10-Q

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                              ____________________

                                    FORM 10-Q

                              ____________________

(Mark One)
|X|  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005

                                       OR

|_|  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934

     FOR THE TRANSITION PERIOD FROM ________ TO _______

                         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 Identification No.)
    incorporation or organization)


           701 N. GREEN VALLEY PARKWAY, SUITE 200, HENDERSON, NV 89074
               (Address of principal executive offices)(Zip Code)

                                 (702) 990-3355
              (Registrant's telephone number, including area code)

               RT. 17B, P.O. BOX 5013, MONTICELLO, NEW YORK, 12701
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 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 |_|

Indicate  by check mark  whether  the  Registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X|

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes |_| No |X|

The number of shares  outstanding of the issuer's  common stock,  as of November
10, 2005 was 26,305,253.






                      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, 2005
                and December 31, 2004...................................   3

          Condensed Consolidated Statements of Operations for the
                three and nine months ended September 30, 2005 and 2004..  4

          Condensed Consolidated Statements of Cash Flows for the
                nine months ended September 30, 2005 and 2004...........   5-6

          Notes to Condensed Consolidated Financial Statements ..........  7-23

ITEM 2.   Management's Discussion and Analysis of Financial Condition
                and Results of Operations................................  24-33

ITEM 3.   Quantitative and Qualitative Disclosures about Market Risk.....  34

ITEM 4.   Controls and Procedures........................................  34


PART II                       OTHER INFORMATION
- -------                       -----------------

ITEM 1.   Legal Proceedings..............................................  35-36

ITEM 4.   Submission of Matters to a Vote of Security Holders............  37

ITEM 6.   Exhibits.......................................................  37

          Signatures.....................................................  38


                                       2



                         PART I--FINANCIAL INFORMATION
                         ITEM 1.--FINANCIAL STATEMENTS
                      EMPIRE RESORTS, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

                                                                          SEPTEMBER    DECEMBER 31,
                                                                           30, 2005       2004
                                                                         (UNAUDITED)     (AUDITED)
                                                                         -----------     ---------
        ASSETS

Current assets:
        Cash and cash equivalents                                          $  6,297     $  7,164
        Restricted cash                                                         611          159
        Accounts receivable                                                   5,099        2,680
        Prepaid expenses and other current assets                             1,547          874
                                                                           --------     --------
                          Total current assets                               13,554       10,877

Property and equipment, net                                                  32,808       33,147
Advances - Tribal Gaming Authorities                                            700          925
Deferred financing costs, net of accumulated amortization of $563
in 2005 and $134 in 2004                                                      3,119        3,009
Deferred development costs                                                    3,890        3,890
Gaming license and development costs                                         10,533        8,905
                                                                           --------     --------
TOTAL ASSETS                                                               $ 64,604     $ 60,753
                                                                           ========     ========
        LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
        Revolving credit facility                                          $  7,345     $     --
        Accounts payable                                                      3,565        3,805
        Construction costs payable                                               --        1,447
        Accrued expenses and other current liabilities                        6,747        5,493
                                                                           --------     --------
                          Total current liabilities                          17,657       10,745

Senior convertible notes                                                     65,000       65,000
                                                                           --------     --------
Total liabilities                                                            82,657       75,745

Stockholders' deficit:
        Preferred stock, 5,000 shares authorized; $0.01 par value -
               Series B, 44 shares issued and outstanding                        --           --
               Series E, $10.00 redemption value, 1,731 shares issued
               and outstanding                                                6,855        6,855
        Common stock, $0.01 par value, 75,000 shares authorized, 26,205
        and 26,080 shares issued and outstanding in 2005 and 2004,
        respectively                                                            262          261
        Additional paid in capital                                           19,174       15,284
        Accumulated deficit                                                 (44,344)     (37,392)
                                                                           --------     --------
                          Total stockholders' deficit                       (18,053)     (14,992)
                                                                           --------     --------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                $ 64,604     $ 60,753
                                                                           ========     ========

The accompanying notes are an integral part of these condensed consolidated
financial statements.

                                       3



                      EMPIRE RESORTS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
              (IN THOUSANDS, EXCEPT FOR PER SHARE DATA) (UNAUDITED)



                                                                      THREE MONTHS ENDED            NINE MONTHS ENDED
                                                                          SEPTEMBER 30,               SEPTEMBER 30,
                                                                         2005         2004         2005         2004
                                                                         ----         ----         ----         ----
   REVENUES:
Racing                                                               $  3,828     $  2,446     $ 10,406     $  7,251
Gaming                                                                 20,696       18,151       51,511       18,461
Food, beverage and other                                                1,646        1,590        3,738        1,705
                                                                     --------     --------     --------     --------
                                                                       26,170       22,187       65,655       27,417
GROSS REVENUES
LESS: PROMOTIONAL ALLOWANCES                                             (522)        (331)      (1,364)        (331)
                                                                     --------     --------     --------     --------
   NET REVENUES                                                        25,648       21,856       64,291       27,086

    COSTS AND EXPENSES:
Operating costs:
Racing                                                                  2,015        1,808        6,627        8,710
Gaming                                                                 17,483       17,833       46,014       18,080
Food, beverage and other                                                  668          735        1,527          769
                                                                     --------     --------     --------     --------
          Total operating costs                                        20,166       20,376       54,168       27,559
Selling, general and administrative                                     4,885        2,013        9,988        7,738
Depreciation                                                              282          316          839          336
Amortization of deferred financing costs                                  146           56          429          300
Interest expense                                                        1,318          628        3,314          965
                                                                     --------     --------     --------     --------
TOTAL COSTS AND EXPENSES                                               26,797       23,389       68,738       36,898
                                                                     --------     --------     --------     --------
       LOSS FROM OPERATIONS                                            (1,149)      (1,533)      (4,447)      (9,812)
Write off of advances to Tribal Gaming Authorities                         --           --          620           --
Write off of gaming license and development costs                          45           --        1,743           --
                                                                     --------     --------     --------     --------
                              NET (LOSS)                               (1,194)      (1,533)      (6,810)      (9,812)
DIVIDENDS PAID ON PREFERRED STOCK                                          --           --           --           30
CUMULATIVE UNDECLARED DIVIDENDS ON PREFERRED STOCK                        388          388        1,164        1,122
                                                                     --------     --------     --------     --------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS                           $ (1,582)    $ (1,921)    $ (7,974)    $(10,964)
                                                                     ========     ========     ========     ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING, BASIC AND DILUTED:         26,147       26,075       26,111       24,905
NET LOSS PER COMMON SHARE, BASIC AND DILUTED                         $  (0.06)    $  (0.07)    $  (0.31)    $  (0.44)
                                                                     ========     ========     ========     ========


The accompanying notes are an integral part of these condensed consolidated
financial statements.

                                       4





                      EMPIRE RESORTS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                  NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
                           (UNAUDITED) (IN THOUSANDS)

                                                                                       2005         2004
                                                                                       ----         ----
                        CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                                                          $ (6,810)    $ (9,812)
  Adjustments to reconcile net loss to net cash used in
  operating activities:
       Depreciation                                                                      839          336
       Amortization of deferred financing costs                                          429          300
       Allowance for doubtful accounts - Advances Litigation Trust                       195           --
       Write off of advances to Tribal Gaming Authorities                                620           --
       Write off of gaming license and development costs                               1,743           --
       Stock-based compensation                                                        3,694        2,227
  Changes in operating assets and liabilities:
         Restricted cash                                                                (452)           7
         Accounts receivable                                                          (2,419)         (20)
         Prepaid expenses and other current assets                                      (673)        (843)
         Accounts payable                                                             (1,217)      (2,731)
         Accrued expenses and other current liabilities                                1,254        2,493
                                                                                    --------     --------
  NET CASH USED IN OPERATING ACTIVITIES                                               (2,797)      (8,043)
                                                                                    --------     --------
                        CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of property and equipment                                                 (1,948)     (27,959)
  Cash acquired from acquisition                                                          --           18
  Advances- Litigation Trust                                                            (195)          --
  Advances - Tribal Gaming Authorities                                                  (395)        (155)
  Gaming license and development costs                                                (2,394)      (1,708)
                                                                                    --------     --------
  NET CASH USED IN INVESTING ACTIVITIES                                               (4,932)     (29,804)
                                                                                    --------     --------
                        CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from revolving credit facility                                              6,860           --
  Proceeds from exercise of stock options and warrants                                    56          119
  Proceeds from the issuance of common stock                                              --       30,375
  Proceeds from the issuance of senior convertible notes                                  --       62,218
  Excess of market value over carrying value of property and equipment purchased          --      (30,825)
  Deferred financing costs                                                               (54)        (314)
  Preferred stock dividends paid                                                          --          (30)
  Stock issuance expenses                                                                 --       (2,317)
  Repayment of promissory notes                                                           --       (5,073)
  Repayment of note payable, bank                                                         --       (3,470)
                                                                                    --------     --------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                              6,862       50,683
                                                                                    --------     --------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                    (867)      12,836

CASH AND CASH EQUIVALENTS, beginning of period                                         7,164        1,354
                                                                                    --------     --------
CASH AND CASH EQUIVALENTS, end of period                                            $  6,297     $ 14,190
                                                                                    ========     ========

                                   (Continued)

                                       5




                      EMPIRE RESORTS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                  NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
                           (UNAUDITED) (IN THOUSANDS)




SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                              2005       2004
                                                                               -----      ----
Cash paid for interest during the period                                      $3,766    $  319

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Issuance of promissory note and redemption of common stock                    $   --    $5,073
Accrued construction costs                                                    $   --    $2,714
Common stock issued for development costs                                     $   --    $1,450
Common stock issued in settlement of preferred stock dividends                $  142    $  210
Deferred financing costs of senior convertible notes                          $   --    $2,782
Deferred financing costs paid with proceeds from revolving credit facility    $  485    $   --
Noncash additions to gaming license and development costs                     $  977    $  378



  The accompanying notes are an integral part of these condensed consolidated
                              financial statements.

                                       6




                      EMPIRE RESORTS, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


BASIS OF PRESENTATION AND GENERAL INFORMATION


         The accompanying  unaudited Condensed Consolidated Financial Statements
have  been  prepared  in  compliance  with  Rule  10-01  of  Regulation  S-X and
accounting  principles  generally  accepted  in the  United  States  of  America
("GAAP"),  as applicable to interim  financial  information  and following other
requirements  of the  Securities  and  Exchange  Commission  ("SEC") for interim
reporting.   Accordingly,   the  unaudited  Condensed   Consolidated   Financial
Statements do not include all of the information and footnotes normally required
by GAAP for  complete  financial  statements.  In our  opinion,  all  normal and
recurring  adjustments and accruals considered necessary for a fair presentation
have been included.  The interim results are not  necessarily  indicative of the
results  for a full year and do not contain  information  included in our annual
consolidated  financial  statements  and notes for the year ended  December  31,
2004.  The  Condensed  Consolidated  Balance  Sheet as of December  31, 2004 was
derived from audited financial statements,  but does not include all disclosures
required by GAAP. These Condensed  Consolidated  Financial  Statements should be
read in conjunction with the Consolidated Financial Statements and notes thereto
included  in our Annual  Report on Form 10-KSB for the year ended  December  31,
2004.

         We were  organized as a Delaware  corporation  on March 19,  1993,  and
since  that time  have  served as a holding  company  for  various  subsidiaries
engaged in the ownership,  development  and operation of gaming  facilities.  We
operate through three principal  subsidiaries,  Monticello  Raceway  Management,
Inc.  ("Monticello  Raceway  Management"),  Monticello  Casino  Management,  LLC
("Monticello Casino Management") and Monticello Raceway Development Company, LLC
("Monticello   Raceway   Development").   Currently,   only  Monticello  Raceway
Management  generates  revenue,  as the operations of the other two subsidiaries
are  contingent  upon the  receipt  of  certain  federal  and  state  regulatory
approvals.

         The unaudited Condensed Consolidated  Statements of Operations and Cash
Flows for the  three and nine  months  ended  September  30,  2004  include  our
accounts and certain  assets and  liabilities  of Catskill  Development,  L.L.C.
("Catskill Development"),  which were not significant and were consolidated with
ours effective January 12, 2004.

NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         REVENUE AND EXPENSE  RECOGNITION.  Revenues represent (i) revenues from
pari-mutuel  wagering,  (ii)  the net win  from  video  gaming  machine  ("VGM")
operations and (iii) food and beverage sales, net of promotional  allowances and
other  miscellaneous  income.  We recognize  revenues from pari-mutuel  wagering
earned from live harness  racing and simulcast  signals from other tracks at the
end of each racing day,  before  deductions of such related  expenses as purses,
stakes and awards.  Revenues from the VGM operations is the  difference  between
the amount wagered by bettors and the amount paid out to bettors and is referred
to as the net  win.  The net  win is  included  in the  amount  recorded  in our
consolidated financial statements as gaming revenue. We deposit the net win from
the video lottery  operations  daily, the State of New York deducts its share of
the net win from the account,  a portion of the balance is allocated to Horsemen
and  Breeder's  for harness  horse racing  activities  and the  remainder is our
commission.  We recognize incentives related to casino play and points earned in
loyalty  programs as a direct  reduction of VGM revenue.  We recognize  revenues
from the VGM  operations  at the end of each day.  Operating  costs  include (i)
amounts collected by us, then paid to the New York State Lottery for the State's
share of the net win,  (ii) amounts due to the Horsemen and  Breeder's for their
share of the net win and (iii) amounts paid for harness  racing  purses,  stakes
and awards.  Also included in operating costs are the costs  associated with the
sale of food, beverage and other miscellaneous items and the marketing allowance
from the State of New York.

         POINT LOYALTY  PROGRAM.  We currently offer a point loyalty program for
our VGM  customers  that allows them to earn points based on the volume of their
VGM  activity.  All points  earned by  customers  are recorded as expense in the
period they are earned. The estimated amount of points redeemable is recorded as
a reduction of revenue and included in promotional allowances. In estimating the
amount of the liability for unredeemed points, which was approximately  $144,000
at September  30, 2005,  we estimate a redemption  rate, a cost of rewards to be
offered and the mix of cash,  goods and services for which reward points will be
redeemed. We use historical data to estimate these amounts.

         PRINCIPLES  OF  CONSOLIDATION.  Our  condensed  consolidated  financial
statements include our accounts and those of our wholly-owned subsidiaries.  All
significant  inter-company  accounts  and  transactions  have  been  eliminated.
Certain prior period  balances have been  reclassified to conform to the current
period presentation.

                                       7



         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.  We maintain significant cash balances with
financial  institutions,  which are not covered by the Federal Deposit Insurance
Corporation. We have not incurred any losses in such accounts and believe we are
not exposed to any significant credit risk on cash.

         RESTRICTED CASH. Under New York State Racing,  Para-Mutual Wagering and
Breeding  Law,  Monticello  Raceway  Management is obliged to withhold a certain
percentage of certain  types of wagers  towards the  establishment  of a pool of
money,  the use of  which is  restricted  to the  funding  of  approved  capital
improvements.  Periodically  during  the  year,  Monticello  Raceway  Management
petitions  the New York State Racing and Wagering  Board to certify that certain
expenditures are eligible for reimbursement  from the capital  improvement fund.
Under the terms of our  revolving  credit  facility with Bank of Scotland we are
required to maintain a bank account in the amount of $400,000 for the benefit of
the bank. This account, including all earnings thereon, is to be maintained as a
reserve  account and is to be refunded to the  Company  upon  settlement  of all
obligations  and the  termination  of the loan  commitment  under the  revolving
credit  facility.  Restricted cash comprises the balance in this account as well
as the balance in the capital improvement fund.

         ACCOUNTS  RECEIVABLE.  Accounts  receivable  are  reported at the gross
amount  outstanding.  Management  expects to  collect  the  entire  amount  and,
accordingly,  determined that no allowance is required at September 30, 2005 and
December 31, 2004. In the normal course of business,  we settle wagers for other
racetracks and are potentially exposed to credit risk. These wagers are included
in accounts  receivable.  Also included in accounts  receivable is approximately
$3.1 million due from the New York State lottery  resulting from a change in the
law governing lottery revenues in April, 2005.

