RULE 424(B)(3)
REGISTRATION STATEMENT 333-114733
PROSPECTUS SUPPLEMENT
DATED JANUARY 6, 2006
TO
PROSPECTUS DATED MAY 14, 2004
---------------------------------------
CATSKILL LITIGATION TRUST
---------------------------------------
This Prospectus Supplement, dated January 6, 2006 (the "Supplement
No. 4"), supplements that certain Prospectus dated May 14, 2004 (the "Original
Prospectus"), as supplemented by those certain Prospectus Supplements dated
November 22, 2004, December 8, 2004 and May 18, 2005 (together with the Original
Prospectus, the "Prospectus") and should be read in conjunction with the
Prospectus.
On August 15, 2005, we filed with the Securities and Exchange
Commission (the "SEC") the attached Quarterly Report on Form 10-QSB for the
period ended June 30, 2005 and on November 14, 2005 we filed with the SEC the
attached Quarterly Report on Form 10-QSB for the period ended September 30,
2005. The attached information supplements and supersedes, in part, the
information contained in the Prospectus. Furthermore, the section entitled
"Selling Unitholders" is hereby amended in its entirety as follows:
SELLING UNITHOLDERS
The following updates the table under the section entitled "Selling
Unitholders" of the Prospectus with respect to the unitholders listed on the
table below, to account for sales and transfers of units listed in such table
that Catskill Litigation Trust is aware of since the date of the Prospectus.
Such transactions are as follows:
o on December 23, 2004, Americas Tower Partners
transferred 169,171 units of beneficial interests in
accordance with the Prospectus' Plan of Distribution;
o on December 23, 2004, Monticello Realty L.L.C.
transferred 5,676,630 units of beneficial interests in
accordance with the Prospectus' Plan of Distribution;
o on December 23, 2004, Avon Road Partners, LP transferred
132,833 units of beneficial interests in accordance with
the Prospectus' Plan of Distribution;
o on December 23, 2004, Scott A. Kaniewski transferred 288
units of beneficial interests in accordance with the
Prospectus' Plan of Distribution;
o on December 23, 2004, Kaniewski Family Limited
Partnership transferred 9,490 units of beneficial
interests in accordance with the Prospectus' Plan of
Distribution;
o on December 23, 2004, KFP Trust transferred 11,250 units
of beneficial interests in accordance with the
Prospectus' Plan of Distribution;
o on December 23, 2004, Philip Berman transferred 9,389
units of beneficial interests in accordance with the
Prospectus' Plan of Distribution;
o on December 23, 2004, Brian Nastruz transferred 288
units of beneficial interests in accordance with the
Prospectus' Plan of Distribution;
o on December 23, 2004, Paul deBary transferred 5,633
units of beneficial interests in accordance with the
Prospectus' Plan of Distribution;
o on May 18, 2005, Paul deBary transferred 3,600 units of
beneficial interests in accordance with the Prospectus'
Plan of Distribution;
o on May 18, 2005, Scott A. Kaniewski transferred 3,600
units of beneficial interests in accordance with the
Prospectus' Plan of Distribution;
o on May 18, 2005, Avon Road Partners, LP transferred
3,600 units of beneficial interests in accordance with
the Prospectus' Plan of Distribution;
o on December 22, 2005, Monticello Realty LLC transferred
55,631 of its units of beneficial interest in Catskill
Litigation Trust to Manhattan Development Corporation in
accordance with the Prospectus' Plan of Distribution;
The table, therefore, is amended as follows in order to (i) remove
Monticello Realty L.L.C. as a selling unitholder, (ii) update the holdings of
Americas Tower Partners, Avon Road Partners, LP, Scott A. Kaniewski, Kaniewski
Family Limited Partnership, KFP Trust, Philip Berman, Brian Nastruz and Paul
deBary and (iii) add Manhattan Development Corporation as a selling unitholder:
Beneficial Ownership
after Offering
--------------
Number of Units Maximum Number
Beneficially of Units
Owned Prior to be Offered Number Percent
Name to Offering for Resale of Units of Class
---- ----------- ---------- -------- --------
Americas Tower Partners 6,430,123 6,430,123 0 --
Avon Road Partners, LP 944,447 944,447 0 --
Scott A. Kaniewski 125,736 125,736 0 --
Kaniewski Family Limited Partnership 216,935 216,935 0 --
KFP Trust 263,108 263,108 0 --
Philip Berman 240,308 240,308 0 --
Brian Nastruz 9,728 9,728 0 --
Paul deBary 126,348 126,348 0 --
Manhattan Development Corporation 55,631 55,631 0 --
All provisions of the Prospectus not specifically amended by this
Supplement remain in full force and effect.
