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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-QSB
(Mark one)

         /X/    Quarterly Report under Section 13 or 15(d) of the Securities
                Exchange Act of 1934

                For the quarterly period ended June 30, 2006

         / /    Transition Report under Section 13 or 15(d) of the Exchange Act

                For the transition period from __________ to __________

                        Commission file number 333-112603

                            CATSKILL LITIGATION TRUST
                            -------------------------
 (Exact Name of Small Business Issuer as Specified in Its Declaration of Trust)

              Delaware                                   16-6547621
-------------------------------------       ------------------------------------
   (State or Other Jurisdiction of          (I.R.S. Employer Identification No.)
   Incorporation or Organization)

                       C/O CHRISTIANA BANK & TRUST COMPANY
                                1314 King Street
                           Wilmington, Delaware 19801
--------------------------------------------------------------------------------
                    (Address of Principal Executive Offices)


                                 (302) 888-7400
--------------------------------------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)


--------------------------------------------------------------------------------
 (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that Catskill  Litigation  Trust was required to file such reports),  and
(2) has been subject to such filing requirements for the past 90 days.
Yes /X/   No / /

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


 As of August 10, 2006, 22,702,896 Units of beneficial interest were outstanding.

 Transitional Small Business Disclosure Format (check one):   Yes / /   No /X/

================================================================================




                                             CATSKILL LITIGATION TRUST

                                                    FORM 10-QSB

                                                       INDEX

PART I - FINANCIAL INFORMATION                                                                              Page

         ITEM 1. CONDENSED FINANCIAL STATEMENTS (unaudited)

         Condensed Balance Sheet as of June 30, 2006                                                        3

         Condensed Statements of Operations for the Three Months and Six Months Ended June 30, 2006
         and June 30, 2005                                                                                  4

         Condensed Statements of Cash Flows for the Six Months Ended June 30, 2006
         and June 30, 2005                                                                                  5

         Notes to Condensed Financial Statements                                                            6-8

         ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS
         OR PLAN OF OPERATION                                                                               9-12

         ITEM 3.  CONTROLS AND PROCEDURES                                                                   12

PART II - OTHER INFORMATION

         ITEM 1.  LEGAL PROCEEDINGS                                                                         13-14

         ITEM 6.  EXHIBITS                                                                                  14

SIGNATURES                                                                                                  15

CERTIFICATIONS                                                                                              16-19


                                                         2


                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                            CATSKILL LITIGATION TRUST
                             CONDENSED BALANCE SHEET
                                  June 30, 2006
                                   (Unaudited)

ASSETS
   Current Assets
         Cash and Cash Equivalents                                  $     9,060
                                                                    -----------
   Total Current Assets                                                   9,060
                                                                    -----------
TOTAL ASSETS                                                        $     9,060
                                                                    ===========

LIABILITIES AND TRUST DEFICIENCY
      Current Liabilities
           Accounts Payable                                         $   134,246
           Line of credit-related party                               1,090,000
                                                                    -----------
      Total Current Liabilities                                       1,224,246
      Trust Deficiency
           Units of Beneficial Interest: authorized 22,702,896;
           issued and outstanding 22,702,896, stated as                  99,336
      Accumulated deficit                                            (1,314,522)
                                                                    -----------
      Total Trust Deficiency                                         (1,215,186)
                                                                    -----------
TOTAL LIABILITIES AND TRUST DEFICIENCY                              $     9,060
                                                                    ===========


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


                                       3


                                                    CATSKILL LITIGATION TRUST
                                               CONDENSED STATEMENTS OF OPERATIONS
                                                           (Unaudited)

                                                      For the             For the             For the             For the
                                                 Three Months Ended  Three Months Ended   Six Months Ended    Six Months Ended
                                                   June 30, 2006       June 30, 2005       June 30, 2006       June 30, 2005
                                                 ------------------  ------------------   ----------------    ----------------
General and Administrative Expenses:
Litigation Trustee Fees                            $     30,000        $     30,000        $     60,000        $     60,000
Administrative Trustee Fees                               1,500               1,500               3,000               3,000
Consulting Fees                                           1,500               1,500               3,000               3,000
Legal Fees                                              120,400             120,122             134,768             276,372
Accounting Fees                                           7,000              14,750              19,000              24,750
Interest Expense                                         19,436               7,998              42,347              14,873
Other                                                     1,344               1,555               3,174               3,742
                                                   ------------        ------------        ------------        ------------
Total General and Administrative Expenses               181,180             177,425             265,289             385,737
Other Income                                                460                 428                 521               1,382
                                                   ------------        ------------        ------------        ------------
Net Loss                                           $   (180,720)       $   (176,997)       $   (264,768)       $   (384,355)
                                                   ============        ============        ============        ============
Loss per unit outstanding                          $      (0.01)       $      (0.01)       $      (0.01)       $      (0.02)
                                                   ============        ============        ============        ============
Units outstanding                                    22,702,896          22,702,896          22,702,896          22,702,896
                                                   ============        ============        ============        ============