         PROPERTY AND  EQUIPMENT.  Property and equipment is stated at cost less
accumulated depreciation.  We provide for depreciation on property and equipment
used by applying the  straight-line  method over the following  estimated useful
lives:

                                                          ESTIMATED
                                                           USEFUL
                ASSETS                                      LIVES
                ------                                      -----
                Vehicles                                 5-10 years
                Furniture, fixtures and equipment        5-10 years
                Land improvements                         20 years
                Building improvements                     40 years
                Buildings                                 40 years

         DEFERRED FINANCING COSTS. Deferred financing costs are amortized on the
straight-line method over the term of the related debt.

         DEFERRED  DEVELOPMENT COSTS.  Deferred  development costs are stated at
cost. We capitalize certain costs directly related to obtaining a gaming license
under a management  agreement with a federally recognized Native American Tribe.
These capitalized costs are periodically reviewed for impairment.

         GAMING LICENSE AND DEVELOPMENT COSTS. In connection with our gaming and
development activities, we capitalize certain legal, architectural,  engineering
and  environmental  study fees, as well as other costs  directly  related to the
gaming license and development of the real estate.  These  capitalized costs are
periodically reviewed for impairment.

         IMPAIRMENT OF LONG-LIVED  ASSETS.  We periodically  review the carrying
value of our  long-lived  assets in relation to historical  results,  as well as
management's  best  estimate  of future  trends,  events  and  overall  business
climate. If such reviews indicate an issue as to whether that the carrying value
of such assets may not be  recoverable,  we will then  estimate  the future cash
flows generated by such assets  (undiscounted and without interest charges).  If
such future cash flows are  insufficient  to recover the carrying  amount of the
assets,  then  impairment  is triggered  and the carrying  value of any impaired
assets would then be reduced to fair value.

         LOSS PER COMMON SHARE. We compute basic loss per share by dividing loss
to common stockholders by the weighted-average common shares outstanding for the
year.  Diluted  earnings per share  reflects the potential  dilution of earnings
that could occur if securities or contracts to issue common stock were exercised
or converted  into common stock or resulted in the issuance of common stock that
then  shared in the  earnings  of the  entity.  Since the effect of  outstanding
options and warrants is  anti-dilutive  with  respect to losses,  they have been
excluded from our  computation  of loss per common share.  Therefore,  basic and
diluted  losses per common share for the three and nine months  ended  September
30, 2005 and 2004 were the same.

         ADVERTISING. We expense the costs of general advertising, promotion and
marketing programs at the time the costs are incurred.  Advertising  expense was
approximately  $481,000  and  $1,074,000,  respectively,  for the three and nine
months ended September 30, 2005 and $492,000 and $675,000, respectively, for the
three and nine months ended September 30, 2004.

         INCOME TAXES.  We apply the asset and  liability  approach to financial
accounting  and  reporting  for  income  taxes.  Deferred  income tax assets and
liabilities are computed for differences between the financial statement and tax
bases of assets and liabilities that will result in future taxable or deductible
amounts,  based on  enacted  tax laws and  rates  for the  periods  in which the
differences  are  expected  to affect  taxable  income.  We have  established  a
valuation  allowance to eliminate deferred tax assets until amounts are expected
to be realized.

                                       8



         ESTIMATES AND ASSUMPTIONS.  The preparation of financial  statements in
conformity with GAAP 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.  We
use significant  estimates including those related to customer  incentives,  bad
debts,  inventories,  estimated  useful lives for  depreciable  and  amortizable
assets,   valuation   reserves  and  estimated   cash  flows  in  assessing  the
recoverability  of  long-lived  assets,  estimated  liabilities  for point based
customer loyalty programs,  income taxes,  contingencies and litigation.  Actual
results may differ from estimates.

         STOCK-BASED COMPENSATION.

         In December 2004,  the Financial  Accounting  Standards  Board ("FASB")
issued  Statement  of Financial  Accounting  Standards  No. 123 (Revised  2004),
"Share Based Payment"  ("SFAS  123-R"),  which replaces the existing SFAS No.123
and supercedes  Accounting  Principles  Board ("APB") Opinion No.25.  SFAS 123-R
requires companies to measure and record compensation  expense for stock options
and other  share-based  payment based upon the instruments'  fair value, and, as
issued,  is effective for interim and annual reporting  periods  beginning after
June 15, 2005.  However,  on April 14, 2005, SEC announced the adoption of a new
rule that amends the compliance  date for SFAS 123-R.  The SEC's new rule allows
companies  to implement  SFAS 123-R at the start of their fiscal year  beginning
after June 15, 2005, which for us would be January 1, 2006.

         As of January 1, 2003,  approximately  two years  before  SFAS 123R was
issued, we began measuring and recording  compensation expense for stock options
and other share-based payment based upon the instruments' fair value. We utilize
a standard option pricing model (i.e.,  Black-Scholes) to measure the fair value
of stock  options  granted  to  Employees  and  non-employees.  While SFAS 123-R
permits  entities to continue to use such a model, the standard also permits the
use of a "lattice" model.

         We expect to adopt SFAS 123-R  effective  January 1,  2006,but have not
yet determined  which of the option pricing models we will use. In addition,  we
have not determined if a change in model will impact on our financial statements
after adopting SFAS 123-R for periods beyond 2005.

         RECLASSIFICATIONS.  Certain prior period amounts have been reclassified
to conform to the current period presentation.

         RECENT ACCOUNTING PRONOUNCEMENTS.

         On July 14,  2005,  FASB issued its  Exposure  Draft,  "Accounting  for
Uncertain Tax Positions",  which is a proposed  interpretation to FASB Statement
No. 109,  "Accounting  for Income  Taxes." This  proposed  interpretation  would
require an  enterprise  to  recognize,  in its  financial  statements,  the best
estimate of the impact of a tax  position.  In  evaluating  whether the probable
recognition  threshold has been met, this proposed  interpretation would require
the  presumption  that the tax  position  will be  evaluated  during an audit by
taxing  authorities.  The term probable is used in this proposed  interpretation
consistent with its use in FASB Statement No. 5, "Accounting Contingencies",  to
mean "the future event or events are likely to occur."  Individual tax positions
that fail to meet the probable  recognition  threshold will generally  result in
either (a) a reduction  in the  deferred  tax asset or an increase in a deferred
tax  liability or (b) an increase in a liability for income taxes payable or the
reduction of an income tax refund  receivable.  The impact may also include both
(a) and (b). The proposed interpretation would be effective as of the end of the
first fiscal year ending after December 15, 2005. The initial recognition of the
effect of applying the proposed interpretation would be a cumulative effect of a
change  in   accounting   principle.   The  comment   period  for  the  proposed
interpretation ends on October 28, 2005. The Company is currently evaluating the
impact of the Exposure Draft on its financial statements.

NOTE B. PROPERTY AND EQUIPMENT

                                              (IN THOUSANDS)
                                    SEPTEMBER 30,      DECEMBER 31,
                                         2005              2004
                                    ----------------------------------

Land                                 $    770            $    770
Land improvements                       1,488               1,481
Buildings                               4,583               4,564
Building improvements                  24,441              23,966
Vehicles                                  130                 130


Furniture, fixtures and equipment       2,743               2,743
                                     --------            --------

                                       34,155              33,654

Less - Accumulated depreciation        (1,347)               (507)
                                     --------            --------

NET BOOK VALUE                       $ 32,808            $ 33,147
                                     ========            ========

                                       9


Depreciation expense was approximately $282,000 and $316,000,  respectively, for
the three months ending September 30, 2005 and 2004 and  approximately  $839,000
and $336,000,  respectively,  for the nine months ending  September 30, 2005 and
2004.

NOTE C.  ADVANCES TO TRIBAL GAMING AUTHORITIES

         We have made  payments  to fund  certain  expenses  of both the  Cayuga
Nation of New York (the "Cayuga Nation") and the Seneca-Cayuga Tribe of Oklahoma
(the  "Seneca-Cayugas")  to help cover development costs for the proposed gaming
facilities  and other  development  projects.  We agreed to provide  development
assistance and support  additional  professional  fees in  conjunction  with the
establishment and initial operations of tribal gaming authorities for the Cayuga
Nation  for  gaming  operations  in the State of New York.  These  advances  are
refundable  under  certain  circumstances  and  are  non-interest-bearing.   The
repayment of these advances is ultimately  dependent upon the development of the
project. As of September 30, 2005 and December 31, 2004,  approximately $700,000
and $925,000, respectively, has been capitalized. On June 30, 2005 in accordance
with our capitalization  policy, we determined to recognize an impairment to our
capitalized  assets  related  to our  agreements  with  the  Seneca-Cayugas.  We
recognized an  impairment  loss of $620,000  since the  likelihood of recovering
these costs  through the  development  of a project  under the  framework of our
current  relationship  with the  Seneca-Cayugas  has  become  doubtful  due to a
variety of factors as further described in Note E.

NOTE D.  DEFERRED DEVELOPMENT COSTS

         Under a special letter  agreement  between the Cayuga Nation and us, we
are to work together to develop a casino in Sullivan County, New York and, as an
inducement  to enter into the  transaction  the Cayuga Nation  received  300,000
shares of our common stock which vested over a twelve month period.  In 2003, an
aggregate  of 200,000  shares of common stock vested at a market value of $10.56
and $13.84 per share, respectively. In 2004, an additional 100,000 shares vested
and  approximately  $1.5 million of additional  cost was  capitalized.  When the
operations of the proposed casino commence,  the deferred development costs will
be systematically recognized over a determinable period. These capitalized costs
are periodically reviewed for impairment.

NOTE E.  GAMING LICENSE AND DEVELOPMENT COSTS

         In connection with the development of real estate for additional gaming
activities,  we have incurred various costs. As of December 31, 2004, Monticello
Raceway Development had capitalized  approximately $8.9 million. During the nine
months ended  September 30, 2005,  Monticello  Raceway  Development  capitalized
approximately  $3.4  million of  additional  costs.  Capitalized  costs that are
specifically  related to Native American  projects are refundable  under certain
circumstances and are  non-interest-bearing.  When the financing of the relevant
operation  is  completed,  the  gaming  license  and  development  costs will be
evaluated for  refundability,  and when the  operations  of the proposed  casino
commence,  the balance of our capitalized  costs, if any, will be systematically
recognized over a determinable  period. These capitalized costs are periodically
reviewed  for  impairment.  During the second  quarter of 2005,  our  efforts to
develop a gaming facility with the Seneca-Cayugas  were  significantly  modified
for a number of reasons,  including changes in the legal and political landscape
and breakdowns in communications between us and the Seneca-Cayugas.  Pursuant to
our policy of assessing the  recoverability of its long-lived assets, we elected
to  write  off  those   development  costs  directly  related  to  the  project.
Accordingly,  we recognized as an impairment loss previously  capitalized  costs
totaling  approximately $1.7 million.  We are continuing to work with the Cayuga
Nation to develop a gaming facility.  These efforts have been adversely affected
by leadership  issues  affecting the Cayuga Nation and have included claims with
regard to decisions by the Cayuga Nation government that are consistent with the
view that our agreements with the Cayugas have expired or been  repudiated.  The
resolution  of these issues under Cayuga law,  which relies on  traditions  that
have not been extensively  documented,  is the sole responsibility of the Cayuga
Nation, although the Bureau fo Indian Affairs is assisting in efforts to mediate
the potential  differences between the parties. One of the issues in question is
who the federally recognized representative of the Tribe is. While this does not
necessarily affect relationships  between the Tribe and the State of New York or
the Company,  it would  directly  affect the necessary  federal  approvals for a
gaming enterprise. The current federally recognized representative has expressed
a lack of support  for the  Company's  efforts  in the past.  In June of 2005 we
entered into an agreement  with members of the Cayuga Council who are working to
form a  provisional  government  consistent  with the  results of a recent  poll
indicating  support  for the  project  by members  of the  Cayuga  Nation.  This
agreement extends our principal agreements with the Cayuga Nation until December

                                       10



31,  2005.  We cannot  predict the outcome of the efforts  that are  underway to
attempt to resolve the  leadership  issues  within the Cayuga  Nation.  However,
based upon our current access to sites which we believe to be highly suitable as
sites for Native American gaming  authorized under existing New York law and the
indications  of support for a gaming project as expressed by the recent poll, we
are optimistic that the leadership  issues will only delay,  rather than defeat,
our mutual  efforts with the Cayuga  Nation to  establish a gaming  facility for
them in the  Catskills.  Development  costs  include costs  associated  with our
Agreement and Plan of Merger and Contribution  with Concord  Associates  Limited
Partnership and Sullivan Resorts, LLC.

NOTE F. SENIOR CONVERTIBLE NOTES

         The following is a brief  description  of our senior  convertible  note
issuance. This arrangement contains financial covenants.

         On July 23,  2004,  we issued $65  million of 5.5%  senior  convertible
notes  presently  convertible  into  approximately  5.2 million shares of common
stock,  subject to adjustment upon the occurrence or  non-occurrence  of certain
events. The notes were issued with a maturity date of July 31, 2014. Interest is
payable  semi-annually  on  January  31 and  July  31 to  the  persons  who  are
registered  holders  at the close of  business  on each  January  15 and July 15
immediately preceding the applicable interest payment date.

         The senior convertible notes are our senior obligations, ranking senior
in right of payment to all of our existing and future subordinated  indebtedness
and  ranking  equally  in right of  payment  with  existing  and  future  senior
indebtedness.  The notes are guaranteed on a senior basis by all of our material
subsidiaries.  The guarantee of each material  subsidiary  guarantor is a senior
obligation of the guarantor,  ranking senior in right of payment to all existing
and future  subordinated  indebtedness  of our guarantors and ranking equally in
right of payment  with any  existing  and  future  senior  indebtedness  of such
guarantor.  The notes are secured by our tangible and intangible assets and by a
pledge of the equity interests of each of our material subsidiaries.

         The notes initially accrued interest at an annual rate of 5.5%, subject
to the occurrence of the "Trigger Event". All of the following events constitute
a Trigger Event under the notes: publication in the Federal Register of approval
by the  Secretary of the  Interior of a Class III gaming  compact for the Cayuga
Catskill Resort;  written approval of a gaming facility management  agreement on
behalf of the chairman of the National Indian Gaming Commission; and the land in
Monticello,  New  York to be used for the  development  of the  Cayuga  Catskill
Resort  having  been  transferred  to the United  States in trust for the Cayuga
Nation.  Since these events have not occurred,  the notes have accrued  interest
from and after July 31,  2005 at an annual  rate of 8%. The  interest  rate will
return to 5.5% upon the occurrence of the Trigger Event.

         The notes can be converted  into shares of our common stock at any time
prior to maturity,  redemption or  repurchase.  The initial  conversion  rate is
72.727 shares per each $1,000 principal amount of notes,  subject to adjustment.
This conversion rate was equivalent to an initial conversion price of $13.75 per
share.  In the event that the notes  convert  prior to July 31, 2007, we will be
required to make an additional  make-whole payment equal to the present value of
all  remaining  scheduled  payments  of  interest  on the notes to be  converted
through and including July 31, 2007, assuming for such purpose that the interest
rate in effect as of the conversion date shall apply for all subsequent interest
periods  through July 31, 2007. Any  make-whole  payment will be payable in cash
or, at our option, in shares of our common stock at a 5% discount to the average
closing  bid price of our  common  stock for the 10  trading  days  prior to the
conversion date.

         Since the Trigger Event did not occur on or prior to July 31, 2005, the
initial  conversion rate per each $1,000  principal amount of notes was reset to
$12.56 per share.

