|
|
ITEM
2:
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
The
following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)
is intended to help the reader understand Canterbury 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 its Canterbury Park Racetrack and Card Casino facility (the
“Racetrack”) in Shakopee, Minnesota, which is approximately 25 miles southwest of downtown Minneapolis. The Racetrack
is the only facility in the State 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 the Card Casino at the Racetrack. The Card Casino 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.
Recent
Reorganization
. The Company was incorporated as a Minnesota corporation in October 2015. The Company is a successor corporation
to another corporation, also named Canterbury Park Holding Corporation, that was incorporated in 1994 (“CPHC”). Effective
as of the close of business on June 30, 2016, CPHC’s business and operations were reorganized into a holding company structure
(the “Reorganization”) pursuant to an Agreement and Plan of Merger dated as of March 1, 2016 that was approved by
CPHC’s shareholders on June 28, 2016.
Further
information regarding the Reorganization is set forth at Note 1 in the Notes to Condensed Consolidated Financial Statements under
Part I above and in the Company’s Registration Statement on Form S-4 (File No. 333-210877) filed with the SEC on April 22,
2016, which information is incorporated herein by reference.
For
purposes of this Report on Form 10-Q, when the term “Company” is used with reference to information covering or related
to periods up to and including June 30, 2016, such term refers to the operations of CPHC prior to the Reorganization.
Operations
Review for the Three and Nine Months Ended September 30, 2016:
EBITDA
EBITDA
represents earnings before interest income, income tax expense, and depreciation and amortization. Adjusted EBITDA excludes certain
non-recurring items to provide a better measure of the Company’s core operating results and to provide period-to-period
comparisons. EBITDA and Adjusted EBITDA are not a measure of performance or liquidity calculated in accordance with accounting
principles generally accepted 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. EBITDA and Adjusted EBITDA have been presented as a supplemental disclosure because they are widely used
measures of performance and a basis for valuation of companies in our industry. Moreover, other companies that provide EBITDA
and Adjusted EBITDA information may calculate EBITDA and Adjusted EBITDA differently than we do. For the nine months ended September
30, 2016, Adjusted EBITDA excluded the gain on sale of land, gain on disposal of assets and gain on insurance recoveries.
The
following table sets forth a reconciliation of net income, a GAAP financial measure, to EBITDA and Adjusted EBITDA (defined above),
which is a non-GAAP measure, for the nine months ended September 30, 2016 and 2015:
|
|
|
|
|
|
|
|
|
Summary of EBITDA Data
|
|
|
|
|
|
|
|
|
|
Nine
Months Ended September 30,
|
|
|
|
|
2016
|
|
|
2015
|
|
|
NET INCOME
|
|
$
|
3,511,490
|
|
|
$
|
1,773,313
|
|
|
Interest (income) expense, net
|
|
|
48,488
|
|
|
|
(1,653
|
)
|
|
Income tax expense
|
|
|
2,419,447
|
|
|
|
1,247,049
|
|
|
Depreciation
|
|
|
1,866,975
|
|
|
|
1,738,900
|
|
|
EBITDA
|
|
|
7,846,400
|
|
|
|
4,757,609
|
|
|
Gain on insurance recoveries
|
|
|
(592,276
|
)
|
|
|
(120,090
|
)
|
|
Gain on disposal of assets
|
|
|
—
|
|
|
|
(347,348
|
)
|
|
Gain on sale of land
|
|
|
(3,990,519
|
)
|
|
|
—
|
|
|
ADJUSTED EBITDA
|
|
$
|
3,263,605
|
|
|
$
|
4,290,171
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA decreased $1,027,000, or 23.9%, and decreased as a percentage of net revenues to 8.0% from 10.3% for the nine months ended
September 30, 2016 as compared to the same period in 2015. The decrease is primarily due to the decline in revenues and an increase
in salaries and benefits for the nine months ended September 30, 2016 compared to the same period in 2015.
Revenues:
Total
net revenues decreased $102,000, or 0.6%, for the three months ended September 30, 2016 as compared to the three months ended
September 30, 2015. This decrease primarily consists of decreases in pari-mutuel and Card Casino revenue of 8.6% and 1.1%, respectively,
partially offset by an increase in food and beverage revenue of 4.4%. Total net revenues decreased $598,000, or 1.4%, for the
nine months ended September 30, 2016 as compared to the nine months ended September 30, 2015. This decrease primarily consists
of decreases in pari-mutuel, Card Casino and food and beverage revenue of 7.1%, 0.8% and 1.0%, respectively. The following discussion
provides further information regarding our operating revenues.