Please insert this Supplement No. 4 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, DC 20549
FORM 10-QSB
(Mark one)
/X/ Quarterly Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 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 Identification No.)
Incorporation or Organization)
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 August 15, 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
INDEX
PART I - FINANCIAL INFORMATION Page
ITEM 1. CONDENSED FINANCIAL STATEMENTS (unaudited)
Condensed Balance Sheet as of June 30, 2005 3
Condensed Statements of Operations for the three months
and six months ended June 30, 2005 and for the three months
ended June 30, 2004 and for the period January 12, 2004
(Date of Inception) to June 30, 2004 4
Condensed Statements of Cash Flows for the period six months
ended June 30, 2005 and for the period January 12, 2004
(Date of Inception) to June 30, 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 12-13
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 14
ITEM 6. EXHIBITS 14
SIGNATURES 15
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CATSKILL LITIGATION TRUST
CONDENSED BALANCE SHEET
June 30, 2005
(Unaudited)
ASSETS
Current Assets
Cash and Cash Equivalents $ 48,870
---------
Total Current Assets 48,870
---------
TOTAL ASSETS $ 48,870
=========
LIABILITIES AND TRUST DEFICIENCY
Current Liabilities
Accrued legal and administrative expenses $ 76,960
Accounts Payable 84,735
Line of credit-related party 650,000
---------
Total Current Liabilities $ 811,695
Trust Deficiency
Units of Beneficial Interest: authorized
22,702,896; issued and outstanding 22,702,896 26,590
Accumulated deficit (789,415)
---------
Total Trust Deficiency (762,825)
---------
TOTAL LIABILITIES AND TRUST DEFICIENCY $ 48,870
=========
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 For the For the January 12, 2004
Three Months Ended Three Months Ended Six Months Ended (Date of Inception)
June 30, 2005 June 30, 2004 June 30, 2005 June 30, 2004
------------------------------------------------------------------------------
General and Administrative Expenses:
Litigation Trustee Fees $ 30,000 $ 30,000 $ 60,000 $ 56,130
Administrative Trustee Fees 1,500 1,500 3,000 7,500
Consulting Fees 1,500 5,000 3,000 11,000
Legal Fees 120,122 12,109 276,372 83,314
Accounting Fees 14,750 9,270 24,750 26,453
Interest 7,998 3,428 14,873 3,428
Other 1,555 3,341 3,742 4,331
--------------------------------------------------------------------------
Total General and Administrative Expenses $ 177,425 $ 64,648 $ 385,737 $ 192,156
Other Income 428 276 1,382 276
--------------------------------------------------------------------------
Net Loss $ (176,997) $ (64,372) $ (384,355) $ (191,880)
==========================================================================
Loss per unit outstanding $ (0.01) $ (0.00) $ (0.02) $ (0.01)
==========================================================================
Units outstanding 22,702,896 22,702,896 22,702,896 22,702,896
==========================================================================
The accompanying notes are an integral part of these condensed financial statements.
