LAS VEGAS SANDS INC, 10-Q, 1999-11-15

LAS VEGAS SANDS INC
10-Q, 1999-11-15
HOTELS & MOTELS

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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

FORM 10-Q

<TABLE>
<C> <S>
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999

<TABLE>
<C> <S>
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>

FOR THE TRANSITION PERIOD FROM ______________ TO ______________

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COMMISSION FILE NUMBER 333-42147

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LAS VEGAS SANDS, INC.

(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
NEVADA 04-3010100
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)

3355 LAS VEGAS BOULEVARD SOUTH, ROOM 1A
LAS VEGAS, NEVADA 89109
(Address of principal executive
offices) (zip code)
</TABLE>

(702) 414-1000
(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last
report)

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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 the number of shares outstanding of each of the issuer's classes of
common stock, as of November 15, 1999.

<TABLE>
<S> <C>
CLASS OUTSTANDING AT NOVEMBER 15, 1999
Common Stock, $.10 par value 925,000 shares
</TABLE>

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LAS VEGAS SANDS, INC.
TABLE OF CONTENTS

<TABLE>
<S> <C> <C>
PART I
FINANCIAL INFORMATION

Item 1. Consolidated Balance Sheets at September 30, 1999 and
December 31, 1998........................................... 1

Consolidated Statements of Operations for the Three and Nine
Months Ended September 30, 1999 and September 30, 1998...... 2

Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1999 and September 30, 1998............. 3

Notes to Consolidated Financial Statements.................. 4-14

Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 15-22

Item 3. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 22

PART II
OTHER INFORMATION

Item 1. Legal Proceedings........................................... 23

Item 6. Exhibits and Reports on Form 8-K............................ 24

Signatures.................................................. 25
</TABLE>
<PAGE>
PART I
FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LAS VEGAS SANDS, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 27,659 $ 2,285
Restricted cash and investments........................... 18,389 133,936
Accounts receivable, net.................................. 33,139 112
Inventories............................................... 3,845 73
Prepaid expenses.......................................... 5,285 2
---------- ----------
Total current assets........................................ 88,317 136,408

Property and equipment, net............................... 1,070,733 833,054
Deferred offering costs, net.............................. 30,773 35,101
Other assets.............................................. 23,631 1,381
---------- ----------
$1,213,454 $1,005,944
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable.......................................... $ 26,862 $ 265
Construction payables..................................... 46,098 77,025
Accrued interest payable.................................. 26,497 9,069
Other accrued liabilities................................. 39,009 3,005
Current maturities of long-term debt...................... 38,542 13,788
---------- ----------
Total current liabilities................................... 177,008 103,152

Other long-term liabilities................................. 2,551
Long-term debt.............................................. 889,027 744,154
---------- ----------
1,068,586 847,306
---------- ----------
Redeemable Preferred Interest in Venetian Casino Resort,
LLC, a wholly owned subsidiary............................ 145,273 90,701
---------- ----------
Commitments and contingencies

Stockholder's equity (deficit)
Common stock, $.10 par value, 3,000,000 shares authorized,
925,000 shares issued and outstanding................... 92 92
Capital in excess of par value............................ 89,188 99,330
Accumulated deficit....................................... (89,685) (31,485)
---------- ----------
(405) 67,937
---------- ----------
$1,213,454 $1,005,944
========== ==========
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.

1
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LAS VEGAS SANDS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Casino.............................................. $ 52,718 $ -- $ 77,362 $ --
Room................................................ 35,541 48,969
Food and beverage................................... 12,007 17,876
Retail and other.................................... 10,718 182 14,442 629
-------- ------- -------- --------
Total revenue....................................... 110,984 182 158,649 629
Less: promotional allowances........................ 10,646 15,337
-------- ------- -------- --------
Net revenue......................................... 100,338 182 143,312 629
-------- ------- -------- --------
Operating expenses:
Casino.............................................. 33,281 51,876
Room................................................ 9,301 13,632
Food and beverage................................... 7,381 11,606
Retail and other.................................... 5,533 6,746
Provision for doubtful accounts and discounts....... 3,502 4,594
Selling, general and administrative................. 20,271 32,031
Rental expense...................................... 2,744 3,517
Depreciation and amortization....................... 10,290 25 14,853 75
-------- ------- -------- --------
92,303 25 138,855 75
-------- ------- -------- --------
Operating profit before pre-opening expenses.......... 8,035 157 4,457 554
Pre-opening expenses................................ 2,896 21,484 4,768
-------- ------- -------- --------
Operating income (loss)............................... 8,035 (2,739) (17,027) (4,214)
-------- ------- -------- --------
Other income (expense):
Interest income..................................... 371 3,929 2,169 14,621
Interest expense, net of amounts capitalized........ (26,596) (8,913) (43,342) (32,533)
-------- ------- -------- --------
Net loss.............................................. $(18,190) $(7,723) $(58,200) $(22,126)
======== ======= ======== ========
Basic and diluted loss per share...................... $ (24.07) $(20.33) $ (73.88) $ (35.90)
======== ======= ======== ========
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.

2
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LAS VEGAS SANDS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1999 1998
-------- --------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................... $(58,200) $(22,126)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................. 14,853 75
Amortization of debt offering costs....................... 4,985 3,824
Interest earned on restricted investments................. (6,388)
Provision for doubtful accounts and discounts............. 4,594
Changes in assets and liabilities:
Accounts receivable..................................... (37,621) (37)
Inventories............................................. (3,772) (34)
Prepaid expenses........................................ (5,283) 45
Other assets............................................ (22,690) (83)
Accounts payable........................................ 26,597 (1,701)
Accrued interest payable................................ 17,428 16,194
Other accrued liabilities............................... 38,555 424
-------- --------
Net cash used in operating activities....................... (20,554) (9,807)
-------- --------
Cash flows from investing activities:
Proceeds from sale of investments........................... 115,547 195,100
Construction of Casino Resort............................... (283,020) (342,357)
-------- --------
Net cash used in investing activities....................... (167,473) (147,257)
-------- --------
Cash flows from financing activities:
Proceeds from preferred interest in Venetian................ 44,431
Proceeds from Mall Construction Loan Facility............... 37,287 66,688
Repayments on Bank Credit Facility-term loan................ (5,625)
Proceeds from Bank Credit Facility-term loan................ 34,000 77,000
Repayments on Bank Credit Facility-revolver................. (9,609) (2,036)
Proceeds from Bank Credit Facility-revolver................. 32,006 10,321
Repayments on FF&E Credit Facility.......................... (2,931)
Proceeds from FF&E Credit Facility.......................... 83,842 5,669
-------- --------
Net cash provided by financing activities................... 213,401 157,642
-------- --------
Increase in cash and cash equivalents....................... 25,374 578
Cash and cash equivalents at beginning of period............ 2,285 857
-------- --------
Cash and cash equivalents at end of period.................. $ 27,659 $ 1,435
======== ========
Supplemental disclosure of cash flow information:
Cash payments for interest.................................. $ 51,509 $ 35,486
======== ========
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.

3
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LAS VEGAS SANDS, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 1 ORGANIZATION AND BASIS OF PRESENTATION

The accompanying consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1998. The year end balance sheet data was derived from audited
financial statements but does not include all disclosures required by generally
accepted accounting principles. In addition, certain amounts in the 1998
financial statements have been reclassified to conform with the 1999
presentation. In the opinion of management, all adjustments and normal recurring
accruals considered necessary for a fair presentation of the results for the
interim period have been included. The interim results reflected in the
unaudited financial statements are not necessarily indicative of expected
results for the full year.

Las Vegas Sands, Inc. ("LVSI") is a Nevada corporation. On April 28, 1989,
LVSI commenced gaming operations in Las Vegas, Nevada, by acquiring the Sands
Hotel and Casino (the "Sands"). On June 30, 1996, LVSI closed the Sands and
subsequently demolished the facility to make way for a planned two phase
hotel-casino resort. The first phase of the hotel-casino resort (the "Casino
Resort") includes 3,036 suites, casino space approximating 116,000 square feet,
approximately 500,000 square feet of convention space, and approximately 445,000
gross leasable square feet of retail shops and restaurants (the "Mall").

The consolidated financial statements as of September 30, 1999,
September 30, 1998 and December 31, 1998 include the accounts of LVSI and its
wholly owned subsidiaries (the "Subsidiaries"), including Venetian Casino
Resort, LLC ("Venetian"), Grand Canal Shops Mall, LLC (the "Mall Subsidiary"),
Lido Casino Resort, LLC (the "Phase II Subsidiary"), Mall Intermediate Holding
Company, LLC ("Mall Intermediate"), Grand Canal Shops Mall Construction, LLC
("Mall Construction"), Lido Intermediate Holding Company, LLC ("Lido
Intermediate"), Grand Canal Shops Mall Holding Company, LLC, Lido Casino Resort
Holding Company, LLC, Grand Canal Shops Mall MM, Inc. and Lido Casino Resort MM,
Inc. (collectively, the "Company"). Each of LVSI and the Subsidiaries is a
separate legal entity and the assets of each such entity are intended to be
available only to the creditors of such entity.