Pari-mutuel
Data Revenues:
|
|
|
|
|
|
|
|
|
|
|
Nine
Months Ended September 30,
|
|
|
Racing Days
|
|
2016
|
|
|
2015
|
|
|
Simulcast only racing days
|
|
|
205
|
|
|
|
203
|
|
|
Live and simulcast racing days
|
|
|
69
|
|
|
|
70
|
|
|
Total Number of Racing Days
|
|
|
274
|
|
|
|
273
|
|
|
|
|
|
|
|
|
|
|
|
|
On-Track Simulcast Handle
|
|
|
|
|
|
|
|
|
|
Simulcast handle on simulcast only racing days
|
|
$
|
13,364,000
|
|
|
$
|
13,665,000
|
|
|
Simulcast handle on live racing days
|
|
|
7,973,000
|
|
|
|
9,057,000
|
|
|
Total simulcast handle
|
|
|
21,337,000
|
|
|
|
22,722,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Live Racing Handle
|
|
|
12,140,000
|
|
|
|
12,509,000
|
|
|
Total On-Track Handle
|
|
|
33,477,000
|
|
|
|
35,231,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Out-of-state Live Handle
|
|
|
31,164,000
|
|
|
|
28,621,000
|
|
|
Total Handle
|
|
$
|
64,641,000
|
|
|
$
|
63,852,000
|
|
During 2016, the Company implemented a live racing
take-out reduction to become the lowest take-out racetrack in the industry to promote our racing on a national scale. As indicated
in the table above, total handle wagered increased $789,000, or 1.2%, in the nine months ended September 30, 2016 compared to the
same period last year.
The increase in total handle is primarily attributable
to the following factors. Out-of-state handle increased by $2,543,000, or 8.9%, for the nine months ended September 30, 2016, compared
to the same period in 2015. The increase was partially offset by a 3.0% decrease in live racing handle primarily due to one less
day of racing and a 6.0% decrease in simulcast handle due in part to the lack of a Triple Crown contender in 2016.
The increase in out-of-state wagering volume didn’t
offset the take-out rate reduction for the three and nine months ended September 30, 2016 compared to the same periods in 2015.
Pari-mutuel revenue decreased $332,000, or 8.5%, and $613,000, or 7.1%, for the three and nine months ended September 30, 2016,
respectively, compared to the same periods in 2015. In addition, the decrease in revenue is attributable to the decline in simulcast
and live racing handle.
Card
Casino Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended September 30,
|
|
|
Nine
Months Ended September 30,
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
Poker Games
|
|
$
|
2,238,000
|
|
|
$
|
2,358,000
|
|
|
$
|
6,953,000
|
|
|
$
|
7,156,000
|
|
|
Table Games
|
|
|
4,475,000
|
|
|
|
4,433,000
|
|
|
|
12,557,000
|
|
|
|
12,639,000
|
|
|
Total Collection Revenue
|
|
|
6,713,000
|
|
|
|
6,791,000
|
|
|
|
19,510,000
|
|
|
|
19,795,000
|
|
|
Other Revenue
|
|
|
612,000
|
|
|
|
614,000
|
|
|
|
1,935,000
|
|
|
|
1,832,000
|
|
|
Total Card Casino Revenue
|
|
$
|
7,325,000
|
|
|
$
|
7,405,000
|
|
|
$
|
21,445,000
|
|
|
$
|
21,627,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
primary source of Card Casino revenue is a percentage of the wagers received from the players as compensation for providing the
Card Casino facility and services, which is 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.
As
indicated in the table above, total Card Casino revenue decreased $182,000 or 0.8%, for the three and nine months, respectively,
ended September 30, 2016 compared to the same periods in 2015. Card Casino revenue was relatively flat for the three and nine
months ended September 30, 2016 compared to the same periods in 2015.
Food
and Beverage Revenue:
Food
and beverage revenue increased $146,000, or 4.4%, for the three months ended September 30, 2016 compared to the same period in
2015. The increase is attributable to increased catering sales and price increases on select menu items. Food and beverage revenue
decreased $71,000, or 1.0%, for the nine months ended September 30, 2016 compared to the same periods in 2015, primarily attributable
to the loss of a major annual musical festival hosted in 2015 due to the sale of our festival field land as noted below in “Gain
on sale of land”.
