EMPIRE RESORTS, INC. 701 N. GREEN VALLEY PARKWAY, SUITE 200 HENDERSON, NV 89074 June 8, 2006 United States Securities and Exchange Commission 100 F Street N.E. Washington, DC 20549-3561 Attention: David R. Humphrey, Branch Chief Re: Empire Resorts, Inc. Form 10-K for the year ended December 31, 2005 Commission File Number: 001-12522 --------------------------------- Ladies and Gentlemen: We acknowledge receipt of the letters of comment dated April 20, 2006 and May 24, 2006 from the Securities and Exchange Commission. The following reflect our responses to the letter dated May 24, 2006 (the "Commission Letter"). The section and page number references below refer to our annual report on Form 10-K for the fiscal year ended December 31, 2005 filed with the Securities and Exchange Commission on March 30, 2006. The responses are numbered to coincide with the numbering of the comments in the Commission Letter. NOTE B - IMPAIRMENT OF LONG LIVED ASSETS, PAGE 54. 2. REFER TO OUR PREVIOUS COMMENTS 8 AND 9. WE NOTE THAT YOU RECOGNIZED $14.3 MILLION OF IMPAIRMENT ON YOUR DEFERRED DEVELOPMENT COSTS DURING FISCAL 2005, AND THAT YOU HAD A BALANCE REMAINING OF $5.6 MILLION IN DEFERRED DEVELOPMENT COSTS AT DECEMBER 31, 2005 PER YOUR BALANCE SHEET. YOUR RESPONSES TO OUR PREVIOUS COMMENTS 8 AND 9 INDICATE THAT THIS BALANCE IS RELATED TO ONE PROJECT "FOR WHICH THE REGULATORY REVIEW PROCESS IS WELL ADVANCED." THE ADDITIONAL DISCLOSURE PROPOSED IN COMMENT 9 DOES NOT PROVIDE THE TYPE OF TRANSPARENCY NECESSARY GIVEN THE SIGNIFICANCE OF THE IMPAIRMENT CHARGES TAKEN DURING 2005, THE BALANCE REMAINING AT DECEMBER 31, 2005, AND THE REMAINING COMMITMENT. AS SUCH, PLEASE REVISE YOUR DISCLOSURE TO PRESENT, FOR EACH PERIOD AN INCOME STATEMENT IS PRESENTED, BY TRIBE, A ROLLFORWARD OF THE AMOUNTS INCLUDED IN DEFERRED DEVELOPMENT COSTS IN YOUR BALANCE SHEET. THIS ROLLFORWARD SHOULD BE ACCOMPANIED BY DISCLOSURE INDICATING THE SPECIFIC USE OF THE AMOUNTS FUNDED, THE REMAINING FUNDING COMMITMENT TO EACH TRIBE, AND THE STATUS OF AND EXPECTED COMPLETION DATE OF SUCH DEVELOPMENT AT THE LATEST BALANCE SHEET DATE.- -------------------------------------------------------------------------------- Deferred Development Cost at Tribe or Project December 31, - -------------------------------------------------------------------------------- 2005 2004 2003 - -------------------------------------------------------------------------------- Seneca-Cayugas - costs incurred with 1,183,882 respect to project development - -------------------------------------------------------------------------------- Cayuga Nation - value of common 3,890,000 2,440,000 shares issued to Tribe as part of general development agreement - -------------------------------------------------------------------------------- Cayuga Nation - costs incurred with respect to project and advances to Tribe for establishment and initial operations of tribal gaming authorities 8,360,255 2,111,000 - -------------------------------------------------------------------------------- Mohawks - costs incurred with respect to project and advances to Tribe for establishment and initial operations of tribal gaming authorities 5,558,000 - -------------------------------------------------------------------------------- Other Projects 285,863 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Total 5,558,000 13,720,000 4,551,000 - -------------------------------------------------------------------------------- In connection with our development project with the St. Regis Mohawk Tribe we have agreed to make payments to the tribe to support operations of the Tribal Gaming Authority and will provide technical assistance, payment of professional and legal consultants and other support as we seek the necessary licenses and approvals to commence construction. Our payments to the tribe are estimated to be approximately $29,000 per month in 2006. 