RULE 424(b)(3)
REGISTRATION STATEMENT 333-114733
PROSPECTUS SUPPLEMENT
DATED MAY 17, 2005
TO
PROSPECTUS DATED MAY 14, 2004
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CATSKILL LITIGATION TRUST
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This Prospectus Supplement, dated May 17, 2005 (the "Supplement No.
3"), supplements that certain Prospectus dated May 14, 2004 (the "Original
Prospectus"), as supplemented by those certain Prospectus Supplements dated
November 22, 2004 and December 8, 2004 (together with the Original Prospectus,
the "Prospectus") and should be read in conjunction with the Prospectus.
On March 31, 2005, we filed with the Securities and Exchange
Commission (the "SEC") the attached Annual Report on Form 10-KSB for the year
ended December 31, 2004 and on May 16, 2005 we filed with the SEC the attached
Quarterly Report on Form 10-QSB/A for the period ended March 31, 2005. The
attached information supplements and supersedes, in part, the information
contained in the Prospectus.
All provisions of the Prospectus not specifically amended by this
Supplement remain in full force and effect.
Please insert this Supplement No. 3 into your Prospectus and retain both this
Supplement and the Prospectus for future reference. If you would like to receive
a copy of the Prospectus, as supplemented to date, please write to Catskill
Litigation Trust at c/o Christiana Bank & Trust Company, 1314 King Street,
Wilmington, Delaware 19801 or call (302) 888-7400.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
|X| ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE OF 1934
For the period January 12, 2004 (date of Inception) to December 31, 2004
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE OF
1934
For the transition period from __________________ to __________________
Commission file number: 333-114733
CATSKILL LITIGATION TRUST
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(Name of small business issuer in its charter)
Delaware 16-6547621
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
c/o Christiana Bank & Trust Company,
1314 King Street, Wilmington, Delaware 19801
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (302) 888-7400
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange
on which registered
Units N/A
- --------------------------------------- ---------------------------------------
Securities registered under 12(g) of the Exchange Act:
Units
- --------------------------------------------------------------------------------
(Title of class)
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 reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes |X| No
|_|
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. |_|
The issuer had no revenue during the fiscal year ended December 31, 2004.
The aggregate market value of the issuer's common equity held by
non-affiliates, as of March 31, 2005 was $0.
As of March 31, 2005, there were 22,702,896 shares of the issuer's common
equity outstanding.
Transitional Small Business Disclosure Format (Check one): Yes |_| No |X|
TABLE OF CONTENTS
Page
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Part I
Item 1. Description of Business 1
Item 2. Description of Property 5
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote of Security Holders 6
Part II
Item 5. Market for Common Equity and Related Stockholder Matters 6
Item 6. Management's Discussion and Analysis or Plan of Operation 9
Item 7. Financial Statements 16
Item 8. Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure 16
Item 8A. Controls and Procedures 16
Item 8B. Other Information 16
Part III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act 17
Item 10. Executive Compensation 17
Item 11. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters. 18
Item 12 Certain Relationships and Related Transactions 19
Item 13 Exhibits 19
Item 14 Principal Accountant Fees and Services 20
-i-
PART I
ITEM 1. DESCRIPTION OF BUSINESS
OUR FORMATION AND PURPOSE
The Catskill Litigation Trust was formed on January 12, 2004 as a part of a
consolidation between entities holding various interests in claims involved in a
litigation. These entities included Empire Resorts, Inc. ("Empire Resorts"),
Monticello Raceway Management, Inc. ("Monticello Raceway Management"),
Monticello Casino Management, LLC ("Monticello Casino Management"), Monticello
Raceway Development Company, LLC ("Monticello Raceway Development") and Mohawk
Management, LLC ("Mohawk Management"). As used in this report, the terms "we,"
"us," "our" and "the Litigation Trust" refer to the Catskill Litigation Trust.
The claims held by various parties involved in the consolidation related to
the alleged alienation and frustration of certain agreements and business
relations with the St. Regis Mohawk Tribe by Park Place Entertainment
Corporation. These agreements and business relationships were formed in the
course of seeking to develop a Native American casino and obtain the required
federal and state approvals to operate and manage it as more fully described
below. The consolidation transaction was part of an effort to develop a casino
with another federally recognized tribe and it was considered an inappropriate
business strategy for the new venture to be involved with continuing to pursue
the litigation claims.
As a result, in order to preserve the beneficial interests of the several
hundred owners of the various plaintiffs it was determined to transfer the
claims to a trust established on behalf of the beneficial owners of the claims.
On January 12, 2004, Empire Resorts, Catskill Development, L.L.C. ("Catskill
Development"), Monticello Raceway Management and Mohawk Management established
the Litigation Trust by, entering into a declaration of trust (the "Declaration
of Trust") with Joseph E. Bernstein, Paul A. deBary, our litigation trustees
(the "Trustees"), and Christiana Bank & Trust Company, our administrative
trustee. Catskill Development, Monticello Raceway Development and Mohawk
Management each assigned to us all of their claims related to the alienation and
frustration of their agreements and business relations with the St. Regis Mohawk
Tribe and their rights to any proceeds from any judgment or settlement that may
arise from any litigation relating to those claims, including (1) a lawsuit
entitled Catskill Development, L.L.C., Mohawk Management, L.L.C., and Monticello
Raceway Development Company, L.L.C., Plaintiffs. v. Park Place Entertainment
Corporation, Defendant. (Civil Action No. 00CIV8660 (CM)(GAY)) (United States
District Court Southern District Of New York), (2) a lawsuit entitled Catskill
Development, L.L.C., Mohawk Management, L.L.C., and Monticello Raceway
Development Company, L.L.C., Plaintiffs. v. Gary Melius, Ivan Kaufman, Walter
Horn, President R.C. - St. Regis Management Company, et al, Defendants. (Index
No. 891/03) (Supreme Court of the State of New York County of Sullivan), and (3)
any future litigation against the St. Regis Mohawk Tribe in connection with the
breach of the Tribe's agreements with any one or more of them. Our purpose is to
prosecute these claims through the recovery of any settlements or final
judgments thereof and distribute the net amount of any such recoveries to our
beneficiaries. Toward that end, we have retained several law firms to prosecute
the claims.
TERMINATION
Our litigation trustees have absolute discretion to determine, that our
assets are not sufficient to justify our continuance and terminate the existence
of the Litigation Trust. In addition, the litigation trustees are required to
terminate the Litigation Trust on the date that all of our litigation claims
have been fully prosecuted to final judgment or dismissal, including all
appeals, and all of our net assets have been distributed to our beneficiaries.
LINE OF CREDIT
Empire Resorts has provided us with an irrevocable line of credit of up to
$2,500,000 to provide funds to pay any and all of our expenses permitted under
the Declaration of Trust. No interest is payable on amounts advanced under our
line of credit. Amounts outstanding under our line of credit are to be repaid by
us from amounts of any settlement or award in connection with our litigation
claims after payment of an amount necessary to pay the fees of our litigation
trustees and other expenses as set forth in our declaration of trust. Repayment
of amounts outstanding under our line of credit may be made as a whole or in
part from time to time at any time without notice. We may reborrow any amounts
so repaid. Our line of credit remains in full force and effect until the
termination of the litigation trust. As of December 31, 2004 and March 31, 2005,
we had $2,000,000 available under this line of credit.
1
BACKGROUND OF OUR LITIGATION CLAIMS
In 1996, a group of businessmen formed a coalition with Empire Resorts and
two other entities and commenced negotiations with the St. Regis Mohawk Tribe
about developing a gaming casino on land adjacent to Monticello Raceway. This
coalition then formed three entities to accomplish distinct aspects of the
project:
o Catskill Development was formed to acquire the land on which the
casino would be built and obtain approval for and implement the
transfer of the land to the United States of America in trust for
the St. Regis Mohawk Tribe for off-reservation gaming.
o Monticello Raceway Development was formed to develop the casino
property, and provide technical expertise for the planning, design,
engineering, and construction of the casino. It would also help the
St. Regis Mohawk Tribe in obtaining financing for the casino
undertaking.
o Mohawk Management was formed to manage the casino.
Each party negotiated a separate contract with the St. Regis Mohawk Tribe
to cover its role. Thus, Catskill Development, after acquiring title to
Monticello Raceway and the surrounding property for $10 million, negotiated a
land purchase agreement; Mohawk Management negotiated a gaming facility
management agreement; and Monticello Raceway Development negotiated a gaming
facility development and construction agreement. Each of the land purchase
agreement and gaming facility management agreement were subject to certain
regulatory approvals from the Bureau of Indian Affairs ("BIA"), the National
Indian Gaming Commission and the State of New York.
On August 2, 1996, Catskill Development applied to the Bureau of Indian
Affairs and National Indian Gaming Commission to place 29 acres of land adjacent
to Monticello Raceway in trust status and to approve the land for a gaming
casino. The Bureau of Indian Affairs then spent 3 1/2 years reviewing and
processing the application, finally approving it on April 6, 2000 and
simultaneously requesting that New York State Governor George Pataki concur.
Before the Governor could formally concur or the National Indian Gaming
Commission could approve the casino management agreement, Park Place
Entertainment Corporation, the world's largest gaming corporation and Atlantic
City's largest casino operator, entered into an agreement providing for the St.
Regis Mohawk Tribe to commit their future casino development efforts exclusively
to Park Place Entertainment Corporation, which conflicted with their agreements
with Catskill Development, Monticello Raceway Development and Mohawk Management.
In an agreement executed on April 14, 2000, the St. Regis Mohawk Tribe promised
to work exclusively with Park Place Entertainment Corporation for consideration,
among other things, of $3,000,000 in cash and Park Place Entertainment
Corporation's promise to indemnify the St. Regis Mohawk Tribe against any
litigation that may result. Indicating that the BIA approval could be
"transferred" without significant delay to a new casino project at another
location in the Catskills, Park Place Entertainment Corporation induced the St.
Regis Mohawk Tribe to enter into agreements very similar to those between
Catskill Development, Monticello Raceway Development and Mohawk Management and
the St. Regis Mohawk Tribe, substituting Park Place Entertainment Corporation's
name for that of Catskill Development, Monticello Raceway Development and Mohawk
Management.
In response to these events, each of Catskill Development, Monticello
Raceway Development and Mohawk Management brought the litigation against Park
Place Entertainment Corporation, asserting claims under New York law for
intentional interference with contractual relations and interference with
business relations. The trial court subsequently dismissed the claim for
intentional interference with contractual relations on the grounds that the
contracts were subject to certain approvals and therefore not effective and
granted Park Place Entertainment Corporation's motion for summary judgment with
respect to the interference with business relations complaint on the grounds
that insufficient evidence of causation or wrongful conduct had been produced,
effectively dismissing the entire case. While the plaintiffs were preparing an
appeal, additional evidence in the form of certain audio tapes were discovered.