Venetian was formed on March 20, 1997 to own and operate certain portions of
the Casino Resort. LVSI is the managing member and owns 100% of the common
voting equity in Venetian. The entire preferred interest in Venetian is owned by
Interface Group Holding Company, Inc. ("Interface Holding"), which is wholly
owned by LVSI's Sole Stockholder (the "Sole Stockholder").

Mall Intermediate, Mall Construction and Lido Intermediate are special
purpose companies, which are wholly owned subsidiaries of Venetian. They are
guarantors or co-obligors of certain indebtedness related to the construction of
the Casino Resort.

The Mall Subsidiary is an indirect wholly owned subsidiary of Mall
Intermediate and was formed on March 20, 1997 to own and operate the Mall.

Construction of the Casino Resort commenced in April 1997. The casino space
and certain suites and facilities at the Casino Resort opened on May 4, 1999 and
the Mall opened on June 19, 1999.

NOTE 2 PER SHARE DATA

Basic and diluted loss per share are calculated based upon the weighted
average number of shares outstanding. The weighed average number of shares
outstanding used in the computation of loss per share of common stock was
925,000 for all periods presented. The net loss available to common

4
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LAS VEGAS SANDS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 2 PER SHARE DATA (CONTINUED)

stockholders used in computing the basic and diluted loss per share includes
accrued preferred dividends of approximately $4.0 million and $10.1 million,
respectively, for the three and nine month periods ended September 30, 1999.

NOTE 3 PROPERTY AND EQUIPMENT

Property and equipment includes costs incurred to construct the Casino
Resort and consists of the following (in thousands):

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
Land and land improvements.......................... $ 93,634 $ 93,634
Building............................................ 801,393
Equipment, furniture and fixtures................... 140,074 392
Construction in progress............................ 50,048 739,028
Less: accumulated depreciation...................... (14,416)
---------- --------
$1,070,733 $833,054
========== ========
</TABLE>

The amounts of interest capitalized as of September 30, 1999 and
December 31, 1998 were $73.1 million and $41.9 million, respectively. The
Company has not capitalized interest expense in the third quarter of 1999. As of
September 30, 1999, construction in progress represents project design and
shared facilities costs for the Phase II Subsidiary.

NOTE 4 LONG-TERM DEBT

Long-term debt consists of the following (in thousands):

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
12 1/4% Mortgage Notes, due November 15, 2004............... $425,000 $425,000
14 1/4% Senior Subordinated Notes, due November 15, 2005....
(Net of unamortized discount of $5,357 and $6,014).......... 92,143 91,486
Mall Construction Loan Facility............................. 140,000 102,713
Bank Credit Facility-Revolver............................... 31,282 8,885
Bank Credit Facility-Term Loan.............................. 144,375 116,000
FF&E Credit Facility........................................ 94,769 13,858
Less: current maturities.................................... (38,542) (13,788)
-------- --------
Total long-term debt........................................ $889,027 $744,154
======== ========
</TABLE>

In connection with the financing for the Casino Resort, the Company entered
into a series of transactions during 1997 to provide for the development and
construction of the Casino Resort. In November 1997, the Company issued $425.0
million aggregate principal amount of Mortgage Notes (the "Mortgage Notes") and
$97.5 million aggregate principal amount of Senior Subordinated Notes (the
"Senior Subordinated Notes" and, together with the Mortgage Notes, the "Notes")
in a private placement. On June 1, 1998, LVSI and Venetian completed an exchange
offer to exchange the Notes for Notes with substantially the same terms. In
November 1997, LVSI, Venetian and a syndicate of

5
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LAS VEGAS SANDS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 4 LONG-TERM DEBT (CONTINUED)

lenders entered into a Bank Credit Facility (the "Bank Credit Facility"). The
Bank Credit Facility provides up to $150.0 million in multiple draw term loans
to the Company for construction and development of the Casino Resort. Up to
$40.0 million of additional credit in the form of revolving loans under the Bank
Credit Facility (the "Revolver") is available generally for working capital. In
November 1997, LVSI, Venetian, Mall Construction and a major non-bank lender
entered into a Mall Construction Loan Facility to provide up to $140.0 million
in financing for the retail mall in the Casino Resort (the "Mall Construction
Loan Facility"). In December 1997, the Company entered into an agreement (the
"FF&E Credit Facility") with certain lenders to provide for $97.7 million of
financing for certain furniture, fixtures and equipment to be secured under the
FF&E Credit Facility and an electrical substation.

During the nine months ended September 30, 1999, $37.3 million, $66.0
million and $83.8 million, respectively, were drawn from the Mall Construction
Loan Facility, the Bank Credit Facility (including $32.0 million under its
Revolver) and the FF&E Credit Facility, respectively. In addition, at
September 30, 1999 the Company had committed to approximately $600,000 of
irrevocable letters of credit drawn on the Revolver. Also during September 1999,
the Company paid scheduled principal repayments of $5.6 million and $2.9 million
under the Bank Credit Facility and the FF&E Credit Facility, respectively.
During the nine months ending September 30, 1999, the Company repaid $9.6
million under its Revolver. SEE ALSO "NOTE 8 SUBSEQUENT EVENTS."

The Company has substantial debt service payments due during the next twelve
months, including quarterly principal repayments on its Bank Credit Facility and
FF&E Credit Facility, aggregating $38.5 million, and interest payments of $33.0
million due for the Notes on May 15 and November 15, 2000. To fund these
payments from operating cash flow, the Company must achieve improved operating
results for its next four fiscal quarters.

NOTE 5 REDEEMABLE PREFERRED INTEREST IN VENETIAN CASINO RESORT, LLC

During 1997, Interface Holding contributed $77.1 million in cash to Venetian
in exchange for a Series A preferred interest (the "Series A Preferred
Interest") in Venetian. By its terms, the Series A Preferred Interest was
convertible at any time into a Series B Preferred Interest in Venetian (the
"Series B Preferred Interest"). In August 1998, the Series A Preferred Interest
was converted into the Series B Preferred Interest. During the second and third
quarters of 1999, Interface Holding contributed $37.3 million and $7.1 million,
respectively, in cash in exchange for an additional Series B Preferred Interest.
The rights of the Series B Preferred Interest include the accrual of a preferred
return of 12% from the date of contribution in respect of the applicable
Series A Preferred Interest or Series B Preferred Interest. Until the
indebtedness under the Bank Credit Facility is repaid and cash payments are
permitted under the restricted payment covenants of the indentures entered into
in connection with the Notes (the "Indentures"), the preferred return on the
Series B Preferred Interest will accrue and will not be paid in cash. Commencing
in November 2009, distributions must be made to the extent of the positive
capital account of the holder. During the nine months ended September 30, 1999,
$10.1 million was accrued on the Series B Preferred Interest.

6
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LAS VEGAS SANDS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 6 COMMITMENTS AND CONTINGENCIES

CONSTRUCTION COSTS

Ground breaking for the Casino Resort occurred in April 1997 and substantial
completion was achieved on November 12, 1999 as more fully described in Note
8--"Subsequent Events". The redevelopment of the site of the Sands is expected
to be completed in two phases (with the first phase being construction of the
Casino Resort and the second phase being construction of a second casino resort
and referred to herein as the "Phase II Resort"). There can be no assurance,
however, as to when, or if, construction of the Phase II Resort will be
commenced or completed due to risks and uncertainties inherent in the
development process.

The Company currently estimates that the total construction cost of the
Casino Resort will be approximately $1.04 billion (excluding certain heating,
ventilating, air conditioning equipment and land acquisition costs), of which
virtually all has been paid to date. In connection with the construction of the
principal components of the Casino Resort, the Company entered into a
construction management agreement (the "Construction Management Agreement") with
Lehrer McGovern Bovis, Inc. (the "Construction Manager"). Such agreement (after
taking into account amendments thereto and approved change orders through
September 30, 1999) provides for a guaranteed maximum price (the "Final GMP")
for construction costs covered by the Construction Management Agreement of
$645.0 million, and a guaranteed completion date of April 21, 1999. As noted
below, the Company is currently engaged in a dispute with the Construction
Manager with respect to both the Final GMP and the guaranteed completion date.

LITIGATION

The Company is party to litigation matters and claims related to its
operations and the construction of the Casino Resort. Except as described below,
the Company does not expect that the final resolution of these matters will have
a material impact on the financial position, results of operation and cash flows
of the Company.

