U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
Quarterly report under section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 2003
Transition report under section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 1-12522
EMPIRE RESORTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3714474
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Rt 17B, P.O. Box 5013, Monticello, New York, 12701
(Address of principal executive offices)
(845) 794-4100 ext 478
(Issuer's telephone number)
(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 the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X.
No
Applicable only to issuers involved in bankruptcy proceedings
during the previous five years.
Check whether the registrant filed all documents and reports
required to be filed by Sections 12, 13 or 15 (d) of the Exchange
Act after the distribution of securities under a plan confirmed
by a court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
December 2, 2003
Common Stock, $0.01 par value: 5,984,651 shares
EMPIRE RESORTS, INC. AND SUBSIDIARIES
INDEX
PART I FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of September
30, 2003 and
December 31, 2002 3
Condensed Consolidated Statements of Operations for the
nine and three months
Ended September 30, 2003 and 2002 4
Condensed Consolidated Statements of Cash Flows
for the nine months ended September 30, 2003 and 2002 5-6
Notes to Condensed Consolidated Financial Statements 7-13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13-15
Item 3. Controls and Procedures 15
PART II OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 17
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
All items that are not applicable or to which the answer is
negative have been omitted from this report.
EMPIRE RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(In thousands, except for per share data)
ASSETS
September 30, December 31,
2003 2002
CURRENT ASSETS:
Cash $ 126 $ 174
Receivable and other current
assets 12 47
Total current assets 138 221
INVESTMENT AND ADVANCES IN CATSKILL
DEVELOPMENT, LLC 7,651 6,437
DEVELOPMENT COSTS CAYUGA NATION OF
NEW YORK 1,056 --
ASSETS OF CASINO VENTURES -- 5,066
DEPOSITS AND OTHER ASSETS -- 14
TOTAL ASSETS $ 8,845 $ 11,738
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable $ -- $1,600
Accounts payable and accrued
expenses 1,048 1,610
Accrued payroll and related
liabilities 108 444
Other liabilities of Casino
Ventures -- 4,158
Total current liabilities 1,156 7,812
COMMITMENTS AND CONTINGENCIES -- --
MINORITY INTEREST -- 791
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value,
75,000 shares authorized,
5,856 and 4,903 issued 59 49
Preferred stock, 5,000 shares
authorized $.01 par value;
Series B, 44 issued and
outstanding -- --
Series E, $10.00 Redemption
Value, 1,731 issued
and outstanding 6,855 6,855
Capital in excess of par
value 116,774 106,711
Accumulated deficit (115,999) (110,445)
Common stock held in
Treasury 5 shares,
at cost -- (35)
Total stockholders'
equity 7,689 3,135
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 8,845 $ 11,738
See accompanying notes to condensed consolidated
financial statements.
EMPIRE RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Nine and Three Months Ended September 30, 2003 and 2002
(Unaudited)
(In thousands, except for per share data)
Nine Months Ended Three Months Ended
September 30, September 30,
2003 2002 2003 2002
REVENUES $ -- $ -- $ -- $ --
COSTS AND EXPENSES:
Selling, general and
administrative 5,474 1,869 2,214 486
Interest 556 354 -- --
Depreciation -- 21 -- 6
Pre-opening and development
costs -- 24 -- --
Total costs and expenses 6,030 2,268 2,214 609
Other income (loss):
Equity in loss of
affiliate (381) (6,934) (37) (6,934)
Gain on sale of investment
and related management
contract 135 3,277 -- --
Gain on extinguishment of debt 389 -- -- --
Miscellaneous -- 3 -- --
Recovery of insurance proceeds 500 -- -- --
Total other income (loss) 643 (3,654) (37)(6,934)
LOSS FROM OPERATIONS
BEFORE MINORITY INTEREST (5,387) (5,922) (2,177)(7,543)
MINORITY INTEREST -- 18 -- --
NET LOSS $ (5,387) (5,904)$(2,251)$(7,543)
CUMULATIVE UNDECLARED
DIVIDENDS ON PREFERRED
STOCK (1,161) (518) (391) (68)
NET LOSS APPLICABLE TO COMMON
STOCK $ (6,548)$(6,422)$(2,642)$(7,611)
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING, basic and
diluted 5,351 4,533 5,776 4,866
LOSS PER COMMON SHARE, basic
and diluted $ (1.23) $(1.42)$ (0.46)$ (1.56)
See accompanying notes to condensed consolidated
financial statements.
EMPIRE RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended September 30,
2003 2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(5,387) $ (5,904)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Gain on sale of investment
and related management
contract (135) (3,277)
Gain on extinguishment of debt (389) --
Minority interest -- (18)
Depreciation -- 21
Equity in loss of affiliate 381 6,934
Stock-based compensation 3,012 --
Non-cash interest 320 --
Interest amortized on loan discount -- 60
Changes in operating assets and
liabilities:
Receivable and other current assets 34 (24)
Other non-current assets -- 194
Accounts payable and accrued
expenses 234 167
Accrued payroll and related
liabilities (336) 100
NET CASH USED IN OPERATING ACTIVITIES (2,266) (1,747)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of investments and
related management contract 145 3,277
Investments and advances in Catskill
Development, LLC (1,314) --
Purchases of property and equipment-
Casino Ventures (113) (639)
Decrease in deposits and other assets 14 --
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES (1,268) 2,638
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of stock 4,689 --
Proceeds from exercise of stock options
and warrants 168 33
Repayment of note payable (1,500) --
Repayment of related party long-term debt -- (1,136)
Proceeds from related party long-term debt-
Casino Ventures 129 678
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES 3,486 (425)
NET INCREASE (DECREASE) IN CASH (48) 466
CASH, beginning of period 174 20
CASH, end of period $ 126 $ 486
See accompanying notes to condensed consolidated
financial statements.
EMPIRE RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2003 2002
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest during the period $ 250 $ 129
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Common stock issued in conversion of
long-term debt and accrued interest $ -- $ 188
Common stock issued in settlement of
preferred stock dividends $ 167 $ 5,770
Common stock issued in settlement of
liabilities $ 415 $ 2,154
Common stock issued for investment in
Catskill Development, LLC $ 281 $ 6,934
Common stock issued in conversion of
preferred stock $ -- $ 9
Retirement of treasury stock $ 35 $ --
Common stock issued for development
costs $ 1,056 $ --
Agreement to issue shares of the
Company's common stock in
settlement of liabilities to
Bryanston Group Inc:
Long-term debt $ -- $ 1,407
Account payable and accrued expenses -- 42
Other liabilities -- 455
$ -- $ 1,904
See accompanying notes to condensed consolidated
financial statements.