The plaintiff's successfully petitioned for the original judgment to be set
aside, so that the additional evidence could be placed in the record. The case
was remanded to the District Court, which allowed for certain limited discovery
in connection with the audio tapes, and then, after a delay of several months,
reentered its original judgment against the plaintiffs on the grounds that the
suppressed audio tapes did not contain evidence of the kind of wrongful conduct
necessary to support the plaintiff's claims for intentional interference with
business relations. The Litigation Trust is now pursuing an appeal of this most
recent judgment.
2
Separately, on April 11, 2003, each of Catskill Development, Monticello
Raceway Development and Mohawk Management filed the litigation against Gary
Melius, Ivan Kaufman and Walter Horn, each of whom served as an intermediary
between the St. Regis Mohawk Tribe and Park Place Entertainment Corporation
during Park Place Entertainment Corporation's successful effort to induce the
St. Regis Mohawk Tribe to renounce their agreements with Catskill Development,
Monticello Raceway Development and Mohawk Management and commit their casino
efforts exclusively to Park Place Entertainment Corporation. In this lawsuit,
the plaintiffs have alleged that the defendants engaged in a conspiracy to
restrain and interfere with the plaintiffs' efforts to develop a casino in
Monticello, New York with the St. Regis Mohawk Tribe. In addition, the
plaintiffs have alleged that the defendants engaged in a fraud and conspiracy by
withholding material evidence from the plaintiffs in connection with their
lawsuit against Park Place Entertainment Corporation. The plaintiffs are seeking
$2 billion in damages. Prosecution of the suit has been deferred by mutual
agreement of the parties until after resolution of similar legal issues in the
lawsuit against Park Place Entertainment Corporation.
At this time it is too difficult to determine whether there will be any
judgments or awards based on either the litigation against Park Place
Entertainment Corporation or the litigation against Gary Melius, Ivan Kaufman
and Walter Horn or on any other lawsuit based on our litigation claims.
Any breach of contract claims that we may file against the St. Regis Mohawk
Tribe must be filed within the applicable statute of limitations, which we
believe is six years from April 14, 2000.
OUR EXPENSE AND RECOVERY ACCOUNTS
Our declaration of trust establishes a fund to be maintained by our
administrative trustee which consists of two accounts, an expense account and a
recovery account. For this fund, our administrative trustee may establish on our
behalf one or more accounts with banks or brokerage firms in which all or part
of our moneys or investments to be deposited in this fund may be held, invested
and reinvested by our administrative trustee pending disbursement or
distribution. Any amount on deposit in this fund that is not required to be held
for present use or distributions is to be accumulated and retained in this fund
and invested and reinvested by our administrative trustee as directed in the
sole discretion of our litigation trustees so as to obtain a reasonable return
on investment with proper regard for the preservation of the principal and so as
to be reasonably available at the times estimated to be necessary for the
purposes of the litigation trust.
DEPOSITS TO AND PAYMENTS OUT OF OUR EXPENSE ACCOUNT
Any amounts received by us, other than amounts received as a recovery of
any settlement or award of our litigation claims, are to be deposited in our
expense account. This includes amounts drawn on our line of credit and amounts
permitted to be transferred from our recovery account to our expense account.
Amounts in this expense account are to be used to pay necessary or useful
expenses, as determined in the sole and absolute discretion of our litigation
trustees.
Our administrative trustee is to make payments out of our expense account
upon (i) the written direction of one of our litigation trustees as of the first
business day of each calendar quarter to pay the quarterly fees of our
litigation trustees and our administrative trustee, and (ii) written direction
signed by one of our litigation trustees with respect to expenses set forth in a
budget (provided that the litigation trustee shall specify in the written
direction the line item of such budget that includes such expense) and by both
of our litigation trustees with respect to all other expenses. Our
administrative trustee has no obligation to verify that the amounts
requisitioned are to be used for the purposes of the litigation trust.
Notwithstanding anything to the contrary in our declaration of trust, our
litigation trustees may, at any time and from time to time, direct our
administrative trustee to pay any expense of our litigation claims or apply to
or for the benefit of our beneficiaries so much or the entire principal of our
expense account, as our litigation trustees, in their sole discretion, may deem
available.
DEPOSITS TO AND DISTRIBUTIONS FROM OUR RECOVERY ACCOUNT
The amount of proceeds received on account of any settlement or award in
connection with our litigation claims is to be deposited in our recovery
account. In the event that we receive any proceeds on account of any settlement
or award, the amount necessary to pay any of our current debts or other
obligations and to provide for our future expenses must be transferred to our
expense account from our recovery account or applied directly to the retirement
of such debts or other obligations at the direction of our litigation trustees.
Not later than thirty days after the close of each calendar year, if there have
been deposits in our recovery account during such year, or within thirty days of
receipt by our administrative trustee of a notice of termination of the
3
litigation trust, our administrative trustee is to calculate the balance in our
recovery account at the end of such year or as of the date of such notice and
the amount so calculated shall be withdrawn from our recovery account and shall
be applied and used to make distributions for the purposes of the litigation
trust as follows:
First: An amount necessary to pay our litigation trustees their fees for
their services as litigation trustees.
Second: If any amount remains after the above requirements have been met,
$7,500,000 shall be paid to Empire Resorts to reimburse it for prior expenses
incurred in connection with our litigation claims and any amounts outstanding
under our line of credit shall be repaid to Empire Resorts.
Third: If any amount remains after the above requirements have been met,
such amount remaining shall be divided among our beneficiaries in proportion to
their ownership of our units as shown on the registration books of our
administrative trustee or transfer agent, as applicable, as of the date that
such distribution is made.
All distributions of the litigation trust are to be made in the sole
discretion of our litigation trustees. In making and scheduling distributions,
neither of our litigation trustees shall have any liability to our
beneficiaries, or to our potential beneficiaries, or to any other person, for
any failure or alleged failure to follow such direction nor shall any of our
litigation trustees be subject to suit by any person that contests the validity
of any action taken under our declaration of trust or seeks to compel or direct
the use, investment or application of amounts in the litigation trust other than
as determined in the discretion of our litigation trustees.
INDEMNIFICATION
We are required to indemnify, to the fullest extent permitted by law,
Empire Resorts, Monticello Raceway Management, Monticello Casino Management,
Monticello Raceway Development, Mohawk Management, our litigation trustees, our
administrative trustee and any of their officers, directors, stockholders,
members, partners, employees, representatives, custodians, nominees, agents,
heirs, successors, assigns or affiliates in connection with any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative by any individual, corporation, estate,
partnership, joint venture, association, joint stock company, limited liability
company, trust, unincorporated association, or government or any agency or
political subdivision thereof, or any other entity of whatever nature, arising
out of or relating to the litigation trust, our line of credit, our litigation
claims, or any acts or omissions of our litigation trustees or our
administrative trustee in their capacity or purportedly in their capacity as our
litigation trustees or our administrative trustee, as the case may be, or
actions taken by our litigation trustees or our administrative trustee
(including actions taken by our litigation trustees or our administrative
trustee, as the case may be in their capacity as officers or directors of any
entity that is a party to the consolidation of Empire Resorts with Monticello
Recovery Management, Monticello Casino Management, Monticello Raceway
Development Company and Mohawk Management so long as such actions relate to the
litigation trust including, without limitation, the negotiation of the terms of
the litigation trust and the approval of the establishment of the litigation
trust and related transactions, but otherwise excluding actions taken by our
litigation trustees or our administrative trustee, as the case may be in such
capacities), against any and all losses, liabilities, damages, judgments,
demands, suits, claims, assessments, charges, fines, penalties and other costs
and expenses, including attorneys' fees and expenses and other fees and expenses
associated with the defense of a claim or incurred by such indemnified person in
obtaining indemnification under our declaration of trust, whether or not in a
formal proceeding.
Notwithstanding the preceding paragraph, no indemnification shall apply in
the case of the indemnification of (i) our litigation trustees, if our
unitholders establish in a final judicial determination by clear and convincing
evidence that damages arose as the result of acts or omissions of our litigation
trustees with deliberate intent to injure our unitholders or with reckless
disregard for the best interests of our unitholders, (ii) our administrative
trustee, if it is established in a final judicial determination by clear and
convincing evidence that damages arose as a result of its gross negligence or
willful misconduct, or (iii) Empire Resorts or its successors, if it is
established in a final judicial determination by clear and convincing evidence
in an action brought by our litigation trustees or by our unitholders that
damages arose as the result of Empire Resorts' or its successor's material
breach of any of its obligations under our line of credit. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, as applicable, shall not, of
itself, create a presumption that (i) our litigation trustees acted or decided
with deliberate intent to injure our unitholders or with reckless disregard for
the best interests of our unitholders, (ii) our administrative trustee acted
with gross negligence or willful misconduct, or (iii) our litigation trustees or
our unitholders established by clear and convincing evidence that Empire Resorts
or its successor materially breached any of its obligations under our line of
credit.
4
To the fullest extent permitted by law, expenses (including attorneys' fees
and expenses) incurred by an indemnified person in defending a civil, criminal,
administrative or investigative action, suit or proceeding for which such
indemnified person is entitled to indemnification shall be paid by us in advance
of the final disposition of such action, suit or proceeding upon receipt of an
undertaking (without bond or security) by or on behalf of such indemnified
person to repay such amount if it shall ultimately be determined that he or it
is not entitled to be indemnified by us as set forth in our declaration of
trust.
We may purchase and maintain insurance to cover our indemnification
obligations and any other liabilities of our litigation trustees and our
administrative trustee. We will use amounts from our expense account (or amounts
from other sources of the litigation trust) to pay for such insurance.
The indemnification and advancement of expenses provided by, or granted
under our declaration of trust shall continue as to a person who has ceased to
be an indemnified person and shall inure to the benefit of the heirs, executors
and administrators of such a person.
REPORTS TO OUR BENEFICIARIES
Our litigation trustees are required to issue annual reports showing our
assets and liabilities at the end of each fiscal year and our receipts and
disbursements for the fiscal year then ended. The annual reports also will
describe changes in our assets, significant changes in the status of our
litigation claims during the reporting period and significant actions taken by
our litigation trustees during the period. Our litigation trustees are also
required to distribute to our beneficiaries a special report if, in the opinion
of our litigation trustees, a material event relating to our assets has
occurred.
GOVERNING LAW
Our declaration of trust and the rights of the parties thereunder are
governed by and interpreted in accordance with the laws of the State of
Delaware.
EMPLOYEES
As of December 31, 2004, we had no subsidiaries or full-time employees.