4
CATSKILL LITIGATION TRUST
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
For the
Period from
For the January 12, 2004
Six Months Ended (Date of Inception)
June 30, 2005 June 30, 2004
-----------------------------------------
OPERATING ACTIVITIES
Net Loss $(384,355) $(191,880)
Adjustments to reconcile net loss to net cash used in operations:
Imputed interest expense 14,873 3,428
Increase in Accounts Payable 614 --
Increase in accrued legal and administrative expenses 45,245 90,370
-------------------------------
Net cash used in operating activities $(323,623) $ (98,082)
Cash flow provided by financing activities
Increase in line of credit-related party 150,000 250,000
-------------------------------
(Decrease) Increase in Cash and Cash Equivalents $(173,623) $ 151,918
-------------------------------
Cash and Cash Equivalents-beginning of period $ 222,493 $ --
-------------------------------
Cash and Cash Equivalents- end of period $ 48,870 $ 151,918
===============================
The accompanying notes are an integral part of these condensed financial statements.
5
CATSKILL LITIGATION TRUST
Notes to Condensed Financial Statements--June 30, 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 ("GAAP"), 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) for a fair presentation. The interim results are
not necessarily indicative of the results that would be expected for
the full year and do not contain information included in our annual
financial statements and notes for the year ended December 31, 2004.
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
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.
6
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 as the Litigation Trust generally does not maintain high cash
balances for any significant period.
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 GAAP 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 June 30, 2005, $650,000 had been drawn against the line of
credit. On July 28, 2005, an additional $50,000 was drawn against the
line of credit.
The Litigation Trust imputed interest on the borrowings at Empire
Resorts' borrowing rate (5.50% per annum at June 30, 2005). Interest
expense for the three months ended June 30, 2005 and June 30, 2004
amounted to $7,998 and $3,428, respectively. Interest expense for the
six months ended June 30, 2005 and for the period January 12, 2004
(date of inception) to June 30, 2004 amounted to $14,873 and $3,428,
respectively Imputed interest expense is deemed contributed capital to
the Litigation Trust.
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)
7
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.
NOTE 6 - CERTAIN RELATIONSHIPS
The Litigation Trustees are both currently members of Empire Resorts'
Board of Directors.
8
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. In preparing the brief on appeal, the Litigation Trust's
counsel became aware of a case that was decided shortly before the
plaintiffs brought the original complaint. The effect of this case is
that jurisdiction may not be found to exist for two of the three
plaintiff entities. We have made the Court of Appeals aware of this
circumstance. If the Court determines that the federal courts lack
jurisdiction over these plaintiffs, they may be required to pursue
their claims in the New York courts. This could increase the expense
involved, and result in additional delay, in prosecuting their claims.
The respondent's brief was filed on June 9, 2005 and the appellant's
reply brief was filed on July 12, 2005. It is not likely that the
appeal will be scheduled for oral arguments prior to October 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 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. We currently
maintain a web site at WWW.CATSKILLTRUST.COM to facilitate communications and
provide a convenient source of more detailed information for our unit-holders
and other interested parties.
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 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
Litigation Trust. The respondent's brief was filed on June 9, 2005 and the
Litigation Trust's reply brief was filed on July 12, 2005. It is not likely that
the appeal will be scheduled for oral arguments prior to late October of 2005 or
that a decision in the appeal will be issued prior to the first quarter of 2006.
10
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 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 unit-holder 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 June 30, 2005, we reported a net loss of $176,997.
Included in these net losses are legal fees of $120,122 (of which legal fees
related to litigation were $107,622), and administrative expenses of $57,303,
offset by dividend income of $428, but no proceeds from any litigation. For the
three months ended June 30, 2004, we reported a net loss of $64,372. Included in
this net loss are legal fees of $12,109 (all of which related to litigation),
and administrative expenses of $52,539 offset by dividend income of $276, but no
proceeds from any litigation.
For the six months ended June 30, 2005, we reported a net loss of $384,355.