On July 30, 1999, Venetian filed a complaint against the Construction
Manager and its parent, Bovis, Inc. ("Bovis"), in United States District Court
for the District of Nevada. The action alleges breach of contract by the
Construction Manager of its obligations under the Construction Management
Agreement and a breach of contract by Bovis of its obligations under a guaranty
of the Construction Management Agreement, including failure to fully pay trade
contractors and vendors and failure to meet the April 21, 1999 guaranteed
completion date. The suit is intended to ask the courts to require the
Construction Manager to pay its contractors, to compensate Venetian for the
Construction Manager's failure to perform its duties under the Construction
Management Agreement and to pay the Company the agreed upon per-day liquidated
damages penalty for failure to meet the guaranteed completion date. Venetian
seeks total damages in excess of $50.0 million.

7
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LAS VEGAS SANDS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 6 COMMITMENTS AND CONTINGENCIES (CONTINUED)

claims that it is owed $145.6 million from Venetian and its affiliates. Based
upon its preliminary review of the complaint and the fact that the Construction
Manager has not provided Venetian with reasonable documentation to support such
claims, the Company believes that the Construction Manager's claims are without
merit and intends to vigorously defend itself in any litigation.

In connection with these disputes, the Construction Manager and its
subcontractors filed mechanics liens against the Casino Resort for $145.6
million and $138.7 million, respectively. By early November 1999, the Company
had purchased surety bonds for all of the claims underlying these liens (other
than approximately $15.0 million of claims with respect to which the
Construction Manager purchased bonds). Consequently, virtually all of these
liens have been discharged of record, and the remaining liens (less than $1.0
million) should be discharged of record once the required statutory notice
period has passed. As a result, there can be no foreclosure of the Casino Resort
in connection with the claims of Bovis and its subcontractors. However, the
Company will be required to pay or immediately reimburse the bonding company if
and to the extent that the underlying claims are judicially determined to be
valid. If such claims are not settled, it is likely to take a significant amount
of time for their validity to be judicially determined.

The Company believes that a substantial portion of these claims are
unsubstantiated, without merit, overstated and/or duplicative. The Construction
Manager itself has publicly acknowledged that at least some of the claims of its
subcontractors are without merit. In addition, the Company believes that
pursuant to the Construction Management Agreement and the Final GMP, the
Construction Manager is responsible for payment of any subcontractors' claims to
the extent they are determined to be valid. The Company may also have and is in
the process of investigating a variety of other defenses to the liens that have
been filed, including, for example, the fact that the Construction Manager and
its subcontractors previously waived or partially released their right to file
liens against the Casino Resort. The Company intends to vigorously defend itself
in any lien proceedings.

All of the pending litigation described above is in preliminary stages and
it is not yet possible to determine its ultimate outcome. If any litigation or
other proceedings concerning the claims of the Construction Manager or
subcontractors were decided adversely to the Company, such litigation or other
lien proceedings could have a material effect on the financial position, results
of operations or cash flows of the Company.

NOTE 7 SUMMARIZED FINANCIAL INFORMATION

Venetian and LVSI are co-obligors of the Notes and certain other
indebtedness related to construction of the Casino Resort and are jointly and
severally liable for such indebtedness (including the Notes). Venetian and Mall
Intermediate, Mall Construction, and Lido Intermediate (collectively, the
"Subsidiary Guarantors") are wholly owned subsidiaries of LVSI. The Subsidiary
Guarantors have jointly and severally guaranteed (or are co-obligors of) such
debt on a full and unconditional basis (other than indebtedness under the Mall
Construction Loan Facility, which is guaranteed only by Mall Intermediate and
Mall Construction). No other subsidiary of LVSI is an obligor or guarantor of
any of the Casino Resort financing.

Venetian, Mall Construction and the Mall Subsidiary, have entered into a
Sale and Contribution Agreement (the "Sale and Contribution Agreement") whereby,
upon substantial completion of the Casino Resort and the satisfaction of certain
other conditions, Mall Construction has agreed to sell,

8
<PAGE>
LAS VEGAS SANDS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 7 SUMMARIZED FINANCIAL INFORMATION (CONTINUED)

and the Mall Subsidiary has agreed to purchase, among other things, (i) all of
its right, title and interest (whether in fee or in leasehold) in and to the
property and improvements that constitute the Mall in their "as is" condition on
the date of Completion (as defined in the funds disbursement and administration
agreement among certain lenders of the Company (the "Disbursement Agreement")),
(ii) monies deposited in certain reserve accounts relating to the Mall,
(iii) all right, title and interest of Mall Construction and to a lease for an
entertainment complex which is adjacent to the casino floor, and (iv) all right,
title and interest of Mall Construction: (a) as landlord under Mall tenant
leases, (b) under an Amended and Restated Reciprocal, Easement, Use and
Operating Agreement among Venetian, Mall Construction and Interface
Group-Nevada, Inc. (the "Cooperation Agreement"), (c) in and to all other
easements, fixtures and improvements appurtenant thereto, (d) under an Energy
Services Agreement, dated as of June 1, 1997, with a heating, ventilating and
air conditioning provider (the "HVAC Provider") and any other Mall intangible
property rights and (e) in and to all Mall personal property (collectively the
"Mall Assets"). In connection with the sale of the Mall, Mall Construction will
transfer to the Mall Subsidiary, under certain circumstances, a specified amount
of the proceeds from the Sole Stockholder's $25.0 million collateralized
completion guaranty (the "Completion Guaranty"). As consideration for such
transfers, the Mall Subsidiary shall, among other things, repay or assume in
full the outstanding balance of the indebtedness under the Mall Construction
Loan Facility. As discussed in Note 8 below, the above-described transactions
were consumated on November 12, 1999.

Because the Mall Subsidiary is not a guarantor of any indebtedness of the
Company, creditors of the Company (including the holders of the Notes) do not
have a direct claim against the assets of the Mall Subsidiary. As a result,
indebtedness of the Company (including the Notes) will be effectively
subordinated to indebtedness of the Mall Subsidiary. The Mall Subsidiary is not
restricted by any of the debt instruments of the Company (including the
Indentures) from incurring any indebtedness. Any indebtedness incurred by the
Mall Subsidiary may include material restrictions on the ability of the Mall
Subsidiary to pay dividends or to make distributions or loans to the Company and
its subsidiaries.

Prior to October 1998, Venetian owned approximately 44 acres of land on or
near the Las Vegas Strip, on the site of the former Sands. Such property
includes the site on which the Casino Resort was constructed. Approximately 14
acres of such land was transferred to the Phase II Subsidiary in October 1998.
The Phase II Resort is planned to be constructed adjacent to the Casino Resort.
Because the Phase II Subsidiary will not be a guarantor of the Company's
indebtedness, creditors of the Company (including the holders of the Notes) will
not have a direct claim against the assets of the Phase II Subsidiary. As a
result, the indebtedness of the Company (including the Notes) will be
effectively subordinated to indebtedness of the Phase II Subsidiary. The Phase
II Subsidiary is not subject to any of the restrictive covenants of the debt
instruments of the Company (including the Notes). Any indebtedness incurred by
the Phase II Subsidiary is expected to include material restrictions on the
ability of the Phase II Subsidiary to pay dividends or make distributions or
loans to the Company and its subsidiaries.

Separate financial statements and other disclosures concerning each of
Venetian and the Subsidiary Guarantors are not presented below because
management believes that they are not material to investors. Summarized
financial information of LVSI, Venetian, the Subsidiary Guarantors and the non-
guarantor subsidiaries on a combined basis as of and for the nine months ended
September 30, 1999 is as follows (in thousands):

9
<PAGE>
LAS VEGAS SANDS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 7 SUMMARIZED FINANCIAL INFORMATION (CONTINUED)

CONDENSED BALANCE SHEETS
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
(1)
LIDO MALL GRAND
INTERMEDIATE INTERMEDIATE CANAL
VENETIAN HOLDING HOLDING SHOPS MALL NON-
LAS VEGAS CASINO RESORT COMPANY COMPANY CONSTRUCTION GUARANTOR
SANDS, INC. LLC LLC LLC LLC SUBSIDIARIES
----------- ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents... $ 17,526 $ 9,554 $5 $5 $ 407 $ 162
Restricted cash and
investments............... 18,389
Intercompany receivable..... 40,001
Accounts receivable, net.... 16,195 15,723 1,221
Inventories................. 3,845
Prepaid expenses............ 1,270 3,700 315
-------- ---------- -- -- -------- -------
Total current assets...... 34,991 91,212 5 5 1,943 162
Property and equipment,
net....................... 855,252 137,187 78,294
Investment in
Subsidiaries.............. 114,225 66,593
Deferred offering costs,
net....................... 25,095 5,678
Other assets................ 2,356 11,704 9,571
-------- ---------- -- -- -------- -------
$151,572 $1,049,856 $5 $5 $154,379 $78,456
======== ========== == == ======== =======
Accounts payable............ $ 2,273 $ 15,630 $ $ $ 462 $ 8,497
Construction payables....... 42,683 3,415
Intercompany payables....... 21,864 17,877 260
Accrued interest payable.... 26,318 179
Other accrued liabilities... 10,627 27,715 667
Current maturities of
long-term debt............ 38,542
-------- ---------- -- -- -------- -------
Total current
liabilities............. 34,764 150,888 19,185 12,172
Other long-term
liabilities............... 2,551
Long-term debt.............. 749,027 140,000
-------- ---------- -- -- -------- -------
34,764 902,466 159,185 12,172
Redeemable Preferred
interest in Venetian...... 145,273
-------- ---------- -- -- -------- -------
Stockholder's equity
(deficit)................. 116,808 2,117 5 5 (4,806) 66,284
-------- ---------- -- -- -------- -------
$151,572 $1,049,856 $5 $5 $154,379 $78,456
======== ========== == == ======== =======