3. AS A RELATED MATTER, YOUR RESPONSE TO OUR PREVIOUS COMMENT 8 INDICATES THAT YOU DO NOT BELIEVE IT IS APPROPRIATE TO APPLY "SOPHISTICATED QUANTITATIVE TECHNIQUES" TO DETERMINE WHETHER IMPAIRMENT EXISTS. IT IS UNCLEAR FROM THIS RESPONSE HOW YOU PERFORM THE ANNUAL IMPAIRMENT TEST AS REQUIRED BY SFAS 144. SUPPLEMENTALLY CLARIFY AND REVISE YOUR DISCLOSURE TO INCLUDE A DETAILED DISCUSSION OF HOW SUCH IMPAIRMENT TEST IS PERFORMED. GIVEN THE SIGNIFICANCE OF IMPAIRMENT CHARGES TAKEN, THIS DISCLOSURE SHOULD INCLUDE THINGS LIKE PROJECT START DATES, REVENUE ASSUMPTIONS, DISCOUNT RATES, PROBABILITY OF SUCCESS, OR OTHER MEASURES YOU FEEL ARE APPROPRIATE. The reference to "sophisticated quantitative techniques" in our earlier response was directed to the subject of the nature of the forecasts of future cash flows for the projects covered by our provision for impairment. During 2005, there were dramatic changes in the legal and political environment affecting the development of projects like these in New York State. As a result of these and other circumstances, our analysis at December 31, 2005 led us to the conclusion that, despite the significant potential income from this type of project, the probability of our realizing that potential income had become virtually zero. Accordingly, when applying that probability, the net present value of the potential future cash flows was negligible and did not support the continued deferral. 2 As to the remaining amount deferred at December 31, 2005, we believe that a conservative estimate of our future cash flows from that project could be as high as $450 million. Accordingly, even the application of a very low probability to that outcome would yield a net present value significantly in excess of the deferred costs associated with the project and our future contractual obligations in connection with it. NOTE L - STOCK OPTIONS AND WARRANTS, PAGE 69. 4. WE NOTE FROM YOUR RESPONSE TO OUR PREVIOUS COMMENT 11 THAT, ON JANUARY 9, 2003 THE OPTIONS WITH AN EXERCISE PRICE OF $17.49 AND THREE-YEAR VESTING WERE CANCELLED AND REPLACED WITH OPTIONS EXERCISABLE AT $2.12 VESTING IMMEDIATELY. IT APPEARS THAT THESE MODIFICATIONS THAT REDUCED THE EXERCISE PRICE WOULD BE ACCOUNTED FOR UNDER VARIABLE ACCOUNTING TREATMENT AS PROVIDED FOR IN QUESTION 11(A) - PARAGRAPHS 38-48 OF FASB INTERPRETATION 44 (FIN 44). IF YOU HAVE APPLIED VARIABLE ACCOUNTING, PLEASE TELL US THE AGGREGATE NET IMPACT (I.E. AMOUNT OF COMPENSATION EXPENSE) RECOGNIZED ON THESE SPECIFIC MODIFIED STOCK OPTIONS GRANTED TO MESSRS. BERMAN AND KANIEWSKI IN EACH OF THE LAST THREE FISCAL YEARS (2003-2005) AND PROVIDE APPROPRIATE DISCLOSURE IN THE NOTES FOR THIS ACCOUNTING TREATMENT AND FINANCIAL STATEMENT IMPACT, ACCORDINGLY. OTHERWISE, IF NECESSARY, PLEASE AMEND THE FISCAL 2005 FORM 10-K TO REVISE THE FINANCIAL STATEMENTS TO ACCOUNT FOR THESE MODIFIED STOCK OPTIONS ISSUED AS A REPLACEMENT TO THE CANCELLED ORIGINAL STOCK OPTIONS AND GRANTED AT A REDUCED EXERCISE PRICE UNDER VARIABLE ACCOUNTING. PLEASE ADVISE AND REVISE, ACCORDINGLY. IF YOU BELIEVE THAT THE ACCOUNTING FOR THE MODIFIED STOCK OPTIONS SHOULD BE ACCORDED DIFFERENT TREATMENT AS STATED ABOVE, PLEASE TELL US THE SPECIFIC LITERATURE YOU RELIED UPON AND EXPLAIN TO US HOW YOU RECORDED THE MODIFICATION OF SUCH OPTIONS. WE MAY HAVE FURTHER COMMENT ON YOUR RESPONSE. FASB Interpretation No. 44 ("FIN 44") only applies to Accounting Principles Board ("APB") No. 25 and has no application to Statement of Financial Accounting Standards ("SFAS") No. 123 (pursuant to paragraph 1 of FIN 44). The Company adopted SFAS No. 123 as of January 1, 2003 and fair valued the options. In addition, as a result of the reverse merger that occurred on January 12, 2004, the Statements of Operations, Stockholders Deficit and Cash Flows for the year ended December 31, 2003 represent the accounts of Catskill Development, LLC only. The Company acknowledges that it is responsible for the adequacy and accuracy of the disclosure in the filings, that staff comments or changes to disclosures in response to staff comments do not foreclose the Commission from taking any action with respect to the filings and the Company will not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States. Sincerely, /s/ Ronald J. Radcliffe Ronald J. Radcliffe Chief Financial Officer 3
- NYNY Dashboard
- Filings
- ETFs
- Insider
- Institutional
-
CORRESP Filing
Empire Resorts (NYNY) Inactive CORRESPCorrespondence with SEC
Filed: 8 Jun 06, 12:00am