EMPIRE RESORTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except for per share data)
Basis for Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the accounting principles generally accepted in
the United States of America and with the requirements of Form 10-QSB and
Regulation S-B as applicable to interim financial information.
Accordingly, the unaudited consolidated financial statements do not include
all of the information and footnotes normally required by accounting
principles generally accepted in the United States of America for complete
financial statements. The preparation of financial statements in
accordance with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues and
expenses and to disclose contingent assets and liabilities at the date of
the financial statements and their potential effect on the reporting
period. In the opinion of management, all normal and recurring adjustments
and accruals considered necessary for a fair presentation have been
included. Operating results for the three and nine month period ended
September 30, 2003 are not necessarily indicative of the results that may
be expected for the year ended December 31, 2003. For further information,
refer to the financial statements and footnotes thereto included in the
Company's annual shareholder's report included in the Form 10-KSB for the
year ended December 31, 2002.
Note 1. Going Concern
The Company has sustained net losses over the past few years and, at
September 30, 2003, had a net working capital deficit of $1,018. In
November 2001, the Company discontinued all significant operations except
for its efforts to develop and manage gaming operations in Monticello, New
York. Such investment is not (other than through the anticipated
transaction described in Note 3) expected to contribute to the Company's
cash flow during the foreseeable future and does not include an interest in
any securities for which a liquid market exists. The Company, thru an
affiliate, has raised additional capital and has entered into a surety
agreement with The Berkshire Bank to guarantee the proceeds (see Note 9).
As described in Note 3, the Company is engaged in a transaction that
will, if consummated, allow the Company to acquire operations that will
generate revenues. On July 3, 2003 the Company entered into an agreement
with CDL, its partner in developing gaming activities at the Raceway and
other related entities, subject to various conditions. A favorable
recommendation with respect to the consummation of the agreement with CDL
was received from a special committee of the Company's Board of Directors
in September 2003 The special committee engaged Kane Reece Associates to
act as its financial advisor in connection with the proposed consolidation.
In connection with its engagement, the special committee requested that
Kane Reece Associates evaluate the fairness of the consolidation's terms to
Empire Resorts and its stockholders from a financial point of view. On
September 8, 2003, Kane Reece Associates delivered a written opinion to
Empire Resorts' special committee stating that, as of that date and based
on and subject to the matters described in its opinion, the consolidation's
terms were fair, from a financial point of view, to the holders of Empire
Resorts' common stock. Additional requirements are still outstanding to
include an opinion that the transaction will be tax-free to all parties.
No assurance can be given that such transaction will ultimately occur or
will occur at the times or on the terms and conditions contained in the
agreement.
The Company's consolidated financial statements have been presented on
the basis that the Company is a going concern. Accordingly, the
consolidated financial statements do not include any adjustments relating
to the recoverability and classification of recorded asset amounts or the
amounts and classification of liabilities or any other adjustments that
might result should the Company be unable to continue as a going concern.
Note 2. Summary of Significant Accounting Policies
Stock Options. Effective January 1, 2003, the Company adopted the fair
value provisions of Statement of Financial Accounting Standards No. 123
"Accounting for Stock-Based Compensation" (SFAS 123) on a prospective
basis. Awards granted under the Company's two stock option plans and awards
granted to non-employees have been included in loss from operations for the
nine months ended September 30, 2003. Net loss for the nine months ended
September 30, 2002 is less than that which would have been recognized if
the fair value based method had been applied to all awards since the
original effective date of Statement 123.
EMPIRE RESORTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(In thousands, except for per share data)
Note 2. Summary of Significant Accounting Policies (CONTINUED)
The following table illustrates the effect on operation and loss per
share if the fair value based method had been applied to all outstanding
and unvested awards in each period:
Nine Months Ended
September 30, September 30,
2003 2002
(thousands except for per share data)
Net loss as reported:
Applicable to common shares $ (6,548) $ (6,422)
Deduct: Total stock-based compensation
expense determined under fair value
based method for all awards granted
modified or settled during each
period, net of related tax effects.$ -- $ (80)
Pro forma net income (loss):
Applicable to common shares $ (6,548) $ (6,502)
Loss per share, basic as
reported $ (1.23) $ (1.42)
Basic, pro forma $ (1.23) $ (1.43)
Diluted as reported $ (1.23) $ (1.42)
Diluted, pro forma $ (1.23) $ (1.43)
New Accounting Pronouncements. In January 2003, Financial Accounting
Standards Board ("FASB") issued Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities, and Interpretation of
Accounting Research Bulletin ("ARB") No. 51" to clarify when a company
should consolidate in its financial statements the assets, liabilities and
activities of a variable interest entity. FIN 46 provides general guidance
as to the definition of a variable interest entity and requires a variable
interest entity to be consolidated if a company absorbs the majority of the
variable interest entity's expected losses, or its entitled to receive a
majority of the variable interest entity's residual returns, or both. FIN
46 is effective immediately for all new variable interest entities created
after January 31, 2003. For variable interest entities created before
February 1, 2003, the consolidation provisions of FIN 46 must be applied
for the first interim or annual reporting period ending after December
15, 2003. The Company has not created a variable interest entity after
January 31, 2003 and is currently analyzing the impact of adoption of FIN
46 on the Company's financial reporting and disclosures.
In May 2003, FASB issued Statement of Financial Accounting Standards
(SFAS) No. 150, Accounting for Certain Financial Instruments with
characteristics of both Liabilities and Equity. SFAS No. 150 changes the
accounting for certain financial instruments, that under previous guidance
could be classified as equity or mezzanine equity, by now requiring those
instruments to be classified as liabilities (or assets in some
circumstances in the statement of financial position. The Company has
determined that SFAS 150 will not effect its financial position or results
of operations.
Reclassifications. Certain prior year amounts have been reclassified to
conform to the 2003 presentation.
Note 3. Investment in Catskill Development, LLC
The Company's principal asset is its interest in CDL, which on June 3,
1996, acquired Monticello Raceway and its surrounding properties for
$10,000, and set aside 29.31 acres of surrounding property for the
development of a Native American Casino. On April 3, 2003, the Cayuga
Nation of New York, a federally recognized Indian Nation (the "Cayuga
Nation"), CDL and certain of CDL's affiliates, including a subsidiary of
the Company, entered into a series of agreements which provide for the
development of a trust land casino adjacent to the Raceway. In furtherance
of these transactions, on April 10, 2003, the Cayuga Nation and the Company
and its affiliate CDL, officially filed with the Eastern Regional Office of
the Bureau of Indian Affairs, an application requesting that the Secretary
of the Interior acquire in trust on behalf of the Cayuga Nation a 30 acre
parcel of land in Monticello, New York to be used for gaming purposes.
