Canterbury Park Holding Corp

Previous wording

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 primarily held at out-of-state racetracks that are televised simultaneously at the Racetrack (“simulcasting”). Unbanked card games, in which patrons compete against each other and not the house, are hosted in the Casino at the Racetrack. The Casino operates 24 hours a day, seven days a week. The Casino offers both poker and table games at up to 80 tables. The Company also derives revenues from related services and activities, such as food and beverage, parking, advertising signage, publication sales, and from other entertainment events and activities held at the Racetrack.

Current wording

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 primarily held at out-of-state racetracks that are televised simultaneously at the Racetrack (“simulcasting”). Unbanked card games, in which patrons compete against each other and not the house, are hosted in the Casino at the Racetrack. The Casino operates 24 hours a day, seven days a week. The Casino offers both poker and table games at up to 80 tables. The Company also derives revenues from related services and activities, such as food and beverage, advertising signage, publication sales, and from other entertainment events and activities held at the Racetrack.

Previous wording

EBITDA represents earnings before interest income, net, income tax expense, depreciation, and amortization. EBITDA is not a measure of performance or liquidity calculated in accordance with generally accepted accounting principles in the United States of America (“GAAP”), and should not be considered an alternative to, or more meaningful than, net income as an indicator of our operating performance or cash flows from operating activities as a measure of liquidity. We present EBITDA as a supplemental disclosure for our Racetrack Operations because it is a widely used measure of performance of and basis for valuation of companies in the gaming industry. Other companies that provide EBITDA information may calculate EBITDA differently than we do. We also present Adjusted EBITDA, a non-GAAP measure, as a supplemental disclosure because we believe it enables investors to understand and assess our core operating results excluding the effect of unusual or non-recurring items, as well as items relating to our real estate development operations, allowing greater transparency related to a significant measure used by management in its financial and operational decision-making. Adjusted EBITDA has economic substance because it is used by management as a performance measure to analyze the performance of our business and provides a perspective on the current effects of operating decisions For the year ended December 31, 2024, Adjusted EBITDA excluded from EBITDA stock-based compensation (which includes the Company's 401(k) match in Company stock contribution), the gain on transfer of land, loss on disposal of assets, and depreciation and amortization and interest related to equity investments. For the year ended December 31, 2023, Adjusted EBITDA excluded from EBITDA stock-based compensation (which includes the Company's 401(k) match in stock contribution), the gain on sale of land, loss on disposal of assets, insurance proceeds received by the Company's equity investment and depreciation, and amortization and interest related to equity investments.

Current wording

EBITDA represents earnings before interest income, net, income tax expense, depreciation, and amortization. EBITDA is not a measure of performance or liquidity calculated in accordance with generally accepted accounting principles in the United States of America (“GAAP”), and should not be considered an alternative to, or more meaningful than, net income as an indicator of our operating performance or cash flows from operating activities as a measure of liquidity. We present EBITDA as a supplemental disclosure for our Racetrack Operations because it is a widely used measure of performance of and basis for valuation of companies in the gaming industry. Other companies that provide EBITDA information may calculate EBITDA differently than we do. We also present Adjusted EBITDA, a non-GAAP measure, as a supplemental disclosure because we believe it enables investors to understand and assess our core operating results excluding the effect of unusual or non-recurring items, as well as items relating to our real estate development operations, allowing greater transparency related to a significant measure used by management in its financial and operational decision-making. Adjusted EBITDA has economic substance because it is used by management as a performance measure to analyze the performance of our business and provides a perspective on the current effects of operating decisions. For the year ended December 31, 2025, Adjusted EBITDA excluded from EBITDA stock-based compensation (which includes the Company's 401(k) match in Company stock contribution), loss on disposal of assets, and depreciation and amortization and interest related to equity investments and their joint ventures. For the year ended December 31, 2024, Adjusted EBITDA excluded from EBITDA stock-based compensation (which includes the Company's 401(k) match in stock contribution), the gain on transfer of land, loss on disposal of assets, and depreciation and amortization and interest related to equity investments and their joint ventures.

Previous wording

Adjusted EBITDA decreased $212,000, or 2.0%, for 2024 compared to 2023. For 2024, Adjusted EBITDA as a percentage of net revenue was 16.6%. For 2023, Adjusted EBITDA as a percentage of net revenue was 17.0%.

Current wording

Adjusted EBITDA decreased $1,395,000, or 12.9%, for 2025 compared to 2024. For 2025, Adjusted EBITDA as a percentage of net revenue was 15.8%. For 2024, Adjusted EBITDA as a percentage of net revenue was 17.6%.