         We are  obligated  to use our best  efforts  to cause the notes and the
guarantees  to  become  secured  by a  mortgage  on our  232  acres  of  land in
Monticello, New York (with such mortgage being released with respect to the site
of the Cayuga  Catskill Resort as required to transfer such site into trust with
the United  States for the Cayuga  Nation and with respect to all 232 acres upon
the occurrence of the Trigger Event).  At September 30, 2005, the holders of the
senior convertible notes did not have the benefit of this security interest.

         For the three and nine months ended  September  30, 2005, we recognized
approximately  $1.2 million and $3.0 million  respectively  in interest  expense
associated with the senior convertible notes.

         We will be seeking the consent of the holders of our 5 1/2% convertible
senior notes in order to amend certain  provisions  of the  indenture  governing
such notes to give management of the Company greater flexibility in developing a
Native American  casino at Monticello  Raceway with other Native American tribes
beside the Cayuga Nation of New York.

NOTE G.  REVOLVING CREDIT FACILITY

         On January 11,  2005,  we entered into a credit  facility  with Bank of
Scotland.  The  credit  facility  provides  for a  $10  million  senior  secured

                                       11



revolving  loan  (subject to certain  reserves)  that  matures in two years.  To
secure  timely  repayment,  we  agreed  to have  our  wholly  owned  subsidiary,
Monticello  Raceway  Management,  grant a mortgage over the  Monticello  Raceway
property and its  material  subsidiaries  guarantee  its  obligations  under the
credit  facility.  We also agreed to pledge our equity  interests  in all of our
current and future  subsidiaries,  maintain certain reserves,  and grant a first
priority  secured  interest in all of our assets,  now owned or later  acquired.
This arrangement contains financial covenants.

         At our option,  loans under the Credit  Facility  bear  interest at the
rate of prime plus 2% or LIBOR plus 4%. Bank of Scotland  has also  entered into
an  Inter-creditor  Agreement with The Bank of New York so that Bank of Scotland
will enjoy a first priority position  notwithstanding the Indenture and security
documents  entered into on July 26, 2004 in connection  with our issuance of $65
million of senior convertible notes.

         We recognized  approximately  $153,000 and $362,000,  respectively,  in
interest  expense for this  facility in the three  months and nine months  ended
September 30, 2005.

NOTE H. STOCK AND STOCK OPTION TRANSACTIONS

         STOCK-BASED  COMPENSATION  --  our  stock-based  compensation  programs
include stock options and restricted stock.

         On January 7, 2005, 10,000 options were granted to all six then serving
non-employee  board members to purchase  common stock at $8.51 per share.  These
options were immediately vested and expire in five years.  Compensation expenses
relating to these  grants  totaling  approximately  $380,000 are included in the
results of operations for the nine months ended September 30, 2005.

         On February 16, 2005,  we issued  12,640  shares of common stock with a
value of  approximately  $142,000 in settlement of all outstanding  dividends on
Series B preferred stock from the year ending December 31, 2004.

         On March 18, 2005,  we issued  30,000  incentive  stock  options with a
strike price of $8.26 to an employee that vest over one year.  The  compensation
expense  associated  with this grant was  approximately  $51,000  and  $188,000,
respectively, for the three and nine months ended September 30, 2005.

         On May 23, 2005,  options that were granted to certain officers and our
former Chief Executive Officer who resigned from their respected  positions were
guaranteed a one year  extension of their  expiration  date.  These options were
issued at $2.12 in 2003. Under normal circumstances  options expire three months
after the end of affiliation.  This extension resulted in approximately $234,000
of compensation expense in the nine months ended September 30, 2005.

         On May 23, 2005, we agreed to grant  1,044,092 ten year,  non-qualified
options to our Chief  Executive  Officer in connection  with his  appointment to
that position. The options have a strike price of $3.99, vest over two years and
were granted  pursuant to our 2005 Equity  Incentive Plan. This Plan was subject
to  shareholder  approval at the date of the grant and this approval was secured
at the Shareholders' Meeting held on August 17, 2005. Accordingly, we recognized
approximately  $810,000  as  compensation  expense  for this  grant in the three
months and nine months ended  September 30, 2005. We also agreed to issue to our
Chief Executive  Officer 261,023 shares of restricted stock pursuant to our 2005
Equity  Incentive Plan.  Thirty - three percent of these shares vest on the date
of grant and the  remainder  vest over two years.  We  recognized  approximately
$400,000 as  compensation  expense  for this grant in the three  months and nine
months ended September 30, 2005.

         On May 23,  2005,  we agreed to grant  150,000 ten year,  non-qualified
options to our Chief  Financial  Officer in connection  with his  appointment to
that position.  The terms of these options were identical to those issued to our
Chief Executive Officer.  Accordingly,  we recognized  approximately $116,000 as
compensation  expense for this grant in the three  months and nine months  ended
September 30, 2005.

         On May 23,  2005,  we agreed to grant  50,000  ten year,  non-qualified
options to our  non-executive  Chairman of the Board of Directors in  connection
with his appointment to that position. The options have a strike price of $3.99,
vest upon grant and were granted  pursuant to our 2005 Equity Incentive Plan. As
this Plan was approved August 17, 2005, we recognized  approximately $175,000 as
compensation  expense for this grant in the three  months and nine months  ended
September 30, 2005.

         On July 22, 2005, we issued 15,000 stock options with a strike price of
$4.02 to one of our directors  upon his  appointment  to the board.  The options
vested upon  grant.  The  compensation  expense  associated  with this grant was
approximately $54,000 for the three and nine months ended September 30, 2005.

                                       12




         On August 17, 2005,  we issued  50,000  incentive  stock options with a
strike price of $3.93 to an employee that vest over two years.  The compensation
expense  associated with this grant was approximately  $38,000 for the three and
nine months ended September 30, 2005.

         One  of  the  provisions  of our  Agreement  and  Plan  of  Merger  and
Contribution  with  Concord  Associates  Limited  Partnership   ("Concord")  and
Sullivan Resorts, LLC ("Sullivan')  requires that, under certain conditions,  we
grant to Concord and  Sullivan  5,188,913  options  with a three year term and a
strike price of $7.50. This grant was effective August 20, 2005. The options can
be  exercised by Concord and  Sullivan,  subject to certain  exceptions,  if the
merger agreement is terminated.  The total estimated fair value of these options
on the effective date was approximately $1,712,000.

         We also granted  options and  restricted  stock to our Chief  Executive
Officer  subject to the closing of the merger with Concord and  Sullivan.  These
options and  restricted  stock will not be issued if the merger with Concord and
Sullivan is not completed. The number of options is 720,000 with a ten year term
and a strike price of $3.99. The number of restricted  shares is 180,000 and the
price at the date of grant was $3.93.  The total  estimated  fair value of these
options  and  restricted   shares  on  the  effective  date  was   approximately
$3,227,000.

         Because  the  ultimate  outcome of the Merger will  determine  which of
these  grants  is  effective,  the  financial  statements  reflect  stock  based
compensation  expense  based  upon  an  evaluation  of  the  likelihood  of  the
successful  completion  applied to the valuations of the individual  grants. The
combined stock based  compensation  expense for these two issues relating to the
Plan of Merger and  Contribution  with  Concord and  Sullivan  is  approximately
$968,000 for the three and nine months ended September 30, 2005.

         In 2004, we issued 129,500  incentive  stock options with strike prices
of $14.25  and $8.63 to  various  employees.  The  option  issuances  provided a
variety of vesting schedules.  The compensation expense associated with the 2004
grants was approximately  $36,000 and $322,000  respectively,  for the three and
nine months ended  September 30, 2005 and  approximately  $279,000 and $848,000,
respectively, for the three and nine months ended September 30, 2004.

                                       13




NOTE I. SUPPLEMENTAL GUARANTOR INFORMATION

         As discussed in Notes F and G, we have  obligations  to pay  principal,
premium,  if any, and interest under certain debt that are guaranteed on a joint
and  several  basis by  substantially  all of our  operating  subsidiaries.  The
guarantees are full and  unconditional  and the guarantor  subsidiaries are 100%
owned.  We have  determined  that  separate,  full  financial  statements of the
guarantors,  Monticello Raceway  Management and Monticello Raceway  Development,
would not be material to  investors  and,  accordingly,  supplemental  financial
information for the guarantors is presented.


EMPIRE RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 2005
(UNAUDITED)
(IN THOUSANDS)



ASSETS                                         Empire                        Non                        Consolidated
                                               Resorts,     Guarantor     Guarantor      Eliminating       Empire
                                                 Inc.      Subsidiaries  Subsidiaries      Entries      Resorts, Inc.
                                              -----------------------------------------------------------------------
Cash and cash equivalents                     $     565    $   5,732     $    --       $    --       $   6,297
Restricted cash                                     408          203          --            --             611
Accounts receivable                                --          5,099          --            --           5,099
Prepaid expenses and other assets                    75        1,472          --            --           1,547
Investments in subsidiaries                       5,060         --            --          (5,060)         --
Inter-company accounts                          151,748         --            --        (151,748)         --
Property and equipment, net                          12       32,796          --            --          32,808
Advances- Tribal Gaming Authorities                --            700          --            --             700
Deferred financing costs, net                     3,119         --            --            --           3,119
Deferred development costs                         --          3,890          --            --           3,890
Gaming license and development costs               --         10,533          --            --          10,533
                                              -----------------------------------------------------------------------
TOTAL ASSETS                                  $ 160,987    $  60,425     $    --       $(156,808)    $  64,604
                                              =======================================================================

LIABILITIES and STOCKHOLDERS' EQUITY
(DEFICIT)
Revolving credit facility                     $   7,345    $    --       $    --       $    --       $   7,345

Accounts payable                                  1,180        2,385          --            --           3,565
Accrued expenses and other liabilities            1,125        5,622          --            --           6,747
Inter-company accounts                             --         58,166        93,582      (151,748)         --
Senior convertible notes                         65,000         --            --            --          65,000
                                              -----------------------------------------------------------------------
    Total liabilities                            74,650       66,173        93,582      (151,748)       82,657
Stockholders' equity (deficit):                  86,337       (5,748)      (93,582)       (5,060)      (18,053)
                                              -----------------------------------------------------------------------
TOTAL LIABILITIES and STOCKHOLDERS' EQUITY    $ 160,987    $  60,425     $    --       $(156,808)    $  64,604
(DEFICIT)
                                              =======================================================================

                                       14





EMPIRE RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2004
(UNAUDITED)
(IN THOUSANDS)


                                                          Empire                        Non                        Consolidated
                                                          Resorts,     Guarantor     Guarantor      Eliminating       Empire
                                                            Inc.      Subsidiaries  Subsidiaries      Entries      Resorts, Inc.
                                                        ------------------------------------------------------------------
ASSETS
Cash and cash equivalents                               $   1,903    $   5,261     $    --       $    --       $   7,164
Restricted cash                                              --            159          --            --             159

Accounts receivable                                          --          2,680          --            --           2,680

Prepaid expenses and other assets                              83          791          --            --             874
Investments in subsidiaries                                 5,060         --            --          (5,060)         --
Inter-company                                             147,299         --            --        (147,299)         --
Property and equipment, net                                  --         33,147          --            --          33,147
Advances- Tribal Gaming Authorities                          --            925          --            --             925
Deferred financing costs, net                               3,009         --            --            --           3,009
Deferred development costs                                   --          3,890          --            --           3,890

Gaming license and development costs                         --          8,905          --            --           8,905
                                                        ------------------------------------------------------------------
TOTAL ASSETS                                            $ 157,354    $  55,758     $    --       $(152,359)    $  60,753
                                                        ===================================================================

LIABILITIES and STOCKHOLDERS' EQUITY (DEFICIT)
Accounts payable                                        $   1,392    $   2,413     $    --       $    --       $   3,805

Construction costs payable                                   --          1,447          --            --           1,447

Accrued expenses and other liabilities                      1,660        3,833          --            --           5,493

Inter-company                                                --         53,717        93,582      (147,299)         --

Senior convertible notes                                   65,000         --            --            --          65,000
                                                        ------------------------------------------------------------------
Total liabilities                                          68,052       93,582      (147,299)       75,745
                                                                                                                  61,410

Stockholders' equity (deficit)                             89,302       (5,652)      (93,582)       (5,060)      (14,992)
                                                        ------------------------------------------------------------------
TOTAL LIABILITIES and STOCKHOLDERS' EQUITY (DEFICIT)    $ 157,354    $  55,758     $    --       $(152,359)    $  60,753
                                                        ==================================================================

                                       15






EMPIRE RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2005
(UNAUDITED)
(IN THOUSANDS)

- --------------------------------------------------------------------------------

                                                    Empire                       Non                        Consolidated
                                                   Resorts,     Guarantor     Guarantor      Eliminating       Empire
                                                     Inc.      Subsidiaries  Subsidiaries      Entries      Resorts, Inc.
                                                     ----      ------------  ------------      -------      -------------

REVENUES
    Racing                                         $   --       $ 10,406        $--             $--          $ 10,406
    Gaming                                             --         51,511         --              --            51,511

    Food, beverage and other                             12        3,726         --              --             3,738
                                                   ---------------------------------------------------------------------
Gross revenues                                           12       65,643         --              --            65,655
Less: Promotional allowances                           --         (1,364)        --              --            (1,364)
                                                   ---------------------------------------------------------------------
Net revenues                                             12       64,279         --              --            64,291
COSTS AND EXPENSES
Operating costs
    Racing                                             --          6,627         --              --             6,627
    Gaming                                             --         46,014         --              --            46,014

    Food, beverage and other                           --          1,527         --              --             1,527
                                                   ---------------------------------------------------------------------
                Total operating costs                  --         54,168         --              --            54,168
Selling, general and administrative                   7,207        2,781         --              --             9,988
Depreciation                                              1          838         --              --               839
Amortization of deferred financing costs                429         --           --              --               429
Inter-company interest (income) expense & other      (4,225)       4,225         --              --              --

Interest expense                                      3,314         --           --              --             3,314
                                                   ---------------------------------------------------------------------
               Total costs and expenses               6,726       62,012         --              --            68,738
                                                   ---------------------------------------------------------------------
 Income (loss) from operations                       (6,714)       2,267         --              --            (4,447)

Write off of advances to Tribal Gaming Authorities     --            620         --              --               620

Write off of gaming license and development costs      --         1,743          --              --             1,743
                                                   ---------------------------------------------------------------------
Net (loss)                                         $ (6,714)    $    (96)        --              --          $ (6,810)
                                                   =====================================================================

                                       16



EMPIRE RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2004
(UNAUDITED)
(IN THOUSANDS)

                                              EMPIRE                    NON-                   CONSOLIDATED
                                             RESORTS,   GUARANTOR     GUARANTOR   ELIMINATING    EMPIRE
                                               INC.    SUBSIDIARIES  SUBSIDIARIES   ENTRIES    RESORTS, INC.
                                               ----    ------------  ------------   -------    -------------
REVENUES:
   Racing                                   $   --       $  7,251     $     --    $  --         $  7,251
   Gaming                                       --         18,461           --       --           18,461
   Food, beverage and other                       95        1,610           --       --            1,705
                                            ----------------------------------------------------------------

Gross revenues                                    95       27,322           --       --           27,417
Less: Promotional allowances                    --           (331)          --       --             (331)
                                            ----------------------------------------------------------------
Net revenues                                      95       26,991           --       --           27,086

COSTS AND EXPENSES:
Operating costs:
     Racing                                     --          8,710           --       --            8,710
     Gaming                                     --         18,080           --       --           18,080
     Food, beverage and other                   --            769           --       --              769
                                            ----------------------------------------------------------------
        Total operating costs                   --         27,559           --       --           27,559

Selling, general and administrative            5,420        2,318           --       --            7,738

Depreciation                                    --            336           --       --              336

Amortization of deferred financing costs          56          244           --       --              300

Inter-company interest (income) expense         (951)         951           --       --             --

Interest expense                                 841          124           --       --              965
                                            ----------------------------------------------------------------

     Total costs and expenses                  5,366       31,532           --       --           36,898
                                            ----------------------------------------------------------------
Net (loss)                                  $ (5,271)    $ (4,541)    $     --    $  --         $ (9,812)
                                            ================================================================


                                       17



EMPIRE RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2005
(UNAUDITED)
(IN THOUSANDS)

                                                        Empire                     Non-       Eliminating   Consolidated
                                                       Resorts,  Guarantor      Guarantor                     Empire
                                                         Inc.   Subsidiaries   Subsidiaries     Entries     Resorts, Inc.