EMPIRE RESORTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(In thousands, except for per share data)
Note 3. Investment in Catskill Development, LLC (CONTINUED)
On May 15, 2003, New York State enacted legislation to enhance the
incentives for racetracks in the State to participate in the State's Video
Lottery program. Although legislation had authorized the program earlier,
none of the racetracks authorized to participate in the program had found
the terms sufficiently attractive to justify the investment required to
participate in the program. Under the newly enacted legislative amendments,
the initial term of the program has been extended to 10-years from the date
of inception and permits year round operations with extended hours.
Approximately 29% of total VLT revenue received is to be distributed to the
tracks and their horsemen/breeders associations. A percentage of VLT
revenues are to be made available to provide gradually increasing purses
for the horsemen and for a breeding fund, thus improving the quality of
racing at the track. During the initial eighteen months of the program, the
NY State Lottery has the ability to approve the opening of temporary VLT
structures while more comprehensive construction takes place. Pursuant to
the original legislation, the New York State Lottery made an allocation of
1,800 VLTs to Monticello Raceway. If market conditions permit, additional
machines may be added without the need for additional legislation.
Participation in this program will require additional approvals by the New
York State Lottery and the development, financing and construction of
additional facilities at Monticello Raceway. Although work on the
implementation of these items is proceeding, no assurance can be given that
the successful implementation will be achieved.
On July 3, 2003, the Company signed an agreement to consolidate
interests and rights in CDL and certain of its affiliates into the Company.
The agreement provides for the Company to acquire a 48 year ground lease on
the Monticello Raceway site and contiguous properties, together with all of
CDL's development and management rights with respect to the site and
related gaming activities, as well as the raceway operations, in exchange
for 80.25% of our outstanding common stock on a post-transaction, fully
diluted basis. The ground lease provides for an annual base rent of $1,800
and is to contain a 36 month option for the Company to acquire title to all
of the property (except, in the event it has been previously sold to the
Cayuga Nation of New York, the 29.31 acre parcel described above). Prior
to consummation of the transaction, the claims in certain litigation by CDL
described below are to be assigned to a trust for the
beneficial owners thereof, including certain stockholders of the Company
and the Company is to provide a $2,500 line of credit to the trust to cover
expenses of the trust. The Company anticipates that this transaction will
close sometime in the fourth quarter of 2003 or the first quarter of 2004,
although there are a number
of approvals that must be obtained and conditions that must be met,
including the exercise of the Company's right to redeem 2,393 shares of the
Company's common stock at $2.12 per share through the issuance of a three
year, 7%, self-amortizing promissory note of the Company pursuant to an
existing agreement with the owners of such shares. CDL is to transfer to
the Company all of its operations at Monticello, and all development and
management rights with respect to Native American gaming, video lottery
terminals and real estate development activities. Under the proposed
transaction, the Company is expected to acquire Monticello Raceway
Development, LLC ("MRD") and all of the equity of Monticello Casino
Management, LLC ("MCM") that it does not currently own and to assume the
rights and obligations of CDL under any agreements with respect to the
development, construction and operation of the proposed Native American
casino.
On July 17, 2003, the Supreme Court for Albany County decided that the
Legislature did not violate the state constitution when it authorized the
governor to sign accords with Indian tribes allowing them to build six new
casinos or when it authorized the New York State Lottery to install video
lottery terminals at the State's racetracks and take part in interstate
lotteries. An appeal of such decision is pending.
In July 1996, CDL and certain affiliates entered into a series of
agreements with the St. Regis Mohawk Tribe relating to the development and
management of a proposed Native American Casino, subject to federal, state
and local approvals, on the Raceway site. Since 2000, CDL and related
entities have been engaged in litigation with Park Place Entertainment
("PPE") alleging tortuous interference with contract and business
relationship in regard to CDL's agreements with the St. Regis Mohawk Tribe.
Summary judgment in favor of the defendant PPE was rendered on August 26,
2002 and was appealed. On March 14, 2003, attorneys for the plaintiffs
filed a motion requesting the District Court to vacate this judgment on the
ground that new evidence had been found. In October 2003, the earlier
judgment was vacated in order to allow the Court to consider the effect of
the new evidence following a brief period of additional discovery. Briefs
on this issue are due to be filed in December, 2003. There is no assurance
that the new evidence will provide a basis for a decision favorable to the
plaintiffs, result in a different judgment or even permit the additional
evidence to be available for purposes of the record in an appeal. As
described above, the interests of the Company with respect to the claims in
such litigation are expected to be transferred to a liquidating trust in
connection with the consolidation transaction with CDL.
The above transaction was not completed by September 30, 2003.
EMPIRE RESORTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
Note 3. Investment in Catskill Development, LLC (CONTINUED)
The Company accounts for its investment in CDL using the equity method.
A loss of $1,523 was recognized by CDL for the nine months ended September
30, 2003. The Company's 25% interest resulted in a loss of $381, which is
reflected in the Company's financial statements at September 30, 2003 as a
reduction of investment on the Balance Sheet and in the other income and
loss on the Statement of Operations.
Presented below is a summary of the unaudited consolidated Balance
Sheet and unaudited Statement of Operations of CDL as of September 30,
2003:
Balance Sheet
Total assets $15,355
Total liabilities 10,710
Members equity $ 4,645
Statement of Operations
Revenues $ 7,475
Costs and expenses 8,998
Net loss $ 1,523
Note 4. Development Costs Cayuga Nation of New York
Under a special letter agreement among the Company, CDL, and the
Cayuga Nation, the parties are to work exclusively with each other
to develop a casino and the Cayuga Nation is to receive 300 shares
of the Company's common stock which will vest over a twelve month
period. On April 9 and October 9, 2003, the Company issued an
aggregate of 200 shares of common stock at a market price of $10.56
and $13.84 per share, respectively. An additional 100 shares are to
be issued on April 9, 2004. Since the 100 shares on April 4, 2004
are subject to continued performance of the agreement, management of
the Company determined that no liability exists until the shares are
required to be issued. The value of these shares are considered a
necessary investment in the success of the project and have been
capitalized . Management of the Company plans to evaluate impairment
of this asset on a periodic basis. If the application of the Cayuga
Nation is denied or the project is otherwise deemed to become doubtful,
management will write-off or reduce the capitalized development costs
associated with the project. The agreement also provides for CDL to
fund certain development costs incurred by the Cayuga Nation on a
monthly basis and for the Cayuga Nation to participate in the ownership
of a to-be-developed hotel within five miles of the Casino by CDL and/or
the Company and its other affiliates. This hotel is to be designated as
the preferred provider to the proposed casino by the Cayuga Nation. The
letter agreement further provides for a reciprocal ten-year option to
acquire up to a 33.33% ownership interest in other lodging,
entertainment, sports and/or retail facilities, which may be developed
or operated within a 15 mile radius of the casino. The special letter
agreement will terminate on April 30, 2004, unless the trust land
application of the Cayuga Nation, and the casino management agreement
have received the required federal approvals. Pursuant to its
agreement to consolidate with Catskill described in Note 3, the
obligation to fund these development costs will become the
responsibility of the Company, not CDL, in the event that the
consolidation is consummated.