CONSOLIDATING/
ELIMINATING
ENTRIES TOTAL
-------------- ----------
<S> <C> <C>
Cash and cash equivalents... $ $ 27,659
Restricted cash and
investments............... 18,389
Intercompany receivable..... (40,001)
Accounts receivable, net.... 33,139
Inventories................. 3,845
Prepaid expenses............ 5,285
--------- ----------
Total current assets...... (40,001) 88,317
Property and equipment,
net....................... 1,070,733
Investment in
Subsidiaries.............. (180,818)
Deferred offering costs,
net....................... 30,773
Other assets................ 23,631
--------- ----------
$(220,819) $1,213,454
========= ==========
Accounts payable............ $ $ 26,862
Construction payables....... 46,098
Intercompany payables....... (40,001)
Accrued interest payable.... 26,497
Other accrued liabilities... 39,009
Current maturities of
long-term debt............ 38,542
--------- ----------
Total current
liabilities............. (40,001) 177,008
Other long-term
liabilities............... 2,551
Long-term debt.............. 889,027
--------- ----------
(40,001) 1,068,586
Redeemable Preferred
interest in Venetian...... 145,273
--------- ----------
Stockholder's equity
(deficit)................. (180,818) (405)
--------- ----------
$(220,819) $1,213,454
========= ==========
</TABLE>

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

(1) The assets and liabilities of Grand Canal Shops Mall Construction, LLC, a
guarantor, will be transferred to Grand Canal Shops Mall, LLC, a
non-guarantor subsidiary, upon substantial completion of the Casino Resort
and satisfaction of certain other conditions. See Note 8--"Subsequent
Events."

10
<PAGE>
LAS VEGAS SANDS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 7 SUMMARIZED FINANCIAL INFORMATION (CONTINUED)

CONDENSED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
LIDO MALL GRAND
INTERMEDIATE INTERMEDIATE CANAL
VENETIAN HOLDING HOLDING SHOPS MALL NON-
LAS VEGAS CASINO RESORT COMPANY COMPANY CONSTRUCTION GUARANTOR
SANDS, INC. LLC LLC LLC LLC SUBSIDIARIES
----------- ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Casino.......................... $77,362 $ $ $ $ $
Room............................ 48,969
Food and beverage............... 17,876
Retail and other................ 968 28,419 3,363
------- -------- ------- ------- ------- -----
Total revenue................... 78,330 95,264 3,363
Less: promotional allowance..... 15,337
------- -------- ------- ------- ------- -----
Net revenue..................... 78,330 79,927 3,363
------- -------- ------- ------- ------- -----
Operating expenses:
Casino.......................... 70,184
Room............................ 13,632
Food and beverage............... 11,606
Retail and other................ 4,238 2,508
Provision for doubtful accounts
and discounts................. 3,764 830
Selling, general and
administrative................ 2,168 29,863
Rental expense.................. 725 2,239 553
Depreciation and amortization... 52 13,588 1,213
------- -------- ------- ------- ------- -----
76,893 75,996 4,274
------- -------- ------- ------- ------- -----
Operating profit (loss) before
pre-opening expenses.......... 1,437 3,931 (911)
Pre-opening expenses............ 143 21,341
------- -------- ------- ------- ------- -----
Operating income (loss)......... 1,294 (17,410) (911)
------- -------- ------- ------- ------- -----
Other income (expense):
Interest income............... 141 2,028
Interest expense, net of
amounts capitalized......... (39,438) (3,904)
------- -------- ------- ------- ------- -----
Net income (loss)............... $ 1,435 $(54,820) $ $ $(4,815) $
======= ======== ======= ======= ======= =====

CONSOLIDATING/
ELIMINATING
ENTRIES TOTAL
-------------- --------
<S> <C> <C>
Revenues:
Casino.......................... $ $ 77,362
Room............................ 48,969
Food and beverage............... 17,876
Retail and other................ (18,308) 14,442
-------- --------
Total revenue................... (18,308) 158,649
Less: promotional allowance..... 15,337
-------- --------
Net revenue..................... (18,308) 143,312
-------- --------
Operating expenses:
Casino.......................... (18,308) 51,876
Room............................ 13,632
Food and beverage............... 11,606
Retail and other................ 6,746
Provision for doubtful accounts
and discounts................. 4,594
Selling, general and
administrative................ 32,031
Rental expense.................. 3,517
Depreciation and amortization... 14,853
-------- --------
(18,308) 138,855
-------- --------
Operating profit (loss) before
pre-opening expenses.......... 4,457
Pre-opening expenses............ 21,484
-------- --------
Operating income (loss)......... (17,027)
-------- --------
Other income (expense):
Interest income............... 2,169
Interest expense, net of
amounts capitalized......... (43,342)
-------- --------
Net income (loss)............... $ $(58,200)
======== ========
</TABLE>

11
<PAGE>
LAS VEGAS SANDS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 7 SUMMARIZED FINANCIAL INFORMATION (CONTINUED)

CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
LIDO MALL GRAND
INTERMEDIATE INTERMEDIATE CANAL
VENETIAN HOLDING HOLDING SHOPS MALL NON-
LAS VEGAS CASINO RESORT COMPANY COMPANY CONSTRUCTION GUARANTOR
SANDS, INC. LLC LLC LLC LLC SUBSIDIARIES
----------- ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities......... $ (6,119) $ (10,367) $ $ $(12,561) $ 8,493
-------- --------- --- ---- -------- --------
Cash flows from investing
activities:
Proceeds from sale of
investments................ 115,547
Construction of Casino
Resort..................... (191,879) (45,431) (45,710)
Investments in
subsidiaries............... (37,262)
-------- --------- --- ---- -------- --------
Net cash used in investing
activities................... (113,594) (45,431) (45,710)
Cash flows from financing
activities:
Proceeds from preferred
interest in Venetian....... 44,431
Proceeds from Mall
Construction Loan
Facility................... 37,287
Repayments on Bank Credit
Facility-term loan......... (5,625)
Proceeds from Bank Credit
Facility-term loan......... 34,000
Repayments on Bank Credit
Facility-revolver.......... (9,609)
Proceeds from Bank Credit
Facility-revolver.......... 32,006
Repayments on FF&E Credit
Facility................... (2,931)
Proceeds from FF&E Credit
Facility................... 83,842
Net increase (decrease) in
intercompany accounts...... 22,429 (43,624) 21,107 88
Proceeds from investment by
parent company.............
-------- --------- --- ---- -------- --------
Net cash provided by financing
activities................... 22,429 132,490 58,394 37,350
-------- --------- --- ---- -------- --------
Increase in cash and cash
equivalents.................. 16,310 8,529 402 133
Cash and cash equivalents at
beginning of period.......... 1,216 1,025 5 5 5 29
-------- --------- --- ---- -------- --------
Cash and cash equivalents at
end of period................ $ 17,526 $ 9,554 $ 5 $ 5 $ 407 $ 162
======== ========= === ==== ======== ========

CONSOLIDATING/
ELIMINATING
ENTRIES TOTAL
-------------- ---------
<S> <C> <C>
Net cash provided by (used in)
operating activities......... $ -- $ (20,554)
--------- ---------
Cash flows from investing
activities:
Proceeds from sale of
investments................ 115,547
Construction of Casino
Resort..................... (283,020)
Investments in
subsidiaries............... 37,262
--------- ---------
Net cash used in investing
activities................... 37,262 (167,473)
Cash flows from financing
activities:
Proceeds from preferred
interest in Venetian....... 44,431
Proceeds from Mall
Construction Loan
Facility................... 37,287
Repayments on Bank Credit
Facility-term loan......... (5,625)
Proceeds from Bank Credit
Facility-term loan......... 34,000
Repayments on Bank Credit
Facility-revolver.......... (9,609)
Proceeds from Bank Credit
Facility-revolver.......... 32,006
Repayments on FF&E Credit
Facility................... (2,931)
Proceeds from FF&E Credit
Facility................... 83,842
Net increase (decrease) in
intercompany accounts......
Proceeds from investment by
parent company............. 37,262 (37,262)
--------- ---------
Net cash provided by financing
activities................... (37,262) 213,401
--------- ---------
Increase in cash and cash
equivalents.................. 25,374
Cash and cash equivalents at
beginning of period.......... 2,285
--------- ---------
Cash and cash equivalents at
end of period................ $ $ 27,659
========= =========
</TABLE>

12
<PAGE>
LAS VEGAS SANDS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 8 SUBSEQUENT EVENTS

Substantial completion of the Casino Resort was achieved on November 12,
1999. This means that as of November 12, 1999, the Casino Resort was fully
constructed and operational, with the exception of punchlist items. As required
by the Disbursement Agreement and the Sale and Contribution Agreement, on the
same day substantial completion was achieved and certain other required
conditions were satisfied (all of which were also satisfied on November 12,
1999) (i) LVSI, Venetian and Mall Construction were released from all liability
under the Mall Construction Loan Facility, (ii) the Mall Assets were released
from the liens under the Bank Credit Facility and the indenture governing the
Mortgage Notes, and (iii) the Mall Assets were purchased by the Mall Subsidiary
which, as consideration for such purchase, assumed in full the outstanding
indebtedness under the Mall Construction Loan Facility.