Previous wording

Total net revenues for 2024 were $61,562,000, an increase of $125,000, or 0.2%, compared to total net revenues of $61,437,000 for 2023. For 2024 as compared to 2023, total pari-mutuel revenue decreased 0.3%, Casino revenue decreased 2.5%, food and beverage revenue increased 1.8%, and other revenue increased 18.3%. See below for a further discussion of our sources of revenues for each of our pari-mutuel, Casino, food and beverage, and other revenues.

Current wording

Total net revenues for 2025 were $59,568,000, a decrease of $1,996,000, or 3.2%, compared to total net revenues of $61,562,000 for 2024. For 2025 as compared to 2024, total Casino revenue decreased 4.4%, pari-mutuel revenue decreased 6.6%, food and beverage revenue increased 3.5%, and other revenue decreased 0.7%. See below for a further discussion of our sources of revenues for each of our Casino, pari-mutuel, food and beverage, and other revenues.

Previous wording

The primary source of Casino revenue is a percentage of the wagers received from the players as compensation for providing the Casino facility and services, referred to as “collection revenue.” Other revenue presented above includes fees collected for the administration of tournaments and amounts earned as reimbursement of the administrative costs of maintaining jackpot funds. Casino revenue represented 63.0% and 64.8% of the Company’s net revenues for the years ended December 31, 2024 and 2023, respectively.

Current wording

The primary source of Casino revenue is a percentage of the wagers received from the players as compensation for providing the Casino facility and services, referred to as “collection revenue.” Other revenue presented above includes fees collected for the administration of tournaments and amounts earned as reimbursement of the administrative costs of maintaining jackpot funds. Casino revenue represented 62.3% and 63.0% of the Company’s net revenues for the years ended December 31, 2025 and 2024, respectively.

Previous wording

Total Casino revenue decreased $1,006,000, or 2.5%, in 2024 compared to 2023.The decrease can be primarily attributed to both a decrease in drop and a lower average collection revenue rate in table games, somewhat offset by an increase in our other table games revenue related to our progressive jackpot administration revenue.

Current wording

Total Casino revenue decreased $1,688,000, or 4.4%, in 2025 compared to 2024.The decrease was primarily driven by lower table games drop attributable to increased competition, as well as a lower average collection revenue rate resulting from a decreased hold percentage. These decreases were partially offset by an increase in our other table games revenue, driven by increases in our progressive jackpot administration revenue.

Previous wording

Total 2024 pari-mutuel revenue decreased $28,000, or 0.3%, compared to 2023. The slight decrease in revenue in 2024 compared to 2023 is primarily due to a decrease in simulcast handle, somewhat offset by increased guest fees from out-state-handle on our live racing product on a per day basis due to increased field size and one additional live race day.

Current wording

Total 2025 pari-mutuel revenue decreased $540,000, or 6.6%, compared to 2024. The decrease in pari-mutuel revenue in 2025 compared to 2024 is primarily due to a decrease in simulcast handle and decreased guest fees from out-state-handle on our live racing product due to decreases in field size and three fewer live race days.

Previous wording

Food and beverage revenues increased $139,000, or 1.8%, to $7,968,000 for the year ended December 31, 2024 compared to 2023. The increase in food and beverage revenues is primarily due to increased catering operations related to hosting large scale special events as well as the one additional live race day year-over-year mentioned above.

Current wording

Food and beverage revenues increased $277,000, or 3.5%, to $8,245,000 for the year ended December 31, 2025 compared to 2024. The increase in food and beverage revenues is primarily due to increased catering operations and food revenues related to hosting large-scale special events.

Previous wording

Other revenues, consisting of admission revenues, corporate sponsorships, space rentals, and other miscellaneous activities, increased $1,020,000, or 18.3%, to $6,593,000 in 2024 compared to 2023. The increase is primarily due to admission revenue increases related to our first ever rodeo, our first comedy series, and our live racing events.

Current wording

Other revenues, consisting of admission revenues, corporate sponsorships, space rentals, and other miscellaneous activities, remained relatively flat, decreasing $44,000, or 0.7%, to $6,550,000 in 2025 compared to 2024.

Previous wording

Total operating expenses increased $436,000, or 0.8%, to $56,862,000 in 2024, from $56,426,000 in 2023. An explanation of changes in specific categories of operating expense is set forth below. Total operating expenses as a percentage of net revenues increased to 92.4% in 2024 from 91.8% in 2023, which was a result of increased operating expenses for 2024 as compared to 2023.

Current wording

Total operating expenses increased $244,000, or 0.4%, to $57,106,000 in 2025, from $56,862,000 in 2024. An explanation of changes in specific categories of operating expense is set forth below. Total operating expenses as a percentage of net revenues increased to 95.9% in 2025 from 92.4% in 2024, which was primarily a result of decreased net revenues for 2025 as compared to 2024.