Other
Revenue:
Other
revenue increased $157,000, or 7.2%, September 30, 2016 compared to the same periods in 2015. This increase is primarily due to
increased advertising revenue payments under the CMA agreement for joint marketing efforts.
Operating
Expenses:
Total
operating expenses decreased $273,000, or 1.8%, for the three months ended September 30, 2016 compared to the same period in 2015.
Total operating expenses increased $432,000, or 1.1%, excluding the gain on sale of land of $3,991,000 in 2016, for the nine months
ended September 30, 2016 compared to the same period in 2015. The following paragraphs provide further detail regarding operating
expenses.
Purse
expense decreased $209,000, or 8.8%, and $293,000, or 5.5%, for the three and nine months, respectively, ended September
30, 2016 compared to the same periods in 2015. The change is primarily due to a decrease in live racing handle and a change
in the statutory formula by which our purse expense is determined. Pursuant to legislation that took effect January 1, purse
rates are now determined based on a single rate, rather than the variable rate depending on the time of the year that
was previously in effect. This change will cause our purse expense in the fiscal year to be higher in the first and
fourth quarters and lower in the second and third quarters when compared to payments calculated under the previous
statutory structure. However, the change is not expected to have any material impact on our purse expense on an
annual basis.
Salaries
and benefits increased $90,000, or 1.5%, and $658,000, or 4.0%, for the three and nine months, respectively, ended September 30,
2016 compared to the same periods in 2015. The increase is primarily due to the State of Minnesota mandated increase in the minimum
wage from $8.00 per hour to $9.00 per hour effective August 1, 2015 to $9.50 per hour effective August 1, 2016.
The
gain on sale of land is due to the sale of approximately 24 acres of land adjacent to the Racetrack for a total consideration
of $4.3 million.
The
gain on disposal of assets is due to sale of the land and buildings related to the Shakopee Valley RV Park to SMSC during 2015.
The purchase price paid by SMSC for these assets was $100,000 and the cancellation of an agreement granting stock
appreciation rights with a liability carrying value of $641,000 that the Company issued to SMSC pursuant to the CMA. The
Company recorded a gain of $347,000.
During
2014, the Company incurred damage to buildings from multiple severe storms at the Racetrack. As of September 30, 2015,
the Company recognized a $120,000 insurance recoveries gain in the Consolidated Statements of Operations as “Gain
on insurance recoveries”. During October 2016, the Company received additional insurance proceeds of $592,000. As
of September 30, 2016, the Company recognized a $592,000 insurance recoveries gain as a “Recognized
Subsequent Event” in the Consolidated Statements of Operations as “Gain on insurance recoveries”, in
accordance with U.S. GAAP. The storms did not cause any material interruptions to the business or impact on the
Company’s consolidated financial results of operations. Based on future events, the Company may receive additional
insurance proceeds. The Company has concluded that these additional funds represent contingent gains and in accordance with
U.S. GAAP, has not recorded an estimate for any additional future proceeds in the Company’s 2016 third quarter
consolidated financial statements.
Other
operating expenses increased $392,000, or 11.6%, and $22,000, or 0.3%, for the three and nine months, respectively, ended September
30, 2016 compared to the same periods in 2015. The changes are primarily attributable to the implementation of a new human capital
management software system, and professional fees related to an announced corporate restructuring and efforts to develop unused
or underutilized land.
Income
tax expense increased $59,000, or 10.3%, for the three months ended September 30, 2016 compared to the same period in 2015.
Income tax expense increased $1,720,000, or 94.0%, for the nine months ended September 30, 2016 compared to the same period
in 2015. The effective rate was comparable year-over-year, but the increase in deferred tax expense is attributable to
recording a deferred tax liability on the gain on sale of the land and gain on insurance recoveries.
Net
Income for the three months ended September 30, 2016 and 2015 was $926,000 and $813,000, respectively. Net Income for the nine
months ended September 30, 2016 and 2015 was $3,511,000 and $1,773,000, respectively.
Contingencies:
The
Company entered into a Cooperative Marketing Agreement (the “CMA”) with the Shakopee Mdewakanton Sioux Community which
became effective on June 4, 2012, and was amended in January 2015 and 2016. The CMA contains certain covenants which, if breached,
would trigger an obligation to repay a specified amount related to such covenant. 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 such 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 costs. See Liquidity and Capital Resources for more information on liquidity and capital resource requirements.