ITEM 2. DESCRIPTION OF PROPERTY
The Litigation Trust owns no significant physical assets. Its property
consists entirely of intangible property in the form of its litigation claims
and its $2,500,000 irrevocable letter of credit from Empire Resorts, Inc., of
which $500,000 had been drawn down as of December 31, 2004. The Litigation Trust
maintains accounts with the administrative trustee. One of these accounts, the
expense account, receives and holds funds pending disbursements for the expenses
of the Litigation Trust. The amounts maintained in this account on a continuous
basis are not significant. Funds for deposit in this expense account are
generally derived from draws on the Litigation Trust's letter of credit from
Empire Resorts, Inc.
ITEM 3. LEGAL PROCEEDINGS
We are a statutory trust created to pursue certain claims assigned to us on
behalf of the beneficial owners of certain entities. The litigation claims arise
from the efforts of Catskill Development, Monticello Raceway Development and
Mohawk Management to develop a gaming casino in Monticello, New York with the
St. Regis Mohawk Tribe and relate to the alleged non-performance, alienation and
frustration of various agreements and business relations related to that effort.
One lawsuit is currently pending and one lawsuit has been discontinued.
The first lawsuit is Catskill Development, L.L.C., Mohawk Management,
L.L.C., and Monticello Raceway Development Company, L.L.C., Plaintiffs. v. Park
Place Entertainment Corporation, Defendant. (Civil Action No. 00CIV8660
(CM)(GAY)) (United States District Court Southern District of New York). A
judgment against the Plaintiffs in this lawsuit has been entered and that
judgment is being appealed.
The second lawsuit is Catskill Development, L.L.C., Mohawk Management,
L.L.C., and Monticello Raceway Development Company, L.L.C., Plaintiffs. against
Gary Melius, Ivan Kaufman, Walter Horn, President R.C. - St. Regis Management
Company, et al, Defendants. (Index No. 891/03) (Supreme Court of the State of
New York County of Sullivan). This lawsuit has been discontinued under an
5
agreement that permits it to be refiled at a future date without being barred by
the statute of limitations
We may also pursue claims for breach of contract against the St. Regis
Mohawk Tribe prior to expiration of the statute of limitations in April 2006.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
There is no current trading market for our units and we do not intend to
seek have our units traded on an exchange or a national market.
Holders
According to Continental Stock Transfer & Trust Company, there were 181
holders of record of our units at December 31, 2004. Such holders of record
include securities depositaries who hold units for more than one person.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
FORWARD-LOOKING STATEMENTS
This Report on Form 10-KSB contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than
statements of historical facts included in this Report, including without
limitation, the statements under "General," and "Liquidity and Capital
Resources," are forward-looking statements. All subsequent written and oral
forward-looking statements attributable to the Litigation Trust or persons
acting on its behalf are expressly qualified in their entirety by the cautionary
statements.
The following discussions should be read in conjunction with our financial
statements and the related notes thereto and other financial information
appearing elsewhere in this report. The following discussion contains
forward-looking statements that involve risks and uncertainties. Our actual
results could differ materially from those anticipated in the forward-looking
statements as a result of various factors, including those discussed elsewhere
in this report.
GENERAL
We are a statutory trust created under Delaware law to pursue certain
litigation claims arising from the efforts of Catskill Development, Monticello
Raceway Development, and Mohawk Management to develop a gaming casino in
Monticello, New York with the St. Regis Mohawk Tribe. Our purposes are the
prosecution of our litigation claims through the recovery of any settlement or
final judgments and the distribution of the net amount of any such recoveries to
our beneficiaries. The plaintiffs spent several years and substantial funds to
develop and obtain required approvals for the casino. Subsequently, Park Place
Entertainment Corporation entered into an agreement providing for the St. Regis
Mohawk Tribe to commit their future casino development efforts exclusively to
Park Place Entertainment Corporation. That agreement conflicted with the Tribe's
agreements with Catskill Development, Monticello Raceway Development and Mohawk
Management
There is one lawsuit presently pending and one lawsuit that has been
discontinued. The first lawsuit is Catskill Development, L.L.C., Mohawk
Management, L.L.C., and Monticello Raceway Development Company, L.L.C.,
Plaintiffs. v. Park Place Entertainment Corporation, Defendant. (Civil Action
No. 00CIV8660 (CM) (GAY)) (United States District Court Southern District of New
York) referred to herein as the "PPE case". A judgment against the plaintiffs in
this lawsuit was initially entered after a motion for summary judgment. This
judgment was subsequently vacated. Additional evidence was entered into the
6
record and a judgment against the plaintiffs was re-entered. This judgment is
being appealed
The second lawsuit is Catskill Development, L.L.C., Mohawk Management,
L.L.C., and Monticello Raceway Development Company, L.L.C., Plaintiffs. against
Gary Melius, Ivan Kaufman, Walter Horn, President R.C. - St. Regis Management
Company, et al, Defendants. (Index No. 891/03) (Supreme Court of the State of
New York County of Sullivan). This lawsuit has been discontinued under an
agreement that permits it to be refiled at a future date without being barred by
the statute of limitations.
The administration of our Litigation Trust will involve the authentication
and payment of fees and expenses for legal and related services in connection
with our litigation claims, reporting and regulatory compliance and the
maintenance of litigation, financial and unitholder records. Administrative
expenses are currently estimated to be approximately $200,000 per year,
including the fees of the litigation and administrative trustees, auditors and
accountants and other support services. Legal fees and other expenses involved
in our litigation claims are difficult to predict with any degree of accuracy.
On the assumption that we may be successful in our current appeal and commence
the work toward a trail on the merits, our current budget for 2005 provides for
legal expenses of approximately $900,000. No assurance can be given that the
appeal will be successful or that the amounts available to us for the payment of
such expenses under our line of credit will be sufficient to carry our
litigation claims through to a successful conclusion or that alternative funds
will be available for such purpose.
Our unit holders will only be entitled to the net proceeds from any
settlement or award, if any, of our litigation claims after the payment of our
expenses, the fees of our litigation trustees, any amounts outstanding under our
line of credit and $7,500,000 to Empire Resorts for reimbursement of prior
expenses incurred in connection with our litigation claims.
RESULTS OF OPERATIONS
For the period January 12, 2004 (date of inception) through December 31,
2004, we reported a net loss of $405,060. Included in this net loss are legal
fees of $215,831 (of which legal fees related to litigation were $140,831), and
administrative expenses of $190,304 offset by dividend income of $1,075, but no
proceeds from any litigation. For the three months ended December 31, 2004, we
reported a net loss of $71,829 compared to a net loss of $125,184 for the three
months ended September 30, 2004. Included in these net losses are legal fees of
$18,896 and $75,336, respectively (of which legal fees related to litigation
were $18,986 and $336, respectively), and administrative expenses of $53,425 and
$50,065 respectively, offset by dividend income of $582 and $217, respectively,
but no proceeds from any litigation. The decrease in overall legal fees in the
fourth quarter of 2004 resulted from completion of much of the legal work
relating to the establishment and initial organization of the Litigation Trust.
The increase in legal expenses related to litigation in the fourth quarter of
2004 resulted from the issuance of a final judgment against the plaintiff's in
the United States District Court and commencement of activity toward
reinstituting the appeal. It is expected that legal fees related to litigation
will increase substantially in 2005 due to the prosecution of this appeal. In
addition, should the appeal be successful, it is likely to be decided prior to
year end and additional fees will then be expended relating to preparations for
a trial.
On June 1, 2004, we filed a Voluntary Discontinuance and Tolling Agreement
with respect to the second lawsuit. Since there are many issues of fact and law
in the PPE case which relate to matters that are also at issue in the second
lawsuit, we believe that, as long as the right to recommence the suit without
regard to the Statute of Limitations was preserved, the discontinuance of this
suit was appropriate in order to avoid the cost of maintaining two separate
lawsuits.
LIQUIDITY AND CAPITAL RESOURCES
Empire Resorts has provided us with an irrevocable line of credit of up to
$2,500,000 to provide funds to pay any and all of our expenses permitted under
the Declaration of Trust. No interest is payable on amounts advanced under our
line of credit. As of December 31, 2004 and March 31, 2005, $500,000 had been
drawn down and was outstanding under this line of credit. Amounts outstanding
are to be repaid by us from proceeds received from any settlement or award in
connection with our litigation claims after payment of an amount necessary to
pay our Litigation Trustees the fees for their services as set forth in the
Declaration of Trust. Repayments of such amounts may be made as a whole or in
part from time to time at any time without notice. We may reborrow any amounts
so repaid. Our line of credit will remain in full force and effect until our
termination.
Empire Resorts is a holding company, owning all the capital stock or
membership interests of certain other entities. Empire Resorts is therefore
dependent on these other entities to pay dividends or make distributions in
order to generate internal cash flow and to satisfy its obligations, including
its obligations under our line of credit. There can be no assurance, however,
that these other entities will generate enough revenue to pay cash dividends or
7
make cash distributions. In addition, these entities may enter into contracts
that limit or prohibit their ability to pay dividends or make distributions.
Empire Resorts had no operating revenue during the fiscal year ended
December 31, 2003 and operating revenue of $44.9 million for the fiscal year
ended December 31, 2004 and sustained net operating losses of approximately $8.0
and $12.7 million, respectively, during such periods. Although Empire Resorts
significantly increased its level of operations during the third quarter of
2004, it has yet to demonstrate that such operations can be profitable.
Therefore, there can be no assurance that Empire Resorts will have the ability
to meet its obligations under our line of credit.
8
ITEM 7. FINANCIAL STATEMENTS
Report of Registered Public Accounting Firm..................... 10
Balance Sheet .................................................. 11
Statement of Operations......................................... 12
Statement of Cash Flows......................................... 13
Notes to Financial Statements................................... 14
9
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have audited the accompanying balance sheet of Catskill Litigation Trust (the
"Litigation Trust") as of December 31, 2004, and the related statements of
operations and cash flows for the period January 12, 2004 (date of inception) to
December 31, 2004. These financial statements are the responsibility of the
Litigation Trust's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Litigation Trust's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statement referred to above present fairly, in all
material respects, the financial position of the Litigation Trust as of December
31, 2004, and the results of its operations and its cash flows for the period
January 12, 2004 (date of inception) to December 31, 2004, in conformity with
accounting principles generally accepted in the United States of America.
Marcum & Kliegman LLP
New York, New York
March 31, 2005
10
CATSKILL LITIGATION TRUST
BALANCE SHEET
December 31, 2004
ASSETS
Current Assets
Cash $ 222,493
---------
Total Current Assets 222,493
---------
TOTAL ASSETS $ 222,493
=========
LIABILITIES AND TRUST DEFICIENCY
Current Liabilities
Accrued legal and administrative expenses $31,715
Accounts payable 84,122
Line of credit-related party 500,000
---------
Total Current Liabilities 615,837
Trust Deficiency
Units of Beneficial Interest: authorized
22,702,896; issued and outstanding 22,702,896 11,716
Accumulated deficit (405,060)
---------
Total Trust Deficiency (393,344)
---------
TOTAL LIABILITIES AND TRUST DEFICIENCY $ 222,493
The accompanying notes are an integral part of these financial statements.