Previous wording

Total purse expense increased $308,000, or 4.1%, in 2024 compared to 2023. The increase is primarily due to the expenses incurred as part of our recruiting and participation incentives paid in 2024 under our annual live race meet and purse fund contribution agreement dated December 21, 2023. See Note 9 for further details of the agreement. No recruiting and participation incentives are planned for the 2025 live race meet. The table below notes the various components of both purse expense and the Minnesota Breeders' Fund expense.

Current wording

Total purse expense decreased $845,000, or 10.7%, in 2025 compared to 2024. The decrease is primarily due to the expenses incurred as part of our recruiting and participation incentives paid in 2024 under our annual live race meet and purse fund contribution agreement dated December 21, 2023. See Note 9 for further details of the agreement. No recruiting and participation incentives were incurred for the 2025 live race meet. The decrease was also due to the decrease in total Casino revenues, due to increased competition, and decreased total pari-mutuel revenues, due to a decrease in overall live race days year-over-year. The table below notes the various components of both purse expense and the Minnesota Breeders' Fund expense.

Previous wording

Salaries and benefits expense increased $651,000, or 2.6%, in 2024 compared to 2023. The increase is primarily due to an increase in our wage-rate structure for seasonal as well as year-round employees to attract and retain front-line workers.

Current wording

Salaries and benefits expense increased $315,000, or 1.2%, in 2025 compared to 2024. The increase is primarily due to an increase in our wage-rate structure for seasonal as well as year-round employees to attract and retain front-line workers.

Previous wording

Cost of food and beverage and other sales increased $133,000, or 4.3%, in 2024 compared to 2023. The increase is primarily due to the increased food and beverage revenues related to increased catering operations as noted above.

Current wording

Cost of food and beverage and other sales decreased $38,000, or 1.2%, in 2025 compared to 2024. The decrease is primarily due to reduced food costs and creating process efficiencies to lower overall costs.

Previous wording

Depreciation and amortization increased $476,000, or 15.1%, in 2024 compared to 2023. The increase is primarily due to placing larger fixed assets into service towards the second half of 2023 as well as placing assets into service related to the first and second phases of our barn relocation and redevelopment plan in the second quarter of 2024.

Current wording

Depreciation and amortization increased $377,000, or 10.4%, in 2025 compared to 2024. The increase is primarily due to placing larger fixed assets into service during the second quarter of 2024 and throughout 2025 related to our barn relocation and redevelopment plan.

Previous wording

Professional and contracted service expenses decreased $320,000, or 5.4%, in 2024 compared to 2023. The decrease is primarily due to higher costs in 2023 related to long-term strategic growth initiatives.

Current wording

Professional and contracted service expenses increased $190,000, or 3.4%, in 2025 compared to 2024. The increase is primarily due to higher costs in 2025 for HISA regulatory costs that are required for live racing.

Previous wording

During 2024, the Company recorded a gain on transfer of land of $1,732,000 as result of transferring approximately 3.5 acres of land to the Trackside Investments joint venture. See Note 11 for further details.

Current wording

During 2024, the Company recorded a gain on transfer of land of $1,732,000 as result of transferring approximately 3.5 acres of land to the Trackside Investments joint venture. See Note 11 for further details. The Company had no sales or transfers of land in 2025.

Previous wording

During 2024, the Company performed a review of any fixed assets that were no longer in service at December 31, 2024. As a result of this review, management determined to dispose of assets resulting in a loss on disposal of $56,000 during the fourth quarter of 2024. In addition to this write-off, the Company had multiple additional asset disposals for a gain of $7,000, resulting in a net loss on disposal of assets of $49,000 for the year ended December 31, 2024. During 2023, the Company performed a review of any fixed assets that were no longer in service at December 31, 2023. As a result of this review, management determined to dispose of assets resulting in a loss on disposal of $223,000 during the fourth quarter of 2023. In addition to this write-off, the Company had multiple additional asset disposals for a gain of $66,000, resulting in a net loss on disposal of assets of $157,000 for the year ended December 31, 2023.

Current wording

During 2025, the Company performed a review of any fixed assets that were no longer in service at December 31, 2025. As a result of this review, management determined to dispose of assets resulting in a loss on disposal of $97,000 during the fourth quarter of 2025. In addition to this write-off, the Company had multiple additional asset disposals for a gain of $41,000, resulting in a net loss on disposal of assets of $56,000 for the year ended December 31, 2025. During 2024, the Company performed a review of any fixed assets that were no longer in service at December 31, 2024. As a result of this review, management determined to dispose of assets resulting in a loss on disposal of $56,000 during the fourth quarter of 2024. In addition to this write-off, the Company had multiple additional asset disposals for a gain of $7,000, resulting in a net loss on disposal of assets of $49,000 for the year ended December 31, 2024.