Liquidity
and Capital Resources:
Net
cash provided by operating activities for the nine months ended September 30, 2016 was $2,543,000 primarily as a result of the
following: The Company reported net income of $3,511,000, depreciation of $1,867,000, and deferred income taxes of $1,215,000. The
Company also experienced an increase in accounts payable of $1,634,000 and Card Casino accruals of $791,000. This was partially
offset by an increase in restricted cash of $574,000 and due from Minnesota horsemen associations of $1,101,000, and partially
offset by the gain on disposal of assets relating to the sale of land of $3,990,000 and gain on insurance recoveries of $592,000.
Net
cash provided by operating activities for the nine months ended September 30, 2015 was $4,142,000 primarily as a result of the
following: The Company reported net income of $1,773,000 and depreciation of $1,739,000. The Company also experienced an increase
in accounts payable of $1,104,000 and Card Casino accruals of $540,000. This was partially offset by an increase in net income
taxes paid of approximately $433,000 and other current assets of $413,000.
Net
cash used in investing activities for the first nine months of 2016 was $3,777,000, primarily for building remodel projects and
the purchase of land. Net cash used in investing activities for the first nine months of 2015 of $3,622,000 was primarily for
a variety of equipment purchases and building remodel projects.
Net
cash used in financing activities during the first nine months of 2016 was $2,589,000, primarily for principal payments of capital
lease obligations and payment of cash dividends to shareholders. Net cash used in financing activities during the first nine months
of 2015 was $942,000 primarily for the payment of cash dividends.
The
Company had a general credit and security agreement with Bremer Bank, which provided a revolving credit line of up to $3,000,000
and expired on September 30, 2016. The Company had no borrowings under the credit line during the nine months ended September
30, 2016 or the year ended December 31, 2015. This general credit line was replaced with a new agreement, see below.
On
November 11, 2016, the Company signed a new general credit and security agreement with Bremer Bank, which provides a revolving
credit line of up to $6,000,000 and expires on November 11, 2017. The line of credit is collateralized by all receivables, inventory,
equipment, and general intangibles of the Company.
The
Company’s cash and cash equivalent balance at September 30, 2016 was $ 4.4 million compared to $ 8.3 million at December
31, 2015. 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, will be sufficient to satisfy its liquidity and capital resource requirements
for regular operations, as well as predevelopment expenses during 2016. However, if the Company engages in real estate development,
additional financing would more than likely be required.
Critical
Accounting Policies and Estimates:
The
preparation of consolidated financial statements in accordance with 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.
Our
significant accounting policies are included in Note 1 to our consolidated financial statements in our 2015 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 approximately 73.7% of
our total assets at September 30, 2016. We utilize 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. To date, we have determined that no impairment of these assets exists.
Stock-Based
Compensation –
Accounting guidance requires recognition of services provided in exchange for a share-based payment based
on the grant date fair market value. We utilize our judgment in determining the assumptions used to determine the fair value of
equity instruments granted using a Black-Scholes model.
Commitments
and Contractual Obligations:
On
June 4, 2012, and amended in January 2015 and 2016, the Company entered into the CMA with the SMSC that expires December 31, 2022.
See “Cooperative Marketing Agreement” below.
Legislation:
Minimum
Wage Legislation
Legislation
that was enacted into law in 2014 increased the minimum wage that must be paid to most company employees from $7.25 to $8.00 on
August 1, 2014, and from $8.00 to $9.00 per hour on August 1, 2015. A further increase from $9.00 to $9.50 per hour went into
effect on August 1, 2016. In addition, starting January 1, 2018, the minimum wage will increase at the beginning of each year
by the rate of inflation with a maximum increase of up to 2.5% per year. Prior to August 1, 2014, the Company employed a large
number of individuals who received an hourly wage equal to or slightly above $7.25 per hour. As a result, this legislation had
an adverse impact in 2014 and 2015 and will continue to have an adverse impact in 2016 and beyond. We have implemented measures,
and will continue to implement measures, to mitigate the impact of this increase by raising our prices and/or reducing our employee
count. However, these measures could themselves have an adverse effect because higher prices and diminished service levels may
discourage customers from visiting the Racetrack. To the extent we are not able to implement such price increases and other cost
cutting measures, the increase in the minimum wage will adversely affect our net income.