REVENUES:

Racing                                               $   --       $  3,828     $   --           $   --       $  3,828

Gaming                                                   --         20,696         --               --         20,696

Food, beverage and other                                    9        1,637         --               --          1,646
                                                     --------------------------------------------------------------------
Gross revenues                                              9       26,161         --               --         26,170

Less: Promotional allowances                             --           (522)        --               --           (522)
                                                     --------------------------------------     -------------------------
Net revenues
                                                            9       25,639         --               --         25,648
                                                     --------------------------------------------------------------------

COSTS AND EXPENSES:
Operating costs:

Racing                                                   --          2,015         --               --          2,015

Gaming                                                   --         17,483         --               --         17,483

Food, beverage and other                                 --            668         --               --            668
                                                     --------------------------------------------------------------------
Total operating costs
                                                         --         20,166         --               --         20,166

Selling, general and administrative                     3,756        1,129         --               --          4,885

Depreciation                                                1          281         --               --            282

Amortization of deferred financing costs                  146         --           --               --            146

Inter-company interest (income) expense                (1,625)       1,625         --               --           --

Interest expense                                        1,318         --           --               --          1,318
                                                     --------------------------------------------------------------------
Total costs and expenses                                3,596       23,201         --               --         26,797
                                                     --------------------------------------------------------------------
Income (loss) from operations
                                                       (3,587)       2,438         --               --         (1,149)

Write off of gaming license and development costs        --             45         --               --             45
                                                     --------------------------------------------------------------------
Net (loss)                                           $ (3,587)    $  2,393     $   --           $   --       $ (1,194)
                                                     =====================================================================

                                       18



EMPIRE RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2004
(UNAUDITED)
(IN THOUSANDS)


                                               EMPIRE                         NON-                      CONSOLIDATED
                                               RESORTS        GUARANTOR     GUARANTOR     ELIMINATING       EMPIRE
                                                INC.        SUBSIDIARIES  SUBSIDIARIES     ENTRIES      RESORTS, INC.
                                                ----        ------------  ------------     -------      -------------
REVENUES:

Racing                                         $   --       $  2,446        $ --            $ --         $  2,446
                                               --------------------------------------------------------------------

Gaming                                             --         18,151          --              --           18,151

Food, beverage and other                             32        1,558          --              --            1,590
                                               --------------------------------------------------------------------

Gross revenues                                       32       22,155          --              --           22,187

Less: Promotional allowances                       --           (331)         --              --             (331)
                                               --------------------------------------------------------------------

Net revenues                                         32       21,824          --              --           21,856

COSTS AND EXPENSES:
Operating costs:

Racing                                             --          1,808          --              --            1,808

Gaming                                             --         17,833          --              --           17,833

Food, beverage and other                           --            735          --              --              735
                                               --------------------------------------------------------------------

   Total operating costs                           --         20,376          --              --           20,376

Selling, general and administrative               1,025          988          --              --            2,013

Depreciation                                       --            316          --              --              316

Amortization of deferred financing costs             56                                                        56

Inter-company interest (income) expense            (951)         951          --              --             --

Interest expense                                    671          (43)         --              --              628
                                               --------------------------------------------------------------------

  Total costs and expenses                          801       22,588          --              --           23,389
                                               --------------------------------------------------------------------
Net (loss)                                     $   (769)    $   (764)       $ --            $ --         $ (1,533)
                                               ====================================================================

                                       19



EMPIRE RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2005
(UNAUDITED)
(IN THOUSANDS)


                                                          EMPIRE                       NON-                     CONSOLIDATED
                                                         RESORTS,    GUARANTOR      GUARANTOR     ELIMINATING      EMPIRE
                                                           INC.     SUBSIDIARIES  SUBSIDIARIES      ENTRIES     RESORTS, INC.
                                                           ----     ------------  ------------     -------     -------------


Net cash provided by (used in) operating activities     $(3,543)    $   746        $  --           $  --         $(2,797)
                                                        -----------------------------------------------------------------

Cash flows from investing activities:

   Purchases of property and equipment                      (13)     (1,935)          --              --          (1,948)

   Advances- Litigation Trust                              (195)       --             --                            (195)

   Advances- Tribal Gaming Authorities                     --          (395)          --              --            (395)

   Gaming license and development costs                    --        (2,394)          --              --          (2,394)

   Advances to subsidiaries                              (4,449)       --                           4,449            --
                                                        -----------------------------------------------------------------
Net cash used in investing activities
                                                         (4,657)     (4,724)          --             4,449        (4,932)
                                                        -----------------------------------------------------------------

Cash flows from financing activities:

   Proceeds from revolving credit facility                6,860        --             --              --           6,860

   Proceeds from exercise of stock options                   56        --             --              --              56

   Advances from Empire Resorts, Inc.                      --         4,449           --            (4,449)         --

   Deferred financing costs                                 (54)       --             --              --             (54)
                                                        -----------------------------------------------------------------
Net cash provided by financing activities
                                                          6,862       4,449           --            (4,449)        6,862
                                                        -----------------------------------------------------------------


Net increase (decrease) in cash and cash equivalents     (1,338)        471           --              --            (867)


Cash and cash equivalents, beginning of period            1,903       5,261           --              --           7,164
                                                        -----------------------------------------------------------------

Cash and cash equivalents, end of period                $   565     $ 5,732        $  --           $  --         $ 6,297
                                                        =================================================================

                                       20




EMPIRE RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2004
(UNAUDITED)
(IN THOUSANDS)


                                                            EMPIRE                       NON-                 CONSOLIDATED
                                                            RESORTS,    GUARANTOR     GUARANTOR   ELIMINATING   RESORTS,
                                                             INC.     SUBSIDIARIES  SUBSIDIARIES     ENTRIES   EMPIRE INC.
                                                             ----     ------------  ------------     -------   -----------

Net cash provided by (used in) operating activities       $ (2,518)    $ (5,525)    $   --       $   --       $ (8,043)
                                                          ----------------------------------------------------------------
Cash flows from investing activities:

Purchases of property and equipment                           --        (27,959)        --           --        (27,959)

Cash acquired from acquisition                                  18         --           --           --             18

Advances- Tribal Gaming Authorities                           --           (155)        --           --           (155)

Gaming license and development costs                          --         (1,708)        --           --         (1,708)

Advances to subsidiaries                                   (42,823)        --           --         42,823         --
                                                          ----------------------------------------------------------------
Net cash used in investing activities                      (42,805)     (29,822)        --         42,823      (29,804)
                                                          ----------------------------------------------------------------

Cash flows from financing activities:

Proceeds from sale of stock                                 30,375         --           --           --         30,375

Proceeds from exercise of stock options and warrants           119         --           --           --            119

Stock issuance expenses                                     (2,317)        --           --           --         (2,317)
Proceeds from issuance of senior convertible notes          62,218         --           --           --         62,218
Excess of market value over carrying value of property
and equipment purchased                                    (30,825)        --           --           --        (30,825)

Advances from Empire Resorts, Inc.                            --         42,823         --        (42,823)        --
Repayment of promissory notes                               (5,073)        --           --           --         (5,073)

Repayment of note payable, bank                               --         (3,470)        --           --         (3,470)
Deferred financing costs                                      (314)        --           --           --           (314)

Preferred stock dividends paid                                 (30)        --           --           --            (30)
                                                          ----------------------------------------------------------------


Net cash provided by financing activities                   54,153       39,353         --        (42,823)      50,683
                                                          ----------------------------------------------------------------

Net increase in cash and cash equivalents                    8,830        4,006         --           --         12,836


Cash and cash equivalents, beginning of period                --          1,354         --           --          1,354
                                                          ----------------------------------------------------------------

Cash and cash equivalents, end of period                  $  8,830     $  5,360     $   --       $   --       $ 14,190
                                                          ================================================================

                                       21


NOTE J. COMMITMENTS AND CONTINGENCIES

         CASINO DEVELOPMENT.  On November 14, 2004, we entered into a memorandum
agreement to provide certain  assistance to the Cayuga Nation in connection with
a proposed  settlement with the State of New York. This agreement provided for a
further  agreement to be entered into to finalize  various terms and conditions.
Due to the  repudiation  of the proposed  framework  for the  settlement  by the
representative  of the Cayuga Nation that signed this  agreement,  no subsequent
agreement has been entered into.  The  memorandum  agreement  provided  that, if
sufficient  funds are not  available  in  connection  with the  financing of the
proposed Cayuga Catskills Resort, we will advance an additional $60.0 million to
allow the  Cayuga  Nation to  accelerate  the  payment of legal fees owed by the
Cayuga Nation in  connection to their land claim,  $50 million of which would be
reimbursed  out of  operations,  to the extent  available,  and the remainder of
which may be reimbursable under other agreements. It is expected that any future
settlement,  if agreed to,  will be on  substantially  different  terms from the
proposal contemplated by the November 14, 2004 Agreement. Therefore it is likely
that any such further  agreement,  if entered  into,  will  include  substantial
revisions of the original memorandum agreement.

         LITIGATION  TRUST. On January 12, 2004, in order to better focus on our
business plan, all of our interests with respect to litigation  against Harrah's
Operating Company,  Inc. were transferred to a liquidating  litigation trust. We
agreed to  provide  the  litigation  trust with a $2.5  million  line of credit.
During the first nine months of 2005, we released  approximately $200,000 to the
litigation trust, increasing the total advanced to $700,000.

         EMPLOYMENT  CONTRACTS.  On May 23, 2005, in connection with appointment
of Ronald J.  Radcliffe  as our Chief  Financial  Officer,  we  entered  into an
employment  agreement with Mr. Radcliffe,  which sets forth terms and provisions
governing Mr. Radcliffe's  employment as Chief Financial Officer.  The Radcliffe
Agreement  provides  for an initial term of three years at an annual base salary
of $275,000.  Mr. Radcliffe shall be entitled to participate in any annual bonus
plan  or  equity  based  incentive  programs  maintained  by us for  our  senior
executives. In connection with his employment,  Mr. Radcliffe received an option
grant of a 10 year non qualified stock option to purchase  150,000 shares of our
common stock pursuant to the 2005 Equity  Incentive Plan at an exercise price of
$3.99,  vesting  33% 90  days  following  the  grant  date,  33%  on  the  first
anniversary  of the grant and 34% on the second  anniversary  of the  grant.  In
addition,  in  connection  with  appointment  of David P.  Hanlon  as our  Chief
Executive  Officer and President , we entered into an employment  agreement with
Mr.  Hanlon,  which sets  forth  terms and  provisions  governing  Mr.  Hanlon's
employment as Chief  Executive  Officer and President.  Mr.  Hanlon's  Agreement
provides  for an  initial  term of  three  years at an  annual  base  salary  of
$500,000.  Mr. Hanlon shall be entitled to  participate in any annual bonus plan
or equity based incentive  programs  maintained by us for our senior executives.
In connection  with his  employment,  Mr.  Hanlon  received an option grant of a
10-year  non-qualified  stock option to purchase  1,044,092 shares of our common
stock pursuant to the 2005 Equity  Incentive Plan at an exercise price per share
of  $3.99,  vesting  33% 90 days  following  the  grant  date,  33% on the first
anniversary  of the grant and 34% on the second  anniversary  of the grant.  Mr.
Hanlon received an additional  option grant of a  non-qualified  stock option to
purchase 720,000 shares,  subject to the closing of transaction among us, Empire
Resorts  Holdings Inc.,  Empire Resorts Sub, Inc.,  Concord  Associates  Limited
Partnership and Sullivan Resorts (the "Concord Transaction"), vesting 33% on the
later to occur of (i) the  closing of the Concord  Transaction  and (ii) 90 days
following the date of grant,  33% on the first  anniversary of the grant and 34%
on the second  anniversary  of the grant.  We also  granted Mr.  Hanlon  261,023
restricted  shares of common stock,  pursuant to the 2005 Equity  Incentive Plan
vesting 33% on the grant date, 33% on the first anniversary of grant, and 34% on
the second  anniversary of the grant. Mr. Hanlon received an additional grant of
180,000  restricted shares,  subject to the closing of the Concord  Transaction,
vesting  33% on  grant  date,  33%  on  first  anniversary  and  34%  on  second
anniversary.

         We  agreed  to  provide  certain  benefits  to  Mr.  Hanlon,  including
maintaining a term life insurance policy on the life of Mr. Hanlon in the amount
of  $2,000,000  and  reimbursement  for  relocation  expenses  and  expenses for
temporary housing.

         HORSEMEN PURSE ACCOUNT.  On September 30, 2005, our total obligation to
fund future purses was approximately  $3.4 million.  Our contract  pertaining to
this obligation with the horsemen  expired on May 31, 2004,  however we continue
to  recognize  this  expense on a basis  consistent  with past  practice.

         LEGAL PROCEEDINGS.  We are a party to various  non-environmental  legal
proceedings and administrative  actions, all arising from the ordinary course of
business.  Although  it is  impossible  to  predict  the  outcome  of any  legal
proceeding, we believe any liability that may finally be determined with respect
to such legal proceedings  should not have a material effect on our consolidated
financial position, results of operations or cash flows.

                                       22



         OFF  TRACK  BETTING  LITIGATION.  On June 15,  2005,  The New York City
Off-Track  Betting  Corporation (the "NYCOTB")  brought an action in the Supreme
Court of the State of New York  County of New York,  against  The New York State
Racing and Wagering Board (the "Board"), Yonkers Raceway and Monticello Raceway.
In its Notice of Petition, the NYCOTB alleges that (i) on February 16, 2005, the
Board  erroneously  interpreted  the New York Racing,  Pari-Mutuel  Wagering and
Breeding  Law when it  concluded  that in  order  for New  York  State  regional
off-track  betting  corporations  (the  "OTBs") to accept  wagers on and display
simulcast signals of out-of-state  thoroughbred races conducted after 7:30 p.m.,
the OTBs must pay the  harness  tracks in their  region a minimum  payment  (the
"Minimum Payment"),  exclusive of commissions paid by such OTBs to those harness
tracks for out-of-state harness races run before 6:00 p.m.; (ii) on February 16,
2005,  the  Board  erroneously  concluded  that  the  Minimum  Payment  must  be
calculated separately as to each harness track located with an OTB's region, and
paid separately to each track, rather than on an aggregate regional basis; (iii)
on February 23, 2005,  the Board erred in requiring OTBs to distribute a portion
of retained  commissions on thoroughbred races conducted at out-of-state  tracks
to their  regional  harness  tracks on days on which  neither the New York State
Racing  Association  is conducting  racing nor are the regional  harness  tracks
accepting wagers or displaying the simulcast signal from any other  thoroughbred
tracks ("Dark Days");  (iv) the determinations made by the Board on February 16,
2005 and  February 23, 2005 were the  functional  equivalent  of  administrative
rule-making,  in violation of New York State law and (v) the determinations made
by the Board on February  16, 2005 and  February  23,  2005 were  arbitrary  and
capricious,   as  the  Board  lacked  the  statutory   authority  to  make  such
determinations.  The NYCOTB seeks judicial annulment of the determinations  made
by the Board on  February  16, 2005 and  February  23,  2005  regarding  how the
Minimum  Payment is  calculated,  that  Minimum  Payments  should be  calculated
separately with respect to each regional harness track and that payments must be
made by OTBs to regional harness tracks on Dark Days. In addition, the NYCOTB is
seeking a refund of all moneys paid to  Monticello  Raceway by it as a result of
the determinations made by the Board on February 16, 2005 and February 23, 2005,
which  according  to the June 15, 2005 Notice of Petition,  total  approximately
$1,700,000.