Included in these net losses are legal fees of $276,372 (of which legal fees
related to litigation were $251,372), and administrative expenses of $109,365,
offset by dividend income of $1,382, but no proceeds from any litigation. For
the period January 12, 2004 (Date of Inception) to June 30, 2004, we reported a
net loss of $191,880. Included in this net loss are legal fees of $83,313
(77,598 of which related to litigation), and administrative expenses of $108,842
offset by dividend income of $276, but no proceeds from any litigation.
The increase in legal fees related to litigation reflects the activity involved
in connection with our appeal to the 2nd Circuit. During the first six months of
2004, the Litigation Trust incurred only limited expenses related to litigation
because Judge McMahon was waiting for a decision by the New York Court of
Appeals prior to rendering her decision. 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 its appeal. The results for
the second quarter of 2005 reflect the increased legal expenses relating to
litigation due to the preparation of briefs for the appeal, including matters
relating to a new jurisdictional issue. In preparing the brief on appeal, our
counsel became aware of a case that was decided shortly before the plaintiffs
brought the original complaint. The effect of this case is that jurisdiction may
not be found to exist for two of the three plaintiff entities. We have made the
Court of Appeals aware of this circumstance. If the Court determines that the
federal courts lack jurisdiction over these plaintiffs, they may be required to
11
pursue their claims in the New York courts. This could increase the expense
involved, and result in additional delay, in prosecuting their claims.
Administrative expenses declined in the first six months of 2005 due to a fix
fee agreement reached with the law firm that handles general administrative
legal work for the Litigation Trust and a decline in expenses related to the
filing of registration statements, supplements and prospectuses with the
Securities and Exchange Commissions in connection with the initial distributions
of trust units. General administrative expenses increased slightly in the second
quarter of 2005 as compared with the first quarter of 2005 due to expenses
associated with the implementation of a web site for the benefit of our
unit-holders.
Under our agreement with counsel arguing the appeal, a portion of the fees
related to arguing the appeal will be contingent on the resulting decision. As a
result, we do not currently expect significant additional 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.
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. Although no interest is payable on amounts
advanced under our line of credit., the Litigation Trust imputes interest on the
borrowings at Empire Resorts borrowing rate (5.5% per annum at June 30, 2005)..
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
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 $23.2 million for the six months ended June 30, 2005
and sustained net operating losses of approximately $8.0, $12.7 and $5.6
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 two quarters 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 Litigation Trust's management, including Joseph E.
Bernstein (acting Chief Executive Officer) and Paul A. deBary (acting Chief
12
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.
13
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. An appeal has been taken and
briefs have been filed by the Litigation Trust. In preparing the brief on
appeal, our counsel became aware of a case that was decided shortly before the
plaintiffs brought the original complaint. The effect of this case is that
jurisdiction may not be found to exist for two of the three plaintiff entities.
We have made the Court of Appeals aware of this circumstance. If the Court
determines that the federal courts lack jurisdiction over these plaintiffs, they
may be required to pursue their claims in the New York courts. This could
increase the expense involved, and result in additional delay, in prosecuting
their claims. The respondent's brief was filed on June 9, 2005 and the
Litigation Trust's reply brief was filed on July 12, 2005. It is not likely that
the appeal will be scheduled for oral arguments prior to late October 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 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.
14
*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
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: August 15, 2005 By: /s/ Joseph E. Bernstein
----------------------------------
Joseph E. Bernstein
Litigation Trustee
DATE: August 15, 2005 By: /s/ Paul A. deBary
----------------------------------
Paul A. deBary
Litigation Trustee
15
Exhibit 31.1
Section 302 Certification
I, Joseph E. Bernstein, certify that:
1. I have reviewed this quarterly report on Form 10-QSB 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: August 15, 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 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: August 15, 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 for the
period ended June 30, 2005;
In connection with the Quarterly Report of Catskill Litigation Trust (the
"Company") on Form 10-QSB for the period ended June 30, 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: August 15, 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 for the
period ended June 30, 2005;
In connection with the Quarterly Report of Catskill Litigation Trust on Form
10-QSB for the period ended June 30, 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: August 15, 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
(Mark one)
/X/ Quarterly Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 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 Identification No.)