Advanced
Deposit Wagering Legislation
During
May 2016, the Advanced Deposit Wagering (“ADW”) legislation was signed into law by the governor of Minnesota. The
bill will establish licensing criteria and regulatory oversight of ADW providers doing business in the State of Minnesota. This
would allow the Minnesota Racing Commission (“MRC”) to regulate pari-mutuel wagering already occurring in Minnesota
and allow Canterbury Park to contract for source market fees from this wagering. These source market fees from ADW handle from
Minnesota residents would benefit the Company, the MRC, Minnesota horseracing industry and Minnesota breeders although it may
also have a negative impact on handle as more customers may wager online. Currently, the Company is assessing the financial impact
of the new legislation and cannot estimate it at this time.
Cooperative
Marketing Agreement:
On
June 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 strengthen Minnesota’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. Such payments have no direct impact on the Company’s consolidated financial statements or operations.
Under
the terms of the CMA, the SMSC paid the horsemen $6.7 million and $6.2 million in the first nine months of 2016 and 2015, respectively,
primarily for purse enhancements for the live race meets in the respective years.
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. Under the CMA,
the SMSC paid the Company $1,197,000 and $944,000 for marketing purposes during the nine months ended September 30, 2016 and 2015,
respectively.
During
January 2015 and 2016, the CMA was amended to adjust the payment amounts between the “Purse Enhancement Payments to Horsemen”
and “Marketing Payments to Canterbury Park.”
SMSC
has currently agreed to make the following purse enhancement and marketing payments for 2017 through 2022:
|
Year
|
|
Purse
Enhancement Payments to Horsemen 1
|
|
Marketing
Payments to Canterbury Park
|
|
|
2017
|
|
$
|
7,466,910
|
|
$
|
1,317,690
|
|
|
2018
|
|
|
7,650,000
|
|
|
1,350,000
|
|
|
2019
|
|
|
7,650,000
|
|
|
1,350,000
|
|
|
2020
|
|
|
7,650,000
|
|
|
1,350,000
|
|
|
2021
|
|
|
7,650,000
|
|
|
1,350,000
|
|
|
2022
|
|
|
7,650,000
|
|
|
1,350,000
|
|
1
Includes $100,000 each year payable to various horsemen associations
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 consolidated statements of operations.
For the nine months ended September 30, 2016, the Company recorded $610,000 in other revenue and incurred $440,000 in advertising
and marketing expense and $170,000 in depreciation related to the SMSC marketing payment. For the nine months ended September
30, 2015, the Company recorded $800,000 in other revenue and incurred $630,000 in advertising and marketing expense and $170,000
in depreciation related to the SMSC marketing payment. The excess of amounts received over revenue is reflected as deferred revenue
which is included in accounts payable on the consolidated balance sheets.
Under
the CMA, the Company agreed for the term of the CMA that it would not promote or lobby the Minnesota legislature for expanded
gambling authority and will support the SMSC’s lobbying efforts against expanding gambling authority.
As
part of the CMA, and pursuant to a related SAR Agreement dated June 14, 2012, the Company issued stock appreciation rights to
the SMSC. For the nine months ended September 30, 2015, the Company recognized $142,000 of expense related to these stock appreciation
rights, of which $142,000 was recorded as an offset to other revenue. On July 30, 2015, the Company sold the land and buildings
related to the Shakopee Valley RV Park located in Shakopee, Minnesota to SMSC for $100,000 plus the cancellation of the vested
and unvested SARs. As a result, there was no expense for the nine months ended September 30, 2016.
Forward-Looking
Statements:
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, we may make forward-looking statements concerning possible or anticipated future financial
performance, prospective business activities or plans which are typically preceded by words such as “believes,” “expects,”
“anticipates,” “intends” or similar expressions. For such 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 such forward-looking statements are subject to risks and uncertainties which could affect our actual results
and cause actual results to differ materially from those indicated in the forward-looking statements. Such risks and uncertainties
include, but are not limited to: material fluctuations in attendance at the Racetrack, decline in interest in wagering on horse
races at the Racetrack, at other tracks, or on unbanked card games offered at the Card Casino, competition from other venues offering
unbanked card games or other forms of wagering, a greater than anticipated expenses or lower than anticipated return on our development
of our underutilized land. competition from other sports and entertainment options, increases in compensation and employee benefit
costs, increases in the percentage of revenues allocated for purse fund payments, higher than expected expenses related to new
marketing initiatives, the impact of wagering products and technologies introduced by competitors, legislative and regulatory
decisions and changes, the general health of the gaming sector, and other factors that are beyond our ability to control or predict.