2.	STOCK BASED COMPENSATION

	Stock based compensation is recorded at fair value as of the date of grant and included in the salaries and benefits expense line item on the consolidated statements of operations and amounted to $91,558 and $132,750 during the six months ended June 30, 2012 and 2011, respectively.

	Prior to June 2, 2011, the Company's Stock Plan provided for annual, automatic grants to each non-employee member of the Board of Directors on the first business day each February of non-qualified stock options to acquire 3,000 shares of common stock. Pursuant to this provision, on February 1, 2011, 15,000 options were granted to five non-employee board members with an exercise price per share equal to the market price on the date of grant of $13.30. The stock options vested over a six-month period and expire in ten years. The compensation cost associated with this grant of Board of Directors options is $93,750 and was recognized as expense over the six-month vesting period.

	Pursuant to Board action taken on April 15, 2011 and shareholder approval on June 2, 2011, the Company's Stock Plan was amended to authorize annual grants of restricted stock or stock options, or both, as determined by the Board, and, pursuant to the amended Stock Plan, on June 2, 2011, 1,000 shares of restricted stock were granted to each of the five non-employee members of the Board of Directors. The restricted stock vested 100% after one year and is subject to restrictions on resale for an additional year. The compensation cost associated with the total grant of 5,000 shares was $73,300 that was recognized as expense over the one-year vesting period. Also pursuant to the amended Stock Plan, on June 7, 2012, 2,364 shares of restricted stock were granted to each of the five non-employee members of the Board of Directors. The restricted stock will vest 100% after one year and will be subject to restrictions on resale for an additional year. The compensation cost associated with the total grant of 11,820 shares is $149,996 that will be recognized as expense over the one-year vesting period.

	On September 8, 2011, 54,250 shares of deferred stock awards were granted to employees with a price per share equal to the market price on the date of grant of $9.27. The issuance of these deferred stock awards is contingent upon the Company obtaining legislation authorizing the operation of a Racino at Canterbury Park on or before December 31, 2012 and the Racino opens for business to the public pursuant to such legal authority by December 31, 2014. The Company believes the likelihood of this event to be remote due to the signing of the Cooperative Marketing Agreement as noted in Note 7.


	The number of shares that may be issued pursuant to options and restricted stock granted and the weighted average fair value during the periods presented were:


	Six Months Ended
	June 30, 2012				June 30, 2011
	Grant		Weighted Average Fair Value Per Share		Grant		Weighted Average Fair Value Per Share

Board stock options		—		—		15,000	$	6.25
Board restricted stock		11,820	$	12.69		5,000	$	14.66

Total shares		11,820				20,000


	The fair value of stock options granted under the Company's 1994 Stock Plan during the first six months of 2011 was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions and results; no stock options were granted during the first six months of 2012:


	2011
Expected dividend yield		0.00	%
Expected weighted-average volatility		50	%
Risk-free interest rate		2.02	%
Expected term of stock options (in years)		5.5
Fair value of stock options on grant date	$	93,750


	A summary of stock option activity as of June 30, 2012 and changes during the six months then ended is presented below:


Stock Options	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Grant Date Fair Value

Outstanding at January 1, 2012		318,002		$	9.21

Granted		—			—
Exercised		(19,750	)	$	7.23
Expired/Forfeited		—			—

Outstanding at June 30, 2012		298,252		$	10.06		5.8 Years	$	3,000,852

Exercisable at June 30, 2012		246,752		$	10.57		5.6 Years	$	2,607,492


	A summary of stock option activity as of June 30, 2011 and changes during the six months then ended is presented below:


Stock Options	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Grant Date Fair Value

Outstanding at January 1, 2011		368,437		$	9.21

Granted		15,000		$	13.30
Exercised		(59,935	)	$	6.84
Expired/Forfeited		(3,250	)	$	7.23

Outstanding at June 30, 2011		320,252		$	9.86		6.7 Years	$	3,157,726

Exercisable at June 30, 2011		212,877		$	10.67		5.8 Years	$	2,272,021


	Employee Stock Ownership Plan – Prior to 2008, the Company contributed shares of its common stock to its Employee Stock Ownership Plan (the "ESOP"). However, no contributions have been made from January 1, 2008 to date, and the Company has not taken any action to reinstate contributions to the ESOP.

	Employee Stock Purchase Plan – On April 3, 1995, the Board of Directors adopted an Employee Stock Purchase Plan (the "ESPP"). Pursuant to Board action taken in September 2011, the ESPP was amended to consist of three-month phases. The plan issued 2,096 shares during the second quarter of 2012. The plan did not issue any shares during the second quarter of 2011. The ESPP has issued a total of 248,262 shares since its inception. Pursuant to Board action taken on June 2, 2012, and effective during the third quarter of 2012, the discount offered to employees as part of the ESPP was raised 5% to 10%.

	Stock Appreciation Rights ("SARs")
	As part of the Cooperative Marketing Agreement (the "Agreement") discussed in Note 7, on June 14, 2012, the Company signed a Stock Appreciation Rights Agreement (the "SAR Agreement") and issued SARs to non-employees. The SAR Agreement granted rights to non-employees to benefit from the appreciation in the value of 165,000 shares of Company common stock above $14.30 per share, a price agreed upon by the two parties. Each right represents the right to be paid the appreciation in the value of one share of stock above $14.30. Ten percent of the rights (16,500 rights) vested immediately and the remaining rights vest at the rate of 16,500 per year beginning in 2013. The SAR Agreement provides for the cash payment of the excess of the fair market value of Canterbury Park Holding Corporation's common stock price on the date of exercise over the grant price. SARs have no effect on dilutive shares or shares outstanding as any appreciation of the Company's common stock value over the grant price is paid in cash and not in common stock. The SAR Agreement and all rights granted expire on December 31, 2022.

	The fair value of SARs is revalued (mark-to-market) each reporting period using the Black-Scholes valuation model based on the Company's period-end stock price. The expected term of the SARs granted is based on the contractual term. Expected volatility is based on the historical volatility of the Company's stock for the length of time corresponding to the expected term of the SARs. The expected dividend yield is based on the Company's historical dividend payments. The risk-free interest rate is based on the U.S. treasury yield curve in effect as of the reporting date for the length of time corresponding to the expected term of the SARs.


	The following weighted-average assumptions were used in calculating the fair value of SARs granted during the three-month period ended June 30, 2012, using the Black-Scholes valuation model; no SARs were granted during the three and six-month periods ended June 30, 2011:


	Three Months Ended June 30, 2012
Expected dividend yield		0.00	%
Expected weighted-average volatility		48.0	%
Risk-free interest rate		1.67	%
Expected term of SARs (in years)		10.55

There were no exercises during the three and six-month periods ended June 30, 2012. The total fair value of SARs vested during the three and six-month periods ended June 30, 2012 was $117,226. This expense was recorded as a component of other pari-mutuel expenses due to the nature of the Agreement. In the future, changes in the fair value of these SARs will also be recorded to this expense.

Changes to the Company's non-vested SARs during the six-month period ended June 30, 2012, are as follows:


	SARs			*Fair Value ()**
Non-vested SARs at December 31, 2011		—			—
Granted		165,000		$	6.09
Vested		(15,000	)	$	6.09
Cancellations		—			—
Non-vested SARs at June 30, 2012		150,000		$	6.09


	*Weighted-average