Previous wording

Other loss, net, for the year ended December 31, 2024 was $3,396,000, a decrease of $6,875,000, compared to an other income, net, of $3,479,000 for the year ended December 31, 2023. The decrease for 2024 is primarily due to our share of a gain recognized on insurance proceeds received on a claim by Doran Canterbury I during 2023. The Company's portion of the gain on insurance proceeds recognized by Doran Canterbury I was $4,228,000. The loss on equity investments for the year ended December 31, 2024 is primarily due to non-cash expenses from depreciation and amortization. This was slightly offset by increased interest income of approximately $93,000 year-over-year, due to the Company transferring available cash into certificates of deposit and money market funds as well as increasing balances related to both our member loans to Doran Canterbury I and Doran Canterbury II and our increase in TIF receivable.

Current wording

Other loss, net, for the year ended December 31, 2025 was $3,276,000, a decrease of $120,000, compared to an other loss, net, of $3,396,000 for the year ended December 31, 2024. The decrease for 2025 is primarily due to increased leasing rates for our Doran Canterbury equity investments, resulting in decreased overall losses recognized. The loss on equity investments for the years ended December 31, 2025 and 2024 is primarily due to non-cash expenses from depreciation and amortization. This was slightly offset by decreased interest income of approximately $105,000 year-over-year, due to both lower average interest rates and a decrease in the Company's average cash balance during 2025 compared to 2024.

Previous wording

The Company recorded a provision for income taxes of $924,000 and $4,417,000 for 2024 and 2023, respectively. The decrease in our tax expense for 2024 compared to 2023 is due to a decrease in income before taxes from operations, primarily related to the 2023 gain on land sale mentioned above. Our effective tax rate was 30.4% and 29.5% for 2024 and 2023, respectively.

Current wording

The Company recorded a provision for income taxes with a benefit of $285,000 and expense of $924,000 for 2025 and 2024, respectively. The income tax benefit for 2025 compared to the income tax expense in 2024 is primarily due to a decrease in income before taxes from operations and a federal interest income tax refund received in the first quarter of 2025. Our effective tax rate was 35.0% and 30.4% for 2025 and 2024, respectively.

Previous wording

The Company recorded net income of $2,113,000, or $0.42 per basic and diluted share for 2024. The Company recorded net income of $10,563,000, or $2.15 per basic and $2.13 per diluted share for 2023.

Current wording

The Company recorded a net loss of $529,000, or $0.10 per basic and diluted share for 2025. The Company recorded net income of $2,113,000, or $0.42 per basic and diluted share for 2024.

Previous wording

Estimate of the allowance for doubtful accounts - Property Tax Increment Financing**“**TIF” Receivable

Current wording

Estimate of the allowance for credit losses - Property Tax Increment Financing**“**TIF” Receivable

Previous wording

As of December 31, 2024, the Company recorded a TIF receivable of approximately $18,898,000, which represents $15,551,000 of principal and $3,347,000 of interest. The TIF receivable requires significant management estimates and judgement pertaining to expected future tax revenue, the Company's development cost on infrastructure improvements, and whether an allowance for doubtful accounts is necessary. The TIF receivable was generated in connection with the Contract for Private Redevelopment, in which the City of Shakopee has agreed that a portion of the future tax increment revenue generated from the developed property around the Racetrack will be paid to the Company to reimburse it for expenses in constructing public infrastructure improvements.

Current wording

As of December 31, 2025, the Company recorded a TIF receivable of approximately $19,986,000, which represents $16,305,000 of principal and $3,681,000 of interest. The TIF receivable requires significant management estimates and judgement pertaining to expected future tax revenue, the Company's development cost on infrastructure improvements, and whether an allowance for doubtful accounts is necessary. The TIF receivable was generated in connection with the Contract for Private Redevelopment, in which the City of Shakopee has agreed that a portion of the future tax increment revenue generated from the developed property around the Racetrack will be paid to the Company to reimburse it for expenses in constructing public infrastructure improvements. For the year ended December 31, 2025, the Company received its first payment from the City of Shakopee totaling $582,000 related to this receivable.

Previous wording

The Company typically performs an annual collectability analysis of the TIF receivable in the fourth quarter of each year, or more frequently if indicators of the receivable to be potentially uncollectable exist. The Company utilizes a third-party to assist with the projected tax increment revenues. The quantitative analysis includes assumptions based on the market values of the completed development projects within Canterbury Commons, which derives the future projected tax increment revenue. The Company uses the analysis to determine if expected future tax increment revenue will exceed the Company's development costs on infrastructure improvements. As a result of our analysis for the year ended December 31, 2024, management believes the TIF receivable will be fully collectible and no allowance related to this receivable is necessary.