Incorporation or Organization)
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 / /
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes / / No /X/
As of November 11, 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
INDEX
PART I - FINANCIAL INFORMATION Page
ITEM 1. CONDENSED FINANCIAL STATEMENTS (unaudited)
Condensed Balance Sheet as of September 30, 2005 3
Condensed Statements of Operations for the three months and nine months
ended September 30, 2005 and for the three months ended September 30, 2004 and for
the period January 12, 2004 (Date of Inception) to September 30, 2004 4
Condensed Statements of Cash Flows for the nine months ended September 30, 2005
and for the period January 12, 2004 (Date of Inception) to September 30, 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 13
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 14
ITEM 6. EXHIBITS 15
SIGNATURES 15
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CATSKILL LITIGATION TRUST
CONDENSED BALANCE SHEET
September 30, 2005
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 14,333
---------
Total Current Assets 14,333
---------
TOTAL ASSETS $ 14,333
=========
LIABILITIES AND TRUST DEFICIENCY
Current Liabilities
Accounts payable $ 240,977
Line of credit-related party 700,000
---------
Total Current Liabilities $ 940,977
Trust Deficiency
Units of Beneficial Interest: authorized
22,702,896; issued and outstanding 22,702,896 40,278
Accumulated deficit (966,922)
---------
Total Trust Deficiency (926,644)
---------
TOTAL LIABILITIES AND TRUST DEFICIENCY $ 14,333
=========
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 For the For the January 12, 2004
Three Months Ended Three Months Ended Nine Months Ended (Date of Inception) to
September 30, 2005 September 30, 2004 September 30, 2005 September 30, 2004
----------------------------------------------------------------------------------------
General and Administrative Expenses:
Litigation Trustee Fees $ 30,000 $ 30,000 $ 90,000 $ 86,130
Administrative Trustee Fees 1,500 1,500 4,500 9,000
Consulting Fees 1,500 6,090 4,500 14,233
Legal Fees 119,363 75,336 395,735 168,333
Accounting Fees 7,000 7,870 31,750 17,140
Interest Expense 13,689 3,438 28,562 6,866
Other 4,654 1,167 8,396 3,083
------------ ------------ ------------ ------------
Total General and Administrative Expenses $ 177,706 $ 125,401 $ 563,443 $ 304,785
Other Income 199 217 1,581 492
------------ ------------ ------------ ------------
Net Loss $ (177,507) $ (125,184) $ (561,862) $ (304,293)
============ ============ ============ ============
Loss per unit outstanding $ (0.01) $ (0.01) $ (0.02) $ (0.01)
============ ============ ============ ============
Units outstanding 22,702,896 22,702,896 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
For the January 12, 2004
Nine Months Ended (Date of Inception) to
September 30, 2005 September 30, 2004
------------------ ---------------------
OPERATING ACTIVITIES
Net Loss $(561,862) $(304,293)
Adjustments to reconcile net loss to net cash used in operations:
Imputed interest expense 28,562 6,866
Accounts Payable 156,855 41,375
Accrued legal and administrative expenses (31,715) 75,000
--------- ---------
Net cash used in operating activities $(408,160) $(181,052)
Cash flow from financing activities
Increase in line of credit-related party 200,000 250,000
--------- ---------
(Decrease) Increase in Cash and Equivalents $(208,160) $ 68,948
Cash and Equivalents-beginning of period 222,493 --
--------- ---------
Cash and Equivalents- end of period $ 14,333 $ 68,948
The accompanying notes are an integral part of these condensed financial statements.
5
CATSKILL LITIGATION TRUST
Notes to Condensed Financial Statements--September 30, 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 ("GAAP"), 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) for a fair presentation. The interim results are
not necessarily indicative of the results that would be expected for
the full year and do not contain all information included in our
annual financial statements and notes for the year ended December 31,
2004.
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
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.