Note 5. Other Stock Transactions
During the fiscal quarter ended September 30, 2003, the Company
consummated the following unregistered private placements:
On July 17, 2003, the Company issued 10 shares of its common stock
to Shaul Golan at $7.75 per share, for an aggregate purchase price of $78.
On July 24, 2003, the Company issued 3 shares of its common stock to
Elliot Steigman at $7.75 per share, for an aggregate purchase price of $23.
On July 25, 2003, the Company issued 7 shares of its common stock to Shaul
Golan at $7.75 per share, for an aggregate purchase price of $54.
On July 30, 2003, the Company issued 1 shares of its common stock to Burton
Eisenberg at $7.75 per share, for an aggregate purchase price of $8.
On July 30, 2003, the Company issued 7 shares of its common stock to
Charles M. Banacos at 7.36 per share, for an aggregate purchase price of
$50.
EMPIRE RESORTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(In thousands, except for per share data)
Note 5. Other Stock Transactions (CONTINUED)
On July 30, 2003, the Company issued 6 shares of its common stock to
Hospitality Investors, LLC at $7.75 per share for an aggregate purchase
price of $50.
On July 30, 2003, the Company issued 6 shares of its common stock to Robert
Caleton at $7.75 per share, for an aggregate purchase price of $50.
On July 31 2003, the Company issued 6 shares of its common stock to Robert
and Karen Spitalnick at $7.75 per share, for an aggregate purchase price
of $50.
On July 31 2003, the Company issued 3 shares of its common stock to
Harvey Brenner at $7.75 per share, for an aggregate purchase price of $25.
On August 14, 2003, the Company issued 5 shares of its common stock to
Joseph E. Harris at $10.00 per share for an aggregate purchase price of
$50.
On August 14, 2003, the Company issued 5 shares of its common stock to
Charles M. Banacos at $6.51 per share for an aggregate purchase price of
$33.
On August 14, 2003, the Company issued 5 shares of its common stock to
Hospitality Investors, LLC at $10.00 per share for an aggregate purchase
price of $50.
On August 14, 2003, the Company issued 9 shares of its common stock to
Robert Carleton at $10.00 per share for an aggregate purchase price of
$91.
On August 15, 2003, the Company issued 5 shares of its common stock to
Andrew J. Groveman at $10.00 per share, for an aggregate purchase price
of $50.
On August 20, 2003, the Company issued 5 shares of its common stock to
The Edelweiss Condominium Tenancy in Common at $10.00 per share for an
aggregate purchase price of $50.
On August 22, 2003, the Company issued 5 shares of its common stock to
Andrew J. Green at $10.00 per share for an aggregate purchase price of
$50.
On September 2, 2003, the Company issued 50 shares of its common stock
to Ezra Dabah and Stanley Silverstein at $8.00 per share, for an aggregate
purchase price of $400.
In consummating each of the above described private placements, the
Company relied upon the exemptions from registration provided by Sections
4(2) of the Securities Act of 1933, as amended (the "Securities Act"), and
Rule 506 promulgated thereunder based upon:
representations from each investor that he, she or it, (a) met one of
the categories of accredited investor set forth in Rule 501, (b) was
acquiring the securities for his, her or its own account and not with a
view towards further distribution and (c) had such sufficient knowledge and
experience in financial and business matters to be capable of evaluating
the merits and risks connected with the applicable investment, and the fact
that (a) no general solicitation of the securities was made by the Company,
(b) the securities issued were "restricted securities" as that term is
defined under Rule 144 promulgated under the Securities Act, (c) the
Company placed appropriate restrictive legends on the certificates
representing the securities regarding the restricted nature of these
securities and (d) prior to the completion of each transaction, each
investor was informed in writing of the restricted nature of the
securities, provided with all information regarding the Company as required
under Rule 502 of Regulation D and was given the opportunity to ask
questions of and receive additional information from the Company regarding
its financial condition and operations.
Note 6. Stock Options
On January 9, 2003, the Company cancelled all of its options
outstanding. On that day the Company awarded options to purchase 854
shares of its common stock at $2.12 per share to expire in 10 years.
Included in the award were 829 options which vested immediately, and 25
options to employees of affiliated companies which vested on July 9, 2003.
On August 5, 2003, an additional 90 options were granted to new board
members to purchase common stock at $7.00 per share. These options were
immediately vested and expire in ten years. Compensation expense
approximating $3,000 was calculated, at the fair market value at the date
the options were granted, and is included in operations for the nine month
period ending September 30, 2003. All 944 options issued in 2003 have been
charged to operations during that period. During the three months ended
September 30, 2003 $8 in proceeds was received from the exercising of
options.
EMPIRE RESORTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(In thousands, except for per share data)
Note 7. Income Taxes
The Company and all of its subsidiaries file a consolidated federal
income tax return. At December 31, 2002, the Company's deferred income tax
asset was comprised of the tax benefit associated with the following items
based on the statutory tax rates currently in effect:
2002
Net operating loss
Carry forwards $59,000
Deferred income tax asset,
gross 23,600
Valuation allowance (23,600)
Deferred income tax asset,
net $ --
Our proposed consolidation with CDL, described in Note 3, will limit
our ability to use our current net operating loss carry forwards,
potentially increasing our future tax liability. As of December 31, 2002,
the Company had net operating loss carry forwards of approximately $59,000
that expire between 2008 and 2022. The Internal Revenue Code allows the
offset of these net operating loss carry forwards against income earned in
future years, thus reducing the tax liability in future years. The
consolidation of our operations with CDL, however, will not permit us to
use the entire amount of the net operating losses due to the change in
control of the Company. A limited amount of the net loss carry-forward may
be applied in future years based upon the change of control and existing
income tax laws.
Note 8. Commitments and Contingencies
On November 6, 2002, the Company and several of it subsidiaries was
named as a defendant in an action by a former partner in its now
discontinued Florida operations brought in the Western District Court of
New York. This suit was discontinued on the merits by the plaintiff on
August 8, 2003.