Current wording

The Company typically performs an annual collectability analysis of the TIF receivable in the fourth quarter of each year, or more frequently if indicators of the receivable to be potentially uncollectable exist. The quantitative analysis includes assumptions based on the market values of the completed development projects within Canterbury Commons, which derives the future projected tax increment revenue. The Company uses the analysis to determine if expected future tax increment revenue will exceed the Company's development costs on infrastructure improvements. As a result of our analysis as well as initial payments received in 2025 with additional payments expected to be received in 2026 from the City of Shakopee, for the year ended December 31, 2025, management believes the TIF receivable will be fully collectible and no allowance related to this receivable is necessary.

Previous wording

Effective December 21, 2021, the Company entered into a Contribution and Indemnity Agreement (“Indemnity Agreement”) with affiliates of Doran Companies (“Doran”) relating to debt financing by Doran Canterbury I, LLC as borrower, which is guaranteed by Doran affiliates. Under the Indemnity Agreement, the Company is obligated to reimburse and indemnify each loan guarantor for any amounts paid by such loan guarantor to the lender on debt financing by Doran Canterbury I, LLC, up to a maximum of $5,000,000. Effective October 27, 2022, the Indemnity Agreementwas amended to increase the maximum indemnification by an additional $700,000. Effective December 12, 2023, the Indemnity Agreement was amended to increase the maximum indemnification by an additional $1,300,000. Effective December 18, 2024, the Indemnity Agreement was amended to increase the maximum indemnification by an additional $500,000, bringing the total to a maximum of $7,500,000.

Current wording

Effective December 21, 2021, the Company entered into a Contribution and Indemnity Agreement (“Indemnity Agreement”) with affiliates of Doran Companies (“Doran”) relating to debt financing by Doran Canterbury I, LLC as borrower, which is guaranteed by Doran affiliates. Under the Indemnity Agreement, the Company is obligated to reimburse and indemnify each loan guarantor for any amounts paid by such loan guarantor to the lender on debt financing by Doran Canterbury I, LLC, up to a maximum of $5,000,000. Effective October 27, 2022, the Indemnity Agreementwas amended to increase the maximum indemnification by an additional $700,000. Effective December 12, 2023, the Indemnity Agreement was amended to increase the maximum indemnification by an additional $1,300,000. Effective December 18, 2024, the Indemnity Agreement was amended to increase the maximum indemnification by an additional $500,000. Effective December 30, 2025, the Indemnity Agreement was amended to increase the maximum indemnification by an additional $250,000, bringing the total to a maximum of $7,750,000.

Previous wording

Effective December 18, 2024, the Company entered into an Indemnity Agreement with affiliates of Doran relating to debt financing by Doran Canterbury II, LLC as borrower, which is guaranteed by Doran affiliates. Under the Indemnity Agreement, the Company is obligated to reimburse and indemnify each loan guarantor for any amounts paid by such loan guarantor to the lender on debt financing by Doran Canterbury II, LLC, up to a maximum of $1,000,000.

Current wording

Effective December 18, 2024, the Company entered into an Indemnity Agreement with affiliates of Doran relating to debt financing by Doran Canterbury II, LLC as borrower, which is guaranteed by Doran affiliates. Under the Indemnity Agreement, the Company is obligated to reimburse and indemnify each loan guarantor for any amounts paid by such loan guarantor to the lender on debt financing by Doran Canterbury II, LLC, up to a maximum of $1,000,000. Effective December 30, 2025, the Indemnity Agreement was amended to increase the maximum indemnification by an additional $1,750,000, bringing the total to a maximum of $2,750,000.

Previous wording

Effective December 21, 2023, the Company entered into its annual live race meet and purse fund contribution agreement with the Minnesota Horsemen’s Benevolent & Protective Association (“MNHBPA”) and the Minnesota Quarter Horse Racing Association (“MQHRA”) regarding the 2024 live race meet. In an effort to increase field size and improve the quality of racing for the 2024 season, the Company guaranteed purses for overnight races at $23,000 per race. The parties recognized there was likely to be a significant financial cost to the Company in establishing a 2024 thoroughbred purse structure intended to average $23,000 per conducted overnight race and that to maintain that average purse structure, the Company made an overpayment that may be repaid to the Company by the MNHBPA through reimbursement in subsequent racing years. This overpayment of purses by the Company was intended to create a short-term bridge until additional purse supplements can be obtained from other sources. At the conclusion of the 2024 live race meet, the Company recorded a receivable related to the overpayment of 2024 purses in the amount of $1,597,463, which is presented on the Company's balance sheet as of December 31, 2024. In the event that additional purse revenue is secured within the five years following the 2025 live race meet through additional forms of gaming at the Company, new revenue streams, or legislative action, the Company will be eligible for reimbursement of the actual 2024 overpayment amount from those purse supplements. Management believes it is likely that additional purse supplements will ultimately be obtained when considering both the length of time to secure such funds (five years following the 2025 live race meet) and the fact that legislation has been introduced in both chambers of the Minnesota legislature that would provide those supplements through revenues from taxes paid by sports wagering licenses. Accordingly, management believes no allowance related to this receivable is necessary at December 31, 2024. In addition, the Company agreed to allocate approximately $400,000 to be used as recruiting and participation incentives to attract thoroughbred trainers, owners, and stables for the 2024 live meet in an effort to generate additional pari-mutuel handle through improved field size. For the year ended 2024, the Company recognized expenses of $418,000 related to these incentives.