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


                                                               4


                                              CATSKILL LITIGATION TRUST
                                          CONDENSED STATEMENT OF CASH FLOWS
                                                     (Unaudited)

                                                                                      For the           For the
                                                                                  Six Months Ended  Six Months Ended
                                                                                    June 30, 2006     June 30, 2005
                                                                                  ----------------  ----------------
Cash flows from operating activities
Net loss                                                                             $(264,768)        $(384,355)
   Adjustments to reconcile net loss to net cash used in operating activities:

      Imputed interest expense                                                          42,347            14,873
      Changes in operating assets and liabilities
      Accounts payable                                                                 134,246               614
      Accrued expenses                                                                    --              45,245
                                                                                     ---------         ---------
Net cash used in operating activities                                                  (88,175)         (323,623)

Cash flow from financing activities
      Increase in line of credit-related party                                          80,000           150,000
                                                                                     ---------         ---------

Decrease in Cash and Cash Equivalents                                                   (8,175)         (173,623)

                                                                                     ---------         ---------
Cash and Cash Equivalents - beginning of period                                         17,235           222,493
                                                                                     ---------         ---------
Cash and Cash Equivalents - end of period                                            $   9,060         $  48,870
                                                                                     =========         =========


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


                                                          5


                            CATSKILL LITIGATION TRUST

       Notes to Condensed Financial Statements--June 30, 2006 (Unaudited)

NOTE 1 - THE TRUST

             The Catskill  Litigation  Trust is a Delaware  statutory trust (the
             "Litigation  Trust")  formed  by  Empire  Resorts,   Inc.  ("Empire
             Resorts"),  Catskill Development,  L.L.C.  ("Catskill")  Monticello
             Raceway Management,  Inc., ("MRMI"),  Monticello Casino Management,
             L.L.C., Monticello Raceway Development Company, L.L.C. ("MRDC") and
             Mohawk  Management,   L.L.C.  ("Mohawk").   On  January  12,  2004,
             22,702,896 units of beneficial  interest were issued to the members
             and stockholders of those entities.  At that time,  Empire Resorts,
             Catskill,  MRDC,  Mohawk,  Joseph E. Bernstein,  Paul A. deBary and
             Christiana  Bank and Trust Company (the  "Administrative  Trustee")
             entered into the Declaration of Trust of Catskill  Litigation Trust
             (the  "Declaration  of Trust").  Messrs.  Bernstein  and deBary are
             hereinafter referred to as the "Litigation Trustees"

             In the Declaration of Trust, Catskill,  MRDC and Mohawk assigned to
             the  Litigation  Trust all of their  claims under or related to the
             alienation  and  frustration  of  their   agreements  and  business
             relations  with the St.  Regis Mohawk Tribe and their rights to any
             judgment or settlement that may arise from any litigation  relating
             to two litigations: Catskill Development, L.L.C., Mohawk Management
             L.L.C.   and  Monticello   Raceway   Development   Company  L.L.C.,
             Plaintiffs v. Park Place Entertainment Corporation,  Defendant (the
             "PPE Case") and Catskill  Development,  L.L.C.,  Mohawk Management,
             L.L.C.,  Monticello Raceway Development Company, L.L.C., Plaintiffs
             v. Gary Melius,  Ivan Kaufman,  Walter Horn,  President  R.C. - St.
             Regis Management Company, et al, Defendants  (hereinafter  referred
             to, collectively with the PPE case, as the "Litigation"). If at any
             time  the  Litigation   Trustees   determine,   in  their  absolute
             discretion,  that  the  assets  of the  Litigation  Trust  are  not
             sufficient to justify its continuance,  the Litigation Trustees are
             authorized  to terminate the  Litigation  Trust.  In addition,  the
             Litigation  Trust is to terminate  on the date that all  litigation
             has been fully prosecuted to final judgment or dismissal, including
             all appeals,  and all Litigation Trust assets have been distributed
             to the Litigation Trust's beneficiaries.

NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

             BASIS OF PRESENTATION

             These unaudited condensed  financial  statements have been prepared
             in accordance with accounting  principles generally accepted in the
             United  States of America  ("GAAP"),  and with Form 10-QSB and Item
             310 of Regulation S-B of the Securities and Exchange Commission. In
             the opinion of the Litigation Trustees,  the accompanying unaudited
             condensed   financial   statements   contain  all  the  adjustments
             necessary (consisting only of normal recurring accruals) for a fair
             presentation. The interim results are not necessarily indicative of
             the  results  that would be  expected  for the full year and do not
             contain all information  included in the Litigation  Trust's annual
             financial  statements  and notes for the year  ended  December  31,
             2005.

             Certain information and footnote  disclosures  normally included in
             financial   statements   prepared  in  accordance  with  accounting
             principles  generally accepted in the United States of America have
             been  condensed or omitted.  It is suggested  that these  financial
             statements  be read  in  conjunction  with  the  audited  financial
             statements and notes thereto  included in the report on Form 10-KSB
             for the year ended December 31, 2005.

