<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
XXX QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ------ ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998.
- ------ TRANSITION REPORT UNDER 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
------------------------------------------------------------------
(Exact name of business issuer as specified in its charter)
Minnesota 41-1775532
- --------------------------------- ---------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1100 Canterbury Road, Shakopee, Minnesota 55379
- -------------------------------------------- -------------
(Address of principal executive offices) (Zip Code)
(612) 445-7223
-----------------------------
(Issuer's Telephone Number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such report), and (2) has been
subject to such filing requirements for the past 90 days. YES X NO
----- -----
The Company had 3,017,142 shares of common stock, $.01 par value per share,
outstanding as of November 9, 1998.
<PAGE>
Canterbury Park Holding Corporation
INDEX
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PART 1. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Unaudited Consolidated Balance Sheets as of September 30,
1998 and December 31, 1997. . . . . . . . . . . . . . . . . . 3
Unaudited Consolidated Statements of Operations for the
periods ended September 30, 1998 and 1997 . . . . . . . . . . 4
Unaudited Consolidated Statements of Cash Flows for the
periods ended September 30, 1998 and 1997 . . . . . . . . . . 5
Notes to Unaudited Consolidated Financial Statements. . . . . 6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. . . . . . . . . . . . . 8
PART II. OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . 14
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
<PAGE>
CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 (UNAUDITED) AND DECEMBER 31, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 82,040 $ 364,214
Accounts receivable, net of allowance for uncollectible accounts 356,571 185,468
Inventory 73,608 76,657
Deposits 20,000 20,000
Prepaid expenses 72,169 106,381
----------- -----------
Total current assets 604,388 752,720
PROPERTY AND EQUIPMENT, net of accumulated depreciation
of $3,488,602 and $2,809,738, respectively 8,604,813 9,061,205
INTANGIBLE ASSETS, net of accumulated amortization of
$18,808 and $14,875, respectively 5,561 9,494
----------- -----------
$ 9,214,762 $ 9,823,419
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 913,830 $ 715,062
Accrued wages and payroll taxes 180,619 200,942
Accrued interest 98,071 103,184
Advance from MHBPA 498,073 709,573
Advance from shareholder (Note 2) 1,651,942
Borrowings under credit agreement 664,384
Accrued property taxes 425,381 305,032
Payable to horsepersons 69,959 14,923
----------- -----------
Total current liabilities 2,850,317 3,700,658
COMMITMENTS AND CONTINGENCIES (Note 3)
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, 10,000,000 shares authorized,
3,003,348 and 2,998,848, respectively, shares
issued and outstanding 30,033 29,989
Additional paid-in capital 8,070,486 8,061,875
Unearned Compensation (22,044)
Accumulated deficit (1,736,074) (1,947,059)
----------- -----------
Total stockholders' equity 6,364,445 6,122,761
----------- -----------
$ 9,214,762 $ 9,823,419
----------- -----------
----------- -----------
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
PERIODS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Pari-mutuel $4,557,745 $4,272,658 $11,552,939 $11,267,142
Concessions 1,102,773 951,398 2,281,814 2,116,747
Admissions and parking 220,960 205,809 481,558 502,836
Programs and racing forms 249,324 246,656 613,952 639,151
Other operating revenue 137,686 105,130 725,942 282,323
---------- ---------- ----------- -----------
6,268,488 5,781,651 15,656,205 14,808,199
OPERATING EXPENSES:
Pari-mutuel expenses
Statutory purses 1,745,479 1,665,296 3,368,285 3,257,901
Host track fees 482,814 443,147 1,459,620 1,428,055
Pari-mutuel taxes 24,276 15,679 53,413 36,665
Minnesota breeders' fund 220,940 204,717 578,420 558,848
Salaries and benefits 1,463,103 1,390,702 3,752,449 3,579,708
Cost of concession sales 298,620 276,554 664,579 621,153
Cost of publication sales 261,645 277,888 655,208 719,144
Depreciation and amortization 233,199 216,820 683,607 640,086
Utilities 238,070 220,792 575,782 536,795
Repairs, maintenance and supplies 229,068 92,123 597,308 357,570
Property taxes 105,652 93,860 297,360 284,001
Advertising and marketing 217,972 271,138 804,251 825,042
Other operating expenses 714,407 828,550 1,862,634 1,970,889
---------- ---------- ----------- -----------
6,235,245 5,997,266 15,352,916 14,815,857
NONOPERATING (EXPENSES) REVENUES:
Interest expense (23,346) (39,980) (93,523) (110,536)
Other, net 182 1,219 735
---------- ---------- ----------- -----------
(23,346) (39,798) (92,304) (109,801)
---------- ---------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAX 9,897 (255,413) 210,985 (117,459)