11
CATSKILL LITIGATION TRUST
STATEMENT OF OPERATIONS
January 12, 2004 (Date of Inception) to
December 31, 2004
General and Administrative Expenses:
Litigation Trustee Fees $ 116,130
Administrative Trustee Fees 10,500
Consulting Fees 16,075
Legal Fees 215,831
Accounting Fees 24,840
Interest Expense 11,716
Other 11,043
----------
Total General and Administrative Expenses 406,135
Other Income 1,075
Net Loss $ (405,060)
==========
Loss per unit outstanding $ (0.02)
==========
Weighted average units outstanding 22,702,896
==========
The accompanying notes are an integral part of these financial statements.
12
CATSKILL LITIGATION TRUST
STATEMENT OF CASH FLOWS
For the period January 12, 2004 (Date of Inception) to
December 31, 2004
OPERATING ACTIVITIES
Net Loss ($405,060)
Adjustments to reconcile net loss to net cash used in operations:
Imputed interest expense 11,716
Increase in accounts payable 84,122
Increase in accrued legal and administrative expenses 31,715
------------
Net cash used in operating activities ($277,507)
Cash flow provided by financing activities
Increase in line of credit-related party 500,000
------------
Cash-beginning of period -
------------
Cash-end of period $222,493
============
The accompanying notes are an integral part of these financial statements.
13
CATSKILL LITIGATION TRUST
Notes to Financial Statements--December 31, 2004
NOTE 1 - THE LITIGATION TRUST
The Catskill Litigation Trust is a Delaware statutory trust (the
"Litigation Trust") formed by Empire Resorts, Inc. ("Empire Resorts"),
Monticello Raceway Management, Inc., ("MRMI"), Monticello Casino
Management, L.L.C., Monticello Raceway Development Company, L.L.C.
("MRDC") and Mohawk Management, L.L.C. ("Mohawk"). On January 12,
2004, 22,702,896 units of beneficial interest were issued to the
members and stockholders of those entities. At that time, Empire
Resorts, Catskill Development, L.L.C. ("Catskill"), MRMI, Mohawk,
Joseph E. Bernstein, Paul A. deBary (Messrs. Bernstein and deBary are
hereinafter referred to as the "Litigation Trustees") and Christiana
Bank and Trust Company (the "Administrative Trustee") entered into the
Declaration of Trust of Catskill Litigation Trust (the "Declaration of
Trust").
In the Declaration of Trust, Catskill, MRDC and Mohawk assigned to the
Litigation Trust all of their claims under or related to the
alienation and frustration of their agreements and business relations
with the St. Regis Mohawk Tribe and their rights to any judgment or
settlement that may arise from any litigation relating to two
litigations entitled Catskill Development, L.L.C., Mohawk Management
L.L.C. and Monticello Raceway Development Company L.L.C., Plaintiffs
v. Park Place Entertainment Corporation, Defendant and Catskill
Development, L.L.C., Mohawk Management, L.L.C., Monticello Raceway
Development Company, L.L.C., Plaintiffs v. Gary Melius, Ivan Kaufman,
Walter Horn, President R.C. - St. Regis Management Company, et al,
Defendants (hereinafter referred to as the "Litigation"). If at any
time the Litigation Trustees determine, in their absolute discretion,
that the assets of the Litigation Trust are not sufficient to justify
its continuance, the Litigation Trustees are authorized to terminate
the Litigation Trust. In addition, the Litigation Trust is to
terminate on the date that all litigation has been fully prosecuted to
final judgment or dismissal, including all appeals, and all Litigation
Trust assets have been distributed to the Litigation Trust's
beneficiaries.
NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
These financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of
America, and with Form 10-KSB and Item 310 of Regulation SB of the
Securities and Exchange Commission.
USE OF ESTIMATES IN THE FINANCIAL STATEMENTS
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
the Litigation Trustees 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 financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on account, demand deposits and
certificates of deposit with original maturities of three months or
less at acquisition and money market funds. From time to time, the
Litigation Trust maintains significant cash balances that are not
covered by the Federal Deposit Insurance Corporation. The Litigation
Trust has not incurred any losses in such accounts and the Litigation
Trustees believe it is not exposed to any significant credit risk on
cash.
INCOME TAXES
For federal income tax purposes, the Litigation Trust is treated as a
grantor trust. Under the grantor trust rules, each holder of a unit of
beneficial interest is treated as the owner of his or her share of the
Litigation Trust's assets. The treatment of income and expense items
under accounting principles generally accepted in the United States of
America may differ from the tax treatment of such items. Expenses
incurred by the Litigation Trust will be capitalized for tax purposes.
14
NOTE 3 - LINE OF CREDIT-RELATED PARTY
Empire Resorts, a related party, has provided the Litigation Trust
with a line of credit of up to $2,500,000. The line of credit can be
used to pay all expenses of the Litigation Trust permitted under the
Declaration of Trust, including but not limited to professional fees
and the fees and expenses of the Litigation and Administrative
Trustees. The line of credit is non-interest bearing and is to be
repaid from any amounts received from litigation settlements or
awards. The line of credit expires upon the termination of the
Litigation Trust.
As of December 31, 2004, $500,000 had been drawn against the line of
credit.
The Litigation Trust imputed interest on the borrowings at Empire
Resorts' borrowing rate (5.50% per annum at December 31, 2004).
Interest expense for the period January 12, 2004 (date of inception)
to December 31, 2004 amounted to $11,716, and was deemed contributed
capital to the Litigation Trust.
NOTE 4 - TRUST DEFICIENCY
On January 12, 2004, 22,702,896 units of beneficial interest were
issued to the Litigation Trust's unitholders. From January 12, 2004 to
December 1, 2004, there were no additional units issued.
NOTE 5 - DISTRIBUTIONS
The distribution of any net proceeds from litigation settlements or
awards, after amounts are applied to cover all current or expected
expenses of the Litigation Trust, is to be made at the sole discretion
of the Litigation Trustees and will be distributed as follows:
First: To pay to the Litigation Trustees their fees arising from
litigation settlements or awards. (See Note 6.)
Second: To reimburse $7,500,000 to Empire Resorts for expenses
incurred in connection with the Litigation prior to the formation of
the Litigation Trust and, in addition, to repay Empire Resorts any
amounts outstanding under the line of credit.
Third: If any amount remains after the above requirements are met,
such amount remaining is to be divided among the beneficiaries of the
Litigation Trust in proportion to their ownership of Units as of the
date the distribution is made.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
COMPENSATION OF LITIGATION TRUSTEES
Each of the two Litigation Trustees is entitled to annual compensation
of $60,000 plus reimbursement of expenses incurred carrying out the
purpose of the Litigation Trust. In addition, one litigation trustee
is entitled to 4%, and the other 1%, of any litigation settlements or
awards.
COMPENSATION OF THE ADMINISTRATIVE TRUSTEE
The Administrative Trustee is entitled to a $5,000 acceptance fee
(which includes the first month administrative fee) and a monthly
administrative fee of $500. In addition, the Administrative Trustee is
entitled to a custody fee on certain cash balances and marketable
securities of .5% per annum on the first $10,000,000 of fair value and
3% on the excess and reimbursement for certain fees and expenses. No
such custody fees have been incurred to date.
15
EXPENSES PAID PRIOR TO THE FORMATION OF THE LITIGATION TRUST
As discussed in Note 5, the Litigation Trust is obligated to pay to
Empire Resorts up to $7,500,000. This amount represents expenses
incurred prior to the formation of the Litigation Trust. The amount is
payable solely from the proceeds of litigation settlements or awards.
REPAYMENTS OF AMOUNTS DRAWN UNDER THE LINE OF CREDIT-RELATED PARTY
As discussed in Note 3, the expenses of the Litigation Trust are
expected to be paid from draws under the line of credit. Amounts drawn
under the line of credit are to be repaid from any amounts received
from litigation settlements or awards.
ADDITIONAL AMOUNTS PAYABLE TO APPEALS COUNSEL
Under the terms of the Litigation Trust's arrangement with the law
firm handling its appeal, additional fees in an aggregate amount not
to exceed $100,000 may be payable to that firm. The exact amount
payable in the event of a reversal of the decision by the trial court
will vary from $50,000 to $100,000 depending on the precise nature of
the outcome.
NOTE 7 - CERTAIN RELATIONSHIPS
The Litigation Trustees are both currently members of Empire Resorts'
Board of Directors.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
ITEM 8A. CONTROLS AND PROCEDURES
(a) The Litigation Trust carried out an evaluation, under the supervision
and with the participation of the Litigation Trust's management, including
Joseph E. Bernstein (acting Chief Executive Officer) and Paul A. deBary (acting
Chief Financial Officer), the Litigation Trust's Litigation Trustees, of the
effectiveness of the design and operation of the Litigation Trust's "disclosure
controls and procedures", as such term is defined in Exchange Act Rule 15d-15e,
as of the end of the period covered by this report. Based upon that evaluation,
Messrs. Bernstein and deBary have concluded that the Litigation Trust's
disclosure controls and procedures were effective as of the end of the period
covered by this report to provide reasonable assurance that information required
to be disclosed by the Litigation Trust in reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in SEC rules and forms.
(b) There have been no significant changes in the Litigation Trust's
internal controls or in other factors that could significantly affect the
Litigation Trust's internal controls subsequent to the date the Litigation Trust
carried out this evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
A control system, no matter how well conceived and operated, can provide
only reasonable, not absolute assurance that the objectives of the control
system are met. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within a company have been detected.
ITEM 8B. OTHER INFORMATION
Not Applicable.
16
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
TRUSTEES
Our litigation trustees and their ages are as follows:
NAME AGE
---- ---
Paul A. deBary 58
Joseph E. Bernstein 56
The business experience of each or our directors and executive officers is
as follows:
PAUL A. DEBARY has been a litigation trustee since the Litigation Trust's
inception. He has been a member of Empire Resorts' board of directors since
February 2002. He has also been a Managing Director at Marquette deBary Co.,
Inc., a New York based broker-dealer since 1997, where he serves as a financial
advisor for state and local government agencies, public and private corporations
and non-profits. Prior to assuming his current position, Mr. deBary served as
Managing Director in the Public Finance Department of Prudential Securities from
1994 to 1997. He was a partner in the law firm of Hawkins, Delafield & Wood in
New York from 1975 to 1994. Mr. deBary received an AB in 1968, and an MBA and JD
in 1971 from Columbia University. He is a member of the American Bar
Association, the New York State Bar Association, the Association of the Bar of
the City of New York and the National Association of Bond Lawyers and serves as
a director of the following non-profit corporations or foundations: Society of
Columbia Graduates, Old Blue Rugby Football Foundation, AA Alumni Foundation and
New Neighborhoods, Inc.