             USE OF ESTIMATES IN THE FINANCIAL STATEMENTS

             The   preparation  of  financial   statements  in  conformity  with
             accounting  principles  generally  accepted in the United States of
             America  requires the  Litigation  Trustees to make  estimates  and
             assumptions   that  affect  the  reported  amounts  of  assets  and
             liabilities and disclosure of contingent  assets and liabilities at
             the date of the financial  statements  and the reported  amounts of
             revenues and expenses during the reporting  period.  Actual results
             could differ from those estimates.


                                       6


             CASH AND CASH EQUIVALENTS

             Cash and cash equivalents include cash on account,  demand deposits
             and  certificates  of deposit  with  original  maturities  of three
             months or less at acquisition and money market funds.  From time to
             time, the Litigation  Trust maintains  significant cash balances in
             excess of the  amounts  covered by the  Federal  Deposit  Insurance
             Corporation.  The  Litigation  Trust has not incurred any losses in
             such accounts and the Litigation Trustees believe it is not exposed
             to any significant credit risk on cash.

             INCOME TAXES

             For federal income tax purposes, the Litigation Trust is treated as
             a grantor  trust.  Under the grantor trust rules,  each holder of a
             unit of  beneficial  interest is treated as the owner of his or her
             share of the Litigation Trust's assets. The treatment of income and
             expense  items under GAAP may differ from the tax treatment of such
             items.  Expenses  incurred by the Litigation  Trust are capitalized
             for tax purposes.

NOTE 3 - LINE OF CREDIT-RELATED PARTY

             Empire Resorts,  a related party, has provided the Litigation Trust
             with a line of credit of up to  $2,500,000.  The line of credit can
             be used to pay all expenses of the Litigation Trust permitted under
             the Declaration of Trust, including but not limited to professional
             fees and the fees and expenses of the Litigation and Administrative
             Trustees.  The line of credit is non-interest  bearing and is to be
             repaid from any amounts  received from  litigation  settlements  or
             awards.  The line of credit  expires  upon the  termination  of the
             Litigation Trust.

             As of June 30, 2006,  $1,090,000 had been drawn against the line of
             credit.  On July 5, 2006, an additional  $150,000 was drawn against
             the line of credit.

             The Litigation  Trust imputed  interest on the borrowings at Empire
             Resorts'  borrowing rate (8.00% per annum at June 30, 2006).  Prior
             to July 1, 2005, Empire Resorts' borrowing rate was 5.50%. Interest
             expense  for the six months  ended June 30,  2006 and June 30, 2005
             amounted to $42,347 and  $14,873,  respectively.  Imputed  interest
             expense is deemed contributed capital to the Litigation Trust.

NOTE 4 - DISTRIBUTIONS

             The distribution of any net proceeds from litigation settlements or
             awards,  after amounts are applied to cover all current or expected
             expenses  of the  Litigation  Trust,  is to be  made  at  the  sole
             discretion of the  Litigation  Trustees and will be  distributed as
             follows:

             First:  To pay the  Litigation  Trustees  their fees  arising  from
             litigation settlements or awards. (See Note 5.)

             Second:  To  reimburse  $7,500,000  to Empire  Resorts for expenses
             incurred in connection  with the Litigation  prior to the formation
             of the Litigation  Trust and, in addition,  to repay Empire Resorts
             any amounts outstanding under the line of credit.

             Third: If any amount remains after the above  requirements are met,
             such amount  remaining is to be divided among the  beneficiaries of
             the Litigation  Trust in proportion to their  ownership of units as
             of the date the distribution is made.

NOTE 5 - COMMITMENTS AND CONTINGENCIES

             COMPENSATION OF LITIGATION TRUSTEES

             Each  of  the  two  Litigation   Trustees  is  entitled  to  annual
             compensation  of $60,000 plus  reimbursement  of expenses  incurred
             carrying out the purpose of the Litigation Trust. In addition,  one
             litigation  trustee is entitled to 4.0%, and the other 1.0%, of any
             litigation settlements or awards.


                                       7


             COMPENSATION OF THE ADMINISTRATIVE TRUSTEE

             The Administrative  Trustee is entitled to a monthly administrative
             fee of $500. In addition, the Administrative Trustee is entitled to
             a custody fee on certain cash balances and marketable securities of
             0.5% per annum on the first  $10,000,000  of fair value and 3.0% on
             the excess and reimbursement for certain fees and expenses.

             EXPENSES PAID PRIOR TO THE FORMATION OF THE LITIGATION TRUST

             As discussed in Note 4, the Litigation Trust is obligated to pay to
             Empire Resorts up to $7,500,000.  This amount  represents  expenses
             incurred prior to the formation of the Litigation Trust. The amount
             is payable  solely from the proceeds of litigation  settlements  or
             awards.