INCOME TAX
---------- ---------- ----------- -----------
NET INCOME (LOSS) $ 9,897 $ (255,413) $ 210,985 $ (117,459)
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
BASIC NET INCOME (LOSS) PER
COMMON SHARE (Note 1) $ .00 $ (.09) $ .07 $ (.04)
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
DILUTED NET INCOME (LOSS) PER
COMMON SHARE (Note 1) $ .00 $ (.09) $ .07 $ (.04)
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
PERIODS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 210,985 $ (117,459)
Adjustments to reconcile net income (loss) to net cash
provided by operations:
Depreciation and amortization 683,607 640,086
Stock options issued for consulting services 22,044 44,088
Loss on sale of property and equipment 10,917
Increase in accounts receivable (171,103) (200,229)
Decrease (increase) in other current assets 37,261 (19,190)
Increase in accounts payable and accrued expenses 178,445 381,991
Decrease in accrued interest (5,113) (55,768)
Increase in accrued property taxes 120,349 95,372
Increase in payable to horsepersons 55,036 3,935
------------ ------------
Net cash provided by operations 1,131,511 783,743
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (224,474) (369,474)
Additions to land (934,927)
Additions to intangible assets (1,668)
Proceeds from sale of property and equipment 1,192 39,800
------------ ------------
Net cash used in investing activities (223,282) (1,266,269)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (payments on) advance from shareholder, net (1,651,942) 225,339
Proceeds on issuance of common stock 8,655 33,281
(Payment on ) proceeds from advance from MHBPA, net (211,500) 104,365
Proceeds from borrowings under credit agreement, net 664,384
------------ ------------
Net cash (used in) provided by financing activities (1,190,403) 362,985
NET DECREASE IN CASH (282,174) (119,541)
CASH AT BEGINNING OF PERIOD 364,214 296,671
------------ ------------
CASH AT END OF PERIOD $ 82,040 $ 177,130
------------ ------------
------------ ------------
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PERIODS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED)
- -------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The summary of significant accounting policies is included in the notes to
consolidated financial statements in the 1997 Annual Report on form 10-KSB.
INCOME TAXES - Income tax expense is computed by applying the estimated
annual effective tax rate to the year-to-date income (if any). For the
nine month period ending September 30, 1998 income tax expense of
approximately $83,000 is offset by a reduction in the valuation allowance
recorded on the deferred tax asset related to the Company's net operating
loss carryforward.
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 at September 30,
1998 are stock options.
UNAUDITED FINANCIAL STATEMENTS - The consolidated balance sheet as of
September 30, 1998, the consolidated statements of operations for the
three and nine months ended September 30, 1998 and 1997, the consolidated
statements of cash flows for the nine months ended September 30, 1998 and
1997, and the related information contained in these notes have been
prepared by management without audit. In the opinion of management, all
accruals (consisting of normal recurring accruals) which are necessary for
a fair presentation of financial position and results of operations for
such periods have been made. Results for an interim period should not be
considered as indicative of results for a full year.
WARRANTS - In August 1998, 1,437,300 warrants to purchase one share of
common stock at an exercise price of $4.875 per share issued as part of the
Company's 1994 initial public offering and 400,000 warrants issued to the
Company's founders in connection with the public offering at an exercise
price of $4.00 per share expired unexercised.
RECLASSIFICATION - Certain reclassifications have been made to the 1997
consolidated financial statements to conform to the presentation adopted in
the 1998 consolidated financial statements. The reclassifications had no
effect on stockholders' equity and net income or loss as previously
reported.
2. RELATED-PARTY TRANSACTIONS
The company entered into a general credit and security agreement with
Bremer Bank, N.A., a financial institution located in South Saint Paul,
Minnesota on June 3, 1998. The commercial revolving credit line provides for
maximum advances of $2,250,000 with interest at the prime rate (8.50% at
September 30, 1998). On June 11, 1998, the Company paid off its line of
credit balance with the Company's majority shareholder, of which $899,679 was
outstanding.
6
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3. CONTINGENCIES
In accordance with an Earn Out Note, given to the prior owner of the
racetrack as part of the consideration paid by the Company to acquire the
racetrack, 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 Pre-Tax 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.