JOSEPH E. BERNSTEIN has been a litigation trustee since the Litigation
Trust's inception. He has been a member of Empire Resorts' board of directors
since 2003 and a managing director of Americas Tower Partners. He started his
career as a corporate tax attorney on Wall Street at Cahill Gordon & Reindel and
as an international tax attorney at Rosenman & Colin. He later started his own
international tax practice. Since the early 1980s, Mr. Bernstein (along with his
brother Ralph, and their partner, Morad Tahbaz, through their jointly-owned
entity, Americas Tower Partners) has been involved in the development of three
million square feet of commercial property in Manhattan, including Americas
Tower, a 50-story office building on Avenue of the Americas and 46th Street.
Americas Tower Partners is presently developing AQUARIA Entertainment City, in
Eilat, Israel, and the Mt. Arbel Resort & Residence Club, overlooking the Sea of
Galilee. Mr. Bernstein holds a B.A. in economics from the University of
California at Davis; a B.A. in agricultural business management from the
University of California at Davis; an M.B.A. in Finance from UCLA Graduate
School of Management; a J.D. from the University of California at Davis School
of Law; and, a Master of Laws Degree (L.L.M.) in taxation from the New York
University School of Law.
CODE OF ETHICS
Due to its limited size, the Litigation Trust has not enacted a code of ethics.
AUDIT COMMITTEE AND AUDIT COMMITTEE FINANCIAL EXPERT
We do not maintain a separately designated audit committee established in
accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as
amended. The Trustees serve as the audit committee.
Our Trustees believe that Mr. Paul A. deBary is an audit committee
financial expert, as such term is defined in Item 401(e)(2)(i)-(iv) of
Regulation S-B.
ITEM 10. EXECUTIVE COMPENSATION
COMPENSATION OF OUR LITIGATION TRUSTEES
Our litigation trustees are entitled to reimbursement of any expenses
incurred in carrying out the purposes of the litigation trust, including
telephone, mail and messenger, travel, conference, meeting, research and other
administrative and office expenses not paid for directly by us and each of our
litigation trustees shall also receive compensation for his services equal to
$5,000 per month in accordance with the terms of our declaration of trust, to
the extent there are funds available. In addition, Joseph Bernstein and Paul
deBary shall receive compensation for their services as our litigation trustees
equal to 4% and 1%, respectively, of the total amount deposited into our
17
recovery account in accordance with the terms of our declaration of trust, to
the extent there are funds available. In the event of the resignation or death
of a litigation trustee, the percentage fees payable to such litigation trustee,
if any, shall be pro rated for time served as a litigation trustee between the
resigned or deceased litigation trustee and his successor litigation trustee(s)
and the amount payable to such resigned or deceased litigation trustee shall be
paid to the litigation trustee or his estate in the case of a deceased
litigation trustee; provided, however, that in the case of the resignation or
death of Joseph Bernstein, the portion of the fee to be pro-rated shall be equal
to 1% of the total amount deposited into our recovery account and Joseph
Bernstein or his estate, as the case may be, shall continue to be entitled to
receive an amount equal to 3% of the total amount deposited into our recovery
account.
COMPENSATION OF OUR ADMINISTRATIVE TRUSTEE
Our administrative trustee is Christiana Bank & Trust Company. The primary
function of our administrative trustee is to fulfill the Delaware law
requirement to have one trustee have its principal place of business located
within the state of Delaware. Our administrative trustee will also perform
certain administrative functions as set forth in our declaration of trust at the
direction of our litigation trustees. Our administrative trustee shall receive
compensation for its services as follows:
o Acceptance Fee..................................$5,000.00;
Includes the first month administration fee
o Monthly Administration Fee........................$ 500.00; and
o Custody Fee on any cash or marketable securities, other than on
certain cash balances:
o .05 of 1% (5.00 basis points) per annum the first $10,000,000 of
the accounts fair market value; and
o .03 of 1% (3.00 basis points) per annum on the balance of the
accounts fair market value.
Plus: $15 for each DTC or FED eligible trade, if applicable, and outgoing
wire transfers: $20 per transfer.
Out of pocket expenses, including legal fees, which may be incurred during
the set-up and administration of the litigation trust, will be billed at cost in
addition to the above-described fees. In the event that special administrative
services and attention are required due to unusual circumstances, an additional
maintenance fee will be charged to cover time and expenses. In the event
Christiana Bank & Trust Company is no longer acting as our administrative
trustee, the compensation of our administrative trustee shall be as mutually
agreed to by our litigation trustees and our administrative trustee.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The following table sets forth certain information known to us with respect
to the beneficial ownership of our units as of March 31, 2005, by (1) all
persons who are beneficial owners of 5% or more of our units, (2) each trustee,
and (4) all trustees as a group.
The information regarding beneficial ownership of our units has been
presented in accordance with the rules of the Securities and Exchange
Commission. Under these rules, a person may be deemed to beneficially own any
units as to which such person, directly or indirectly, has or shares voting
power or investment power, and to beneficially own any shares of our units as to
which such person has the right to acquire voting or investment power within 60
days through the exercise of any stock option or other right. The percentage of
beneficial ownership as to any person as of a particular date is calculated by
dividing (a) (i) the number of units beneficially owned by such person plus (ii)
the number of units as to which such person has the right to acquire voting or
investment power within 60 days by (b) the total number of units outstanding as
of such date, plus any units that such person has the right to acquire from the
Company within 60 days. Including those units in the tables does not, however,
constitute an admission that the named unitholder is a direct or indirect
beneficial owner of those units. Unless otherwise indicated, each person or
entity named in the table has sole voting power and investment power (or shares
that power with that person's spouse) with respect to all units listed as owned
by that person or entity.
18
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Name and Address of Beneficial
Owner (1) Units Beneficially Owned
- --------------------------------- --------------------------------
SHARES PERCENTAGE
------ ----------
Paul A. deBary 129,948 *
Joseph E. Bernstein (2) 6,430,123 28.32%
Maurice Dabbah 1,891,451 8.33%
Americas Tower Partners 6,430,123 28.32%
Avon Road Partners, LP 3,810,275 16.78%
Directors and Officers as a Group 6,556,471 28.88%
- -------------
* less than 1%
(1) Unless otherwise indicated, the address of each unitholder, director, and
executive officer listed above is c/o Empire Resorts, Inc., Route 17B, P.O.
Box 5013, Monticello, New York, 12701.
(2) NYL Development Corporation, NYL Limited Partners Limited Partnership and
Americas Tower Limited Partners Limited Partnership are the general
partners of Americas Tower Partners. NYL Development Corporation is
indirectly owned by Joseph E. Bernstein and Ralph J. Bernstein. Joseph E.
Bernstein and Ralph J. Bernstein are the sole general partners of NYL
Limited Partners Limited Partnership, which is the sole general partner of
Americas Tower Limited Partners Limited Partnership. As a result, Joseph E.
Bernstein and Ralph J. Bernstein jointly hold investment and voting power
over the units being offered by Americas Tower Partners. Joseph E.
Bernstein is one of our two co-trustees.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In the event there is a settlement or award with respect to our litigation
claims, Empire Resorts is to be paid $7,500,000 for reimbursement of prior
expenses incurred in connection with our litigation claims prior to our
unitholders receiving any proceeds.
Our litigation trustees are both current members of the Board of Directors
of Empire Resorts. Our litigation trustees will receive compensation for their
services as our litigation trustees. See "Item 10 - Executive Compensation."
ITEM 13. EXHIBITS
3.1 Declaration of Trust of the Catskill Litigation Trust. (1)
3.2 Certificate of Trust of the Catskill Litigation Trust. (1)
4.1 Specimen Certificate for the Catskill Litigation Trust's Units. (1)
10.1 Line of Credit dated January 12, 2004 between the Catskill Litigation
Trust and Empire Resorts, Inc. and related promissory note. (1)
23.1 Consent of Independent Certified Public Accountants. (2)
31.1 Section 302 Certification of Principal Executive Officer. (2)
31.2 Section 302 Certification of Principal Financial Officer. (2)
32.1 Section 906 Certification of Principal Executive Officer. (2)
32.2 Section 906 Certification of Principal Financial Officer. (2)
- --------------------------------
(1) Incorporated by reference to the Litigation Trust's Registration
Statement on Form S-1 filed with the Securities and Exchange Commission
on February 9, 2004.
19
(2) Filed herewith.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Our principal accountant for the audit and review of our annual and
quarterly financial statements, respectively, during the past fiscal year was
Marcum & Kliegman, LLP. Moreover, the following table shows the fees paid or
accrued by us to Marcum & Kliegman, LLP during this period.
TYPE OF SERVICE 2004
- --------------- ----
Audit Fees (1) $27,140
Audit-Related Fees (2) 9,683
Tax Fees (3) -
All Other Fees (4) -
----------
TOTAL $36,823
(1) Comprised of the audit of our annual financial statements and reviews of
our quarterly financial statements.
(2) Comprised of services rendered in connection with our capital raising
efforts, registration statements, and consultations regarding financial
accounting and reporting.
(3) Comprised of services for tax compliance, tax return preparation, tax
advice, and tax planning.
(4) Fees related to other filings with the Securities and Exchange Commission,
including consents.
In accordance with the Sarbanes-Oxley Act of 2002, the Trustees serving as
the Audit Committee established policies and procedures under which all audit
and non-audit services performed by our principal accountants must be approved
in advance by the Trustees. As provided in the Sarbanes-Oxley Act of 2002, all
audit and non-audit services to be provided after May 6, 2003 must be
pre-approved by the Trustees in accordance with these policies and procedures.
The Trustees determined that any non-audit services provided by Marcum &
Kliegman, LLP were compatible with maintaining the independence of Marcum &
Kliegman, LLP.
20
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CATSKILL LITIGATION TRUST
(Registrant)
DATE: March 31, 2005 By: /s/ Joseph E. Bernstein
---------------------------------------
Joseph E. Bernstein
Litigation Trustee
DATE: March 31, 2005 By: /s/ Paul A. deBary
---------------------------------------
Paul A. deBary
Litigation Trustee
Exhibit 31.1
Section 302 Certification
I, Joseph E. Bernstein, certify that:
1. I have reviewed this annual report on Form 10-KSB of Catskill Litigation
Trust;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this annual report based on such evaluation; and
c) disclosed in this annual report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting.