             REPAYMENTS OF AMOUNTS DRAWN UNDER THE LINE OF CREDIT-RELATED PARTY

             As discussed in Note 4, the  expenses of the  Litigation  Trust are
             expected  to be paid from draws  under the line of credit.  Amounts
             drawn  under the line of credit are to be repaid  from any  amounts
             received from litigation settlements or awards.

             ADDITIONAL AMOUNTS PAYABLE TO APPEALS COUNSEL

             Under the terms of the Litigation Trust's  arrangement with the law
             firm handling its appeal,  additional  fees in an aggregate  amount
             not to exceed $100,000 may be payable to that firm.

             The exact amount payable in the event of a reversal of the decision
             by the trial court will vary from $50,000 to $100,000  depending on
             the precise nature of the outcome.

NOTE 6 - CERTAIN RELATIONSHIPS

             The  Litigation  Trustees  are both  currently  members  of  Empire
             Resorts' Board of Directors.

NOTE 7 - RECENT ACCOUNTING PRONOUNCEMENTS

            In February 2006, the Financial  Accounting Standards Board ("FASB")
            issued Statement of Financial  Accounting  Standard 155 - Accounting
            for Certain Hybrid  Financial  Instruments  ("SFAS No. 155"),  which
            eliminates  the exemption from applying SFAS No. 133 to interests in
            securitized   financial  assets  so  that  similar  instruments  are
            accounted for similarly  regardless of the form of the  instruments.
            SFAS No. 155 also allows the election of fair value  measurement  at
            acquisition,  at issuance, or when a previously recognized financial
            instrument is subject to  re-measurement.  Adoption is effective for
            all financial  instruments acquired or issued after the beginning of
            the first fiscal year that begins after  September  15, 2006.  Early
            adoption is permitted.  The adoption of SFAS No. 155 is not expected
            to  have a  material  effect  on the  Litigation  Trust's  financial
            position, results of operations or cash flows.

            In March 2006,  the FASB issued  Statement of  Financial  Accounting
            Standard 156 - Accounting  for Servicing of Financial  Assets ("SFAS
            No. 156"), which requires all separately recognized servicing assets
            and servicing  liabilities be initially measured at fair value. SFAS
            No. 156 permits, but does not require, the subsequent measurement of
            servicing assets and servicing  liabilities at fair value.  Adoption
            is required as of the beginning of the first fiscal year that begins
            after September 15, 2006. Early adoption is permitted.  The adoption
            of SFAS No. 156 is not  expected  to have a  material  effect on the
            Litigation Trust's financial position, results of operations or cash
            flows.



                                       8


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

FORWARD-LOOKING STATEMENTS

         This Report on Form 10-QSB contains "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended and Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All
statements  other than  statements of historical  facts included in this Report,
including without limitation, the statements under "General," and "Liquidity and
Capital Resources," are forward-looking  statements.  All subsequent written and
oral forward-looking  statements attributable to the Litigation Trust or persons
acting on its behalf are expressly qualified in their entirety by the cautionary
statements.

         The  following  discussions  should  be read in  conjunction  with  our
financial   statements  and  the  related  notes  thereto  and  other  financial
information  appearing  elsewhere  in  this  report.  The  following  discussion
contains  forward-looking  statements that involve risks and uncertainties.  Our
actual  results  could  differ   materially   from  those   anticipated  in  the
forward-looking  statements  as a result of  various  factors,  including  those
discussed elsewhere in this report.

GENERAL

         We are a statutory  trust created under Delaware law. Our formation was
a condition to the merger of Empire Resorts, Inc. ("Empire Resorts"), Monticello
Raceway  Management,  Inc.,  ("MRMI"),   Monticello  Casino  Management,  L.L.C.
("MCM"),  Monticello Raceway  Development  Company,  L.L.C.  ("MRDC") and Mohawk
Management,  L.L.C.  ("Mohawk").  Also as a condition  to that  merger,  each of
Catskill Development, L.L.C. ("Catskill"), MRDC, and Mohawk, agreed to assign to
us all of their claims under or related to the  alienation  and  frustration  of
their  agreements and business  relations with the St. Regis Mohawk Tribe.  That
assignment included rights to any proceeds from any settlement or award that may
arise from any litigation  relating to that claim.  We currently  maintain a web
site  at  WWW.CATSKILLTRUST.COM  to  facilitate  communications  and  provide  a
convenient  source of more detailed  information for our  unit-holders and other
interested parties.

         Our litigation claims arise from the efforts of each of Catskill, MRDC,
and  Mohawk  to  develop  with the St.  Regis  Mohawk  Tribe a gaming  casino in
Monticello,  New York. The plaintiffs spent several years and substantial  funds
to develop and obtain  required  approvals  for the casino.  Subsequently,  Park
Place  Entertainment  Corporation,  the world's  largest gaming  corporation and
Atlantic City's largest casino operator, entered into an agreement providing for
the St. Regis Mohawk Tribe to commit  their future  casino  development  efforts
exclusively to Park Place Entertainment  Corporation.  That agreement conflicted
with the Mohawk Tribe's agreements with Catskill, MRDC and Mohawk.