On November 12, 1999, the Company entered into various limited waiver
agreements (the "Waivers") with the administrative agent and lenders under the
Bank Credit Facility, the lender under the Mall Construction Loan Facility, the
lender under the FF&E Credit Facility and certain parties to the Disbursement
Agreement. Under the Waivers, the various lenders waived certain defaults and
events of default (to the extent, if any, they exist or may have existed)
arising from the litigation with the Construction Manager, the facts relating to
the underlying dispute with the Construction Manager and the mechanics liens
that were filed against the Casino Resort. As conditions to the effectiveness of
the Waivers, the Company and the Sole Stockholder, among other things
(i) agreed to pay a fee to the lenders under the Bank Credit Facility and the
FF&E Credit Facility, (ii) agreed to purchase surety bonds for all of the
mechanics liens and cause the title company to provide endorsements ensuring
that the deeds of trust under the Bank Credit Facility, the Mall Construction
Loan Facility and the Mortgage Notes are free and clear of all mechanics liens,
and (iii) agreed that the Sole Stockholder's Completion Guaranty would,
notwithstanding the prior agreement of the parties providing for termination of
such guaranty upon substantial completion of the Casino Resort, remain in effect
until "final completion" (i.e., the completion of all remaining punchlist items
and the final resolution or settlement of all disputes with the Construction
Manager and subcontractors) and be unlimited in amount with respect to all
construction costs arising from scope changes. All of the conditions to the
effectiveness of the limited waivers were satisfied on November 12, 1999 and, as
a result (i) the Company has access to borrowings under the Revolver, the
Completion Guaranty and restricted cash, investments and other project funds
held by the disbursement agent under the Disbursement Agreement, (ii) the
disbursement agent under the Disbursement Agreement approved and released an
advance under the Disbursement Agreement to pay for various project construction
costs in the amount of approximately $28.3 million, and (iii) the agent under
the FF&E Credit Facility released approximately $6.5 million of lender funds
under such facility. The sources of funds for the advance under the Disbursement
Agreement included approximately $23.4 million of funds provided by the Sole
Stockholder pursuant to his Completion Guaranty (leaving approximately $5.0
million in the cash collateral account that secures the Completion Guaranty) and
approximately $4.9 million of restricted cash and investments held by the
disbursement agent.

The Waivers under the Bank Credit Facility and the FF&E Credit Facility also
each provide that the Company may incur additional indebtedness up to an
aggregate principal amount of $15.0 million, provided that such additional
indebtedness (i) may not be secured by any liens on any property or assets owned
by the Company or by any other direct or indirect equity interests in the
Company, and (ii) will be subordinated to all indebtedness under the Senior Debt
(as defined below).

13
<PAGE>
LAS VEGAS SANDS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 8 SUBSEQUENT EVENTS (CONTINUED)

In accordance with its terms, advances made under the Completion Guaranty up
to $25.0 million are treated as a junior loan from the Sole Stockholder to
Venetian (the "Completion Guaranty Loan") that is subordinated in right of
payment (except as described below) to the indebtedness under the Bank Credit
Facility, the Mall Construction Loan Facility, the FF&E Credit Facility, the
Mortgage Notes and the Senior Subordinated Notes. The Completion Guaranty Loan
matures on November 16, 2005 and bears interest at a rate of 14 1/4% per annum.
Although interest may accrue on the Completion Guaranty Loan, no cash payments
with respect to such loan may be made until senior indebtedness is repaid,
except for payments made from certain construction-related recoveries. As noted
above, on November 12, 1999 an advance of approximately $23.4 million was made
under the Completion Guaranty and is being treated as a Completion Guaranty
Loan.

Following the transfer of the Mall Assets to the Mall Subsidiary on
November 12, 1999, the Sole Stockholder agreed to provide a working capital
facility to LVSI in the form of a subordinated note (the "Subordinated Working
Capital Note"). Under the Subordinated Working Capital Note, the Sole
Stockholder has agreed to provide $15.0 million to LVSI on a revolving basis.
The Subordinated Working Capital Note matures on June 1, 2006 and bears interest
at a rate of 12% per annum. The Subordinated Working Capital Note is
subordinated to all indebtedness under the terms of each of the Bank Credit
Facility, the FF&E Credit Facility, the Mortgage Notes and the Subordinated
Notes (collectively, the "Senior Debt"). Under the subordination provisions of
the Subordinated Working Capital Note, no cash interest payments may be made
while any indebtedness is outstanding under the Bank Credit Facility (instead,
interest will accrue and be capitalized), and no cash principal payments may be
made while any Senior Debt is outstanding. When the indebtedness under the Bank
Credit Facility has been repaid, cash interest may be paid on the Subordinated
Working Capital Note if no default or event of default exists, or would result
from such payment, under any Senior Debt. On November 12, 1999, the Company
borrowed $15.0 million under the Subordinated Working Capital Note to fund its
working capital requirements (including interest payments under the Senior
Debt).

On November 12, 1999, the Company paid $30.9 million of interest on the
Notes that was due on November 15, 1999.

14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion should be read in conjunction with, and is
qualified in its entirety by, the consolidated financial statements and the
notes thereto and other financial information included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1998. Certain statements in
this "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" are forward-looking statements. See "--SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS."

GENERAL

The Company owns and operates the Casino Resort, a large-scale
Venetian-themed hotel, casino, retail, meeting and entertainment complex in Las
Vegas, Nevada.

CONSTRUCTION COSTS

The Company currently estimates that the aggregate construction costs for
the Casino Resort will be approximately $1.04 billion (of which virtually all
has been paid to date), excluding the HVAC Equipment (as defined below) and land
acquisition costs. The construction of the principal components of the Casino
Resort was undertaken by the Construction Manager under the Construction
Management Agreement. Under the Construction Management Agreement, the
Construction Manager agreed to substantially complete the Casino Resort by
April 21, 1999. The Construction Management Agreement also provided that the
Company and the Construction Manager would establish the Final GMP. The Company
and the Construction Manager agreed on a Final GMP for work included within the
scope of work of the Construction Manager of $645.0 million. Included within the
Final GMP is up to $70.0 million to construct and install certain heating,
ventilating and air conditioning equipment (the "HVAC Equipment"). Subject to
certain exceptions, under the Construction Management Agreement if the cost of
the work covered by such agreement exceeded the amount of the Final GMP plus
approved change orders, the Construction Manager agreed to be responsible for
such excess costs. As contemplated by the project agreements, certain funds,
such as the original $40.0 million general project contingency, realized cost
savings, other available funds and the Sole Stockholder's $25.0 million
Completion Guaranty have been reallocated, applied or are available to pay for
the Final GMP.

Through July 12, 1999, the Company had paid all construction amounts for
which the Construction Manager had submitted proper payment requisitions within
the Final GMP. The Construction Manager has asserted that it is entitled to
substantial amounts in excess of the Final GMP and that it is entitled to an
extension of the guaranteed completion date of April 21, 1999. The Company
believes that the Construction Manager's claims are unfounded and that it is
entitled to receive a per-day liquidated damages penalty for the Construction
Manager's failure to meet the April 21, 1999 guaranteed completion date. As
described in "PART II, ITEM 1. LEGAL PROCEEDINGS," Venetian commenced a lawsuit
against the Construction Manager and its parent, Bovis, for breach of contract
and the Construction Manager has filed a complaint against the Company.

On August 2, 1999, in connection with the disputes described above, the
Construction Manager filed mechanics liens against the Casino Resort for $145.6
million. Subcontractors which performed work at, or furnished labor, materials
or equipment to the project have also filed mechanics liens against the Casino
Resort for $138.7 million. By early November 1999, the Company had purchased
surety bonds for all of the claims underlying these liens (other than
approximately $15.0 million of claims with respect to which the Construction
Manager purchased bonds). Consequently, virtually all of these liens have been
discharged of record, and the remaining liens (less than $1.0 million) should be
discharged of record once the required statutory notice period has passed. As a
result, there can be no foreclosure of the Casino Resort in connection with the
claims of Bovis and its subcontractors. However, the Company will be required to
pay or immediately reimburse the bonding company if and to the extent that the
underlying claims are judicially determined to be valid. If such claims are not

15
<PAGE>
settled, it is likely to take a significant amount of time for their validity to
be judicially determined. The Company intends to vigorously defend itself and
the Casino Resort in any litigation and lien proceedings.