         At  the  same  time,  each  of  Suffolk  Regional   Off-Track   Betting
Corporation (the "SROTB"),  Nassau Regional  Off-Track Betting  Corporation (the
"NROTB") and The Catskill Regional  Off-Track Betting  Corporation (the "CROTB")
brought  substantially  similar actions  against the Board,  Yonkers Raceway and
Monticello  Raceway  in the  Supreme  Court of the  State of New York  County of
Suffolk,  the  Supreme  Court of the State of New York  County of Nassau and the
Supreme Court of the State of New York County of Orange,  respectively,  seeking
substantially similar remedies. However, while the CROTB stated in its Notice of
Petition  that it paid  Monticello  Raceway  approximately  $363,000  due to the
determinations  made by the Board on February  16, 2005 and  February  23, 2005,
which the CROTB now seeks  reimbursement for, neither of the Notice of Petitions
filed by the SROTB  nor the  NROTB  state  any sum  certain  paid to  Monticello
Raceway due to the  determinations  made by the Board on  February  16, 2005 and
February  23,  2005 for which they too now seek  reimbursement.  We believe  any
liability should not have a material effect on our financial statements

NOTE K. SUBSEQUENT EVENTS

         On October 12, 2005, we received a letter of voluntary resignation from
Robert A. Berman tendering his resignation effective Friday, October 14, 2005 as
vice chairman and as a member of our board of directors.

         On October 12, 2005, we received a letter of voluntary resignation from
David J. Matheson  tendering his resignation  effective  Wednesday,  October 12,
2005 as a member of our board of directors.

         During the third  quarter of 2005,  we executed  various  agreements to
allow us to  pursue  the  possibility  that a prior  approval  for a  casino  at
Monticello  Raceway  could be used to develop a resort for the St.  Regis Mohawk
Tribe. We are in receipt of a letter, dated November 2, 2005, from the St. Regis
Mohawk Tribal Council to Philip Hogen, Chairman of the NIGC, and George Skibine,
the BIA's Acting Deputy Assistant Secretary for Economic Development and Policy,
stating that the St. Regis Mohawk Tribe has formally  decided to pursue a casino
project solely with Empire Resorts at Monticello Raceway. This letter was issued
as part of the effort to seek New York Governor George Pataki's concurrence with
the BIA's April 6, 2000 finding that a transfer of 29 acres of land owned by the
Empire Resorts would be in the best interest of the Mohawks and not  detrimental
to the surrounding  community.  The St. Regis Mohawk Tribe has now withdrawn its
application  for  land at the  Kutsher's  site  to be  developed  with  Harrah's
Entertainment,  Inc. and  requested an expedited  review of its  application  to
acquire 29.31 acres at Monticello Raceway.

         We will be seeking the consent of the holders of our 5 1/2% convertible
senior notes in order to amend certain  provisions  of the  indenture  governing
such notes to give management of the Company greater flexibility in developing a
Native American  casino at Monticello  Raceway with other Native American tribes
beside the Cayuga Nation of New York.

                                       23




ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The Management's  Discussion and Analysis of the Financial Condition and Results
of  Operations  should be read  together with the  Management's  Discussion  and
Analysis of Financial  Condition and Results of Operations and the  Consolidated
Financial  Statements  in our Annual  Report on Form  10-KSB for the fiscal year
ended December 31, 2004.

FORWARD-LOOKING STATEMENTS

         This Quarterly Report on Form 10-Q contains statements which constitute
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. These forward-looking statements generally relate to our strategies,
plans and  objectives  for future  operations  and are based  upon  management's
current   plans  and  beliefs  or  estimates   of  future   results  or  trends.
Forward-looking  statements  also involve risks and  uncertainties,  which could
cause  actual  results  to  differ   materially  from  those  contained  in  any
forward-looking  statement.  Many of these  factors  are beyond  our  ability to
control or predict.

         You should not place undue reliance on any forward-looking  statements,
which are based on current  expectations.  Further,  forward-looking  statements
speak  only  as of the  date  they  are  made,  and we  will  not  update  these
forward-looking  statements,  even if our  situation  changes in the future.  We
caution the reader that a number of important factors  discussed herein,  and in
other reports filed with the  Securities and Exchange  Commission,  could affect
our actual  results and cause  actual  results to differ  materially  from those
discussed in forward-looking statements.

OVERVIEW

         We were  organized as a Delaware  corporation  on March 19,  1993,  and
since  that time  have  served as a holding  company  for  various  subsidiaries
engaged in the  ownership,  development  and  operation of gaming and  amusement
industries.

         We now operate  Monticello  Raceway (the  "Raceway"),  a harness  horse
racing facility located in Monticello,  New York, 90 miles Northwest of New York
City and on June 30,  2004,  we began  operating  1,744  video  gaming  machines
("VGM") on the  property.  We have an agreement  with the St. Regis Mohawk Tribe
(the  "Mohawks") to develop and manage a Native  American casino adjacent to the
Raceway.  We also  have an  agreement  with the  Cayuga  Nation of New York (the
"Cayuga  Nation") to develop and manage a Native  American  casino  entitled the
Cayuga Catskill Resort. We may acquire through a merger next year two additional
resort  properties.  Our current business plan is to develop two to three resort
locations  in the  Catskills  region  of New  York.  These  locations  will have
multifaceted  recreation facilities and other amenities. We have and continue to
explore resort development in other geographical locations.  Additional business
developments  or other  unforeseen  events may occur,  resulting  in the need to
raise  additional  funds.  Any such  developments  would  require  us to  obtain
additional funds through additional equity or outside financing.

         Our management  believes,  that while there is much undeveloped land in
the  Catskills  region,  there  are only a few sites  that can have  appropriate
entitlements (such as rights to water and waist water disposal), room and zoning
for ancillary development and appropriate access to main highways to accommodate
the volume of visitors  expected at a  successful  casino  project.  Much of the
Catskills  region  has  been  designated  as  nature  preserves  and  cannot  be
developed.   Among  the  sites  that  we  believe  are  appropriate  for  casino
development is our Monticello facility, the former Concord Resort and the former
Grossinger's property.

         We plan to grow  and  diversify  our  business  through  marketing  our
services to gaming and hospitality  clients,  seeking  consulting  relationships
with  additional  gaming  clients and being  receptive  to  acquisitions,  joint
ventures  or other  growth  opportunities  to include  ownership  of  additional
development property.

         We have  spent  significant  amounts  of  money  generated  principally
through  the  issuance  of equity and debt in  connection  with our  development
activities, primarily for the design, development, financing and construction of
our VGM operation,  as well as the  predevelopment,  design, and negotiations of
Native American casinos.  Predevelopment  costs include expenses associated with
legal fees, accounting fees and costs relating to employees. Some of these costs
have been  capitalized.  We  periodically  review  these  capitalized  costs for
impairment. If such review shows that the assets are impaired the carrying value
will be reduced to fair value which could adversely affect the financial results
in that period.

         We have never  declared or paid any cash dividends on our common stock.
We currently  intend to retain our earnings,  if any, to finance our growth and,
therefore,  do not  anticipate  paying any cash dividends on our common stock in
the foreseeable future. Any determination to pay dividends in the future will be
at the  discretion  of our board of directors and will depend upon our financial
condition,  results of operations  and capital  requirements.  In addition,  the
payment of cash  dividends is  restricted  by financial  covenants in our credit
agreement with Bank of Scotland.

                                       24



RACEWAY OPERATIONS AT MONTICELLO RACEWAY

         Monticello  Raceway  Management,  Inc. our wholly owned subsidiary is a
New York corporation that operates  Monticello  Raceway,  a harness horse racing
facility located in Monticello, New York that includes our VGM operation.

         Monticello Raceway harness horse racing derives its revenue principally
from (i)  wagering  at the Raceway on live races run at the  Raceway;  (ii) fees
from  wagering at  out-of-state  locations on races  simulcast  from the Raceway
using export simulcasting; (iii) revenue allocations, as prescribed by law, from
betting activity at New York City,  Nassau County and Catskill Off Track Betting
facilities  ("OTB")  (certain of such  revenues are shared with Yonkers  Raceway
based on a pro rata market share calculation updated monthly);  (iv) wagering at
the  Raceway  on races  broadcast  from  out-of-state  racetracks  using  import
simulcasting;  and (v),  program  and racing  form  sales,  the sale of food and
beverages and certain other ancillary activities.  The Raceway operation employs
approximately 100 employees including management.

VIDEO GAMING OPERATIONS AT MONTICELLO RACEWAY

         A VGM is an  electronic  gaming  device  that  allows a patron  to play
electronic  versions  of  various  lottery  games of chance  and is  similar  in
appearance to a traditional  slot machine.  On June 30, 2004, we began operating
1,744  VGM on  45,000  square  feet of floor  space at  Monticello  Raceway.  At
September 30, 2005, the number of VGM in operation was 1,717.  The VGM operation
employs approximately 300 employees.

         On  April  13,  2005,  New  York  State  enacted  a law  impacting  VGM
operations that, among other things,  established a vendor's marketing allowance
which is greater  than that  provided  under the then  existing New York law and
eliminated the provisions of the prior law which mandated that certain  proceeds
from video lottery gaming be reinvested in the horse racing industry. Our vendor
fee  previously  was  not   sufficient  to  cover  the   significant   costs  of
installation,  security,  and operation of video lottery  terminals  while still
providing  a  sufficient  return  so  as  to  ensure  among  other  things  that
out-of-state operators did not have a competitive advantage.

ST. REGIS MOHAWK RESORT DEVELOPMENT

         We had  previously  attempted  to develop a casino  with the Mohawks in
2000.  Specifically,  the Mohawks received  certain federal  approvals needed in
2000 to build a casino at Monticello Raceway that would have been managed by the
Company's predecessor,  Catskill Development, L.L.C. However, in April 2000, the
Mohawks agreed to work  exclusively with Park Place  Entertainment  Corporation,
now part of Harrah's Entertainment, Inc., which proposed to develop a casino for
the Mohawks at the nearby Kutsher's Sporting Academy.  However,  by Summer 2005,
the  needed  approvals  for a  casino  at  Kutsher's  Sporting  Academy  had not
materialized, and the Mohawks' tribal leaders engaged the Company to discuss the
possibility  of moving forward with the  previously  obtained  approvals for the
casino project at Monticello Raceway.

         On August 1, 2005, we entered into a letter  agreement with the Mohawks
pursuant to which the  Mohawks  acknowledged  that on April 6, 2000,  the United
States  Department of the Interior advised New York State Governor George Pataki
that the  acquisition  of 29 acres at  Monticello  Raceway  would be in the best
interest of the Mohawks and would not be detrimental to the community. Under the
letter agreement, the Company and the Mohawks affirmed, subject to the requested
concurrence by Governor Pataki, all of their prior contracts to develop a Native
American  casino at  Monticello  Raceway (the "St.  Regis Mohawk  Casino").  The
Mohawks further agreed to (1) satisfy all  requirements for the Bureau of Indian
Affairs (the "BIA") in  connection  with the transfer of the 29 acres of land to
the United States government in trust for the Mohawks, (2) resolve any remaining
issues for the finalization of the pre-existing management agreement with one of
the Company's  subsidiaries for the project previously submitted to the National
Indian Gaming Commission (the "NIGC"),  (3) execute any amendment or revision to
such management agreement,  or any collateral  agreements,  that may be mutually
agreed  upon in such  process,  (4)  support  the  approval  of such  management
agreement,  as so  amended  or  revised,  by the  NIGC  and (5) take any and all
reasonably required steps to consummate the land to trust transfer of the parcel
pursuant to the April 6, 2000 determination as promptly as practicable following
the concurrence of Governor Pataki.

CAYUGA CATSKILL RESORT DEVELOPMENT

         On April 3, 2003,  Monticello Casino Management,  the Cayuga Nation and
the Cayuga Catskill Gaming Authority (the  "Authority"),  an  instrumentality of
the Cayuga  Nation  formed to develop and conduct  gaming  operations  signed an
initial form of gaming facility management agreement and related agreements. The
agreements  provided for us to supply technical and financial  assistance to the
Cayuga  Nation  and  to  serve  as its  exclusive  partner  in the  development,
construction,  financing,  operation and management of a proposed  casino in the
Monticello area. The principal agreements were extended in June 2005 to December
31, 2005.  Our  agreements  with the Cayuga Nation were entered into through our
principal  subsidiaries.  Subsequent to entering into our initial agreement with
the Cayuga Nation,  leadership  issues have arisen within the Cayuga Nation.  We
entered into the extension  agreement with members of the Cayuga Council who are
working to form a  provisional  government.  Efforts are  underway to attempt to

                                       25



resolve the leadership issues within the Cayuga Nation and we cannot predict the
outcome of these efforts.  However, based on our unique access to sites which we
believe to be highly  suitable as sites for Native  American  gaming  authorized
under existing New York law and the results of a recent poll indicating  support
for the  project by members of the Cayuga  Nation,  we are  optimistic  that the
leadership issues will only delay,  rather than defeat,  our mutual efforts with
the Cayuga Nation.

         Currently,  it is anticipated that the Cayuga Nation will be authorized
to  develop  and  operate  a  gaming  facility  as the  result  of a land  claim
settlement  agreement  with  the  State  of  New  York.  There  are  significant
preconditions  that must  occur  before  such a  settlement  can  occur.  First,
legislation must be passed by the New York State  legislature.  Second,  similar
legislation must be passed by the United States Congress. Third, title to a site
must be transferred to the United States and accepted into trust for the benefit
of the Cayuga  Nation.  Fourth,  the Cayuga  Nation  must enter into a Class III
gaming  compact  with the  State  of New  York.  The  negotiations  between  the
interested  parties are complex and we  anticipate  that there may be changes to
our initial  agreements.  We do not  currently  anticipate  settlement  of these
issues prior to 2006.

         On July 22, 2005, the Company entered into a letter  agreement with the
Cayuga Nation and the Cayuga Catskill  Gaming  Authority (the  "Authority"),  as
represented  by the  leaders  of the Tribe who are  currently  in support of the
project.  Under this letter  agreement,  the Company,  the Cayuga Nation and the
Authority  agreed  that,  if the  Governor  were to concur with the existing BIA
approval for the Mohawks to acquire the site at Monticello  Raceway,  the Cayuga
Nation and the Authority  would work with the Company to develop a larger parcel
of land located at the site of the former  Concord  Hotel and Resort,  which the
Company is in contract to acquire, as the site for the Cayuga Catskill Resort (a
Native American casino to be jointly developed by the Company, the Cayuga Nation
and the  Authority).  This new arrangement  contemplates  that the Cayuga Nation
will acquire more  sovereign  land and develop a hotel on such land as well as a
casino.  The new letter agreement is subject to the same leadership  issues that
apply with respect to our extension agreement as more fully described below.

         CAYUGA NATION LEADERSHIP ISSUES

         We have been advised  that on July 18, 2005,  Mr.  Franklin  Keel,  the
Regional  Director of the Eastern  Regional  Division of the BIA sent letters to
two groups of members of the Cayuga Nation currently seeking federal recognition
of their tribal leadership. Mr. Keel did not grant federal recognition to either
group,  but  offered  to  assist  with  mediation  or other  means  of  conflict
resolution.  Although the degree to which the Cayuga  Nation  honors our current
agreements  with respect to the planned Cayuga  Catskill Resort is ultimately an
internal matter for the Cayuga Nation, the question of federal  recognition is a
matter that may affect the approval process for any management  agreement by the
NIGC. We have  indicated our support for efforts to resolve the  leadership  and
federal representation issues as promptly as possible through mediation or other
conflict resolution means.