4. CURRENT ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130 "Reporting Comprehensive Income" (SFAS 130),
which establishes standards for the reporting of comprehensive income
and its components. Comprehensive income is defined as the change in
equity during the period from transactions and other events and
circumstances from non-owner sources. Implementation of SFAS 130 did not
have a material effect on the Company's financial statements.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
GENERAL
Canterbury Park Holding Corporation (the "Company") owns and operates
Canterbury Park, the only pari-mutuel horse racing facility in the State of
Minnesota (the "Racetrack"). The Company's revenues for the period from
January 1, 1998 to September 30, 1998 were derived primarily from pari-mutuel
take-out on races simulcast to Canterbury Park from racetracks throughout the
country during 273 days of racing, including 55 days when live racing was
also conducted. In 1998 the Company intends to have over 350 simulcast
racing days. The Company hosted 52 days of live thoroughbred and quarter
horse racing at the Racetrack from May 16, 1998 to August 16, 1998, and
conducted three days of live harness racing over the 1998 Labor Day weekend.
During live race meets, the Company earns pari-mutuel take-out on wagering on
live races at the Racetrack and additional pari-mutuel revenue from
broadcasting its live races to out-of-state racetracks around the country.
In addition to pari-mutuel revenues, the Company generates revenues from
admissions, advertising, parking, publication sales, concessions, special
events, advertising and other sources.
RESULTS OF OPERATIONS FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30,
1998 AND 1997:
Total operating revenues increased approximately 8.4% during the three
months ended September 30, 1998, compared to the three months ended September
30, 1997 and 5.7% for the nine months ended September 30, 1998 compared to the
nine months ended September 30, 1997. Other operating revenues increased
approximately 31% and 157% for the three month and nine month periods ended
September 30, 1998, respectively, due primarily to increased space rental
revenues generated by leasing underutilized areas of the Racetrack grounds for
vehicle storage during the first nine months of 1998. Vehicle storage revenues
were approximately $51,000 and $386,000, respectively, for the three month and
nine month periods ended September 30, 1998. There were no vehicle storage
revenues in the comparable periods of 1997.
Total pari-mutuel revenues increased 6.7% and 2.5%, respectively, for the
three and nine month periods ended September 30, 1998 compared to the same
periods in 1997 due primarily to an increase in on-track handle during live
racing. On-track handle increased $1.5 million or 7.6% and $1.6 million or
2.9%, respectively, for the three month and nine month periods ended September
30, 1998 compared to the same periods in 1997. Partially offsetting the
increases in pari-mutuel revenues resulting from on-track wagering was a
decrease in guest fee revenue resulting from a 36.8% decrease in import handle
from broadcasting its live race signal to other racetracks. A switch in 1998
from Saturday evening to Saturday afternoon live racing caused the import
handle to decrease from approximately $12.6 million wagered during the 1997 live
meet, to approximately $8.0 million wagered during the 1998 live meet. The
reduction in out-of-state handle was anticipated due to the Saturday afternoon
simulcast market being much more competitive than the Saturday evening market.
The switch from evening racing on Saturdays to afternoon racing during the 1998
live meet increased on-track attendance and wagering in an effort to maximize
revenues per dollar wagered. On-track
8
<PAGE>
wagers provide substantially higher margins to the Company than wagers placed
at out-of-state locations.
As shown in the table below, total on-track handle on live racing days
in 1998 increased approximately 4.5% compared to 1997 although the Company
conducted one less live racing day in the 1998 period. Average daily
on-track handle on days when both live and simulcast racing were conducted
increased approximately 6.4% in 1998 compared to 1997 due primarily to a 3.1%
increase in average daily attendance on those days.
Average daily handle on simulcast only race days decreased 1.6% compared
to the same period in 1997 due to lower average daily attendance. However,
total handle on simulcast only days increased from the comparable periods in
1997 due primarily to the seven additional simulcast only race days in 1998.
Total handle for the nine months ended September 30, 1998 decreased 4.7%
compared to the same period in 1997 due to the reduction in import handle.