On August 9, 1999, the Company notified the insurance companies providing
coverage under the Construction Manager's liquidated damages insurance policy
(the "LD Policy") that it has a claim under the LD Policy. The LD Policy
provides insurance coverage for the failure of the Construction Manager to
achieve substantial completion of the portions of the Casino Resort covered by
the Construction Management Agreement within 30 days of the April 21, 1999
deadline, with a maximum liability under the LD Policy of $24,062,000 and with
coverage being provided for days 31-120 of the delay in the achievement of
substantial completion. The Company is in the process of determining when
substantial completion, as defined in the LD Policy, occurred so that it can
determine the exact amount of its claim under the LD Policy. The Company expects
the LD Policy insurers to assert many of the same claims and defenses that the
Construction Manager has or will assert in the above-described litigations.
Liability under the LD Policy may ultimately be determined by binding
arbitration.

For more information, See "--LIQUIDITY AND CAPITAL RESOURCES" and "PART II,
ITEM 1. LEGAL PROCEEDINGS."

RECENT EVENTS

On November 12, 1999, the Company entered into the Waivers under the Bank
Credit Facility, the Mall Construction Loan Facility, the FF&E Credit Facility
and the Disbursement Agreement. Under the Waivers, the various lenders waived
certain defaults and events of default (to the extent, if any, they exist or may
have existed) arising from the litigation with the Construction Manager, the
facts relating to the underlying dispute with the Construction Manager and the
mechanics liens that were filed against the Casino Resort. As conditions to the
effectiveness of the Waivers, the Company and the Sole Stockholder, among other
things (i) agreed to pay a fee to the lenders under the Bank Credit Facility and
the FF&E Credit Facility, (ii) agreed to purchase surety bonds for all of the
mechanics liens and cause the title company to provide endorsements ensuring
that the deeds of trust under the Bank Credit Facility, the Mall Construction
Loan Facility and the Mortgage Notes are free and clear of all mechanics liens,
and (iii) agreed that the Sole Stockholder's Completion Guaranty would,
notwithstanding the prior agreement of the parties providing for termination of
such guaranty upon substantial completion of the Casino Resort, remain in effect
until "final completion" (i.e., the completion of all remaining punchlist items
and the final resolution or settlement of all disputes with the Construction
Manager and subcontractors) and be unlimited in amount with respect to all

16
<PAGE>
construction costs arising from scope changes. All of the conditions to the
effectiveness of the limited waivers were satisfied on November 12, 1999 and, as
a result (i) the Company has access to borrowings under the Revolver, the
Completion Guaranty, and restricted cash and investments, and other project
funds held by the disbursement agent under the Disbursement Agreement, (ii) the
disbursement agent under the Disbursement Agreement approved and released an
advance under the Disbursement Agreement to pay for various project construction
costs in the amount of approximately $28.3 million, and (iii) the agent under
the FF&E Credit Facility released approximately $6.5 million of lender funds
under such facility.

Following the transfer of the Mall Assets to the Mall Subsidiary on
November 12, 1999, the Sole Stockholder agreed to provide a working capital
facility to LVSI in the form of the Subordinated Working Capital Note. Under the
Subordinated Working Capital Note, the Sole Stockholder has agreed to provide
$15.0 million to LVSI on a revolving basis. The Subordinated Working Capital
Note matures on June 1, 2006 and bears interest at a rate of 12% per annum. The
Subordinated Working Capital Note is subordinated to all of the Senior Debt.
Under the subordination provisions of the Subordinated Working Capital Note, no
cash interest payments may be made while any indebtedness is outstanding under
the Bank Credit Facility (instead, interest will accrue and be capitalized), and
no cash principal payments may be made while any Senior Debt is outstanding.
When the indebtedness under the Bank Credit Facility has been repaid, cash
interest may be paid on the Subordinated Working Capital Note if no default or
event of default exists, or would result from such payment, under any Senior
Debt. On November 12, 1999, the Company borrowed $15.0 million under the
Subordinated Working Capital Note to fund its working capital requirements
(including interest payments under the Senior Debt).

On November 12, 1999, the Company paid $30.9 million of interest on the
Notes that was due on November 15, 1999.

OPERATING RESULTS

NINE MONTHS ENDED SEPTEMBER 30, 1999

For the nine month period ended September 30, 1999, the Company produced net
revenues of $143.3 million of which $77.4 million and $49.0 million represented
casino and gross hotel revenues, respectively. Revenues from table games and
slots were $41.8 million and $34.9 million, respectively. Operating profit
before interest, depreciation, amortization, rental expense and pre-opening
expenses was $22.8 million.

THREE MONTHS ENDED SEPTEMBER 30, 1999

For the three month period ended September 30, 1999, the Company produced
net revenues of $100.3 million. Casino revenues totaled $52.7 million and
included table games and slots revenues of $29.6 and $22.5, respectively. Hotel
revenues were $35.3 million during the fiscal quarter. Operating profit before
interest, depreciation, amortization, rental expense and pre-opening expenses
was $21.0 million.

The Company has improved operating results for its most recent fiscal
quarter. Currently 3,030 of the Casino Resort's rooms are available for use. In
July, a traditionally slow month in Las Vegas, the Company's occupancy rate was
85% with an average daily room rate of $127. For August and September, occupancy
was 92% with average daily room rates of $145 and $162, respectively.

17
<PAGE>
During each month of its third quarter, the Company experienced increases in
slot machine handle and per unit per day win amounts over the previous month.
The Company's table games win percentages during the months of July, August and
September were 19.1%, 12.9% and 17.3%. The table games win percentage for the
months of August and September was significantly lower than the Company's budget
and industry averages. In addition to the low table games win percentage, the
operating margin was impacted by other factors, including the construction
delays described above.

The Company anticipates that its operating results will improve in the next
quarter. In October 1999, the occupancy rate for the Casino Resort was 89% with
an average daily room rate of $184. As of November 1, 1999, 59 of the 74 tenant
spaces in the Mall were occupied, and the Company anticipates 95% occupancy of
the Mall tenant spaces by the end of December 1999.

OTHER FACTORS AFFECTING EARNINGS

The Company incurred pre-opening expenses of $21.5 million during the six
month period ended June 30, 1999. No pre-opening expenses were incurred during
the three month period ended September 30, 1999. From the inception of the
project through June 30, 1999, the Company expensed $30.2 million for
pre-opening activities. Pre-opening expenses included payroll, advertising,
professional services and other general and administrative expenses related to
the opening of the Casino Resort.

Interest income decreased by $3.6 million and $12.5 million for the three
month and nine month periods ended September 30, 1999 versus the same periods of
1998 as a result of expending the proceeds from the sale of the Notes to fund
construction expenses of the Casino Resort. The Company did not capitalize any
interest during the three month period ended September 30, 1999, but did
capitalize $11.4 million of interest during the same period of 1998.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 1999 and December 31, 1998, the Company held cash and
cash equivalents of $27.7 million and $2.3 million, respectively. On such dates,
the Company also held restricted cash and investments of $18.4 million and
$133.9 million, respectively. Net cash used in operating activities for the
first nine months of 1999 was $20.6 million, compared with $9.8 million for the
same period in 1998.

Capital expenditures during the first nine months of 1999 were $283.0
million, consisting of construction of the Casino Resort. Of the cost expended
or incurred during the first nine months of 1999, $66.0 million, $37.3 million
and $83.8 million were drawn from the Bank Credit Facility (including $32.0
million under the Revolver), the Mall Construction Loan Facility and the FF&E
Credit Facility, respectively. The balance of the capital expenditures
represents proceeds from the Notes and reduction of accruals for construction
payables.

As of September 30, 1999, the Company estimated that approximately $45.0
million of the total project cost of approximately $1.04 billion, excluding the
HVAC Equipment and land acquisition costs, remained to be paid. On November 12,
1999, approximately $34.8 million of the outstanding project payables were paid
or funded into lender escrow accounts under the Disbursement Agreement and the
FF&E Credit Facility. The sources of such payments were $11.4 million of
restricted cash and $23.4 million of advances from the owner guaranty account
under the Completion Guaranty. The $23.4 million of funds advanced under the
Completion Guaranty is treated as a junior subordinated loan from the Sole
Stockholder to Venetian. See Note 8. "--Subsequent Events" to the Financial
Statements. The remaining project payables for the Casino Resort are expected to
be funded from restricted cash and investments available under the Disbursement
Agreement and the FF&E Credit Facility.