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Date: March 31, 2005 /s/ Joseph E. Bernstein
-------------------------------------------
Name: Joseph E. Bernstein
Title: Acting Chief Executive Officer
Exhibit 31.2
Section 302 Certification
I, Paul A. deBary, certify that:
1. I have reviewed this annual report on Form 10-KSB of the registrant Catskill
Litigation Trust;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
Catskill Litigation Trust as of, and for, the periods presented in this annual
report;
4. Catskill Litigation Trust's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to Catskill Litigation Trust, (which
has no consolidated subsidiaries), is made known to us by others, particularly
during the period in which this annual report is being prepared;
b) evaluated the effectiveness of Catskill Litigation Trust's disclosure
controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this annual report based on such evaluation; and
c) disclosed in this annual report any change in the Catskill Litigation
Trust's internal control over financial reporting that occurred during it's most
recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting.
5. Catskill Litigation Trust's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to Catskill Litigation Trust's auditors and any persons performing
the equivalent functions of an audit committee of Catskill Litigation Trust):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect Catskill Litigation Trust's ability to record,
process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in Catskill Litigation Trust's internal
control over financial reporting.
Date: March 31, 2005 /s/ Paul A. deBary
---------------------------------------
Name: Paul A. deBary
Title: Acting Chief Financial Officer
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER (1)
Pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the
Sarbanes-Oxley Act of 2002, the following certification is being made to
accompany the Registrant's Annual Report on Form 10-KSB for the period ended
December 31, 2004;
In connection with the Annual Report of Catskill Litigation Trust (the
"Company") on Form 10-KSB for the period ended December 31, 2004 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Joseph E. Bernstein, Acting Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. ss. 1350, adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 that to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
Section 15(d), as applicable, of the Securities Exchange Act of 1934,
as amended; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/s/ Joseph E. Bernstein
----------------------------------------
Name: Joseph E. Bernstein
Title: Acting Chief Executive Officer
Date: March 31, 2005
(1) A signed original of this written statement required by Section 906
has been provided to Catskill Litigation Trust and will be retained by
Catskill Litigation Trust and furnished to the Securities and Exchange
Commission or its staff upon request.
The foregoing certification is being furnished solely pursuant to 18 U.S.C.
Section 1350 and is not being filed as part of the Report or as a separate
disclosure document.
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER (1)
Pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the
Sarbanes-Oxley Act of 2002, the following certification is being made to
accompany the Registrant's Annual Report on Form 10-KSB for the period ended
December 31, 2004;
In connection with the Annual Report of Catskill Litigation Trust on Form 10-KSB
for the period ended December 31, 2004 as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, Paul A. deBary, Acting Chief
Financial Officer of the Catskill Litigation Trust, certify, pursuant to 18
U.S.C. ss. 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 that to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
Section 15(d), as applicable, of the Securities Exchange Act of 1934,
as amended; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Catskill Litigation Trust.
/s/ Paul A. deBary
----------------------------------------
Name: Paul A. deBary
Title: Acting Chief Financial Officer
Date: March 31, 2005
(1) A signed original of this written statement required by Section 906
has been provided to Catskill Litigation Trust and will be retained by
Catskill Litigation Trust and furnished to the Securities and Exchange
Commission or its staff upon request.
The foregoing certification is being furnished solely pursuant to 18 U.S.C.
Section 1350 and is not being filed as part of the Report or as a separate
disclosure document
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB/A
(Mark one)
/X/ Quarterly Report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 2005
/ / Transition Report under Section 13 or 15(d) of the Exchange Act
For the transition period from __________ to __________
Commission file number 333-112603
CATSKILL LITIGATION TRUST
-------------------------
(Exact Name of Small Business Issuer as Specified in Its Declaration of Trust)
DELAWARE 16-6547621
- ------------------------------------------- -------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
C/O CHRISTIANA BANK & TRUST COMPANY
1314 King Street
Wilmington, Delaware 19801
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices)
(302) 888-7400
- --------------------------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
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 Catskill Litigation Trust was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes /X/ No / /
As of May 13, 2005, 22,702,896 Units of beneficial interest were
outstanding.
Transitional Small Business Disclosure Format (check one): Yes / / No /X/
================================================================================
CATSKILL LITIGATION TRUST
FORM 10-QSB/A
INDEX
PART I - FINANCIAL INFORMATION Page
ITEM 1. CONDENSED FINANCIAL STATEMENTS (unaudited)
Condensed Balance Sheet as of March 31, 2005 3
Condensed Statements of Operations for the three
months ended March 31, 2005 and for the
period January 12, 2004 (Date of Inception) to March 31, 2004 4
Condensed Statements of Cash Flows for the period
three months ended March 31, 2005 and for the period
January 12, 2004 (Date of Inception) to March 31, 2004 5
Notes to Condensed Financial Statements 6-9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION 10-12
ITEM 3. CONTROLS AND PROCEDURES 12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 13
ITEM 6. EXHIBITS 13
SIGNATURES 14
2
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CATSKILL LITIGATION TRUST
CONDENSED BALANCE SHEET
March 31, 2005
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 6,217
---------
Total Current Assets 6,217
---------
TOTAL ASSETS $ 6,217
=========
LIABILITIES AND TRUST DEFICIENCY
Current Liabilities
Accrued legal and administrative expenses $ 100,044
Line of credit-related party 500,000
---------
Total Current Liabilities $ 600,044
Trust Deficiency
Units of Beneficial Interest: authorized
22,702,896; issued and outstanding 22,702,896 18,591
Accumulated deficit (612,418)
---------
Total Trust Deficiency (593,827)
---------
TOTAL LIABILITIES AND TRUST DEFICIENCY $ 6,217
=========
The accompanying notes are an integral part of these condensed financial
statements
3
CATSKILL LITIGATION TRUST
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
For the Period from
For the January 12, 2004
Three Months Ended (Date of Inception) to
March 31, 2005 March 31, 2004
-------------------------------------------
General and Administrative Expenses:
Litigation Trustee Fees $ 30,000 $ 26,130
Administrative Trustee Fees 1,500 6,000
Consulting Fees 1,500 6,000
Legal Fees 156,250 71,204
Accounting Fees 10,000 17,183
Interest 6,875 --
Other 2,187 990
------------ ------------
Total General and Administrative Expenses $ 208,312 $ 127,507
Other Income 954 --
------------ ------------
Net Loss $ (207,358) $ (127,507)
============ ============
Loss per unit outstanding $ (0.01) $ (0.01)
============ ============
Weighted average units outstanding 22,702,896 22,702,896
============ ============
The accompanying notes are an integral part of these condensed financial
statements.
4
CATSKILL LITIGATION TRUST
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Period from
For the January 12, 2004
Three Months Ended (Date of Inception) to
March 31, 2005 March 31, 2004
-----------------------------------------------
OPERATING ACTIVITIES
Net Loss $(207,358) $(127,507)
Adjustments to reconcile net loss to net cash used in operations:
Imputed interest expense 6,875
Decrease in accounts payable (84,122)
Increase in accrued legal and administrative expenses 68,329 127,507
--------- ---------
Net cash used in operating activities $(216,276) $ --
--------- ---------
Decrease in cash and cash equivalents $(216,276) $ --
Cash and cash equivalents-beginning of period $ 222,493 $ --
--------- ---------
Cash and cash equivalents- end of period $ 6,217 $ --
========= =========
The accompanying notes are an integral part of these condensed financial
statements.
5
CATSKILL LITIGATION TRUST
Notes to Condensed Financial Statements--March 31, 2005 (Unaudited)
NOTE 1 - THE TRUST
The Catskill Litigation Trust is a Delaware statutory trust (the
"Litigation Trust") formed by Empire Resorts, Inc. ("Empire Resorts"),
Monticello Raceway Management, Inc., ("MRMI"), Monticello Casino
Management, L.L.C., Monticello Raceway Development Company, L.L.C.
("MRDC") and Mohawk Management, L.L.C. ("Mohawk"). On January 12, 2004,
22,702,896 units of beneficial interest were issued to the members and
stockholders of those entities. At that time, Empire Resorts, Catskill
Development, L.L.C. ("Catskill"), MRMI, Mohawk, Joseph E. Bernstein,
Paul A. deBary (Messrs. Bernstein and deBary are hereinafter referred
to as the "Litigation Trustees") and Christiana Bank and Trust Company
(the "Administrative Trustee") entered into the Declaration of Trust of
Catskill Litigation Trust (the "Declaration of Trust").
In the Declaration of Trust, Catskill, MRDC and Mohawk assigned to the
Litigation Trust all of their claims under or related to the alienation
and frustration of their agreements and business relations with the St.
Regis Mohawk Tribe and their rights to any judgment or settlement that
may arise from any litigation relating to two litigations entitled
Catskill Development, L.L.C., Mohawk Management L.L.C. and Monticello
Raceway Development Company L.L.C., Plaintiffs v. Park Place
Entertainment Corporation, Defendant (the "PPE Case") and Catskill
Development, L.L.C., Mohawk Management, L.L.C., Monticello Raceway
Development Company, L.L.C., Plaintiffs v. Gary Melius, Ivan Kaufman,
Walter Horn, President R.C. - St. Regis Management Company, et al,
Defendants (hereinafter referred to, collectively with the PPE Case, as
the "Litigation"). If at any time the Litigation Trustees determine, in
their absolute discretion, that the assets of the Litigation Trust are
not sufficient to justify its continuance, the Litigation Trustees are
authorized to terminate the Litigation Trust. In addition, the
Litigation Trust is to terminate on the date that all litigation has
been fully prosecuted to final judgment or dismissal, including all
appeals, and all Litigation Trust assets have been distributed to the
Litigation Trust's beneficiaries.
NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
These condensed financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of
America, and with Form 10-QSB and Item 310 of Regulation S-B of the
Securities and Exchange Commission. In the opinion of the Litigation
Trustees, the accompanying condensed financial statements contain all
the adjustments necessary (consisting only of normal recurring
accruals) to present fairly the financial position, results of
operations and cash flows as of March 31, 2005 and for the three months
then ended. Operating results for the three months ended March 31, 2005
are not necessarily indicative of the results that would be expected
for the year ended December 31, 2005.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed
6
or omitted. It is suggested that these financial statements be read in
conjunction with the audited financial statements and notes thereto
included in the report on Form 10-KSB for the period January 12, 2004
(date of inception) to December 31, 2004.
USE OF ESTIMATES IN THE FINANCIAL STATEMENTS
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
the Litigation Trustees 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 financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on account, demand deposits and
certificates of deposit with original maturities of three months or
less at acquisition and money market funds. From time to time, the
Litigation Trust maintains significant cash balances that are not
covered by the Federal Deposit Insurance Corporation. The Litigation
Trust has not incurred any losses in such accounts and the Litigation
Trustees believe it is not exposed to any significant credit risk on
cash.