SUMMARY OF OPERATING DATA:
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
Sept. 30, 1998 Sept. 30, 1997
<S> <C> <C>
RACING DAYS
Simulcast only days 218 211
Live and simulcast days 55 56
------------ ------------
Total Racing Days 273 267
ATTENDANCE
Simulcast only days 92,248 91,197
Live and simulcast days 192,970 190,564
------------ ------------
Total Attendance 285,218 281,761
ON-TRACK HANDLE
Simulcast only days $29,822,000 $29,330,000
Live and simulcast days
Live racing 12,013,000 11,321,000
Simulcast racing 12,876,000 12,494,000
OUT-OF-STATE LIVE HANDLE 7,985,000 12,635,000
------------ ------------
Total Handle $62,696,000 $65,780,000
AVERAGE DAILY ATTENDANCE
Simulcast only days 423 432
Live and simulcast days 3,509 3,403
ON-TRACK PER CAPITA WAGERING
Simulcast only days $ 323 $ 322
Live and simulcast days 129 125
ON-TRACK AVERAGE DAILY HANDLE
Simulcast only days $ 136,798 $ 139,005
Live and simulcast days 452,527 425,268
</TABLE>
9
<PAGE>
Concession revenues increased approximately 15.9% and 7.8% for the three
and nine month periods ended September 30, 1998, respectively, compared to
the same periods in 1997. The increase is due primarily to special events in
the months of August and September of 1998 and to higher live racing
attendance during both the third quarter and year-to-date periods in 1998
compared to 1997. On August 21, 1998, Canterbury Park hosted its second
Lilith Fair, a concert which has drawn nearly 30,000 people to the Racetrack
each year. The Company also hosted K102's Fan Jam and KDWB's Last Chance
Summer Dance concerts in September of 1998 attracting approximately 24,000
spectators to the two-day weekend event. Special events generated concession
revenues of approximately $400,000 during the third quarter of 1998 compared
to $210,000 in the third quarter of 1997.
Total operating expenses for the three month and nine month periods
ended September 30, 1998 have increased approximately $238,000 or 4.0%, and
$537,000 or 3.6%, respectively, over the same periods in 1997. This increase
results primarily from increases in pari-mutuel expenses, salaries and
benefits and repairs, maintenance and supplies expenses. These increases are
partially offset by decreases in advertising and marketing and other
operating expenses.
Pari-mutuel expenses have increased 6.2% and 3.4% for the three month
and nine month periods ended September 30, 1998 compared to the same periods
in 1997, respectively. The increases are attributable to higher on-track
handle for the quarter and year-to-date.
Salaries and benefit expenses have increased $72,000 or 5.2% and
$173,000 or 4.8%, respectively, for the three month and nine month periods
ended September 30, 1998 compared to the three month and nine month periods
ended September 30, 1997. The increase is attributable to normal salary
increases, the costs associated with additional employee benefit plans and
higher costs of employee medical plans.
Repairs, maintenance and supplies expenses have increased $137,000 and
$240,000 for the three and nine month periods ended September 30 1998,
compared to the periods in 1997, respectively. The increase for the quarter
is attributable primarily to repairs and maintenance of the Racetrack parking
lots during the third quarter of 1998. The Company also upgraded the
facility's valet entrance and made other repairs of facility systems and
video equipment during 1998.
Other operating expenses have decreased 13.8% and 5.5%, respectively,
for the three month and nine month periods ended September 30, 1998 compared
to the same periods in 1997. In 1997, expenses related to legislative
efforts totaled approximately $151,000 and $263,000 for the three and nine
month periods ended September 30, 1997. These expenses related primarily to
an effort to obtain legislative approval for casino gaming at the Racetrack
as a revenue source to finance a new major league baseball stadium in
Minnesota. Comparatively, in 1998, Canterbury has incurred legislative
expenses totaling $12,000 and $64,000 during the three and nine month periods
ended September 30, 1998. The reduction in legislative expenses was
partially offset by costs of new memberships in trade organizations such as
the NTRA, the TRA and the TRPB in 1998.
10
<PAGE>
The Company's net income of $210,985 for the nine months ended September
30, 1998 compares to a net loss of ($117,459) for the nine months ended
September 30, 1997. Net income of $9,897 for the three months ended
September 30, 1998 compares to a net loss of ($255,413) for the three months
ended September 30, 1997 This is the first time in the Company's history
that it has reported an operating profit and a net profit in any quarter in
which live racing was conducted at the Racetrack.
LIQUIDITY AND CAPITAL RESOURCES
During the period January 1, 1998 through September 30, 1998, cash
provided by operating activities was $1,131,511, which resulted principally
from net income of $210,985, depreciation and amortization of $683,607, and
an increase in accounts payable and accrued expenses of $178,445. Other
items providing cash from operations included an increase in property taxes
payable of $120,349 and an increase in the payable to non-thoroughbred
horsepersons of $55,036. These items were partially offset by an increase in
accounts receivable of $171,103.