Current wording

Effective December 21, 2023, the Company entered into its annual live race meet and purse fund contribution agreement with the Minnesota Horsemen’s Benevolent & Protective Association (“MNHBPA”) and the Minnesota Quarter Horse Racing Association (“MQHRA”) regarding the 2024 live race meet. In an effort to increase field size and improve the quality of racing for the 2024 season, the Company guaranteed purses for overnight races at $23,000 per race. The parties recognized there was likely to be a significant financial cost to the Company in establishing a 2024 thoroughbred purse structure intended to average $23,000 per conducted overnight race and that to maintain that average purse structure, the Company made an overpayment that may be repaid to the Company by the MNHBPA through reimbursement in subsequent racing years. This overpayment of purses by the Company was intended to create a short-term bridge until additional purse supplements can be obtained from other sources. At the conclusion of the 2024 live race meet, the Company recorded a receivable related to the overpayment of 2024 purses in the amount of $1,597,463, which is presented as Other long-term receivables on the Company's balance sheet as of December 31, 2024. In addition, the Company agreed to allocate approximately $400,000 to be used as recruiting and participation incentives to attract thoroughbred trainers, owners, and stables for the 2024 live meet in an effort to generate additional pari-mutuel handle through improved field size. For the year ended 2024, the Company recognized expenses of $418,000 related to these incentives.

Previous wording

Effective January 31, 2025, the Company entered into its annual live race meet and purse fund contribution agreement with the MNHBPA and the MQHRA regarding the upcoming 2025 live race meet. In an effort to maintain field size and improve the quality of racing for the 2025 season, the Company has guaranteed an additional $500,000 of purse monies to be distributed above the minimum amount defined in Minnesota Statutes Chapter 240. In the event that additional purse revenues are secured throughout the duration of the 2025 live race agreement through additional forms of gaming at the Company, new revenue streams, or legislative action, the Company has agreed to provide additional purse monies of up to $1,500,000, to a total of $2,000,000 in potential overpayment of purses to support the 2025 live race meet. The parties recognize there is likely to be a significant financial cost to the Company in establishing this 2025 thoroughbred purse structure and that to maintain that average purse structure, the Company will be making an overpayment that may be repaid to the Company through reimbursement in subsequent racing years. This anticipated overpayment of purses by the Company is intended to create a short-term bridge until additional purse supplements can be obtained from other sources. In the event that additional purse revenue is secured within the five years following the 2025 live race meet through additional forms of gaming at the Company, new revenue streams, or legislative action, the Company will be eligible for reimbursement of the actual 2025 overpayment amount from those purse supplements.

Current wording

Effective January 31, 2025, the Company entered into its annual live race meet and purse fund contribution agreement with the MNHBPA and the MQHRA regarding the 2025 live race meet. In an effort to maintain field size and improve the quality of racing for the 2025 season, the Company guaranteed an additional $500,000 of purse monies to be distributed above the minimum amount defined in Minnesota Statutes Chapter 240. The parties recognized there was likely to be a significant financial cost to the Company in establishing this 2025 thoroughbred purse structure and that to maintain that average purse structure, the Company made an overpayment that may be repaid to the Company by the MNHBPA through reimbursement in subsequent racing years. This overpayment of purses by the Company was intended to create a short-term bridge until additional purse supplements can be obtained from other sources. At the conclusion of the 2025 live race meet, the Company recorded a receivable related to the overpayment of 2025 purses in the amount of $500,000.

Previous wording

Cash provided by operating activities for 2023 was $11,537,000, primarily as a result of the following: the Company reported net income of $10,563,000, depreciation of $3,145,000, deferred income taxes of $2,826,000, and stock-based compensation and 401(k) match totaling $1,379,000, offset by a gain from equity investment of $1,501,000 and a gain on land sale of $6,490,000. The Company experienced an increase in cash related to a decrease in employee retention credit receivable of $6,103,000, offset by a decrease in accounts payable, net of land, buildings, and equipment funded through accounts payable, of $1,465,000, and an increase in income taxes receivable of $2,031,000.

Current wording

Cash provided by operating activities for 2025 was $8,900,000, primarily as a result of the following: the Company reported a net loss of $529,000, depreciation and amortization of $3,998,000, a loss on equity investment of $5,243,000, an increase in deferred income taxes of $625,000, and stock-based compensation and 401(k) match totaling $1,602,000. The Company experienced an increase in cash related to a decrease in income taxes receivable and prepaid income taxes of $760,000, offset by an increase in other long-term receivables of $500,000, related to the 2025 purse fund contribution agreement, an increase in TIF receivable of $916,000, related to interest accrued, and a decrease in accounts payable, net of land, buildings, and equipment funded through accounts payable of $1,623,000, primarily related to payments for our barn relocation and redevelopment plan.