                                       26




PROPOSED CONCORD AND GROSSINGER LAND ACQUISITION

         On March 3, 2005,  we entered into an Agreement  and Plan of Merger and
Contribution  with  Concord  Associates  Limited  Partnership  ("Concord"),  and
Sullivan  Resorts,  LLC  ("Sullivan")  (the  "Merger  Agreement").   The  Merger
Agreement  amends and  supersedes  the November 12, 2004 letter  agreement.  The
acquisition  is  expected  to allow us to  obtain  additional  casino  and hotel
development sites, totaling over 1,200 acres of land.  Grossinger's Resort Hotel
and Golf Course,  consists of  approximately  582 acres of land,  various unused
hotel buildings, golf course and related facilities.  The Concord Hotel consists
of approximately 163 acres of land, unused hotel buildings,  the Challenger golf
course and  related  facilities.  The Concord  Resort and Golf Club,  leases the
International  golf course until the  property is  appropriately  subdivided  at
which point Concord will convey fee title for no additional  consideration,  the
ground lease for the Monster golf course,  a club house, and lodging and support
facilities.

         If the transactions contemplated by the merger agreement are completed,
a new entity will control the Company ("New  Empire"),  and in exchange for each
share of the Company's common stock owned, holders will receive one share of new
common stock and in exchange for each share of the Company's  Series B or Series
E preferred  stock,  holders will  receive one share of  preferred  stock in New
Empire  having  equivalent  terms to the  Series B or Series E  preferred  stock
respectively.  For the contribution to New Empire of certain real estate assets,
Concord will receive approximately 18 million shares of New Empire common stock,
which  will  constitute  approximately  40% of the total  number  of issued  and
outstanding  shares of the New Empire common stock on a fully diluted basis, and
New Empire will assume or otherwise satisfy certain indebtedness and liabilities
not to exceed $30 million.  Prior to executing the Merger  Agreement,  we formed
two new subsidiaries, Empire Resorts Holdings, Inc. and Empire Resorts Sub, Inc.
Empire Resorts Sub, Inc. will merge with and into the Company,  with the Company
being the surviving corporation.

         We will hold a special  meeting of stockholders to consider and vote on
the transactions. We have started the necessary preparations for the transaction
and have  expended  capital  resources to comply with both internal and external
requirements and the covenants of the agreement. The transaction contemplated by
the Merger Agreement is intended to qualify as a tax-free  exchange  pursuant to
the Internal Revenue Code of 1986, as amended.

         Robert  Berman,  a former  member of our board of directors  and former
chief  executive  officer of Empire,  Scott  Kaniewski,  former Chief  Financial
Officer of Empire, Morad Tahbaz, former President of Empire, Ralph Bernstein,  a
member of our board of  directors,  Joseph  Bernstein,  a member of our board of
directors,  and certain of their affiliates,  beneficially owning  approximately
40% of the  voting  power  of our  common  stock  as of the  date of the  merger
agreement,  have entered into a voting  agreement.  Under the voting  agreement,
Messrs. Berman,  Kaniewski,  Tahbaz,  Bernstein,  and Bernstein,  and certain of
their  affiliates  have granted to Concord an  irrevocable  proxy to vote all of
their shares of our common stock in favor of approval and adoption of the merger
agreement and approval of the transactions  contemplated by the merger agreement
and against any alternative  business  combination proposal or any other action,
proposal, transaction or agreement that would result in the breach of any of our
obligation under the merger agreement or of any of their  obligations  under the
voting agreement.

         We anticipate  the merger to close in 2006 due to the complexity of the
transaction.  We anticipate  restructuring  debt associated with the merger, and
will  seek  various  amendments  (or  covenant  waivers)  to our  existing  debt
instruments, prior to the closing.

                                       27




MONTICELLO RACEWAY DEVELOPMENT

         Monticello Raceway  Development is a New York limited liability company
with the exclusive right to design, engineer,  develop, construct, and furnish a
Class III Gaming  facility  that is  proposed to be  developed  on 29 of the 232
acres of land at the Monticello Raceway in Monticello, New York.

         Monticello  Raceway  Development,  in  connection  with its  gaming and
development activities,  capitalizes certain legal,  architectural,  engineering
and environmental  study fees, as well as other costs including  salaries of key
personnel,  directly  related to the gaming license and  development of the real
estate.  On June 30,  2005 in  accordance  with our  capitalization  policy,  we
determined to recognize an impairment to our  capitalized  assets related to our
agreements  with the Seneca - Cayuga Tribe of Oklahoma.  We elected to recognize
an  impairment  loss of  approximately  $2.4  million  since the  likelihood  of
recovering  these costs through the development of a project under the framework
of our current  relationship  with the Seneca - Cayuga Tribe has become doubtful
due to a variety of factors.  We will  continue to search for other  development
opportunities for the proposed Merger Agreement.

         During the nine months ended  September  30, 2005 and 2004,  Monticello
Raceway  Development  capitalized  approximately  $3.4 million and $2.1 million,
respectively,   of  additional   costs   associated  with  advances  and  casino
development  projects.  Capitalized  costs that are specifically  related to our
current Native American projects are refundable under certain  circumstances and
are  non-interest-bearing.  When the financing of the operation is completed the
gaming  license and  development  costs will be evaluated for refund ability and
when  the  operations  of a  proposed  casino  commence  the  balance,  if  any,
systematically  recognized over a determinable  period.  These capitalized costs
are  periodically  reviewed for  impairment.  At September 30, 2005,  Monticello
Raceway Development employed two full-time employees.

         We believe that our  management  agreement  with the Cayuga Nation with
all  appropriate  approval  will  generate  net revenue in the first year of the
development  contract.  In addition,  most of the costs that are  capitalized at
September 30, 2005 will be reimbursed  through  provisions of the contracts with
development  capital raised by our Native  American  partners.  We are currently
evaluating the available deferred tax asset to utilize when this revenue becomes
realizable.

SENECA-CAYUGA CASINO DEVELOPMENT OPERATIONS

         On August 19, 2004,  we entered into a one year letter  agreement  with
the Seneca-Cayugas,  to develop a gaming facility in the Catskills region of New
York.

         In  April  2005,  the  Seneca-Cayugas   began  exploring  the  idea  of
developing a Native  American  casino in Saugerties,  New York, in the county of
Ulster,  at a site  controlled  by a third  party.  We have  advised them of our
concerns  in  proceeding  with  this site  rather  than of  developing  a Native
American  casino in Sullivan  County,  New York at a site we have identified and
secured  control over  because of concerns  that they may not be able to achieve
timely approvals for such site.

         In addition to the foregoing,  on May 5, 2005 we received a letter from
a law firm  purporting  to  represent  the  Seneca-Cayugas  which  stated  that,
following its review of certain  documentation,  the firm had concluded  that we
and the  Seneca-Cayugas  do not have an  enforceable  or valid  contract for any
purpose  whatsoever.  The letter  alleged that  negotiations  between us and the
Seneca-Cayugas  had  terminated  and inquired  whether we had a position that is
different from their  conclusion.  We have received no official  confirmation of
the  allegations  made in this  letter.  However,  since the date of this letter
significant  changes  have  occurred  as  a  result  of  legislative  and  legal
developments  affecting  the status of the  Seneca-Cayugas'  casino  development
efforts  and we  have  conducted  no  further  official  negotiations  with  the
Seneca-Cayugas.   Accordingly,   pursuant  to  our  policy  of   assessing   the
recoverability  of  its  long-lived  assets,  we  elected  to  write  off  those
development costs directly related to the project. Accordingly, we recognized as
a loss previously  capitalized costs totaling approximately $2.4 million for the
nine months ended September 30, 2005.

                                       28



COMPETITION

         We believe that Monticello  Raceway and the St. Regis Mohawk Casino are
uniquely  situated to be successful as the site for enhanced gaming  operations,
as the  site is less  than 90 miles  northwest  of New York  City,  making  it a
shorter  trip from the  nation's  most  populous  metropolitan  area than either
Atlantic City or any regional Native  American  casino,  including  Foxwoods and
Mohegan Sun in Connecticut.  There are  approximately  one million adults living
within 50 miles of the Raceway and  approximately  18.4  million  adults  living
within  100  miles  of  the  Raceway  with  an  average   household   income  of
approximately  $76,000.  The  Raceway is  directly  adjacent  to Highway 17, has
highly visible  signage and  convenient  access and is less than 1,000 feet from
the highway.  There is no direct competition at this time for our VGM operations
within  85  miles  of the  Raceway.  However,  on July 4,  2004,  the  State  of
Pennsylvania  enacted a law  allowing  for the  operation  of up to 61,000  slot
machines at 14 gambling halls,  including  seven  racetracks,  five  stand-alone
parlors,  and two resorts.  Pursuant to this new law,  slot  machine  facilities
could be developed within 30 miles of the Raceway that compete directly with our
VGM  operation.  Furthermore,  while a number of  prospective  competitors  have
expressed  interest in sponsoring the  development  of another  Native  American
casino in the  Monticello,  New York area,  we believe that each of them is at a
competitive  disadvantage  given our site's ease of access, our ability to offer
horse racing and VGM in addition to regular casino gambling, and our belief that
we and our partners are  considerably  further along in the regulatory  approval
process than any other competitor.

         A  number  of  states  are  currently   considering   or   implementing
legislation  to  legalize  or expand  gaming.  Such  legislation  presents  both
potential  opportunities  to establish new properties and potential  competitive
threats to business at our existing property (such as Pennsylvania).  The timing
and occurrence of these events remain uncertain.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

         The following is a brief discussion of the critical accounting policies
used  in the  preparation  of our  financial  statements,  including  accounting
policies and methods  used by us, which  require  subjective  judgments  and are
considered very important to the understanding of our financial condition.

         The significant accounting estimates inherent in the preparation of our
financial statements include estimates  associated with management's  evaluation
of the recoverability of gaming related capitalized costs,  accounts receivable,
the Horsemen's future purse liability and advances to tribal gaming authorities.

         In December 2004,  the Financial  Accounting  Standards  Board ("FASB")
issued  Statement of Financial  Accounting  Standards  ("SFAS")  123-R  (revised
December  2004),  "Share-Based  Payment",  which  is a  revision  of  SFAS  123,
"Accounting  for Stock-Based  Compensation,"  and supersedes APB Opinion No. 25,
"Accounting  for Stock Issued to Employees."  This  statement  requires that the
fair value at the grant date resulting from all share-based payment transactions
be recognized in the financial statements. Further, SFAS 123-R requires entities
to  apply  a  fair-value  based  measurement  method  in  accounting  for  these
transactions.  This value is  recorded  over the vesting  period.  On January 1,
2003,  we  adopted  SFAS  123 and  are  reporting  the  fair  value  recognition
provisions on a prospective basis.  Recognition of expenses  associated with the
issuance  of options  has had a  material  effect on  operating  results in past
periods and will have a material  effect in the periods  that options are issued
in the future. We expect to adopt SFAS 123-R effective January 1, 2006, based on
the new effective date announced by the SEC.

         RECENT ACCOUNTING PRONOUNCEMENTS.

On July 14, 2005, FASB issued its Exposure Draft,  "Accounting for Uncertain Tax
Positions",  which is a  proposed  interpretation  to FASB  Statement  No.  109,
"Accounting  for Income  Taxes." This proposed  interpretation  would require an
enterprise to recognize,  in its financial statements,  the best estimate of the
impact  of a tax  position.  In  evaluating  whether  the  probable  recognition
threshold  has  been  met,  this  proposed   interpretation  would  require  the
presumption  that the tax position  will be evaluated  during an audit by taxing
authorities.   The  term  probable  is  used  in  this  proposed  interpretation
consistent with its use in FASB Statement No. 5, "Accounting Contingencies",  to
mean "the future event or events are likely to occur."  Individual tax positions
that fail to meet the probable  recognition  threshold will generally  result in
either (a) a reduction  in the  deferred  tax asset or an increase in a deferred
tax  liability or (b) an increase in a liability for income taxes payable or the
reduction of an income tax refund  receivable.  The impact may also include both
(a) and (b). The proposed interpretation would be effective as of the end of the
first fiscal year ending after December 15, 2005. The initial recognition of the
effect of applying the proposed interpretation would be a cumulative effect of a
change  in   accounting   principle.   The  comment   period  for  the  proposed
interpretation ends on October 28, 2005. The Company is currently evaluating the
impact of the Exposure Draft on its financial statements.

RESULTS OF OPERATIONS

   THREE  MONTHS  ENDED  SEPTEMBER  30,  2005  COMPARED  TO THREE  MONTHS  ENDED
SEPTEMBER 30, 2004

                                       29



   REVENUES.  Net revenues increased  approximately $3.8 million (17.3%) for the
quarter ended  September  30, 2005 compared to September 30, 2004.  Revenue from
racing  increased by  approximately  $1.4  million  (56.5%) and revenue from VGM
operations  by  approximately  $2.5  million  (14.0%)  offset by an  increase in
complimentary expense of approximately $0.2 million.

         In VGM  operations,  the  daily  win per  unit  for the  quarter  ended
September 30, 2005 was $123.17 compared to $113.12 for the corresponding quarter
in 2004 (an increase of 8.8%).  The increase in racing  revenues was a result of
increased  revenue  allocations  from OTB  facilities.  The track that  normally
shares in those  allocations  with us was not in operation  for the three months
ended September 30, 2005 and our allocable share was increased  significantly as
a  result.  That  track had been in  operation  in the  corresponding  period in
2004.

   OPERATING COSTS.  Operating costs decreased by approximately  $207,000 (1.0%)
for the quarter ended September 30, 2005 compared to September 30, 2004.

   SELLING,  GENERAL AND  ADMINISTRATIVE.  Selling,  general and  administrative
expenses  increased  approximately  $2.9 million in the third quarter of 2005 as
compared to the third  quarter of 2004.  This  increase was due  primarily to an
increase  in  stock-based  compensation  of  approximately  $2.4  million and an
increase in other compensation of approximately $400,000.

   INTEREST  EXPENSE.  Interest  expense  was  approximately  $1.3  million  and
$628,000,  respectively, for the quarters ended September 30, 2005 and 2004. Our
senior  convertible  notes issued in July 2004 were  outstanding  in the quarter
ended  September 30, 2004 for  approximately 2 months at an annual interest rate
of 5.5%. In the quarter ended  September 30, 2005 they were  outstanding at 5.5%
annual  interest  rate for one  month  and at 8%  annual  interest  rate for two
months.  The reason for this increase in rate was the absence of a Trigger Event
before  July  31,  2005 as  described  in Note F to the  Condensed  Consolidated
Financial  Statements.  This  resulted in an  increase  in  interest  expense of
approximately  $569,000. The remainder of the increase is due to interest on our
revolving  credit  line which had  approximately  $7.3  million  outstanding  at
September 30, 2005.

   DEPRECIATION. Depreciation expense was approximately $282,000 for the quarter
ended  September 30, 2005 and $316,000 for the quarter ended September 30, 2004.
The  major  portion  of  our  building  improvements,  furniture,  fixtures  and
equipment  relates to our VGM  operations  and was placed in service  when those
operations commenced on June 30, 2004.

   NINE MONTHS ENDED  SEPTEMBER 30, 2005 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 2004

   Our operations  during the nine months ended September 30, 2005 and 2004 were
not similar due to the commencement of VGM operations on June 30, 2004.

   REVENUES.  Net revenues  increased  approximately  $37.2 million for the nine
months  ended  September  30, 2005  compared to the  comparable  period in 2004.
Racing operations provided approximately $3.1 of that increase and the remainder
was due to the VGM operations that started June 30, 2004.

   OPERATING COSTS.  Operating costs increased  approximately  $26.6 million for
the nine months ended  September  30, 2005 compared to September 30, 2004 due to
operating costs associated with the VGM operations.

   SELLING,  GENERAL AND  ADMINISTRATIVE.  Selling,  general and  administrative
expenses increased approximately $2.2 million in the nine months ended September
30, 2005  compared to the same  period in 2004 due  primarily  to an increase in
stock - based compensation and other compensation in 2005.

   INTEREST  EXPENSE.  Interest  expense  was  approximately  $3.3  million  and
$965,000,  respectively,  for the nine months  ended June 30, 2005 and 2004.  In
July 2004 we issued $65 million senior  convertible  notes with an interest rate
of 5.5% to July 31, 2005 and 8% thereafter,  and in January 2005 we entered into
a revolving  credit  facility  with Bank of  Scotland.  The increase in interest
expense is consistent with that additional financing.