         There  is  one  lawsuit   pending   and  one  lawsuit   that  has  been
discontinued.  The  first  lawsuit  is  Catskill  Development,   L.L.C.,  Mohawk
Management,   L.L.C.,  and  Monticello  Raceway  Development  Company,   L.L.C.,
Plaintiffs. v. Park Place Entertainment  Corporation,  Defendant.  (Civil Action
No. 00CIV8660 (CM) (GAY)) (United States District Court Southern District of New
York)  referred to herein as the "PPE case".  This  lawsuit had  initially  been
dismissed  on  a  motion  for  summary  judgment.   However,   the  trial  court
subsequently  vacated the earlier  decision  granting  summary  judgment to Park
Place  Entertainment,  in order to consider new  evidence  and allow  additional
discovery proceedings. After these proceedings were completed, the dismissal was
reinstated.  An  appeal  has  been  taken  and a brief  has  been  filed  by the
Litigation  Trust.  The  respondent's  brief  was  filed on June 9, 2005 and the
Litigation Trust's reply brief was filed on July 12, 2005. Oral arguments on the
appeal were heard on October 17,  2005.  On March 8, 2006,  the Court of Appeals
for the Second  Circuit  vacated the judgment in the case.  It  determined  that
there was no jurisdiction over two of the plaintiffs in the case and remanded it
to the District Court for additional findings as to the jurisdiction over the


                                       9


remaining  plaintiff and as to the possible  third party  beneficiary  status of
that plaintiff with respect to contracts entered into by the other plaintiffs.

         The  District  Court  held a hearing  on April 30,  2006 and  requested
briefs on the third party beneficiary  issue,  which were completed and filed by
the end of July. In addition, the parties entered into a stipulation agreeing to
request dismissal of the non-diverse  plaintiffs without prejudice and providing
for the Litigation  Trustees,  as diverse parties succeeding to the interests of
the  non-diverse  plaintiffs,  to  file a new  complaint,  following  which  the
District  Court entered a decision  dismissing  the two  non-diverse  plaintiffs
without prejudice. In accordance with the stipulations,  after the filing of the
new  complaint,  the parties  will move to  consolidate  the new action with the
existing action.  The Litigation Trust has agreed that in any such  consolidated
lawsuit,  the District  Court's prior  decisions and orders will be binding upon
them in such suit to the same extent as the dismissed  plaintiffs,  i.e. subject
to their right to appeal any judgment  based upon such  decisions  and orders to
the  United  States  Court of  Appeals  for the  Second  Circuit.  We expect the
District  Court to  re-enter a judgment  against  the  plaintiff's  and render a
decision on the third party beneficiary issue.  Assuming that the court does not
require  additional  hearings or briefs,  such a decision may be rendered in the
3rd or 4th  quarter of 2006,  after  which the Court of Appeals  will assign the
case to a new panel of  judges.  Additional  briefs  and oral  arguments  may be
required.  It is unlikely  that a decision on the appeal will be issued prior to
the first quarter of 2007.

         The second lawsuit is Catskill Development,  L.L.C., Mohawk Management,
L.L.C., and Monticello Raceway Development Company,  L.L.C.,  Plaintiffs against
Gary Melius,  Ivan Kaufman,  Walter Horn,  President R.C. - St. Regis Management
Company,  et al,  Defendants.  (Index No. 891/03) (Supreme Court of the State of
New York  County of  Sullivan).  This  lawsuit  has been  discontinued  under an
agreement that permits it to be refiled at a future date without being barred by
the statute of  limitations.  Our purposes are the prosecution of our litigation
claims  through  the  recovery  of any  settlement  or final  judgments  and the
distribution of the net amount of any such recoveries to our beneficiaries.

         The   administration   of  our   Litigation   Trust  will  involve  the
authentication  and payment of fees and expenses for legal and related  services
in connection with our litigation  claims,  reporting and regulatory  compliance
and  the  maintenance  of  litigation,   financial  and   unit-holder   records.
Administrative expenses,  exclusive of imputed interest, are currently estimated
to be approximately  $200,000 per year,  comprised of the fees of the litigation
and  administrative  trustees,   auditors  and  accountants  and  other  support
services.  Legal fees and other  expenses  involved in pursuing  our  litigation
claims are  impossible to predict with any degree of accuracy.  No assurance can
be given that the amounts available to us for the payment of such expenses under
our line of credit will be sufficient to carry our litigation  claims through to
a successful  conclusion  or that  alternative  funds will be available for such
purpose.

         Our  unit-holders  will only be entitled to the net  proceeds  from any
settlement or award,  if any, of our litigation  claims after the payment of our
expenses, the fees of our litigation trustees, any amounts outstanding under our
line of credit and  $7,500,000  to Empire  Resorts  for  reimbursement  of prior
expenses incurred in connection with our litigation claims.