Previous wording

Cash provided by operating activities for 2024 was $6,488,000, primarily as a result of the following: the Company reported net income of $2,113,000, depreciation of $3,621,000, loss on equity investment of $5,468,000 and stock-based compensation and 401(k) match totaling $1,447,000, offset by a gain on land transfer of $1,732,000. The Company experienced an increase in cash related to a decrease in income taxes receivable and prepaid income taxes of $897,000, offset by an increase in other long-term receivables of $1,597,000, related to the 2024 purse fund contribution agreement, an increase in TIF receivable of $681,000 and a decrease in accounts payable, net of land, buildings, and equipment funded through accounts payable of $2,121,000, primarily related to payments for our barn relocation and redevelopment plan.

Current wording

Cash provided by operating activities for 2024 was$6,488,000, primarily as a result of the following: the Company reported net income of $2,113,000, depreciation of $3,621,000, loss on equity investment of $5,468,000 and stock-based compensation and 401(k) match totaling $1,447,000, offset by a gain on land transfer of $1,732,000. The Company experienced an increase in cash related to a decrease in income taxes receivable and prepaid income taxes of $897,000, offset by an increase in other long-term receivables of $1,597,000, related to the 2024 purse fund contribution agreement, an increase in TIF receivable of $681,000 and a decrease in accounts payable, net of land, buildings, and equipment funded through accounts payable of $2,121,000, primarily related to payments for our barn relocation and redevelopment plan.

Previous wording

Net cash used in investing activities for 2023 of $455,000 was used primarily for additions to land, buildings, and equipment of $7,908,000, an increase in related party receivable of $971,000, primarily due to additional member loans and interest related to the member loans, and purchases of short-term investments of $5,000,000. This was partially offset by proceeds received from the sale of land of $8,336,000 and proceeds from the sale of short-term investments of $5,000,000.

Current wording

Net cash used in investing activities for 2025 of $5,453,000 was used primarily for additions to land, buildings, and equipment of $4,183,000, primarily related to our barn relocation and redevelopment plan, additions for TIF eligible improvements of $754,000, an increase in related party receivable of $1,216,000, primarily due to additional member loans and interest related to the member loans, and purchases of short-term investments of $9,500,000. This was partially offset by proceeds from the sale of short-term investments of $9,500,000 and proceeds from TIF receivable of $582,000.

Previous wording

Net cash used in financing activities for 2023 was $1,345,000 primarily due to cash dividends paid to shareholders and payments for taxes of equity awards, partially offset by proceeds from the issuance of common stock.

Current wording

Net cash used in financing activities for 2025 was $1,310,000 primarily due to cash dividends paid to shareholders and payments for taxes of equity awards, partially offset by proceeds from the issuance of common stock.

Previous wording

At December 31, 2024, we had cash, cash equivalents, and restricted cash of $13,687,000 compared to $25,842,000 at December 31, 2023. This $12,155,000 decrease consisted of $6,488,000 of net cash provided by operating activities in 2024, offset by $17,349,000 of net cash used in investing activities in 2024 and $1,293,000 of net cash used in financing activities in 2024. We believe our existing cash and cash equivalents, along with our short-term investments and cash flow from operations and availability of borrowing under our revolving line of credit agreement, will be sufficient to meet our liquidity and working capital requirements beyond the next 12 months.

Current wording

At December 31, 2025, we had cash, cash equivalents, and restricted cash of $15,824,000 compared to $13,687,000 at December 31, 2024. This $2,137,000 increase consisted of $8,900,000 of net cash provided by operating activities in 2025, offset by $5,453,000 of net cash used in investing activities in 2025 and $1,310,000 of net cash used in financing activities in 2025. We believe our existing cash and cash equivalents, along with our short-term investments and cash flow from operations and availability of borrowing under our revolving line of credit agreement, will be sufficient to meet our liquidity and working capital requirements beyond the next 12 months.

Previous wording

As of December 31, 2024, the Company has completed phases one and two of the barn relocation and redevelopment plan with phase three currently underway, with estimated remaining costs of approximately $2,500,000. In addition, the Company expects to spend the remaining $2,042,000 in tax increment financing over the next six months for the completion of tax increment related improvements.

Current wording

As of December 31, 2025, the Company has substantially completed phase three of the barn relocation and redevelopment plan with minimal costs remaining. In addition, the Company expects to spend the remaining $1,288,000 in tax increment financing over the next twelve months for the completion of tax increment related improvements.

