevelopment Agreement with funds from its current operating resources and existing credit facility and, potentially, third-party financing sources. TheCity of Shakopee has authorized changes to the Redevelopment Agreement and the responsibilities of the Company, but the Company, theCity of Shakopee and other parties have not formally entered into an agreement that memorializes these changes. The Company will provide updated disclosure when the parties enter into a new agreement. As part of the authorized changes regarding the responsibilities of the Company and the city ofShakopee , improvements onUnbridled Avenue will be primarily constructed by theCity of Shakopee . As a result, should Canterbury enter into the agreement that memorializes these changes, the total estimated cost of TIF eligible improvements to be borne by the Company will be reduced by$5,744,000 . These improvements were substantially complete as of the date of this filing. Forward-Looking Statements: From time-to-time, in reports filed with theSecurities and Exchange Commission , in press releases, and in other communications to shareholders or the investing public, we may make forward-looking statements concerning possible or anticipated future financial performance, prospective business activities or plans that are typically preceded by words such as "believes," "expects," "anticipates," "intends" or similar expressions. For these forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in federal securities laws. Shareholders and the investing public should understand that these forward-looking statements are subject to risks and uncertainties that could affect our actual results and cause actual results to differ materially from those indicated in the forward-looking statements. These risks and uncertainties include, but are not limited to: ? The COVID-19 Pandemic has materially adversely affected the number of visitors at our facility and disrupted our operations, and while our
business operations are recovering beginning with the 2021 second quarter,
we may be adversely impacted by changes in the spread of COVID-19 variants;
? We face significant competition, both directly from other racing and gaming
operations and indirectly from other forms of entertainment and leisure
time activities, which could have a material adverse effect on our operations;
? We may not be able to attract a sufficient number of horses and trainers to
achieve above average field sizes; ? Nationally, the popularity of horse racing has declined;
? Our horse racing and gaming businesses are sensitive to economic conditions
that may affect consumer confidence, consumer discretionary spending, or
our access to credit in a manner that adversely affects our operations;
? A lack of confidence in the integrity of our core businesses could affect
our ability to retain our customers and engage with new customers;
? Horse racing is an inherently dangerous sport and our racetrack is subject
to personal injury litigation; 25
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? Our business depends on using totalizator services;
? Inclement weather and other conditions may affect our ability to conduct
live racing; ? Purse Enhancement Payments and Marketing Payments under our CMA with SMSC may not continue after 2022;
? We are subject to changes in the laws that govern our business, including
the possibility of an increase in gaming taxes, which would increase our
costs, and changes in other laws may adversely affect our ability to compete;
? We are subject to extensive regulation from gaming authorities that could
adversely affect us; ? We rely on the efforts of our partnerDoran for the development and
profitable operation of our Triple Crown
joint venture;
? We rely on the efforts of our partner
development project;
? We may not be successful in executing our real estate development strategy;
? We are obligated to make improvements in the TIF district and will be reimbursed only to the extent of future tax revenue; ? An increase in the minimum wage mandated under Federal orMinnesota law could have a material adverse effect on our operations and financial results; ? We depend on key personnel;
? The payment and amount of future dividends is subject to
discretion and to various risks and uncertainties;
? Our information technology and other systems are subject to cyber security
risk including misappropriation of customer information or other breaches
of information security; ? We process, store, and use personal information and other data, which
subjects us to governmental regulation and other legal obligations related
to privacy, and our actual or perceived failure to comply with such obligations could harm our business; ? Energy and fuel price increases may adversely affect our costs of operations and our revenues; ? Other factors that are beyond our ability to control or predict.
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