18
<PAGE>
Assuming the Company is not obligated to pay for the Construction Manager's
or its subcontractors' asserted claims in excess of the Final GMP amount, the
funds provided by the above sources are expected to be sufficient to liquidate
the remaining project payables. If there are any additional delay costs and
construction cost overruns, or if the Company is required to pay any of the
asserted claims of the Construction Manager and its subcontractors, the Company
may use cash received from the following sources to fund such costs, cost
overruns and claims: (i) the LD Policy for costs of certain construction delays
and the proceeds of other (e.g., casualty) insurance policies, (ii) the
Construction Manager, Bovis and its ultimate parent corporation, Peninsular and
Oriental Steam Navigation Company ("P & O"), pursuant to the Construction
Management Agreement, a guaranty of the Construction Management Agreement by
Bovis and a guaranty of Bovis's obligation under such guaranty by P & O,
respectively, (iii) third parties, pursuant to their liability to the Company
under their agreements with the Company, (iv) amounts received from the Phase II
Subsidiary for shared facilities designed and constructed to accommodate the
operations of the Casino Resort and the Phase II Resort, or for the purchase of
machinery and equipment that will be used for the construction of the Phase II
Resort, (v) the Sole Stockholder, pursuant to his liability under the Completion
Guaranty, (vi) borrowings under the Revolver, (vii) additional debt or equity
financings as described below, and (viii) operating cash flow. If the Company
were required to pay substantial additional construction costs, cost overruns
and claims, and if it were unable to raise or obtain the funds from the sources
described above, there could be a material adverse effect on the Company.

The Completion Guaranty provides that, subject to certain conditions and
limitations, if available funds are not sufficient to fund all construction and
development costs, the Sole Stockholder is obligated to fund excess costs up to
a maximum aggregate amount of $5.0 million (after giving effect to the $23.4
million Completion Guaranty payment described above), provided that such maximum
aggregate amount does not apply with respect to all excess costs attributable to
scope changes. The Sole Stockholder's obligation to fund such excess
construction and development costs under the Completion Guaranty is
collateralized by the remaining $5.0 million of cash or cash equivalents pledged
to and held by the disbursement agent under the Disbursement Agreement.

Because the Company could not access the Revolver or any project funds from
August 3, 1999 to November 12, 1999 while mechanics liens against the Casino
Resort were outstanding, the Sole Stockholder contributed $7.1 million to
Venetian in return for a Series B Preferred Interest during the third quarter
for working capital purposes. Also, during the second quarter of 1999, the
Company received $37.3 million from the Phase II Subsidiary (which was funded
from indirect equity contributions by the Sole Stockholder through Venetian as a
Series B Preferred Interest) to reimburse the Company for a portion of the
shared facilities costs between the Casino Resort and the Phase II Resort.

For the next twelve months, the Company expects to fund its operations and
debt service requirements from (i) operating cash flow, (ii) borrowings under
the Revolver portion of the Bank Credit Facility, and (iii) proceeds from the
Subordinated Working Capital Note. As of September 30, 1999, $31.2 million of
the $40.0 million Revolver under the Bank Credit Facility was drawn. Prior to
the end of 1999, the Company expects to refinance the Mall Construction Loan
Facility as described under "--MALL SUBSIDIARY AND TRANSFER OF MALL ASSETS." The
Company has significant debt service for payments due during the next twelve
months, including principal quarterly payments on its Bank Credit Facility and
FF&E Credit Facility aggregating $38.5 million, and interest payments of $33.0
million on the Notes on May 15 and November 15, 2000. To fund these payments
from operating cash flow will require the Company to achieve substantially
improved operating results. No assurance can be given that the Company will
achieve such improved operating results.

If the Company is required to pay additional construction costs or any of
the Construction Manager's or its subcontractors' claims, or if the Company is
unable to meet its debt service requirements, the Company will seek, if
necessary and to the extent permitted under the Indentures

19
<PAGE>
and the terms of the Bank Credit Facility, additional financing through bank
borrowings or debt or equity financings. Also, there can be no assurance that
new business developments or other unforeseen events will not occur resulting in
the need to raise additional funds. There can be no assurance that additional or
replacement financing, if needed, will be available to the Company, and, if
available, that the financing will be on terms favorable to the Company, or that
the Sole Stockholder or any of his affiliates will provide any such financing.

MALL SUBSIDIARY AND TRANSFER OF MALL ASSETS

On November 12, 1999, Mall Construction transferred the Mall Assets to the
Mall Subsidiary pursuant to the Sale and Contribution Agreement. Upon such
transfer, (i) the Mall Assets were released by the trustee under the Mortgage
Notes and the agent under the Bank Credit Facility and so were no longer
security for the Mortgage Notes or for the indebtedness under the Bank Credit
Facility, and (ii) the indebtedness under the Mall Construction Loan Facility
was assumed by the Mall Subsidiary, and the Company and its subsidiary
guarantors were released from all obligations under such indebtedness.

To finance the payment in full of the Mall Construction Loan Facility,
Goldman Sachs Mortgage Company ("GSMC") and an entity wholly owned by the Sole
Stockholder (the "Tranche B Take-out Lender") separately have entered into
commitment agreements with the Mall Subsidiary whereby GSMC has agreed to
provide debt financing to the Mall Subsidiary of up to $105.0 million (the
"Tranche A Take-out Financing") and the Tranche B Take-out Lender has agreed to
provide debt financing to the Mall Subsidiary of up to $35.0 million (the
"Tranche B Take-out Financing" and, together with the Tranche A Take-out
Financing, the "Mall Take-out Financing"). The consummation of the Tranche A
Take-out Financing is subject to certain conditions, including delivery of legal
opinions (including certain substantive non-consolidation opinions). On
November 12, 1999, GSMC agreed that the litigation with the Construction
Manager, any amounts held to be due and payable to the Construction Manager or
any subcontractors, and the potential defaults and events of default waived
under the Waivers, will not cause a failure of any of the conditions precedent
to the consummation of the Tranche A Take-out Financing. The Tranche A Take-out
Financing and the Tranche B Take-out Financing is scheduled to occur in December
1999, at which time the Mall Assets will be transferred to a newly-created
subsidiary of Mall Subsidiary.

Because the Mall Subsidiary is not a guarantor of any indebtedness of the
Company (other than the Mall Construction Loan Facility and the Mall Take-out
Financing with respect to which it is or will be the obligor), creditors of the
Company (including the holders of the Notes but excluding the lenders under the
Mall Construction Loan Facility and the Mall Take-out Financing) do not have a
direct claim against the assets of the Mall Subsidiary. As a result,
indebtedness (including the Notes) of the Company (excluding the Mall
Subsidiary) is now effectively subordinated to indebtedness of the Mall
Subsidiary (including the Mall Construction Loan Facility and the Mall Take-out
Financing). The Mall Subsidiary is not restricted by any of the debt instruments
of LVSI, Venetian or the Company's subsidiary guarantors (including the
Indentures) from incurring any indebtedness. Any indebtedness incurred by the
Mall Subsidiary (including the Tranche A Take-out Financing) may include
material restrictions on the ability of the Mall Subsidiary to pay dividends or
to make distributions or loans to the Company and its subsidiaries.

PHASE II RESORT AND TRANSFER OF PHASE II LAND

If the Phase II Subsidiary determines to construct the Phase II Resort, the
Phase II Subsidiary will be required to raise substantial debt and/or equity
financings. Currently, there are no commitments to fund any portion of the
construction and development costs of the Phase II Resort. In accordance with
the Disbursement Agreement, land on which the Phase II Resort (the "Phase II
Land") will be built was transferred to the Phase II Subsidiary in
October 1998.

20
<PAGE>
The development, construction and opening of the Casino Resort is not
dependent on the construction and opening of the Phase II Resort. The
development of the Phase II Resort may require obtaining additional regulatory
approvals. The Company does not expect to begin construction on the Phase II
Resort until at least next year.

Because the Phase II Subsidiary will not be a guarantor of the Company's
indebtedness, creditors of the Company (including the holders of the Notes) will
not have a direct claim against the assets of the Phase II Subsidiary. As a
result, the indebtedness of the Company (including the Notes) will be
effectively subordinated to indebtedness of the Phase II Subsidiary. The Phase
II Subsidiary is not subject to any of the restrictive covenants of the debt
instruments of the Company (including, without limitation, the covenants with
respect to the limitations on indebtedness and restrictions on the ability to
pay dividends or to make distributions or loans to the Company and its
subsidiaries). Any indebtedness incurred by the Phase II Subsidiary may include
material restrictions on the ability of the Phase II Subsidiary to pay dividends
or make distributions or loans to the Company and its subsidiaries.

However, the debt instruments of the Company limit the ability of LVSI,
Venetian or any of their subsidiaries to guarantee or otherwise become liable
for any indebtedness of the Phase II Subsidiary. Such debt instruments also
restrict the sale or other disposition by the Company and its subsidiaries of
capital stock of the Phase II Subsidiary, including the sale of any such capital
stock to the Sole Stockholder or any affiliate of the Sole Stockholder. In
addition, prior to commencement of construction of the Phase II Resort, Venetian
has the right to approve the plans and specifications for the Phase II Resort.