On March 31, 2003, the Company settled an action it brought in The
Circuit Court of Washington County, Mississippi against Investors Insurance
Company of America, Tanenbaum Harber Co. Inc. and Aon Risk Services, Inc.
of Pennsylvania for breach of contract concerning the breakaway of the
Company's Bayou Caddy's Jubilee Casino in 1998. The Company received a
total settlement of $500 from all parties in the second quarter of 2003.
The Company is involved in various legal actions that have arisen in
the normal course of business. In the opinion of the Company's management,
the resolution of these other matters will not have a material adverse
effect on the consolidated financial position, results of operations or
cash flows of the Company.
There is a possibility that the Company may have offered and sold certain
shares of common stock in violation of Section 5 of the Securities Act of
1933, as amended. As a result, the purchasers of such shares may be
entitled to a number of remedies, including a one year rescission right
with respect to any shares of common stock which have been improperly
sold to them. Specifically, the transactions in question relate to the
sale of 579 shares of common stock from April 15 through September, 2003,
that have an aggregate purchase price of $ 4,633. Such purchasers could be
entitled to have the aggregate purchase price of $4,633 of such shares
refunded by us, plus interest. The Company cannot assure that they have,
or will be able to obtain, capital sufficient to fund any such repurchases,
if required. If it becomes likely that a rescission offer will have to be
made, the Company will have to adjust its financial statements to reclassify
up to $4,633 from stockholders' equity to a liability.
Note 9. Subsequent Events
On October 29, 2003, an affiliate of the Company, Monticello Raceway
Management, Inc. ("MRMI") consummated a $3,500,000 loan agreement with The
Berkshire Bank. MRMI is a wholly owned subsidiary of Catskill Development,
L.L.C.("Catskill"), in which the Company currently owns a minority
interest. Pursuant to the terms of the planned consolidation with
Catskill, MRMI is scheduled to become a wholly owned subsidiary of the
Company. Prior to the consummation of the loan, Catskill and MRMI entered
into a 48 year lease with regard to the Monticello Raceway property, which
includes an option to purchase the property. The loan is secured by a
leasehold mortgage, a pledge of raceway revenues and security interests in
certain equipment. The leasehold mortgage loan bears interest at 8.75% and
matures in two years, with monthly principal and interest payments based on
a 48 month amortization schedule.
EMPIRE RESORTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(In thousands, except for per share data)
Note 9. Subsequent Events (CONTINUED)
Proceeds from the loan are to be used primarily to pay for design and
development costs and site work in connection with the planned improvements
to Monticello Raceway in preparation for video lottery operations. Total
costs of the improvements are expected to exceed $20,000,000. A portion of
the proceeds from the loan is also expected to pay certain administrative
expenses of the Company. The Company has entered into a surety agreement
with The Berkshire Bank to guarantee the loan.
Under a special letter agreement among the Company, Catskill, and the
Cayuga Nation, the parties are to work exclusively with each other to
develop a casino and, as an inducement to enter into the transaction, the
Cayuga Nation is to receive 300 shares of the Company's common stock
vesting over a twelve month period. On October 9, 2003, the Company issued
100 shares of common stock at a market value of $13.84 per share. An
additional 100 shares vest on April 9, 2004
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (per thousands except per share data)
This Quarterly Report on Form 10-QSB contains forward-looking
statements that involve risks and uncertainties. These statements are
based on certain assumptions that may prove to be erroneous and are subject
to certain risks principally relating to the ability to complete and fund
its Catskill development project. The actual results may differ
significantly from the results discussed in the forward-looking statements.
Overview
The Company had no revenue from operations during the fiscal year
ended December 31, 2002 and for the nine months ended September 30, 2003.
Plan of Operations
Over the past 3 years the Company has taken steps to divest itself of
all of its significant assets other than its voting membership interest in
Catskill Development, LLC ("CDL"). The Company's principal asset at this
time is an approximately 25% equity interest in CDL. Therefore, the
Company's ability to develop a successful business is therefore largely
dependent on the success or failure of CDL, and the Company's financial
results in the future will be based on different activities than those from
its prior fiscal years. The Company's activities during the three quarters
of 2003 have consisted principally of completing the disposition of
unprofitable assets, reducing fixed liabilities, generating working capital
through sales of equity securities and enhancing its ability to participate
in the revenues and management of the operations currently controlled by
CDL.
The Company has entered into a definitive agreement on July 3, 2003,
to acquire additional interests in CDL and other related entities for
developing gaming activities at Monticello Raceway (the "Raceway"). The
Company hopes this transaction will close sometime in the fourth quarter of
2003 or the first quarter of 2004, although there are a number of approvals
that must be obtained and
conditions that must be met. The proposed transaction is important to the
Company because it currently faces a liquidity shortfall. As of September
30, 2003 the Company had reduced its negative working capital balance by
$6,573 since December 31, 2002, but current liabilities still exceeded
current assets by $1,018. The Company needs to raise additional funds in
order to meet its obligations and fund its current operating expenses
either through distributions, liquidation of investments, sale of equity or
incurrence of additional debt, which may result in restrictions under
lender covenants.
If the consolidation with CDL described above is consummated, the
Company is expected to acquire Monticello Raceway Management, Inc. and will
thus assume control of Monticello Raceway and its operating revenues. The
Company believes this will strengthen its ability to obtain new financing
on reasonable terms and its long-term viability, although there are a
number of approvals that must be obtained and conditions that must be met,
including the exercise of the Company's right to redeem 2,393 shares of the
Company's common stock at $2.12 per share through the issuance of a three
year, 7%, self-amortizing promissory note of the Company pursuant to an
existing agreement with the owners of such shares.
Under a special letter agreement among the Company, CDL, and the Cayuga
Nation, the parties are to work exclusively with each other to develop a
casino and the Cayuga Nation is to receive 300 shares of the Company's
common stock which will vest over a twelve month period. On April 9 and
October 9, 2003, the Company issued an aggregate of 200 shares of common
stock at a market price of $10.56 and $13.84 per share, respectively. An
additional 100 shares are to be issued on April 9, 2004. Since the 100
shares on April 4, 2004 are subject to continued performance of the
agreement, management of the Company determined that no liability exists
until the shares are required to be issued. The value of these shares
are considered a necessary investment in the success of the project and
have been capitalized . Management of the Company plans to evaluate
impairment of this asset on a periodic basis. If the application of the
Cayuga Nation is denied or the project is otherwise deemed to become
doubtful, management will write-off or reduce the capitalized development
costs associated with the project. The agreement also provides for CDL
to fund certain development costs incurred by the Cayuga Nation on a
monthly basis and for the Cayuga Nation to participate in the ownership
of a to-be-developed hotel within five miles of the Casino by CDL and/or
the Company and its other affiliates. This hotel is to be designated as
the preferred provider to the proposed casino by the Cayuga Nation. The
letter agreement further provides for a reciprocal ten-year option to
acquire up to a 33.33% ownership interest in other lodging, entertainment,
sports and/or retail facilities, which may be developed or operated within
a 15 mile radius of the casino. The special letter agreement will terminate
on April 30, 2004, unless the trust land application of the Cayuga Nation,
and the casino management agreement have received the required federal
approvals. Pursuant to its agreement to consolidate with Catskill described
in Note 3, the obligation to fund these development costs will become the
responsibility of the Company, not CDL, in the event that the consolidation
is consummated.