   DEPRECIATION.  Depreciation  expense was approximately  $839,000 for the nine
months ended September 30, 2005 and $336,000 for the nine months ended September
30,  2004.  This  variance  was due to  depreciation  of building  improvements,
furniture,  fixtures and equipment additions relating to the VGM operations that
commenced on June 30, 2004.

   OTHER. During the second quarter of 2005, our negotiations under an agreement
with the Seneca-Cayugas to develop gaming facilities was adversely affected by a
variety of circumstances. Pursuant to our policy of assessing the recoverability
of long-lived  assets,  we elected to write off those development costs directly
related  to  the  project.  Accordingly,  we  recognized  as a  loss  previously
capitalized costs totaling  approximately $2.4 million for the nine months ended
September 30, 2005.

OPERATING EXPENSES

         For the nine  months  ending  September  30,  2005 and the year  ending
December 31, 2004,  all operating  expenses are  attributable  to our operations
through Monticello Raceway.  The following table presents the expense categories
that comprise  operating  expenses as a percentage of total operating  expenses.
Operating  expenses  were  not  comparable  for the  nine  month  period  ending
September  30, 2005 as compared to the  corresponding  nine month period in 2004
due to the commencement of our VGM operation on June 30, 2004.

                                       30



                                              Nine Months Ended      Year Ended December 31,
                                              September30, 2005              2004
                                              ------------------     -----------------------
As a percentage of revenue:
Purses, Commissions and Cost of Sales              80%                      71%
Labor and related expenses                         13%                      17%
Building occupancy related expenses                 6%                      10%
Other operating expenses                            1%                       2%

                                              -----------------       -----------------
Total operating expenses  (in thousands)        $54.2                    $44.3
                                              =================       =================

   New York State Lottery's share in the VGM revenue was approximately $11.2 and
$32.6 million,  respectively,  during the three and nine months ending September
30, 2005.

LIQUIDITY AND CAPITAL RESOURCES
   Cash  and cash  equivalents  ("cash")  decreased  approximately  $867,000  to
approximately  $6.3 million as of September  30, 2005 from December 31, 2004. At
September  30,  2005,  approximately  $7.3  million  was  borrowed on our credit
facility with the Bank of Scotland.



                                                  Nine Months Ended
                 (in thousands)             September 30, September 30,
                                               2005          2004
                                            ---------------------------

Net cash used in operating activities        $ (2,797)    $ (8,043)


Net cash used in investing activities          (4,932)     (29,804)


Net cash provided by financing activities       6,862       50,683

- -----------------------------------------    --------     --------

Net increase (decrease) in cash              $   (867)    $ 12,836
                                             ========     ========

   Our  principal  source of  liquidity  is cash  generated  from our  operating
activities,  the issuance of public or private  placement  debt, bank borrowings
under our credit facility and the issuance of equity and debt securities.

   Our principal liquidity needs for the remaining three months of 2005 are:

          - fund normal recurring expenses;
          - meet the  obligations  under  our  operating  line-of-credit,  which
            matures in January 2007;
          - fund  the  obligations  for our  current  and  proposed  development
            projects in the Catskills region of New York.

         On August 1, 2005 the  interest  rate on our senior  convertible  notes
increased  to 8%. On January 31, 2006,  the  interest  payment due on the senior
convertible  notes will be $2.6  million (in the  absence of the  Trigger  Event
occurring during the six months to January 31, 2006).

         We will be seeking the consent of the holders of our 5 1/2% convertible
senior notes in order to amend certain  provisions  of the  indenture  governing
such notes to give management of the Company greater flexibility in developing a
Native American  casino at Monticello  Raceway with other Native American tribes
beside the Cayuga Nation of New York.

         Resort  operations  are highly  seasonal in nature  with peak  activity
occurring from June to September.  Our operating  results are susceptible to the
effects of heavy snowfall, floods and adverse weather conditions.  Historically,
we have  temporarily  suspended  operations on various  occasions as a result of
such  adversities.   Under  less  severe  weather  conditions,   general  public
perception of diminished  access to the casino  resulted in decreased  revenues.
Therefore,  we do not believe  the revenue  results for the first nine months of
2005 will be indicative of the total revenue for the full year 2005.

         At September  30,  2005,  we had  undeclared  dividends on our Series E
Preferred  Stock of  approximately  $3.9  million and  undeclared  dividends  of
approximately  $125,000 on our Series B Preferred Stock.  With a few exceptions,

                                       31




we have  historically  paid the Series B  Preferred  Stock  dividends  in common
stock.

         At September 30, 2005,  included in accrued  expenses is  approximately
$3.4 million  relating to future Horsemen  account race purses that we will fund
for Monticello  Raceway.  At December 31, 2004 the amount was approximately $2.6
million. Our contract with the Horsemen expired on May 31, 2004.

         Net cash used in  operating  activities  during the nine  months  ended
September  30,  2005  totaled  approximately  $2.8  million.  This is  primarily
attributable  to interest  and  corporate  expenses  and an increase in accounts
receivable  relating  to  marketing  allowance  funds  from the New  York  State
Lottery.

         Net cash used in investing  activities  in during the nine months ended
September 30, 2005 totaled  approximately $4.9 million,  consisting primarily of
approximately  $1.9 million for a new paddock and  equipment  and  approximately
$2.8  million  in costs  associated  with the  casino  development  project  and
advances to Tribal Gaming Authorities.

         Net cash provided by financing  activities during the nine months ended
September 30, 2005 totaled approximately $6.9 million,  which is attributable to
the borrowings under our revolving credit facility.

         In April 2005, a New York State law modification established a vendor's
fee  which  amended  the  split  of gross  gaming  revenues  to allow a  greater
percentage to be retained by the racetracks for operating  expenses.  Our vendor
fee  previously  was  not   sufficient  to  cover  the   significant   costs  of
installation,  security,  and operation of video lottery  terminals  while still
providing  a  sufficient  return  so  as  to  ensure  among  other  things  that
out-of-state  operators  did not have a  competitive  advantage.  Currently  the
additional amount due attributable to the marketing program is being held by the
State of New York.  The amount  being held by the State of New York at September
30, 2005 was approximately $3.1 million,  which includes the marketing allowance
and is recorded as an account receivable at that date.

         Monticello Raceway Management  currently offers a point loyalty program
for our VGM  customers  which allow them to earn  points  based on the volume of
their VGM  activity.  Points  earned by customers are recorded as expense in the
period they are earned. In estimating the amount of the liability for unredeemed
points,  which was  approximately  $144,000 at September 30, 2005, we estimate a
redemption  rate, a cost of rewards to be offered and the mix of cash, goods and
services for which reward  points will be redeemed.  We use  historical  data to
estimate these amounts.

         On November 12, 2004,  we granted  Concord  Associates  an  irrevocable
three year option to purchase up to  5,188,913  shares of our Common  Stock at a
price of $7.50 per share as a termination  fee. The options are  exercisable  in
the event that the merger  agreement  is  terminated  for certain  reasons.  Our
responsibilities  in relation to keeping the options from being  exercisable are
to secure a favorable vote of both the common stock shareholders and the holders
of the senior convertible  notes. In addition,  if we have a change of ownership
prior to the  consummation  of the  acquisition of the Concord and  Grossinger's
Resort Hotels and Golf Courses,  the new ownership must complete the acquisition
transaction.  Our Board of Directors voted in favor of the acquisition. The cost
associated  with the options is recorded  beginning in the three and nine months
ended  September  30,  2005 as  further  described  in  Note H to the  Condensed
Consolidated Financial Statements.

         As part of the  consideration for the proposed merger, we will issue to
Concord  and  Sullivan  18 million  shares of common  stock,  approximately  40%
ownership of our company on a fully diluted basis.  In addition to the shares of
common stock,  we will assume certain real estate related debt not to exceed $30
million.

         As of December 31, 2004,  we had net operating  loss carry  forwards of
approximately  $77  million  that expire  between  2008 and 2024.  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. Our merger with the operations of Catskill Development in 2004 limits the
amount of usable  net  operating  losses due to the  change in  control.  We are
evaluating the impact of the limitations for future application.

         The State of New York approved Monticello Raceway  Management,  Inc.and
the  property  owned  by it  in  2002  as an  Empire  Zone.  Monticello  Raceway
Management,  Inc. is therefore  eligible  for tax credits  which are applied for
when the Company files its' New York State  corporate tax returns.  The credits,
exemptions, and reductions are as follows.

         1)       Wage Tax Credit:
         2)       Real Estate Tax Credit
         3)       Tax Reduction Credit
         4)       Sales Tax Exemption
         5)       Utility rate reductions

         The Wage Tax  credit is a five  year  program.  The  credit is based on
increased  employment within the Empire Zone.  Monticello Raceway Management has
qualified for approximately  $225,000 in credits for 2004. The credit has a life
of 5 years and an indefinite carryover of any unused credits.

                                       32




         The Real Estate Tax credit and the Tax Reduction  credit have a life of
15 years.  The Real Estate Tax credit is a refundable  credit of all real estate
taxes paid on an Empire  Zone  Property.  The Real Estate Tax credit for 2004 is
approximately  $200,000 and is included in our accounts  receivable at September
30, 2005. The Tax Reduction credit is a  non-refundable  credit used against NYS
corporation tax due.

OFF-BALANCE SHEET ARRANGEMENTS

         On January 12, 2004, in order to better focus on the  development  of a
VGM program at the Raceway and  current  business  arrangements  with the Cayuga
Nation,  all our interests with respect to litigation against Harrah's Operating
Company,  Inc. which alleged tortuous interference with contractual and business
relationships,  were transferred to a liquidating litigation trust. We agreed to
provide  the  litigation  trust  with a $2.5  million  line of  credit.  Through
September  30, 2005, a total of $700,000  had been  disbursed to the  litigation
trust. Due to the unpredictable nature of the litigation and the pending motions
currently  under  review,  we  have  provided  for  a  valuation   allowance  of
approximately  $700,000  against the receivable  from the litigation  trust.  We
expect to make  additional  disbursements  on this line of credit in fiscal year
2005.

         On May 23, 2005, in connection with  appointment of Ronald J. Radcliffe
as Chief  Financial  Officer  of the  Company,  we  entered  into an  employment
agreement with Mr.  Radcliffe,  which sets forth terms and provisions  governing
Mr. Radcliffe's  employment as Chief Financial Officer.  The Radcliffe Agreement
provides  for an  initial  term of  three  years at an  annual  base  salary  of
$275,000.  Mr.  Radcliffe  shall be entitled to  participate in any annual bonus
plan or equity based incentive programs maintained by the Company for its senior
executives. In connection with his employment,  Mr. Radcliffe received an option
grant a 10 year non  qualified  stock option to purchase  150,000  shares of our
common  pursuant  to the 2005  Equity  Incentive  Plan,  subject to  shareholder
approval, at an exercise price per share of $3.99, vesting 33% 90 days following
the grant date, 33% on the first  anniversary of the grant and 34% on the second
anniversary of the grant. In addition,  in connection with  appointment of David
P. Hanlon as Chief Executive Officer and President of Empire Resorts,  Inc. , we
entered into an employment agreement with Mr. Hanlon, which sets forth terms and
provisions  governing Mr.  Hanlon's  employment as Chief  Executive  Officer and
President.  The Hanlon Agreement  provides for an initial term of three years at
an annual base salary of $500,000.  Mr. Hanlon shall be entitled to  participate
in any annual bonus plan or equity based  incentive  programs  maintained by the
Company for its senior executives. In connection with his employment, Mr. Hanlon
received an option  grant of a 10-year  non-qualified  stock  option to purchase
1,044,092 shares of our common stock pursuant to the 2005 Equity Incentive Plan,
subject  to  shareholder  approval,  at an  exercise  price  per share of $3.99,
vesting 33% 90 days  following the grant date,  33% on the first  anniversary of
the grant and 34% on the second anniversary of the grant. Mr. Hanlon received an
additional  option grant of a  non-qualified  stock  option to purchase  720,000
shares, subject to shareholder approval and the closing of transaction among the
Company,  Empire  Resorts  Holdings  Inc.,  Empire  Resorts Sub,  Inc.,  Concord
Associates Limited Partnership and Sullivan Resorts (the "Concord Transaction"),
vesting 33% on the later to occur of (i) the closing of the Concord  Transaction
and (ii) 90 days  following the date of grant,  33% on the first  anniversary of
the grant and 34% on the second  anniversary  of the grant.  We also granted Mr.
Hanlon 261,023  restricted  shares,  pursuant to the 2005 Equity Incentive Plan,
subject to shareholder approval, vesting 33% on the grant date, 33% on the first
anniversary of grant, and 34% on the second anniversary of the grant. Mr. Hanlon
received  an  additional  grant  of  180,000  restricted   shares,   subject  to
shareholder approval and the closing of the Concord Transaction,  vesting 33% on
grant date, 33% on first anniversary and 34% on second anniversary.

         We  agreed  to  provide  certain  benefits  to  Mr.  Hanlon,  including
maintaining a term life insurance policy on the life of Mr. Hanlon in the amount
of  $2,000,000  and  reimbursement  for  relocation  expenses  and  expenses for
temporary housing.

                                       33




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         We do not utilize financial  instruments for trading purposes and holds
no derivative  financial  instruments  which could expose it to market risk. Our
exposure to market risks related to fluctuations in interest rates is limited to
our variable  rate  borrowings  of $7.3 million at September  30, 2005 under our
revolving  credit  facility.  A change in  interest  rates of one percent on the
balance  outstanding  at September 30, 2005 would cause a change in total annual
interest costs of $73,000.  The carrying values of these borrowings  approximate
their fair values at September 30, 2005.

ITEM 4. CONTROLS AND PROCEDURES

         We maintain  disclosure  controls and  procedures  that are designed to
ensure that information  required to be disclosed in our reports filed under the
Securities Exchange Act of 1934 is recorded, processed,  summarized and reported
within the time periods  specified  in the SEC's rules and forms,  and that such
information is accumulated and  communicated  to our  management,  including the
Chief Executive Officer and Chief Financial  Officer,  as appropriate,  to allow
timely decisions regarding required disclosure.  In designing and evaluating the
disclosure controls and procedures,  management recognized that any controls and
procedures, no matter how well designed and operated can provide only reasonable
assurance  of  achieving  the desired  control  objectives,  and  management  is
required to apply its judgment in evaluating the  cost-benefit  relationship  of
possible controls and procedures.  Management believes, however, that a controls
system,  no matter how well  designed  and  operated,  cannot  provide  absolute
assurance that the objectives of the controls  system are met, and no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within a company have been detected. Also, we have investments
in certain  unconsolidated  entities.  As we do not control these entities,  our
disclosure controls and procedures with respect to such entities are necessarily
substantially   more  limited  than  those  we  maintain  with  respect  to  our
consolidated subsidiaries.

         We carried  out an  evaluation  as of  September  30,  2005,  under the
supervision  and with the  participation  of  management,  including  the  Chief
Executive  Officer and Chief  Financial  Officer,  of the  effectiveness  of the
design and operation of its  disclosure  controls and  procedures as required by
Rule 13a-15 of the Securities Exchange Act of 1934, as amended.  Based upon that
evaluation,  the  Chief  Executive  Officer  and  the  Chief  Financial  Officer
concluded  that our  disclosure  controls and procedures are effective to timely
alert them to any material information (including our consolidated subsidiaries)
that  must be  included  in our  periodic  Securities  and  Exchange  Commission
filings.

CHANGES IN OUR FINANCIAL REPORTING INTERNAL CONTROLS.

         There  has  been no  change  in our  internal  control  over  financial
reporting (as defined in Rules  13a-15(f) and  15d-15(f)  promulgated  under the
Exchange  Act)  during our fiscal  quarter  ended  September  30,  2005 that has
materially affected,  or is reasonably likely to materially affect, our internal
control over financial reporting.