Previous wording

The Company offers unbanked table games that refer to a wagering system or game where wagers “lost” or “won” by the host are accumulated into a “player pool” to enhance the total amount paid back to players in any other card game. The Company is required to return accumulated player pool funds to the players through giveaways, promotional items, prizes, or by other means. The player pool liability was $542,000 and $1,055,000 at December 31, 2024 and 2023, respectively. Additionally, the table games jackpot pool was $696,000 and $524,000 at December 31, 2024 and 2023, respectively.

Current wording

The Company offers unbanked table games that refer to a wagering system or game where wagers “lost” or “won” by the host are accumulated into a “player pool” to enhance the total amount paid back to players in any other card game. The Company is required to return accumulated player pool funds to the players through giveaways, promotional items, prizes, or by other means. The player pool liability was $418,000 and $542,000 at December 31, 2025 and 2024, respectively. Additionally, the table games jackpot pool was $1,149,000 and $697,000 at December 31, 2025 and 2024, respectively.

Previous wording

The Company also maintains a poker promotional pool where a portion of the poker “rake” is collected and accumulated into a promotional pool to enhance the total amount paid back to poker players. The Company is required to return accumulated poker promotional pool funds to the players through poker jackpots, giveaways, promotional items, prizes, or by other means. The poker promotional pool liability was $364,000 and $339,000 at December 31, 2024 and 2023, respectively.

Current wording

The Company also maintains a poker promotional pool where a portion of the poker “rake” is collected and accumulated into a promotional pool to enhance the total amount paid back to poker players. The Company is required to return accumulated poker promotional pool funds to the players through poker jackpots, giveaways, promotional items, prizes, or by other means. The poker promotional pool liability was $117,000 and $364,000 at December 31, 2025 and 2024, respectively.

Previous wording

The Casino offers progressive jackpots for poker games. Amounts collected for these jackpot funds are accrued as liabilities until paid to winners. At December 31, 2024 and 2023, accrued jackpot funds totaled $88,000 and $172,000, respectively. The MRC regulates the operation of the player pool and progressive jackpot pools. These liabilities have the potential for significant fluctuation on a daily basis.

Current wording

The Casino offers progressive jackpots for poker games. Amounts collected for these jackpot funds are accrued as liabilities until paid to winners. At December 31, 2025 and 2024, accrued jackpot funds totaled $152,000 and $88,000, respectively. The MRC regulates the operation of the player pool and progressive jackpot pools. These liabilities have the potential for significant fluctuation on a daily basis.

Previous wording

All games in the Casino are played using chips. The value of chips issued and outstanding, referred to as the “outstanding chip liability,” was $447,000 and $558,000 at December 31, 2024 and 2023, respectively. This liability has the potential for significant fluctuation on a daily basis depending upon the demand for chip redemptions and sales.

Current wording

All games in the Casino are played using chips. The value of chips issued and outstanding, referred to as the “outstanding chip liability,” was $469,000 and $447,000 at December 31, 2025 and 2024, respectively. This liability has the potential for significant fluctuation on a daily basis depending upon the demand for chip redemptions and sales.

Previous wording

Our second largest individual operating expense item is purse expense. Pursuant to an agreement with the MNHBPA, we transferred into a trust account or paid directly to the MNHBPA, approximately $8,288,000 and $7,133,000 in purse funds related to thoroughbred races for 2024 and 2023, respectively. Minnesota law provides that amounts transferred into this trust account are the property of the trust and not the Company. There were no unpaid purse fund obligations due to the MNHBPA at December 31, 2024 or 2023.

Current wording

Our second largest individual operating expense item is purse expense. Pursuant to an agreement with the MNHBPA, we transferred into a trust account or paid directly to the MNHBPA, approximately $6,956,000 and $8,288,000 in purse funds related to thoroughbred races for 2025 and 2024, respectively. Minnesota law provides that amounts transferred into this trust account are the property of the trust and not the Company. There were no unpaid purse fund obligations due to the MNHBPA at December 31, 2025 or 2024.

Previous wording

In March 2022, the Company entered into a five-year agreement with a totalizator provider. Pursuant to the agreement, the vendor provides totalizator equipment and related software which records and processes all wagers and calculates odds and payoffs. The future minimum purchase obligations under the new agreement are $166,400 per year. The amounts charged to operations for totalizator expenses for the years ended December 31, 2024 and 2023 were $200,000 and $205,000, respectively.

Current wording

In March 2022, the Company entered into a five-year agreement with a totalizator provider. Pursuant to the agreement, the vendor provides totalizator equipment and related software which records and processes all wagers and calculates odds and payoffs. The future minimum purchase obligations under the new agreement are $166,400 per year. The amounts charged to operations for totalizator expenses for the years ended December 31, 2025 and 2024 were $203,000 and $200,000, respectively.