         Under our agreement with counsel  arguing the appeal,  a portion of the
fees related to arguing the appeal will be contingent on the resulting decision.
However,  these contingent fees do not relate to the additional matters relating
to jurisdiction  that arose subsequent to the initial briefing of the case. As a
result,  we currently  expect  significant  additional  expenses  related to the
appeal. We do not expect additional expenses related to a trial (which is itself
dependent  on the  outcome of the appeal)  until at least the second  quarter of
2007.

         On June 1,  2004,  we  filed a  Voluntary  Discontinuance  and  Tolling
Agreement  with  respect to the second  lawsuit.  Since there are many issues of


                                       10


fact and law in the PPE case which  relate to matters  that are also at issue in
the second lawsuit, we believe that, as long as the right to recommence the suit
without regard to the statute of limitations was preserved,  the  discontinuance
of this  suit was  appropriate  in order to avoid  the cost of  maintaining  two
separate lawsuits.

RESULTS OF OPERATIONS

For the three months  ended June 30,  2006,  we reported a net loss of $180,720.
Included in these net losses are legal fees of $120,400, administrative expenses
of $41,344 and imputed  interest of $19,436,  offset by dividend income of $460,
but no proceeds from any  litigation.  For the three months ended June 30, 2005,
we reported a net loss of $176,997.  Included in this net loss are legal fees of
$120,122,  administrative  expenses of $49,305  and imputed  interest of $7,998,
offset by dividend income of $428, but no proceeds from any litigation.

For the six months  ended June 30,  2006,  we  reported a net loss of  $264,768.
Included in these net losses are legal fees of $134,768, administrative expenses
of $88,174 and imputed  interest of $42,347,  offset by dividend income of $521,
but no proceeds from any litigation.  For the six months ended June 30, 2005, we
reported  a net loss of  $384,355.  Included  in this net loss are legal fees of
$276,372,  administrative  expenses of $94,492 and imputed  interest of $14,873,
offset by dividend income of $1,382, but no proceeds from any litigation.

The  expenditures  for legal fees in the first two quarters of 2006, as compared
with the comparable period for 2005,  reflect the level of activity necessary to
make  submissions  to the  District  Court in response  to the issues  raised on
remand as compared with the preparation of briefs for submission to the Court of
Appeals  for the  Second  Circuit  first half of 2005.  However,  the delays and
additional submissions resulting from the remand have significantly added to the
cost of the litigation.

Administrative  expenses,  excluding legal fees, increased slightly in the first
two  quarters  of 2006 as  compared  with the first two  quarters of 2005 due to
expenses associated with the implementation of a web site for the benefit of our
unit-holders  and  increased  accounting  fees.  Imputed  interest  expense  has
increased significantly due the additional withdrawals on the line of credit.

LIQUIDITY AND CAPITAL RESOURCES

         Empire Resorts has provided us with an irrevocable line of credit of up
to  $2,500,000  to provide  funds to pay any and all of our  expenses  permitted
under the  Declaration  of Trust.  Although  no  interest  is payable on amounts
advanced under our line of credit,  the Litigation Trust imputes interest on the
borrowings  at Empire  Resorts  borrowing  rate (8% per annum at June 30, 2006).
Amounts  outstanding  under  our  line of  credit  are to be  repaid  by us from
proceeds received from any settlement or award in connection with our litigation
claims after payment of an amount  necessary to pay our Litigation  Trustees the
fees for their services as set forth in the Declaration of Trust.  Repayments of
amounts  outstanding  under our line of credit may be made as a whole or in part
from  time to time at any time  without  notice.  We may  reborrow  any  amounts
repaid.  Our line of credit  will  remain in full  force  and  effect  until our
termination.

         Empire  Resorts is a holding  company,  owning all the capital stock or
membership  interests of certain  other  entities.  Empire  Resorts is therefore
dependent  on these other  entities to pay  dividends or make  distributions  in
order to generate  internal cash flow and to satisfy its obligations,  including
its obligations  under our line of credit.  There can be no assurance,  however,
that these other entities will generate  enough revenue to pay cash dividends or
make cash  distributions.  In addition,  these entities may enter into contracts
that limit or prohibit their ability to pay dividends or make distributions.


                                       11


         Empire  Resorts had operating  revenue of  approximately  $9.7, $45 and
$86.8  million for the fiscal  years ended  December  31,  2003,  2004 and 2005,
respectively,  and sustained net operating losses of  approximately  $6.5, $12.7
and $18.5 million,  respectively,  during such periods.  Although Empire Resorts
significantly  increased  its level of  operations  during  2005,  it has yet to
demonstrate that such operations can be profitable.  Therefore,  there can be no
assurance  that Empire  Resorts  will have the  ability to meet its  obligations
under our line of credit.