INCOME TAXES
For federal income tax purposes, the Litigation Trust is treated as a
grantor trust. Under the grantor trust rules, each holder of a unit of
beneficial interest is treated as the owner of his or her share of the
Litigation Trust's assets. The treatment of income and expense items
under accounting principles generally accepted in the United States of
America may differ from the tax treatment of such items. Expenses
incurred by the Litigation Trust will be capitalized for tax purposes.
NOTE 3 - LINE OF CREDIT-RELATED PARTY
Empire Resorts, a related party, has provided the Litigation Trust with
a line of credit of up to $2,500,000. The line of credit can be used to
pay all expenses of the Litigation Trust permitted under the
Declaration of Trust, including but not limited to professional fees
and the fees and expenses of the Litigation and Administrative
Trustees. The line of credit is non-interest bearing and is to be
repaid from any amounts received from litigation settlements or awards.
The line of credit expires upon the termination of the Litigation
Trust.
As of March 31, 2005, $500,000 has been drawn against the line of
credit.
The Litigation Trust imputed interest on the borrowings at Empire
Resorts' borrowing rate (5.50% per annum at March 31, 2005). Interest
expense for the three months ended March 31, 2005 and for the period
January 12, 2004 (date of inception) to March 31, 2004 amounted to
$6,875 and $0, respectively, and was deemed contributed capital to the
Litigation Trust.
7
NOTE 4 - DISTRIBUTIONS
The distribution of any net proceeds from litigation settlements or
awards, after amounts are applied to cover all current or expected
expenses of the Litigation Trust, is to be made at the sole discretion
of the Litigation Trustees and will be distributed as follows:
First: To pay the Litigation Trustees their fees arising from
litigation settlements or awards. (See Note 5)
Second: To reimburse $7,500,000 to Empire Resorts for expenses incurred
in connection with the Litigation prior to the formation of the
Litigation Trust and, in addition, to repay Empire Resorts any amounts
outstanding under the line of credit.
Third: If any amount remains after the above requirements are met, such
amount remaining is to be divided among the beneficiaries of the
Litigation Trust in proportion to their ownership of units as of the
date the distribution is made.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
COMPENSATION OF LITIGATION TRUSTEES
Each of the two Litigation Trustees is entitled to annual compensation
of $60,000 plus reimbursement of expenses incurred carrying out the
purpose of the Litigation Trust. In addition, one litigation trustee is
entitled to 4%, and the other 1%, of any litigation settlements or
awards.
COMPENSATION OF THE ADMINISTRATIVE TRUSTEE
The Administrative Trustee is entitled to a $5,000 acceptance fee
(which includes the first month administrative fee) and a monthly
administrative fee of $500. In addition, the Administrative Trustee is
entitled to a custody fee on certain cash balances and marketable
securities of .5% per annum on the first $10,000,000 of fair value and
3% on the excess and reimbursement for certain fees and expenses.
EXPENSES PAID PRIOR TO THE FORMATION OF THE LITIGATION TRUST
As discussed in Note 4, the Litigation Trust is obligated to pay to
Empire Resorts up to $7,500,000. This amount represents expenses
incurred prior to the formation of the Litigation Trust. The amount is
payable solely from the proceeds of litigation settlements or awards.
REPAYMENTS OF AMOUNTS DRAWN UNDER THE LINE OF CREDIT-RELATED PARTY
As discussed in Note 4, the expenses of the Litigation Trust are
expected to be paid from draws under the line of credit. Amounts drawn
under the line of credit are to be repaid from any amounts received
from litigation settlements or awards.
ADDITIONAL AMOUNTS PAYABLE TO APPEALS COUNSEL
Under the terms of the Litigation Trust's arrangement with the law firm
handling its appeal, additional fees in an aggregate amount not to
exceed $100,000 may be payable to that firm. The exact amount payable
in the event of a reversal of the decision by the trial court will vary
from $50,000 to $100,000 depending on the precise nature of the
outcome.
8
NOTE 6 - CERTAIN RELATIONSHIPS
The Litigation Trustees are both currently members of Empire Resorts'
Board of Directors.
NOTE 7 - SUBSEQUENT EVENTS
Following the re-entry of an adverse judgment with respect to the PPE
case in the District Court in the fourth quarter of 2004, the
Litigation Trust recommenced an appeal to the Court of Appeals for the
Second Circuit. The appellant's brief in the appeal was filed on April
1, 2005. A reply brief is currently due on June 9, 2005. It is not
likely that the appeal will be scheduled for oral arguments prior to
late August of 2005 or that a decision in the appeal will be issued
prior to the first quarter of 2006.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Forward-Looking Statements
This Report on Form 10-QSB/A contains "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). All statements other than statements of historical facts included in this
Report, including without limitation, the statements under "General," and
"Liquidity and Capital Resources," are forward-looking statements. All
subsequent written and oral forward-looking statements attributable to the
Litigation Trust or persons acting on its behalf are expressly qualified in
their entirety by the cautionary statements.
The following discussions should be read in conjunction with our
financial statements and the related notes thereto and other financial
information appearing elsewhere in this report. The following discussion
contains forward-looking statements that involve risks and uncertainties. Our
actual results could differ materially from those anticipated in the
forward-looking statements as a result of various factors, including those
discussed elsewhere in this report.
General
We are a statutory trust created under Delaware law. Our formation
was a condition to the consolidation of Empire Resorts, Inc. ("Empire Resorts"),
Monticello Raceway Management, Inc., ("MRMI"), Monticello Casino Management,
L.L.C. ("MCM"), Monticello Raceway Development Company, L.L.C. ("MRDC") and
Mohawk Management, L.L.C. ("Mohawk"). Also as a condition to that consolidation,
each of Catskill Development, L.L.C. ("Catskill"), MRDC, and Mohawk, agreed to
assign to us all of their claims under or related to the alienation and
frustration of their agreements and business relations with the St. Regis Mohawk
Tribe. That assignment included rights to any proceeds from any settlement or
award that may arise from any litigation relating to that claim. Our litigation
claims arise from the efforts of each of Catskill, MRDC, and Mohawk to develop
with the St. Regis Mohawk Tribe a gaming casino in Monticello, New York. The
plaintiffs spent several years and substantial funds to develop and obtain
required approvals for the casino. Subsequently, Park Place Entertainment
Corporation, the world's largest gaming corporation and Atlantic City's largest
casino operator, entered into an agreement providing for the St. Regis Mohawk
Tribe to commit their future casino development efforts exclusively to Park
Place Entertainment Corporation. That agreement conflicted with the Mohawk
Tribe's agreements with Catskill, MRDC and Mohawk.
There is one lawsuit presently pending and one lawsuit that has been
discontinued. The first lawsuit is Catskill Development, L.L.C., Mohawk
Management, L.L.C., and Monticello Raceway Development Company, L.L.C.,
Plaintiffs. v. Park Place Entertainment Corporation, Defendant. (Civil Action
No. 00CIV8660 (CM) (GAY)) (United States District Court Southern District of New
York) referred to herein as the "PPE case". This lawsuit had initially been
dismissed on a motion for summary judgment. However, the trial court
subsequently vacated the earlier decision granting summary judgment to Park
Place Entertainment, in order to consider new evidence and allow additional
discovery proceedings. After these proceedings were completed the dismissal was
reinstated. An appeal has been taken and a brief has been filed by the Trust. A
reply brief is currently due on June 9, 2005. It is not likely that the appeal
will be scheduled for oral arguments prior to late August of 2005 or that a
decision in the appeal will be issued prior to the first quarter of 2006. The
second lawsuit is Catskill Development, L.L.C., Mohawk Management, L.L.C., and
Monticello Raceway Development Company, L.L.C., Plaintiffs. against Gary Melius,
Ivan Kaufman, Walter Horn, President R.C. - St. Regis Management Company, et al,
Defendants. (Index No. 891/03) (Supreme Court of the State of New York County of
10
Sullivan). This lawsuit has been discontinued under an agreement that permits it
to be refiled at a future date without being barred by the statute of
limitations. Our purposes are the prosecution of our litigation claims through
the recovery of any settlement or final judgments and the distribution of the
net amount of any such recoveries to our beneficiaries.
The administration of our Litigation Trust will involve the
authentication and payment of fees and expenses for legal and related services
in connection with our litigation claims, reporting and regulatory compliance
and the maintenance of litigation, financial and unitholder records.
Administrative expenses are currently estimated to be approximately $200,000 per
year, including the fees of the litigation and administrative trustees, auditors
and accountants and other support services. Legal fees and other expenses
involved in our litigation claims are impossible to predict with any degree of
accuracy. No assurance can be given that the amounts available to us for the
payment of such expenses under our line of credit will be sufficient to carry
our litigation claims through to a successful conclusion or that alternative
funds will be available for such purpose.
Our unit holders will only be entitled to the net proceeds from any
settlement or award, if any, of our litigation claims after the payment of our
expenses, the fees of our litigation trustees, any amounts outstanding under our
line of credit and $7,500,000 to Empire Resorts for reimbursement of prior
expenses incurred in connection with our litigation claims.
RESULTS OF OPERATIONS
For the three months ended March 31, 2005, we reported a net loss of $207,358.
Included in these net losses are legal fees of $156,250 (of which legal fees
related to litigation were $144,250), and administrative expenses of $45,187,
offset by dividend income of $954, but no proceeds from any litigation. For the
period January 12, 2004 (date of inception) through March 31, 2004, we reported
a net loss of $127,507. Included in this net loss are legal fees of $71,204 (of
which legal fees related to litigation were $65,489), and administrative
expenses of $56,303 offset by dividend income of $0, but no proceeds from any
litigation.
The first quarter results reflect increased legal expenses relating to
litigation due to the preparation of briefs for the appeal, but reduced legal
fees related to administration due to the initiation of a flat fee arrangement.
Following the re-entry of an adverse judgment with respect to the PPE case in
the District Court in the fourth quarter of 2004, the Trust recommenced an
appeal to the court of Appeals for the Second Circuit. Our briefs in the appeal
were filed on April 1, 2005. A reply brief is currently due on June 9, 2005. It
is not likely that the appeal will be scheduled for oral arguments prior to late
August of 2005 or that a decision in the appeal will be issued prior to the
first quarter of 2006. Under our agreement with counsel arguing the appeal, fees
related to arguing the appeal will be contingent on the resulting decision. As a
result, we do not expect significant expenses related to the appeal or a trial
(which is itself dependent on the outcome of the appeal) until at least the
first quarter of 2006.
On June 1, 2004, we filed a Voluntary Discontinuance and Tolling Agreement with
respect to the second lawsuit. Since there are many issues of fact and law in
the PPE case which relate to matters that are also at issue in the second
lawsuit, we believe that, as long as the right to recommence the suit without
regard to the statute of limitations was preserved, the discontinuance of this
suit was appropriate in order to avoid the cost of maintaining two separate
lawsuits.