If final arrangements
with the New York State Lottery for the operation of the terminals are made
promptly and construction of the necessary facilities is able to commence
within the next three or four months, these operations are expected to
generate additional revenues for the Raceway's operations in the second or
third quarter of 2004. Such revenues are not expected to be
EMPIRE RESORTS, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED) (per thousands except per share data)
available to the Company on a near term basis unless the planned
consolidation with CDL is consummated. Pending, or in the absence of such
transaction, the Company will be required to continue to depend on the
issuance of equity securities to meet working capital requirements. There
is no assurance that such equity issuances will be able to continue or that
the amounts available as a result thereof will be sufficient to meet the
Company's needs.
Results of Operations
Net loss was $ 5,387 for the nine months ended September 30, 2003
which compares with a net loss of $ 5,904 for the same period of 2002.
After providing for dividends on preferred stock, the net loss applicable
to common shares was $ 6,548 or $ 1.23 per share in 2003 compared to net
loss of $ 6,422 or $ 1.42 per share in 2002.
The Company had no operations through the nine months ended September
30, 2003 and 2002. Selling, General and Administrative expenses increased
to $ 5,474 in the third quarter of 2003 from $ 1,869 in 2002, primarily as
a result of the recognition of stock based compensation of $3,012 due to
the January 1, 2003 adoption by the Company of SFAS No. 123.
Liquidity and Capital Resources
Cash used in operating activities through the third quarter of 2003
totaled $2,266, which is primarily attributable to loss form operations.
The Company had a working capital deficiency of $1,018 at September 30,
2003 caused by continuing expenses incurred during this period regarding
the proposed acquisition of certain operations of CDL.
During the nine months ended September 30, 2003, the Company used
$1,268 for investing activities, consisting primarily of $1,314 in
investments and advances to CDL, offset by $145 in additional proceeds on
the sale of investments and related management contracts.
In addition, the Company received approximately $4,689 from the
private sale of common stock, $168 from the exercising of warrants and
options and used $1,500 in repayment of a note payable to Society General.
In June, 2003, the Company retired all of its current Notes
Payable. The Company was indebted to Societe Generale for a $1,600 note due
in installments plus accrued interest at 16% per annum. Installment
payments in the amount of $400 each plus accrued interest was due in both
February and March 2003, respectively, with the balance due in June 2003.
On February 28, 2003, the Company entered into an amendment to extend the
February and March 2003 payments until April 15, 2003. On April 15, 2003, a
second amendment to the agreement was entered into requiring principal
payments of $150 in cash and $100 plus accrued interest of $89 through the
issuance of common stock. The balance of $1,350 due on June 15, 2003 plus
accrued interest was paid in full on June 20, 2003 after entering into an
additional five day extension agreement with the lender.
On October 29, 2003, an affiliate of the Company, Monticello Raceway
Management, Inc. ("MRMI") consummated a $3,500 loan agreement with The
Berkshire Bank. MRMI is a wholly owned subsidiary of Catskill Development,
L.L.C.("Catskill"), in which the Company currently owns a minority
interest. Pursuant to the terms of the planned consolidation with
Catskill, MRMI is scheduled to become a wholly owned subsidiary of the
Company. Prior to the consummation of the loan, Catskill and MRMI entered
into a 48 year lease with regard to the Monticello Raceway property, which
includes an option to purchase the property. The loan is secured by a
leasehold mortgage, a pledge of raceway revenues and security interests in
certain equipment. The leasehold mortgage loan bears interest at 8.75% and
matures in two years, with monthly principal and interest payments based on
a 48 month amortization schedule. Proceeds from the loan are to be used
primarily to pay for design and development costs and site work in
connection with the planned improvements to Monticello Raceway in
preparation for video lottery operations. Total costs of the improvements
are expected to exceed $20,000. A portion of the proceeds from the
loan is also expected to pay certain administrative expenses of the
Company. The Company has entered into a surety agreement with The Berkshire
Bank to guarantee the loan.
There is a possibility that the Company may have offered and sold certain
shares of common stock in violation of Section 5 of the Securities Act of
1933, as amended. As a result, the purchasers of such shares may be
entitled to a number of remedies, including a one year rescission right
with respect to any shares of common stock which have been improperly sold
to them. Specifically, the transactions in question relate to the sale of
579 shares of common stock from April 15 through September, 2003, that have
an aggregate purchase price of $ 4,633. Such purchasers could be entitled to
have the aggregate purchase price of $4,633 of such shares refunded by us,
plus interest. The Company cannot assure that they have, or will be able to
obtain, capital sufficient to fund any such repurchases, if required. If it
becomes likely that a rescission offer will have to be made, the Company will
have to adjust its financial statements to reclassify up to $4,633 from
stockholders' equity to a liability.
EMPIRE RESORTS, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED) (per thousands except per share data)
Critical Accounting Estimates and New Pronouncements
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management 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.
Certain estimates used by management are particularly susceptible to
significant changes, such as the recoverability of the investment and
advances in Catskill Development, LLC. As described above, management
expects to recover its investment in Catskill Development, LLC through the
development of video lottery terminal operations or a Native American
casino project or the sale of the property, however the extent and timing
of such recoveries are subject to the consummation of the transaction with
CDL and various other contingencies as described above.
Effective January 1, 2003, the Company adopted the fair value
provisions of SFAS No. 123 "Accounting for Stock-Based Compensation" on a
prospective basis. Awards granted under the Company's two stock option
plans and awards granted to non-employees have been included in loss from
operations for the nine months ended September 30, 2003. The cost related
to option based compensation has been calculated using the Black-Scholes
method.
Although the Company is subject to continuing litigation, the ultimate
outcome of which cannot be determined, management believes any additional
liabilities that may result from pending litigation in excess of insurance
coverage will not be an amount that will materially increase the
liabilities of the Company as presented in the attached consolidated
financial statements.