RISK RELATED TO THE SUBORDINATION STRUCTURE OF THE MORTGAGE NOTES

The Mortgage Notes represent senior secured debt obligations of LVSI and
Venetian, secured by second priority liens on the collateral securing the
Mortgage Notes (the "Note Collateral"). However, the guarantees of the Mortgage
Notes by its subsidiaries, Mall Intermediate and Lido Intermediate
(collectively, the "Subordinated Guarantors"), are unsecured, subordinated debt
obligations of the guarantors. The structure of these guarantees present certain
risks for holders of the Mortgage Notes. For example, if the Note Collateral
were insufficient to pay the debt secured by such liens, or such liens were
found to be invalid, then holders of the Mortgage Notes would have a senior
claim against any remaining assets of LVSI and Venetian. In contrast, because of
the subordination provision with respect to the Subordinated Guarantors, holders
of the Mortgage Notes will always be fully subordinated to the claims of holders
of senior indebtedness of the Subordinated Guarantors.

YEAR 2000

The Company has purchased and installed new computer hardware and software
to operate the Casino Resort. The Company is addressing the issue of computer
programs and embedded computer chips being unable to distinguish between the
years 1900 and 2000. The Company has established an internal review system to
ensure that all new systems purchased and installed to operate the Casino Resort
are year 2000 compliant. The new systems have been implemented in connection
with the opening of the Casino Resort. The review system includes requiring all
computer software vendors to certify in writing that software acquired is year
2000 compliant and to test all new systems for year 2000 compliance. The review
system is under the direction of the Casino Resort's Vice President of
Information Systems.

COST

The total cost associated with required testing of systems to become year
2000 compliant is not expected to be material to the Company's financial
position, results of operations or cash flows. Funds

21
<PAGE>
for the screening and testing of the new systems are included in the project
budget for the purchase of computer systems.

RISKS

Due to the general uncertainty inherent in the year 2000 problem, resulting
in part from the uncertainty of the year 2000 readiness of third party suppliers
and customers, the Company is unable to determine at this time whether the
consequences of year 2000 failures will have a material impact on the Company's
results of operations, liquidity or financial condition. The Company believes
that with the screening process in place the possibility of significant
interruptions of normal operations should be reduced. The Company has made
inquiries to determine whether the year 2000 issue will have any effect on its
suppliers and business partners. The Company has not, however, determined the
adequacy of year 2000 compliance for other industries that the Casino Resort
will rely upon, including but not limited to, the airline industry and telephone
service suppliers.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this section and elsewhere in this Quarterly Report on
Form 10-Q (as well as information included in oral statements or other written
statements made or to be made by the Company) constitute "forward-looking
statements." Such forward-looking statements include the discussions of the
business strategies of the Company and expectations concerning future
operations, margins, profitability, liquidity and capital resources. Although
the Company believes that such forward-looking statements are reasonable, it can
give no assurance that any forward-looking statements will prove to be correct.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors, which may cause the actual results, performance or
achievements of the Company to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such factors include, among others, the risks associated with
entering into a new venture and new construction, competition and other planned
construction in Las Vegas, year 2000 risks, government regulation related to the
casino industry (including the legalization of gaming in certain jurisdictions,
such as Native American reservations in the State of California), leverage and
debt service (including sensitivity to fluctuations in interest rates),
uncertainty of casino spending and vacationing in casino resorts in Las Vegas,
occupancy rates and average daily room rates in Las Vegas, demand for all-suites
rooms, the popularity of Las Vegas as a convention and trade show destination,
the completion of infrastructure improvements in Las Vegas, including the
current expansion of the Las Vegas Convention Center and the recent expansion of
McCarran International Airport, litigation risks, including the outcome of the
pending disputes with the Construction Manager and subcontractors and general
economic and business conditions which may impact levels of disposable income of
consumers and pricing of hotel rooms.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss arising from adverse changes in market rates
and prices, such as interest rates, foreign currency exchange rates and
commodity prices. The Company's primary exposure to market risk is interest rate
risk associated with its long-term debt. The Company attempts to manage its
interest rate risk by managing the mix of its long-term fixed-rate borrowings
and variable rate borrowings under the Bank Credit Facility, the Mall
Construction Loan Facility and the FF&E Credit Facility, and by use of interest
rate cap and floor agreements. The ability to enter into interest rate cap and
floor agreements will allow the Company to manage its interest rate risk
associated with its variable rate debt. See "--ITEM 2. MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--LIQUIDITY AND
CAPITAL RESOURCES."

22
<PAGE>
PART II
OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On July 30, 1999, Venetian filed a complaint against the Construction
Manager and Bovis in United States District Court for the District of Nevada.
The action alleges breach of contract by the Construction Manager of its
obligations under the Construction Management Agreement and a breach of contract
by Bovis of its obligations under a guaranty of the Construction Management
Agreement, including failure to fully pay trade contractors and vendors and
failure to meet the April 21, 1999 guaranteed completion date. The suit is
intended to ask the courts to require the Construction Manager to pay its
contractors, to compensate Venetian for the Construction Manager's failure to
perform its duties under the Construction Management Agreement and to pay the
Company the agreed upon per-day liquidated damages penalty for failure to meet
the guaranteed completion date. Venetian seeks total damages in excess of $50.0
million.

In response to Venetian's breach of contract claims against the Construction
Manager and Bovis, the Construction Manager filed a complaint on August 3, 1999
against Venetian in the District Court of Clark County, Nevada. The action
alleges a breach of contract and QUANTUM MERUIT under the Construction
Management Agreement and also alleges that the Venetian defrauded the
Construction Manager in connection with the construction of the Casino Resort.
The Construction Manager seeks damages, attorney's fees and costs and punitive
damages. In the lawsuit, the Construction Manager claims that it is owed $145.6
million from Venetian and its affiliates. Based upon its preliminary review of
the complaint and the fact that the Construction Manager has not provided
Venetian with reasonable documentation to support such claims, the Company
believes that the Construction Manager's claims are without merit and intends to
vigorously defend itself in any litigation.

In connection with these disputes, the Construction Manager and its
subcontractors filed mechanics liens against the Casino Resort for $145.6
million and $138.7 million, respectively. By early November 1999, the Company
had purchased surety bonds for all of the claims underlying these liens (other
than approximately $15.0 million of claims with respect to which the
Construction Manager purchased bonds). Consequently, virtually all of these
liens have been discharged of record, and the remaining liens (less than $1
million) should be discharged of record once the required statutory notice
period has passed. As a result, there can be no foreclosure of the Casino Resort
in connection with the claims of Bovis and its subcontractors. However, the
Company will be required to pay or immediately reimburse the bonding company if
and to the extent that the underlying claims are judicially determined to be
valid. If such claims are not settled, it is likely to take a significant amount
of time for their validity to be judicially determined.

23
<PAGE>
All of the pending litigation described above is in preliminary stages and
it is not yet possible to determine its ultimate outcome. If any litigation or
other proceedings concerning the claims of the Construction Manager or
subcontractors were decided adversely to the Company, such litigation or other
lien proceedings could have a material effect on the financial position, results
of operations or cash flows of the Company.

For additional information, see "Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations--Construction Costs."

Items 2 Through 5 of Part II are Not Applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) List of Exhibits

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT
- ----------- -----------------------
<C> <S>
27.1 Financial Data Schedule
</TABLE>

(b) Reports on Form 8-K

On August 2, 1999, the Company filed a report on Form 8-K announcing the
commencement of a lawsuit against Bovis and the Construction Manager.

24
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

<TABLE>
<S> <C> <C>
LAS VEGAS SANDS, INC.

By: /s/ SHELDON G. ADELSON
-----------------------------------------
Sheldon G. Adelson
Chairman of the Board, Chief
Executive Officer and Director
November 15, 1999

By: /s/ HARRY D. MILTENBERGER
-----------------------------------------
Harry D. Miltenberger
Vice President-Finance
(principal financial and accounting
officer)
November 15, 1999
</TABLE>

<PAGE>
<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 27,659
<SECURITIES> 18,389
<RECEIVABLES> 37,733
<ALLOWANCES> 4,594
<INVENTORY> 3,845
<CURRENT-ASSETS> 88,317
<PP&E> 1,085,149
<DEPRECIATION> 14,416
<TOTAL-ASSETS> 1,213,454
<CURRENT-LIABILITIES> 177,008
<BONDS> 517,143
145,273
0
<COMMON> 92
<OTHER-SE> (497)
<TOTAL-LIABILITY-AND-EQUITY> 1,213,454
<SALES> 0
<TOTAL-REVENUES> 143,312
<CGS> 0
<TOTAL-COSTS> 138,855
<OTHER-EXPENSES> 21,484
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43,342
<INCOME-PRETAX> (58,200)
<INCOME-TAX> 0
<INCOME-CONTINUING> (58,200)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,200)
<EPS-BASIC> (74)
<EPS-DILUTED> (74)

</TABLE>