11
LIQUIDITY AND CAPITAL RESOURCES
Empire Resorts has provided us with an irrevocable line of credit of
up to $2,500,000 to provide funds to pay any and all of our expenses permitted
under the Declaration of Trust. No interest is payable on amounts advanced under
our line of credit. Amounts outstanding under our line of credit are to be
repaid by us from proceeds received from any settlement or award in connection
with our litigation claims after payment of an amount necessary to pay our
Litigation Trustees the fees for their services as set forth in the Declaration
of Trust. Repayments of amounts outstanding under our line of credit may be made
as a whole or in part from time to time at any time without notice. We may
reborrow any amounts so repaid. Our line of credit will remain in full force and
effect until our termination. The Litigation Trust imputes interest on the
borrowings at Empire Resorts borrowing rate (5.5% per annum at March 31, 2005).
Empire Resorts is a holding company, owning all the capital stock or
membership interests of certain other entities. Empire Resorts is therefore
dependent on these other entities to pay dividends or make distributions in
order to generate internal cash flow and to satisfy its obligations, including
its obligations under our line of credit. There can be no assurance, however,
that these other entities will generate enough revenue to pay cash dividends or
make cash distributions. In addition, these entities may enter into contracts
that limit or prohibit their ability to pay dividends or make distributions.
Empire Resorts had no operating revenue during the fiscal year ended
December 31, 2003 and operating revenue of $44.9 million for the fiscal year
ended December 31, 2004 and $16.6 million for the three months ended March 31,
2005 and sustained net operating losses of approximately $8.0, $12.7 and $3.2
million, respectively, during such periods. Although Empire Resorts
significantly increased its level of operations during the third and fourth
quarters of 2004 and the first quarter of 2005, it has yet to demonstrate that
such operations can be profitable. Therefore, there can be no assurance that
Empire Resorts will have the ability to meet its obligations under our line of
credit.
ITEM 3. CONTROLS AND PROCEDURES
(a) The Litigation Trust carried out an evaluation, under the supervision and
with the participation of the Trust's management, including Joseph E. Bernstein
(acting Chief Executive Officer) and Paul A. deBary (acting Chief Financial
Officer), the Litigation Trust's Litigation Trustees, of the effectiveness of
the design and operation of the Litigation Trust's "disclosure controls and
procedures", as such term is defined in Exchange Act Rule 15d-15e, as of the end
of the period covered by this report. Based upon that evaluation, Messrs.
Bernstein and deBary have concluded that the Litigation Trust's disclosure
controls and procedures were effective as of the end of the period covered by
this report to provide reasonable assurance that information required to be
disclosed by the Litigation Trust in reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in SEC rules and forms.
(b) There have been no significant changes in the Litigation Trust's internal
controls or in other factors that could significantly affect the Litigation
Trust's internal controls subsequent to the date the Litigation Trust carried
out this evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
A control system, no matter how well conceived and operated, can
provide only reasonable, not absolute assurance that the objectives of the
control system are met. Because of the inherent limitations in all control
systems, no internal controls can provide absolute assurance that all control
issues and instances of fraud, if any, within a company have been detected.
12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are a statutory trust created under Delaware law. Our formation
was a condition to the consolidation of Empire Resorts with MRMI, MCM, MRDC, and
Mohawk. Also as a condition to that consolidation, each of Catskill, MRDC and
Mohawk, agreed to assign to us all of their claims under or related to the
alienation and frustration of their agreements and business relations with the
St. Regis Mohawk Tribe. That assignment included rights to any proceeds from any
settlement or award that may arise from any litigation relating to that claim.
Our litigation claims arise from the efforts of each of Catskill, MRDC and
Mohawk to develop with the St. Regis Mohawk Tribe a gaming casino in Monticello,
New York. We spent several years and substantial funds to develop and obtain
required approvals for the casino. Subsequently, Park Place Entertainment
Corporation, the world's largest gaming corporation and Atlantic City's largest
casino operator, entered into an agreement providing for the St. Regis Mohawk
Tribe to commit their future casino development efforts exclusively to Park
Place Entertainment Corporation. That agreement conflicted with the Mohawk
Tribe's agreements with Catskill MRDC and Mohawk. There is one lawsuit presently
pending and one lawsuit that has been discontinued. The first lawsuit is
Catskill Development, L.L.C., Mohawk Management, L.L.C., and Monticello Raceway
Development Company, L.L.C., Plaintiffs. v. Park Place Entertainment
Corporation, Defendant. (Civil Action No. 00CIV8660 (CM)(GAY)) (United States
District Court Southern District of New York). This lawsuit had initially been
dismissed on a motion for summary judgment. However, the trial court vacated the
earlier decision granting summary judgment to Park Place Entertainment, in order
to allow consideration of new evidence and additional discovery proceedings.
Following those proceedings judgment in favor of the defendant was reinstated.
This judgment has been appealed. Briefs have been or are being filed, but
arguments are not expected to be heard prior to the third quarter of 2005. The
second lawsuit is Catskill Development, L.L.C., Mohawk Management, L.L.C., and
Monticello Raceway Development Company, L.L.C., Plaintiffs. against Gary Melius,
Ivan Kaufman, Walter Horn, President R.C. - St. Regis Management Company, et al,
Defendants. (Index No. 891/03) (Supreme Court of the State of New York County of
Sullivan). This lawsuit has been discontinued under an agreement that permits it
to be refiled at a future date without being barred by the statute of
limitations. Our purposes are the prosecution of our claims now through the
recovery of any settlement or final judgments and the distribution of the net
amount of any such recoveries to our beneficiaries.
ITEM 6. EXHIBITS
a: Exhibits
*31.1 Certification of Acting Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2 Certification of Acting Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
*32.1 Certification of the Acting Chief Executive Officer
pursuant to 18 U.S.C. Section 1350 adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
*32.2 Certification of the Acting Chief Financial Officer
pursuant to 18 U.S.C. Section 1350 adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
*Filed herewith
13
SIGNATURES
In accordance with the requirements of the Exchange Act, Catskill
Litigation Trust caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CATSKILL LITIGATION TRUST
(Registrant)
DATE: May 13, 2005 By: /s/ Joseph E. Bernstein
-----------------------------
Joseph E. Bernstein
Litigation Trustee
DATE: May 13, 2005 By: /s/ Paul A. deBary
-----------------------------
Paul A. deBary
Litigation Trustee
14
Exhibit 31.1
Section 302 Certification
I, Joseph E. Bernstein, certify that:
1. I have reviewed this quarterly report on Form 10-QS/A of Catskill Litigation
Trust;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
Catskill Litigation Trust as of, and for, the periods presented in this
quarterly report;
4. Catskill Litigation Trust's other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e) for Catskill Litigation Trust and
have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to Catskill Litigation Trust,
including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this quarterly report is
being prepared;
b) evaluated the effectiveness of Catskill Litigation Trust's disclosure
controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this quarterly report based on such evaluation; and
c) disclosed in this quarterly report any change in Catskill Litigation
Trust's internal control over financial reporting that occurred during Catskill
Litigation Trust's most recent fiscal quarter (Catskill Litigation Trust's
fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, Catskill Litigation
Trust's internal control over financial reporting.
5. Catskill Litigation Trust's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to Catskill Litigation Trust's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect Catskill Litigation Trust's ability to record,
process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in Catskill Litigation Trust's internal
control over financial reporting.
Date: May 13,2005 /s/ Joseph E. Bernstein
-------------------------------------
Name: Joseph E. Bernstein
Title: Acting Chief Executive Officer
Exhibit 31.2
Section 302 Certification
I, Paul A. deBary, certify that:
1. I have reviewed this quarterly report on Form 10-QSB/A of Catskill Litigation
Trust;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
Catskill Litigation Trust as of, and for, the periods presented in this
quarterly report;
4. Catskill Litigation Trust's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e) for Catskill Litigation Trust and
have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to Catskill Litigation Trust, (which
has no consolidated subsidiaries), is made known to us by others, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of Catskill Litigation Trust's disclosure
controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this quarterly report based on such evaluation; and
c) disclosed in this quarterly report any change in the Catskill Litigation
Trust's internal control over financial reporting that occurred during it's most
recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect, Catskill Litigation Trust's internal control over financial
reporting.
5. Catskill Litigation Trust's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to Catskill Litigation Trust's auditors and any persons performing
the equivalent functions of an audit committee of Catskill Litigation Trust):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect Catskill Litigation Trust's ability to record,
process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in Catskill Litigation Trust's internal
control over financial reporting.
Date: May 13, 2005 /s/ Paul A. deBary
-------------------------------------
Name: Paul A. deBary
Title: Acting Chief Financial Officer
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER (1)
Pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the
Sarbanes-Oxley Act of 2002, the following certification is being made to
accompany Catskill Litigation Trust's Quarterly Report on Form 10-QSB/A for the
period ended March 31, 2005;
In connection with the Quarterly Report of Catskill Litigation Trust (the
"Company") on Form 10-QSB/A for the period ended March 31, 2005 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Joseph E. Bernstein, Acting Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. ss. 1350, adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 that to my knowledge:
(1) The Report fully complies with the requirements of Section
13(a) or Section 15(d), as applicable, of the Securities
Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of the Company.
/s/ Joseph E. Bernstein
--------------------------------------
Name: Joseph E. Bernstein
Title: Acting Chief Executive Officer
Date: May 13, 2005
(1) A signed original of this written statement required by
Section 906 has been provided to Catskill Litigation Trust and
will be retained by Catskill Litigation Trust and furnished to
the Securities and Exchange Commission or its staff upon
request.
The foregoing certification is being furnished solely pursuant to 18 U.S.C.
Section 1350 and is not being filed as part of the Report or as a separate
disclosure document.
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER (1)
Pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the
Sarbanes-Oxley Act of 2002, the following certification is being made to
accompany Catskill Litigation Trust's Quarterly Report on Form 10-QSB/A for the
period ended March 31, 2005;
In connection with the Quarterly Report of Catskill Litigation Trust on Form
10-QSB/A for the period ended March 31, 2005 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Paul A. deBary, Acting
Chief Financial Officer of the Catskill Litigation Trust, certify, pursuant to
18 U.S.C. ss. 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 that to my knowledge:
(1) The Report fully complies with the requirements of Section
13(a) or Section 15(d), as applicable, of the Securities
Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of the Catskill Litigation Trust.
/s/ Paul A. deBary
----------------------------------
Name: Paul A. deBary
Title: Acting Chief Financial Officer
Date: May 13, 2005
(1) A signed original of this written statement required by
Section 906 has been provided to Catskill Litigation Trust and
will be retained by Catskill Litigation Trust and furnished to
the Securities and Exchange Commission or its staff upon
request.
The foregoing certification is being furnished solely pursuant to 18 U.S.C.
Section 1350 and is not being filed as part of the Report or as a separate
disclosure document.