ITEM 3.  CONTROLS AND PROCEDURES

(a) The Litigation  Trust carried out an evaluation,  under the  supervision and
with the participation of the Litigation Trust's management, including Joseph E.
Bernstein  (acting  Chief  Executive  Officer) and Paul A. deBary  (acting Chief
Financial  Officer),   the  Litigation  Trust's  Litigation  Trustees,   of  the
effectiveness of the design and operation of the Litigation Trust's  "disclosure
controls and procedures",  as such term is defined in Exchange Act Rule 15d-15e,
as of the end of the period covered by this report.  Based upon that evaluation,
Messrs.  Bernstein  and  deBary  have  concluded  that  the  Litigation  Trust's
disclosure  controls and procedures  were effective as of the end of the periods
covered by this report to provide reasonable assurance that information required
to be  disclosed  by the  Litigation  Trust in reports  that it files or submits
under the Exchange Act is recorded,  processed,  summarized and reported  within
the time periods specified in SEC rules and forms.

(b) There have been no significant  changes in the Litigation  Trust's  internal
controls or in other  factors  that could  significantly  affect the  Litigation
Trust's  internal  controls  subsequent to the date the Litigation Trust carried
out this evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.

         A control  system,  no matter  how well  conceived  and  operated,  can
provide only  reasonable,  not absolute  assurance  that the  objectives  of the
control  system are met.  Because of the  inherent  limitations  in all  control
systems,  no internal  controls can provide absolute  assurance that all control
issues and instances of fraud, if any, within a company have been detected.


                                       12


PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         We are a statutory  trust created under Delaware law. Our formation was
a condition to the  consolidation  of Empire  Resorts with MRMI,  MCM, MRDC, and
Mohawk. Also, as a condition to that consolidation,  each of Catskill,  MRDC and
Mohawk,  agreed to  assign to us all of their  claims  under or  related  to the
alienation and frustration of their  agreements and business  relations with the
St. Regis Mohawk Tribe. That assignment included rights to any proceeds from any
settlement or award that may arise from any  litigation  relating to that claim.
Our  litigation  claims  arise from the  efforts of each of  Catskill,  MRDC and
Mohawk to develop with the St. Regis Mohawk Tribe a gaming casino in Monticello,
New York.  We spent several  years and  substantial  funds to develop and obtain
required  approvals  for the  casino.  Subsequently,  Park  Place  Entertainment
Corporation,  the world's largest gaming corporation and Atlantic City's largest
casino  operator,  entered into an agreement  providing for the St. Regis Mohawk
Tribe to commit their future  casino  development  efforts  exclusively  to Park
Place  Entertainment  Corporation.  That  agreement  conflicted  with the Mohawk
Tribe's agreements with Catskill MRDC and Mohawk.

         There  is one  lawsuit  now  pending  and one  lawsuit  that  has  been
discontinued.  The  first  lawsuit  is  Catskill  Development,   L.L.C.,  Mohawk
Management,   L.L.C.,  and  Monticello  Raceway  Development  Company,   L.L.C.,
Plaintiffs. v. Park Place Entertainment  Corporation,  Defendant.  (Civil Action
No. 00CIV8660  (CM)(GAY)) (United States District Court Southern District of New
York).  This  lawsuit  had  initially  been  dismissed  on a motion for  summary
judgment. However, the trial court vacated the earlier decision granting summary
judgment to Park Place  Entertainment,  in order to allow  consideration  of new
evidence and  additional  discovery  proceedings.  Following  those  proceedings
judgment in favor of the defendant was reinstated.  An appeal has been taken and
briefs  have been  filed by the  Litigation  Trust.  In  preparing  the brief on
appeal,  our counsel became aware of a case that was decided  shortly before the
plaintiffs  brought  the  original  complaint.  The  effect of this case is that
jurisdiction may not be found to exist for two of the three plaintiff  entities.
We made the Court of Appeals aware of this circumstance. If the Court determines
that the federal courts lack  jurisdiction  over these  plaintiffs,  they may be
required to pursue their claims in the New York courts.  This could increase the
expense  involved,  and result in additional delay, in prosecuting their claims.
The  respondent's  brief was filed on June 9,  2005 and the  Litigation  Trust's
reply brief was filed on July 12, 2005.  Oral arguments on the appeal were heard
on October 17, 2005. At that time,  one member of the panel  questioned  whether
there were factual issues that needed to be determined before the jurisdictional
issues could be resolved.  On March 8, 2006,  the  Litigation  Trust  received a
Summary  Order from the United  States  Court of Appeals for the Second  Circuit
with  regard  to  the  Litigation   Trust's  appeal  in  the  case  of  Catskill
Development,   L.L.C.,   Mohawk  Management,   L.L.C.,  and  Monticello  Raceway
Development  Company,  L.L.C.,  Plaintiffs.  v.  Harrah's  Entertainment,  Inc.,
Defendant.

