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 Condensed Consolidated Statements of Operations and amounted to $64,000 and $62,000 for the three months ended September 30, 2015 and 2014, respectively. For the nine months ended September 30, 2015 and 2014, stock-based compensation totaled $225,000 and $190,000, respectively.

Board of Directors Stock Option and Restricted Stock Grants

The Company’s Stock Plan was amended to authorize annual grants to non-employee members of the Board of Directors of restricted stock or stock options, or both, as determined by the Board. Options granted under the Plan generally expire 10 years after the grant date and generally become exercisable over a four year period. The restricted stock generally vests 100% after one year and is subject to restrictions on resale for an additional year. Restricted stock awards are subject to forfeiture if a board member terminates prior to the shares vesting. As of September 30, 2015, 13,940 shares were not vested with a weighted average fair value of $10.76 per share.

Employee Stock Option Grants

The Company has granted incentive stock options to employees pursuant to the Company’s Stock Plan with an exercise price equal to the market price on the date of grant. The options vest over a 42-month period and expire in 10 years.

A summary of stock option activity as of September 30, 2015 and changes during the nine months ended is presented below:



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

Outstanding at January 1, 2015		255,252	$	9.63
Granted		-		-
Exercised		(4,250)		6.27
Expired/Forfeited		(15,000)		17.10
Outstanding at September 30, 2015		236,002	$	9.22		3.4 Years	$	2,174,772

Exercisable at September 30, 2015		236,002	$	9.22		3.4 Years	$	2,174,772

Employee Deferred Stock Award Grants

Employee deferred stock awards are subject to forfeiture if an employee terminates prior to the vesting. Generally, the awards vest ratably over a four-year period and compensation costs are recognized over the vesting period. Compensation costs are recorded in “Salaries and benefits” on the Condensed Consolidated Statements of Operations.

A summary of the changes in employee deferred stock award grants as of September 30, 2015, is as follows:



			Weighted
			Average
	Deferred		Fair Value
	Stock		Per Share
Non-Vested Balance, January 1, 2015		34,750	$	10.27
Granted		1,000		10.01
Vested		(250)		10.01
Forfeited		-		-
Non-Vested Balance, September 30, 2015		35,500	$	10.26

Stock Appreciation Rights (“SARs”)

As part of the Cooperative Marketing 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 the 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 represented 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 vested at the rate of 16,500 per year beginning in January 2013. The SAR Agreement provided 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 $14.30. SARs had no effect on dilutive shares or shares outstanding as any appreciation of the Company’s common stock value over $14.30 was to be paid in cash and not in common stock.

On July 30, 2015, the Company sold the land and buildings related to the Shakopee Valley RV Park located in Shakopee, Minnesota to SMSC (“Shakopee Mdewakanton Sioux Community”) for $100,000 plus the cancellation of the vested and unvested SARs. The sale resulted in a $347,000 gain on the Consolidated Statements of Operations – Gain on disposal of assets.

Changes to the Company’s non-vested SARs during the nine months ended September 30, 2015 were as follows:



	SARs		Weighted Average Fair Value
Non-vested SARs at December 31, 2014		115,500	$	4.50
Granted		—		—
Vested		(16,500)		5.04
Cancellations		(99,000)		5.39
Non-vested SARs at September 30, 2015		-	$	-