6
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 in excess of the
amounts 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 GAAP may differ from the tax treatment of such items. Expenses
incurred by the Litigation Trust are 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 September 30, 2005, $700,000 had been drawn against the line of
credit. On October 11, 2005, an additional $150,000 was drawn against
the line of credit.
The Litigation Trust imputed interest on the borrowings at Empire
Resorts' borrowing rate (8.00% per annum at September 30, 2005). Prior
to July 1, 2005, Empire Resorts' borrowing rate was 5.50%. Interest
expense for the three months ended September 30, 2005 and September
30, 2004 amounted to $13,689 and $3,438, respectively. Interest
expense for the nine months ended September 30, 2005 and for the
period January 12, 2004 (date of inception) to September 30, 2004
amounted to $28,562 and $6,866, respectively. Imputed interest expense
is deemed contributed capital to the Litigation Trust.
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:
7
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 4.0%, and the other 1.0%, 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 0.5% per annum on the first $10,000,000 of fair value
and 3.0% 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. In preparing the brief on appeal, the Litigation Trust's
counsel became aware of a case that was decided shortly before the
plaintiffs brought the original complaint. The effect of this case is
that jurisdiction may not be found to exist for two of the three
plaintiff entities. We have made the Court of Appeals aware of this
circumstance. If the Court determines that the federal courts lack
jurisdiction over these plaintiffs, they may be required to pursue
their claims in the New York courts. This could increase the expense
involved, and result in additional delay, in prosecuting their claims.
The respondent's brief was filed on June 9, 2005 and the appellant's
reply brief was filed on July 12, 2005. Oral arguments on the appeal
were heard on October 17, 2005. At that time, one member of the panel
questioned whether there were factual issues that needed to be
determined before the jurisdictional issues could be resolved. The
Litigation Trust's attorneys took the position that there were not and
this was not contradicted by the attorneys for the defendants.
However, a return of the case to the District Court for additional
findings on jurisdiction could result in some additional expense for
the Litigation Trust and also, possibly, significant delay. Barring an
interim decision on jurisdiction, it is unlikely that a decision on
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 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. We currently
maintain a web site at www.catskilltrust.com to facilitate communications and
provide a convenient source of more detailed information for our unit-holders
and other interested parties.
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 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 Litigation Trust. The respondent's brief
was filed on June 9, 2005 and the Litigation Trust's reply brief was filed on
July 12, 2005. Oral arguments on the appeal were heard on October 17, 2005. It
is unlikely that a decision on 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
10
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 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 unit-holder 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 September 30, 2005, we reported a net loss of
$177,507. Included in these net losses are legal fees of $119,363 (of which
legal fees related to litigation were $107,362), and administrative expenses of
$58,343, offset by dividend income of $199, but no proceeds from any litigation.
For the three months ended September 30, 2004, we reported a net loss of
$125,184. Included in this net loss are legal fees of $75,336 (of which only
$336 related to litigation), and administrative expenses of $50,065 offset by
dividend income of $217, but no proceeds from any litigation.
For the nine months ended September 30, 2005, we reported a net loss of
$561,863. Included in these net losses are legal fees of $395,735 (of which
legal fees related to litigation were $362,950), and administrative expenses of
$164,493, offset by dividend income of $1,580, but no proceeds from any
litigation. For the period January 12, 2004 (Date of Inception) to September 30,
2004, we reported a net loss of $304,293. Included in this net loss are legal
fees of $168,333 ($93,333 of which related to litigation), and administrative
expenses of $136,452 offset by dividend income of $492, but no proceeds from any
litigation.
The increase in legal fees related to litigation reflects the activity involved
in connection with our appeal to the 2nd Circuit. During the first six months of
2004, the Litigation Trust incurred only limited expenses related to litigation
because Judge McMahon was waiting for a decision by the New York Court of
Appeals prior to rendering her decision. 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 its appeal. The results for
the second and third quarters of 2005 reflect the increased legal expenses
relating to litigation due to the preparation of briefs for the appeal,
including matters relating to a new jurisdictional issue. In preparing the brief
on appeal, our counsel became aware of a case that was decided shortly before
the plaintiffs brought the original complaint. The effect of this case is that
jurisdiction may not be found to exist for two of the three plaintiff entities.