Net cash used in investing activities for the nine months ended
September 30, 1998 of $223,282 relates primarily to the acquisition of
furniture, fixtures and equipment and improvements to the facility parking
lots. The net cash used in investing activities for the nine months ended
September 30, 1997 of $1,266,269 represents primarily the acquisition of a 30
acre tract of undeveloped land adjacent to the Racetrack on August 18, 1997
at a cost of $934,927. The company had other property, equipment and
building improvement additions of $369,474 in 1997.
During the period January 1, 1998 through September 30, 1998, cash used
in financing activities was $1,190,403, resulting primarily from the pay off
of the Company's line of credit with Mr. Curtis Sampson, the Company's
Chairman of the Board. The proceeds from a new revolving line of credit
agreement with a local financial institution provided cash for financing
activities and partially offset the cash used in paying off the Sampson line
of credit. In addition, the Company paid down it's advances from the MHBPA
by $211,500.
The Company entered into a general credit and security agreement with
Bremer Bank, N.A., a financial institution located in South Saint Paul,
Minnesota on June 3, 1998. The commercial revolving credit line provides for
maximum advances of $2,250,000 with interest at the prime rate (8.50% at
September 30, 1998). The new lending arrangement also includes a term loan
commitment of $750,000.
The Company is required by statute to segregate purse funds received
from wagering on simulcast and live horse races for future payment as purses
for live horse races at the Racetrack or other uses of Minnesota's
horsepersons' association. Pursuant to an agreement, with the Minnesota
Horseman's Benevolent and Protective Association, Inc. ("MHBPA"), during the
nine months ended September 30, 1998 and 1997, the Company transferred into a
trust account or paid directly to the MHBPA approximately $3,250,000 and
$3,188,000, respectively. At September 30, 1998, the Company had an
additional $498,073 liability to the MHBPA which will be paid in 1998, with
interest, in accordance with the agreement.
11
<PAGE>
The Company believes that the funds to be generated from operations
together with funds available under its $2,250,000 line of credit with a
local financial institution will be sufficient to satisfy its liquidity and
capital resource requirements for the next twelve months. The Company
anticipates that it may 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.
As of November 4, 1998, borrowings under the line of credit were
approximately $581,000 with an interest rate of 8.00%.
In August 1998, 1,437,300 warrants to purchase one share of common stock
at an exercise price of $4.875 per share issued as part of the Company's 1994
initial public offering and 400,000 warrants issued to the Company's
founders in connection with the public offering at an exercise price of $4.00
per share expired unexercised.
OPERATING PLAN:
At September 30, 1998, the Company had concluded its 1998 live race meet
which consisted 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 1998 Labor Day weekend.
The Company's ability to operate profitably during the remainder of 1998
will largely depend on its ability to maintain levels of attendance and
wagering handle for simulcast racing at levels similar to 1997. The Company
will also need to maintain operating expenses at levels similar to 1997. In
addition, the Company continues to emphasize the expansion of special events
and leasing of underutilized Racetrack space in order to maximize the
potential of the facility year-round.
FACTORS AFFECTING FUTURE PERFORMANCE:
The Company has identified and evaluated its in-house personal computer
systems for year 2000 compliance. These PC based applications are compliant
and are not considered to be critical to the Company's daily operations. The
Company utilizes a racing office administrative network system which is
considered to be obsolete and will be replaced prior to commencement of the
live race meet in May of the year 2000. The Company is currently evaluating
alternative products and the related conversion costs. The estimated cost of
software and hardware replacement for the racing office system is $25,000.
The Company has evaluated the impact that the failure of significant
suppliers to achieve year 2000 readiness would have on its operations. The
Company has a contract with Autotote Systems, Inc. ("Autotote") for
totalizator services, including equipment and computer programs which record
and process all wagers and calculate odds and payoffs. Autotote has assured
the Company, in writing, of their commitment to achieve year 2000 compliance.
Autotote's goal is to complete the assessment and remediation planning phase
by November 1, 1998. Should Autotote fail to remediate its own year 2000
issue, pari-mutuel wagering would cease at the Racetrack beginning January 1,
2000. The Company's current contract with Autotote expires in May 1999. The
Company will evaluate Autotote's progress toward year 2000 readiness during
its contract negotiations in 1999. There can be no guarantee that the
12
<PAGE>
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.
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-QSB, 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.
13
<PAGE>
PART II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None
Item 2. CHANGES IN SECURITIES
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly cause this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Canterbury Park Holding Corporation
Dated: November 11, 1998 /s/ Randall D. Sampson
---------------------------------------
Randall D. Sampson,
President, Chief Executive Officer and
Treasurer
14
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