                                       34




                                     PART II
                                OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

OPERATING ENVIRONMENT

         We are a party from time to time to various  other legal  actions  that
have arisen in the normal course of business. On an ongoing basis, we assess the
potential  liabilities  related to any  lawsuits or claims  brought  against us.
While it is  typically  very  difficult  to  determine  the timing and  ultimate
outcome of such actions, we use our best judgment to determine if it is probable
that we will incur an expense related to the settlement or final adjudication of
such matters and whether a reasonable  estimation of such probable loss, if any,
can be made. In assessing  probable  losses,  we make estimates of the amount of
insurance  recoveries,  if any. We accrue a liability  when we believe a loss is
probable and the amount of loss can be reasonably estimated. Due to the inherent
uncertainties  related to the  eventual  outcome  of  litigation  and  potential
insurance  recovery,  it is possible  that  certain  matters may be resolved for
amounts  materially  different from any  provisions or disclosures  that we have
previously made. In the opinion of our management, the resolution of these legal
actions  will  not  have a  material  and  adverse  effect  on the  consolidated
financial position, results of operations or cash flows.

         On May 3, 2005,  in Dalton v. Pataki and Karr v.  Pataki,  the New York
Court  of  Appeals   (the   highest   court  in  New  York  State)   upheld  the
constitutionality of the development of class III casinos on Indian lands in New
York State and the  installation of video lottery  terminals at certain New York
State racetracks,  including  Monticello Raceway.  Specifically,  the court held
that because New York State already  permits certain forms of "class III" gaming
for charitable and other special purposes, it cannot ban those types of wagering
on Indian lands, and that the federal Indian Gaming  Regulatory Act preempts New
York law, which  regulates  rather than prohibits the such types of gaming.  The
court then went on approve legislation permitting the establishment of up to six
class III casinos on Indian land in the State of New York. With respect to video
lottery terminals, the court held that legislation permitting the New York State
Division of Lottery to install  video  lottery  terminals in certain  racetracks
survives  constitutional  scrutiny,  even though a percentage of the proceeds is
dedicated to horse  racing and  breeding.  In this  regard,  the court held that
while the New York State Constitution  permits lotteries only so long as the net
proceeds are used to support education, it is up to the legislature to determine
what expenses are necessary to promote the game and,  therefore,  what remaining
portion  constitutes "net proceeds" that must go for educational  purposes,  and
that such necessary  promotional expenses can include amounts dedicated to horse
racing and breeding.

         On June 15, 2005, The New York City Off-Track Betting  Corporation (the
"NYCOTB") brought an action in the Supreme Court of the State of New York County
of New York, against The New York State Racing and Wagering Board (the "Board"),
Yonkers Raceway and Monticello  Raceway.  In its Notice of Petition,  the NYCOTB
alleges that (i) on February 16, 2005, the Board erroneously interpreted the New
York Racing,  Pari-Mutuel  Wagering  and Breeding Law when it concluded  that in
order for New York State regional off-track betting corporations (the "OTBs") to
accept  wagers on and display  simulcast  signals of  out-of-state  thoroughbred
races  conducted  after 7:30 p.m., the OTBs must pay the harness tracks in their
region a minimum payment (the "Minimum Payment"),  exclusive of commissions paid
by such OTBs to those harness tracks for  out-of-state  harness races run before
6:00 p.m.; (ii) on February 16, 2005, the Board  erroneously  concluded that the
Minimum  Payment must be calculated  separately as to each harness track located
with an OTB's  region,  and paid  separately  to each  track,  rather than on an
aggregate  regional  basis;  (iii) on  February  23,  2005,  the Board  erred in
requiring OTBs to distribute a portion of retained  commissions on  thoroughbred
races conducted at out-of-state  tracks to their regional harness tracks on days
on which neither the New York State Racing  Association is conducting racing nor
are the regional  harness  tracks  accepting  wagers or displaying the simulcast
signal from any other thoroughbred tracks ("Dark Days"); (iv) the determinations
made by the Board on February 16, 2005 and February 23, 2005 were the functional
equivalent of administrative rule-making, in violation of New York State law and
(v) the  determinations  made by the Board on February 16, 2005 and February 23,
2005 were arbitrary and capricious,  as the Board lacked the statutory authority
to  make  such  determinations.  The  NYCOTB  seeks  judicial  annulment  of the
determinations  made by the Board on  February  16, 2005 and  February  23, 2005
regarding how the Minimum Payment is calculated, that Minimum Payments should be
calculated  separately  with  respect to each  regional  harness  track and that
payments  must be made by OTBs to  regional  harness  tracks  on Dark  Days.  In
addition,  the  NYCOTB  is  seeking a refund of all  moneys  paid to  Monticello
Raceway by it as a result of the  determinations  made by the Board on  February
16, 2005 and February 23, 2005,  which  according to the June 15, 2005 Notice of
Petition, total approximately $1,700,000.

         At  the  same  time,  each  of  Suffolk  Regional   Off-Track   Betting
Corporation (the "SROTB"),  Nassau Regional  Off-Track Betting  Corporation (the
"NROTB") and The Catskill Regional  Off-Track Betting  Corporation (the "CROTB")
brought  substantially  similar actions  against the Board,  Yonkers Raceway and

                                       35




Monticello  Raceway  in the  Supreme  Court of the  State of New York  County of
Suffolk,  the  Supreme  Court of the State of New York  County of Nassau and the
Supreme Court of the State of New York County of Orange,  respectively,  seeking
substantially similar remedies. However, while the CROTB stated in its Notice of
Petition  that it paid  Monticello  Raceway  approximately  $363,000  due to the
determinations  made by the Board on February  16, 2005 and  February  23, 2005,
which the CROTB now seeks  reimbursement for, neither of the Notice of Petitions
filed by the SROTB  nor the  NROTB  state  any sum  certain  paid to  Monticello
Raceway due to the  determinations  made by the Board on  February  16, 2005 and
February 23, 2005 for which they too now seek reimbursement.

         It should  be noted  that  commissions  are  being  paid to  Monticello
Raceway under the  determinations  of the Board that are being  challenged,  and
that any refund made in the event that the  plaintiffs  are  successful in these
lawsuits could be  substantially  in excess of the amounts stated in the Notices
of Petition.  Counsel for the Company is currently  reviewing these claims,  but
has not formed an opinion as to the merits of the  claims.  The  Company has not
established any reserves  against the contingency  that the claims made in these
actions are found to be wholly or partially correct.

         On August 8, 2005, each of these cases was  consolidated  into a single
lawsuit to be heard before the Supreme  Court of the State of New York County of
Albany.  Oral  arguments  for this lawsuit are scheduled to commence in December
2005.

SUBSEQUENT EVENTS

         On October 12, 2005, we received a letter of voluntary resignation from
Robert A. Berman tendering his resignation effective Friday, October 14, 2005 as
vice chairman and as a member of our board of directors.

         On October 12, 2005, we received a letter of voluntary resignation from
David J. Matheson  tendering his resignation  effective  Wednesday,  October 12,
2005 as a member of our board of directors.

         We are in receipt of a letter,  dated  November  2, 2005,  from the St.
Regis Mohawk Tribal  Council to Philip Hogen,  Chairman of the NIGC,  and George
Skibine,  the BIA's Acting Deputy Assistant  Secretary for Economic  Development
and Policy,  stating that the St.  Regis  Mohawk  Tribe has formally  decided to
pursue a casino project solely with Empire Resorts at Monticello  Raceway.  This
letter was issued in response to New York Governor George Pataki's position that
he would not execute a  concurrence  to the BIA's April 6, 2000  finding  that a
transfer  of 29 acres of land owned by the Empire  Resorts  would be in the best
interest of the Mohawks and not detrimental to the  surrounding  community until
the Mohawks selected between Harrah's Entertainment,  Inc. and the Company as it
co-developer for a Native American casino in the Catskills. The St. Regis Mohawk
Tribe has now withdrawn  its  application  for land at the Kutsher's  site to be
developed with Harrah's Entertainment, Inc. and requested an expedited review of
its application to acquire 29.31 acres at Monticello Raceway.

         We will be seeking the consent of the holders of our 5 1/2% convertible
senior notes in order to amend certain  provisions  of the  indenture  governing
such notes to give management of the Company greater flexibility in developing a
Native American  casino at Monticello  Raceway with other Native American tribes
beside the Cayuga Nation of New York.

                                       36



ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS


         a)   On August  17,  2005,  the  Company  held its  annual  meeting  in
              Monticello, New York;

         b)   The  following  Directors  were elected  based upon the  following
              tabulations of votes:

                                                    FOR              WITHHELD
                                                    ---              --------
                  David P. Hanlon                 21,700,681         229,538
                  Robert H. Friedman              21,697,906         232,313

              The  second  order of  business  was to  consider  and vote upon a
              proposal to adopt the Company's 2005 Equity  Incentive Plan, which
              passed based upon the following tabulations of votes.

                  FOR                              AGAINST           WITHHELD
                  ---------                        -------           --------
                  10,583,768                     1,152,214            24,427

ITEM 6.  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.
     32.1   Certification of the Chief Executive Officer pursuant to Section 906
            of the Sarbanes-Oxley Act of 2002.
     32.2   Certification of the Chief Financial Officer pursuant to Section 906
            of the Sarbanes-Oxley Act of 2002

                                       37




                                   SIGNATURES

   In accordance with the  requirements of the Securities  Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                                EMPIRE RESORTS, INC.



Dated: November 14, 2005                   /s/ David P. Hanlon
                                           -------------------------------------
                                           David P. Hanlon
                                           President and Chief Executive Officer




Dated:  November 14, 2005                  /s/ Ronald J. Radcliffe
                                           -------------------------------------
                                           Ronald J. Radcliffe
                                           Chief Financial Officer

                                       38

EX-31.1

                                                                    EXHIBIT 31.1

CERTIFICATION  OF CHIEF EXECUTIVE  OFFICER  PURSUANT TO RULE 13A-14(A) UNDER THE
SECURITIES EXCHANGE ACT OF 1934

I, David P. Hanlon, Chief Executive Officer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Empire Resorts, Inc.;

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 registrant as
of, and for, the periods presented in this report;

4.  The  registrant's  other  certifying  officer  and  I  are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures,  or caused such disclosure
controls and  procedures to be designed  under our  supervision,  to ensure that
material  information  relating to the  registrant,  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) Evaluated the  effectiveness  of the  registrant's  disclosure  controls and
procedures and presented in this report our conclusions  about the effectiveness
of the disclosure  controls and procedures,  as of the end of the period covered
by this report based on such evaluation; and

(c)  Disclosed in this report any change in the  registrant's  internal  control
over  financial  reporting  that occurred  during the  registrant's  most recent
fiscal  quarter  that  has  materially  affected,  or is  reasonably  likely  to
materially affect, the registrant's  internal control over financial  reporting;
and

5. The registrant's other certifying officer and I have disclosed,  based on our
most recent  evaluation of internal  control over  financial  reporting,  to the
registrant's  auditors  and the audit  committee  of the  registrant's  board of
directors (or persons performing the equivalent functions):

(a) All  significant  deficiencies  and  material  weaknesses  in the  design or
operation of internal  control over  financial  reporting  which are  reasonably
likely  to  adversely  affect  the  registrant's  ability  to  record,  process,
summarize and report financial information; and

(b) Any fraud,  whether  or not  material,  that  involves  management  or other
employees who have a significant role in the registrant's  internal control over
financial reporting.

                           EMPIRE RESORTS, INC.




Dated: November 14, 2005                   /s/ David P. Hanlon
                                           -------------------------------------
                                           David P. Hanlon
                                           President and Chief Executive Officer

EX-31.2

                                                                    EXHIBIT 31.2

CERTIFICATION  OF CHIEF FINANCIAL  OFFICER  PURSUANT TO RULE 13A-14(A) UNDER THE
SECURITIES EXCHANGE ACT OF 1934

I Ronald J. Radcliffe, Chief Financial Officer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Empire Resorts, Inc;

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 registrant as
of, and for, the periods presented in this report;

4.  The  registrant's  other  certifying  officer  and  I  are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures,  or caused such disclosure
controls and  procedures to be designed  under our  supervision,  to ensure that
material  information  relating to the  registrant,  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) Evaluated the  effectiveness  of the  registrant's  disclosure  controls and
procedures and presented in this report our conclusions  about the effectiveness
of the disclosure  controls and procedures,  as of the end of the period covered
by this report based on such evaluation; and

(c)  Disclosed in this report any change in the  registrant's  internal  control
over  financial  reporting  that occurred  during the  registrant's  most recent
fiscal  quarter  that  has  materially  affected,  or is  reasonably  likely  to
materially affect, the registrant's  internal control over financial  reporting;
and

5. The registrant's other certifying officer and I have disclosed,  based on our
most recent  evaluation of internal  control over  financial  reporting,  to the
registrant's  auditors  and the audit  committee  of the  registrant's  board of
directors (or persons performing the equivalent functions):

(a) All  significant  deficiencies  and  material  weaknesses  in the  design or
operation of internal  control over  financial  reporting  which are  reasonably
likely  to  adversely  affect  the  registrant's  ability  to  record,  process,
summarize and report financial information; and

(b) Any fraud,  whether  or not  material,  that  involves  management  or other
employees who have a significant role in the registrant's  internal control over
financial reporting.

 EMPIRE RESORTS, INC.



Dated:  November 14, 2005                                /s/ Ronald J. Radcliffe
                                                         -----------------------
                                                         Ronald J. Radcliffe
                                                         Chief Financial Officer

EX-32.1

                                                                    EXHIBIT 32.1

     CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE
               SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350)

         In connection with the Quarterly  Report of Empire  Resorts,  Inc. (the
"Company")  on Form 10-Q for the period ended  September  30, 2005 as filed with
the  Securities  and  Exchange  Commission  on the date hereof  (the  "Quarterly
Report"),  I, David P. Hanlon, Chief Executive Officer of the Company,  certify,
pursuant to Section  906 of the  Sarbanes-Oxley  Act of 2002 (18 U.S.C.  Section
1350), that:

(1)      The Quarterly  Report fully complies with the  requirements  of Section
13(a) of the Securities Exchange Act of 1934; and

(2)      The information  contained in the Quarterly Report fairly presents,  in
all material respects,  the financial  condition and results of operation of the
Company.


Date: November 14, 2005
EMPIRE RESORTS, INC.




By: /s/ David P. Hanlon
    -----------------------------------------
        David P. Hanlon
        President and Chief Executive Officer

A signed  original of this written  statement  required by Section 906, or other
document authenticating, acknowledging, or otherwise adopting the signature that
appears in typed form within the  electronic  version of this written  statement
required by Section 906, has been provided to Empire  Resorts,  Inc. and will be
retained by Empire  Resorts,  Inc. and furnished to the  Securities and Exchange
Commission or its staff upon request.

EX-32.2

                                                                    EXHIBIT 32.2


     CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE
               SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350)

         In connection with the Quarterly  Report of Empire  Resorts,  Inc. (the
"Company")  on Form 10-Q for the period ended  September  30, 2005 as filed with
the  Securities  and  Exchange  Commission  on the date hereof  (the  "Quarterly
Report"),  I,  Ronald J.  Radcliffe,  Chief  Financial  Officer of the  Company,
certify,  pursuant to Section 906 of the  Sarbanes-Oxley  Act of 2002 (18 U.S.C.
Section 1350), that:

(1)      The Quarterly  Report fully complies with the  requirements  of Section
13(a) of the Securities Exchange Act of 1934; and

(2)      The information  contained in the Quarterly Report fairly presents,  in
all material respects,  the financial  condition and results of operation of the
Company.

Date: November 14, 2005


By:   /s/ Ronald J. Radcliffe
      ------------------------
      Ronald J. Radcliffe
      Chief Financial Officer

A signed  original of this written  statement  required by Section 906, or other
document authenticating, acknowledging, or otherwise adopting the signature that
appears in typed form within the  electronic  version of this written  statement
required by Section 906, has been provided to Empire.