New Accounting Pronouncements. In January 2003, Financial Accounting
Standards Board ("FASB") issued Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities, and Interpretation of
Accounting Research Bulletin ("ARB") No. 51" to clarify when a company
should consolidate in its financial statements the assets, liabilities and
activities of a variable interest entity. FIN 46 provides general guidance
as to the definition of a variable interest entity and requires a variable
interest entity to be consolidated if a company absorbs the majority of the
variable interest entity's expected losses, or its entitled to receive a
majority of the variable interest entity's residual returns, or both. FIN
46 is effective immediately for all new variable interest entities created
after January 31, 2003. For variable interest entities created before
February 1, 2003, the consolidation provisions of FIN 46 must be applied
for the first interim or annual reporting period ending after December
15, 2003. The Company has not created a variable interest entity after
January 31, 2003, and is currently analyzing the impact of adoption of FIN
46 on the Company's financial reporting and disclosures.
In May 2003, FASB issued Statement of Financial Accounting Standards
(SFAS) No. 150, Accounting for Certain Financial Instruments with
characteristics of both Liabilities and Equity. SFAS No. 150 changes the
accounting for certain financial instruments, that under previous guidance
could be classified as equity or mezzanine equity, by now requiring those
instruments to be classified as liabilities (or assets in some
circumstances in the statement of financial position. The company has
determined that SFAS 150 will not effect its financial position or results
of operations.
ITEM 3. CONTROLS AND PROCEDURES
An evaluation was carried out under the supervision and with the
participation of the Company's management, including the Chief Executive
Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness
of the Company's disclosure controls and procedures. Based on that
evaluation, the CEO and CFO have concluded that as of the end of the period
covered by this report, the Company's disclosure controls and procedures
are effective to provide reasonable assurance that information required to
be disclosed by the Company in reports that it files or submit under the
Securities Exchange Act of 1934 is recorded, processed, summarized and
timely reported as provided in the Securities and Exchange Commission rules
and forms. The Company periodically reviews the design and effectiveness of
our internal controls over financial reporting, including compliance with
various laws and regulations that apply to the Company's operations. The
Company makes modifications to improve the design and effectiveness of its
internal control structure, and may take other corrective action, if the
Company's reviews identify deficiencies or weaknesses in its controls. No
changes occurred during the quarter ended September 30, 2003 in the
Company's internal controls over financial reporting that have materially
affected, or are reasonably likely to materially affect, the Company's
internal control over financial reporting.
EMPIRE RESORTS, INC. AND SUBSIDIARIES
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Park Place Entertainment Corporation
In July 1996, Catskill Development, LLC, and certain of our other
affiliates entered into a series of agreements with the Saint Regis Mohawk
Tribe of Hogansburg, New York to jointly develop an Indian gaming facility
on land located at the Monticello Raceway. In April 2000, while awaiting
final approval for the requisite gaming licenses and government approvals
to operate such a facility, Catskill Development learned that Park Place
Entertainment Corporation had entered into an exclusive agreement to
develop and manage any casino development the Tribe might have in the State
of New York. On November 13, 2000, Catskill Development, LLC and certain of
our other affiliates filed an action against Park Place Entertainment
Corporation in the United States District Court for the Southern District
of New York. In our lawsuit, we and the other plaintiffs have alleged that
Park Place Entertainment Corporation tortuously interfered with our
contract and prospective business relationships, engaged in unfairly
competitive behavior and had violated certain state imposed anti-trust
protections. In August 2002, the District Court granted Park Place
Entertainment Corporation's motion for summary judgment on our claim for
interference with business relationships and confirmed the dismissal of all
of our other claims. The Plaintiffs have filed a notice of appeal with
respect to the dismissal of its case against PPE and has retained the firm
of Mayer, Brown, Rowe & Maw to represent it in the appeal. Briefs have
been filed and a decision on the appeal should be rendered within a year.
Although management believes that the Plaintiffs have meritorious arguments
in the appeal, no assurance can be given that the appeal will be successful
or that, even if the appeal is successful as a whole or in part, the
litigation will ultimately be resolved in a manner advantageous to us.
On March 14, 2003, attorneys for the plaintiffs filed a motion
requesting the District Court to vacate the adverse judgment in the above
action on the ground that new evidence has been found that has a material
bearing on important issues affecting the judgment. Although the Company
has been advised by the attorneys handling the case that the new evidence
relates to substantial important issues, it does not relate to all of the
issues or charges in the Plaintiff's original complaint or all of the
issues covered by the pending appeal in the case by the Plaintiffs.
In October 2003, a ruling was rendered granting a short discovery
period for the court to hear additional arguments that relates to the
issues of the litigation. There is no guarantee that the new arguments
will create a favorable judgment or a trial will be granted, or provide
evidence that will be available for purposes of the record in the appeal.
Briefs on these issues are currently scheduled to be filed in December,
2003.
In its agreement with CDL described above, the Company has agreed that
the claims of the Plaintiffs in relating to the circumstances which gave
rise to the above action be transferred to the beneficial owners thereof
through a trust created as of the date of consummation of such transaction
and the Company has agreed to provide a letter of credit to cover expenses
of the trust.
Minority LLC Partner Lawsuit
On November 6, 2002, we, and several of our affiliates were named as
defendants in an action brought by D.F.S., LLC and Fedele Scutti in United
States District Court for the Western District Court of New York. This
suit was discontinued on merits by the plaintiff on August 8, 2003 and the
Company has received the Court's final order.
Operating Environment
We are a party to various other legal actions that have arisen in the
normal course of business. In the opinion of our management, the
resolution of these other matters will not have a material and adverse
effect on the consolidated financial position, results of operations or
cash flows.
EMPIRE RESORTS, INC. AND SUBSIDIARIES
PART II OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
On August 5, 2003, an additional 90,000 options were granted to new
board members to purchase common stock at $7.00 per share. These options
were immediately vested and expire in ten years. During the three months
ended September 30, 2003 $8,000 was received from the proceeds from the
exercising of options.
During the fiscal quarter ended September 30, 2003, the Company
consummated the following unregistered private placements (in thousands):
On July 17, 2003, the Company issued 10 shares of its common stock
to Shaul Golan at $7.75 per share, for an aggregate purchase price of $78.
On July 24, 2003, the Company issued 3 shares of its common stock to
Elliot Steigman at $7.75 per share, for an aggregate purchase price of $23.
On July 25, 2003, the Company issued 7 shares of its common stock to Shaul
Golan at $7.75 per share, for an aggregate purchase price of $54.
On July 30, 2003, the Company issued 1 shares of its common stock to Burton
Eisenberg at $7.75 per share, for an aggregate purchase price of $8.
On July 30, 2003, the Company issued 7 shares of its common stock to
Charles M. Banacos at 7.36 per share, for an aggregate purchase price of
$50.
On July 30, 2003, the Company issued 6 shares of its common stock to
Hospitality Investors, LLC at $7.75 per share for an aggregate purchase
price of $50.