We have made the Court of Appeals aware of this circumstance. If the Court
determines that the federal courts lack jurisdiction over these plaintiffs, they
may be required to pursue their claims in the
11
New York courts. This could increase the expense involved, and result in
additional delay, in prosecuting their claims. Administrative expenses declined
in the first six months of 2005 due to a fix fee agreement reached with the law
firm that handles general administrative legal work for the Litigation Trust and
a decline in expenses related to the filing of registration statements,
supplements and prospectuses with the Securities and Exchange Commission in
connection with the initial distributions of trust units. General administrative
expenses increased slightly in the second quarter of 2005 as compared with the
first quarter of 2005 due to expenses associated with the implementation of a
web site for the benefit of our unit-holders.
Under our agreement with counsel arguing the appeal, a portion of the fees
related to arguing the appeal will be contingent on the resulting decision. As a
result, we do not currently expect significant additional expenses related to
the appeal. We also do not expect the additional expenses related to a trial
(which is itself dependent on the outcome of the appeal) until at least the
first quarter of 2006. However, should the 2nd Circuit determine to request
additional findings of fact with respect to jurisdiction, we may incur
additional expenses relating to the appeal in the fourth quarter of 2005.
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. Although no interest is payable on amounts
advanced under our line of credit., the Litigation Trust imputes interest on the
borrowings at Empire Resorts borrowing rate (8% per annum at September 30,
2005). 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
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 $23.2 million for the six months ended June 30, 2005
and sustained net operating losses of approximately $8.0, $12.7 and $5.6
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 two quarters 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.
12
ITEM 3. 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 periods
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.
13
PART I - 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 now 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. An appeal has been taken and
briefs have been filed by the Litigation Trust. In preparing the brief on
appeal, our counsel became aware of a case that was decided shortly before the
plaintiffs brought the original complaint. The effect of this case is that
jurisdiction may not be found to exist for two of the three plaintiff entities.
We have made the Court of Appeals aware of this circumstance. If the Court
determines that the federal courts lack jurisdiction over these plaintiffs, they
may be required to pursue their claims in the New York courts. This could
increase the expense involved, and result in additional delay, in prosecuting
their claims. The respondent's brief was filed on June 9, 2005 and the
Litigation Trust's reply brief was filed on July 12, 2005. Oral arguments on the
appeal were heard on October 17, 2005. At that time, one member of the panel
questioned whether there were factual issues that needed to be determined before
the jurisdictional issues could be resolved. The Litigation Trust's attorneys
took the position that there were not and this was not contradicted by the
attorneys for the defendants. However, a return of the case to the District
Court for additional findings on jurisdiction could result in some additional
expense for the Litigation Trust and also, possibly, significant delay. Barring
an interim decision on jurisdiction, it is unlikely that a decision on 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 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.
14
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
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: November 11, 2005 By: /s/ Joseph E. Bernstein
----------------------------------
Joseph E. Bernstein
Litigation Trustee
DATE: November 11, 2005 By: /s/ Paul A. deBary
----------------------------------
Paul A. deBary
Litigation Trustee
15
Exhibit 31.1
Section 302 Certification
I, Joseph E. Bernstein, certify that:
1. I have reviewed this quarterly report on Form 10-QSB 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: November 11, 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 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: November 11, 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 for the
period ended September 30, 2005;
In connection with the Quarterly Report of Catskill Litigation Trust (the
"Company") on Form 10-QSB for the period ended September 30, 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: November 11, 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 for the
period ended September 30, 2005;
In connection with the Quarterly Report of Catskill Litigation Trust on Form
10-QSB for the period ended September 30, 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: November 11, 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.