         The  unpublished  order  remanded  the case to the  District  Court for
additional  development  of the record.  In the  appeal,  the  Litigation  Trust
brought to the  attention  of the court a recent  decision  which  measured  the
diversity of a limited  liability  company  according to the  citizenship of its
individual members, rather than the state of its organization.  If this decision
were found to be a precedent,  the  Litigation  Trust conceded that diversity of
citizenship sufficient to establish subject matter jurisdiction in the case with
respect to Catskill and Mohawk would not exist.  However,  the Litigation  Trust
argued that this decision has been  inconsistently  applied and therefore should
not be  followed.  The Court of Appeals  has  rejected  the  Litigation  Trust's
arguments in this respect.

         The Litigation Trust also requested the Court to preserve  jurisdiction
in the case by dismissing the  non-diverse  plaintiffs and proceeding to rule on
the  issues on appeal as they apply to the  remaining  plaintiff.  However,  the
Court found the record to be  insufficient to determine the ownership of MRDC on
the date of the  commencement  of the  action.  Moreover,  the  Court  felt that
additional findings of fact were required for the court to determine whether the


                                       13


dismissal of the non-diverse  plaintiffs would result in prejudice to any of the
parties.

         In  remanding  the case,  the Court of  Appeals  vacated  the  original
judgment,  directing  that if the  District  Court  determined  that  MRDC was a
diverse party whose jurisdiction should be preserved,  it could consider whether
to  reinstate  all or part of its  prior  judgment.  In  addition,  the Court of
Appeals indicated that the trial court should make a determination as to whether
the remaining plaintiff would be a third party beneficiary of the contracts made
with the non-diverse parties under New York law.

         The  District  Court  held a hearing  on April 30,  2006 and  requested
briefs on the third party beneficiary  issue,  which were completed and filed by
the end of July. In addition, the parties entered into a stipulation agreeing to
request dismissal of the non-diverse  plaintiffs without prejudice and providing
for the Litigation  Trustees,  as diverse parties succeeding to the interests of
the  non-diverse  plaintiffs,  to  file a new  complaint,  following  which  the
District  Court entered a decision  dismissing  the two  non-diverse  plaintiffs
without prejudice. In accordance with the stipulations,  after the filing of the
new  complaint,  the parties  will move to  consolidate  the new action with the
existing action.  The Litigation Trust has agreed that in any such  consolidated
lawsuit,  the District  Court's prior  decisions and orders will be binding upon
them in such suit to the same extent as the dismissed  plaintiffs,  i.e. subject
to their right to appeal any judgment  based upon such  decisions  and orders to
the  United  States  Court of  Appeals  for the  Second  Circuit.  We expect the
District  Court to  re-enter a judgment  against  the  plaintiff's  and render a
decision on the third party beneficiary issue.  Assuming that the court does not
require  additional  hearings or briefs,  such a decision may be rendered in the
3rd or 4th  quarter of 2006,  after  which the Court of Appeals  will assign the
case to a new panel of  judges.  Additional  briefs  and oral  arguments  may be
required.  It is unlikely  that a decision on the appeal will be issued prior to
the first quarter of 2007.

         The second lawsuit is Catskill Development,  L.L.C., Mohawk Management,
L.L.C., and Monticello Raceway Development Company, L.L.C., Plaintiffs.  against
Gary Melius,  Ivan Kaufman,  Walter Horn,  President R.C. - St. Regis Management
Company,  et al,  Defendants.  (Index No. 891/03) (Supreme Court of the State of
New York  County of  Sullivan).  This  lawsuit  has been  discontinued  under an
agreement that permits it to be refiled at a future date without being barred by
the statute of  limitations.  Our purposes are the prosecution of our claims now
through the recovery of any settlement or final  judgments and the  distribution
of the net amount of any such recoveries to our beneficiaries.

ITEM 6.  EXHIBITS

a:  Exhibits

         *31.1    Certification  of Acting Chief Executive  Officer  pursuant to
                  Section 302 of the Sarbanes-Oxley Act of 2002.

         *31.2    Certification  of Acting Chief Financial  Officer  pursuant to
                  Section 302 of the Sarbanes-Oxley Act of 2002.

         *32.1    Certification  of the Acting Chief Executive  Officer pursuant
                  to 18 U.S.C.  Section 1350 adopted  pursuant to Section 906 of
                  the Sarbanes-Oxley Act of 2002.

         *32.2    Certification  of the Acting Chief Financial  Officer pursuant
                  to 18 U.S.C.  Section 1350 adopted  pursuant to Section 906 of
                  the Sarbanes-Oxley Act of 2002.

         *Filed herewith


                                       14


                                   SIGNATURES

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

                                                CATSKILL LITIGATION TRUST
                                                       (Registrant)

DATE:  August 10, 2006                          By: /s/ Joseph E. Bernstein
                                                    ----------------------------
                                                    Joseph E. Bernstein
                                                    Litigation Trustee

DATE:  August 10, 2006                          By: /s/ Paul A. deBary
                                                    ----------------------------
                                                    Paul A. deBary
                                                    Litigation Trustee


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