On July 30, 2003, the Company issued 6 shares of its common stock to Robert
Caleton at $7.75 per share, for an aggregate purchase price of $50.
On July 31 2003, the Company issued 6 shares of its common stock to Robert
and Karen Spitalnick at $7.75 per share, for an aggregate purchase price
of $50.
On July 31 2003, the Company issued 3 shares of its common stock to
Harvey Brenner at $7.75 per share, for an aggregate purchase price of $25.
On August 14, 2003, the Company issued 5 shares of its common stock to
Joseph E. Harris at $10.00 per share for an aggregate purchase price of
$50.
On August 14, 2003, the Company issued 5 shares of its common stock to
Charles M. Banacos at $6.51 per share for an aggregate purchase price of
$33.
On August 14, 2003, the Company issued 5 shares of its common stock to
Hospitality Investors, LLC at $10.00 per share for an aggregate purchase
price of $50.
On August 14, 2003, the Company issued 9 shares of its common stock to
Robert Carleton at $10.00 per share for an aggregate purchase price of
$91.
On August 15, 2003, the Company issued 5 shares of its common stock to
Andrew J. Groveman at $10.00 per share, for an aggregate purchase price
of $50.
On August 20, 2003, the Company issued 5 shares of its common stock to
The Edelweiss Condominium Tenancy in Common at $10.00 per share for an
aggregate purchase price of $50.
On August 22, 2003, the Company issued 5 shares of its common stock to
Andrew J. Green at $10.00 per share for an aggregate purchase price of
$50.
On September 2, 2003, the Company issued 50 shares of its common stock
to Ezra Dabah and Stanley Silverstein at $8.00 per share, for an aggregate
purchase price of $400.
In consummating each of the above described private placements, the
Company relied upon the exemptions from registration provided by Sections
4(2) of the Securities Act of 1933, as amended (the "Securities Act"), and
Rule 506 promulgated thereunder based upon:
representations from each investor that he, she or it, (a) met one of
the categories of accredited investor set forth in Rule 501, (b) was
acquiring the securities for his, her or its own account and not with a
view towards further distribution and (c) had such sufficient knowledge and
experience in financial and business matters to be capable of evaluating
the merits and risks connected with the applicable investment, and the fact
that (a) no general solicitation of the securities was made by the Company,
(b) the securities issued were "restricted securities" as that term is
defined under Rule 144 promulgated under the Securities Act, (c) the
Company placed appropriate restrictive legends on the certificates
representing the securities regarding the restricted nature of these
securities and (d) prior to the completion of each transaction, each
investor was informed in writing of the restricted nature of the
securities, provided with all information regarding the Company as required
under Rule 502 of Regulation D and was given the opportunity to ask
questions of and receive additional information from the Company regarding
its financial condition and operations.
EMPIRE RESORTS, INC. AND SUBSIDIARIES
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
31.1 Certification of the Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
31.2 Certification of the Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
32.1Certification of the Chief Executive Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
32.2Certification of the Chief Financial Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
b) Reports on Form 8-K and 8-K/A
(1) Current Report on Form 8-K dated October 8, 2003;
(2) Current Report on Form 8-K dated October 31, 2003; and
(3) Current Report on Form 8-K/A dated November 3, 2003.
EMPIRE RESORTS, INC. AND SUBSIDIARIES
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Dated: December 3, 2003 /s/ ROBERT A. BERMAN
Robert A. Berman
Chief Executive Officer
(Principal Executive
Officer)
Dated: December 3, 2003 /s/ SCOTT A. KANIEWSKI
Scott A. Kaniewski
Chief Financial Officer
(Principal Accounting and
Financial Officer)
302 CERTIFICATION - SMALL BUSINESS
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Robert A. Berman, Chief Executive Officer, certify that:
1. I have reviewed this quarterly report on Form 10-QSB/A of Empire
Resorts, Inc and Subsidiaries
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary tomake the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in
all material respects the financial condition, results of operations
and cash flows of the small business issuer as of, and for, the
periods presented in this report;
4. The small business issuer'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))
and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and
have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the small business
issuer, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;
(c) Evaluated the effectiveness of the small business issuer'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 report based
on such evaluation; and
(d) Disclosed in this report any change in the small business
issuer's internal control over financial reporting that occurred
during the small business issuer's most recent fiscal quarter
(the small business issuer's fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably
likely to materially affect, the small business issuer's internal
control over financial reporting; and
5. The small business issuer's other certifying officer and I
have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the small business issuer's
auditors and the audit committee of the small business issuer's
board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the small business
issuer's ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the small business
issuer's internal control over financial reporting.
Date: December 3, 2003
/s/ Robert A. Berman
Robert A. Berman
Chief Executive Officer
302 CERTIFICATION - SMALL BUSINESS
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I Scott A. Kaniewski, Chief Financial Officer, certify that:
1. I have reviewed this quarterly report on Form 10-QSB/A of Empire
Resorts, Inc and Subsidiaries;
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in
all material respects the financial condition, results of operations
and cash flows of the small business issuer as of, and for, the
periods presented in this report;
4. The small business issuer'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))
and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and
have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the small business
issuer, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which
this report is being prepared;
(b) Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;
(c) Evaluated the effectiveness of the small business issuer'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 report based
on such evaluation; and (d) Disclosed in this report any change in
the small business issuer's internal control over financial reporting
that occurred during the small business issuer's most recent fiscal
quarter (the small business issuer's fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably
likely to materially affect, the small business issuer's internal
control over financial reporting; and
5. The small business issuer's other certifying officer and I have
disclosed, based on our most recent evaluation of internal control
over financial reporting, to the small business issuer's auditors
and the audit committee of the small business issuer's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the small business
issuer's ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the small business
issuer's internal control over financial reporting.
Date: December 3, 2003
/s/ Scott A. Kaniewski
Scott A. Kaniewski
Chief Financial Officer
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.
1350), the undersigned, Robert A. Berman, Chairman and Chief Executive
Officer of Empire Resorts, Inc., a Delaware corporation (the "Company"),
does hereby certify, to his knowledge, that:
The Quarterly report Form 10-QSB/A for the quarter ended September 30, 2003
of the Company (the "Report") fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
By: /s/Robert A. Berman
Robert A. Berman
Chief Executive Officer
EXHIBIT 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.
1350), the undersigned, Scott A. Kaniewski, Chief Financial Officer of
Empire Resorts, Inc., a Delaware corporation (the "Company"), does hereby
certify, to his knowledge, that:
The Quarterly report Form 10-QSB/A for the quarter ended September 30, 2003
of the Company (the "Report") fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
By: /s/Scott A. Kaniewski
Scott A. Kaniewski
Chief Financial Officer