SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: April 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number 0-21278
LAS VEGAS ENTERTAINMENT NETWORK, INC
(Exact name of small business issuer as
specified in its Charter)
Delaware 94-3125854
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
1801 Century Park East, Los Angeles, California 90067
(Address of principal executive offices)(Zip Code)
(310) 551-0011
(Registrant's telephone number, including area code)
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 the latest practicable date.
Common Stock, $.001 par value 35,066,199
Title of Class Number of Shares outstanding at
June 15, 1996
DOCUMENTS INCORPORATED BY REFERENCE: NONE
<PAGE>
<TABLE>
<CAPTION>
LAS VEGAS ENTERTAINMENT NETWORK, INC. AND SUBSIDIARIES
(A Company in the Development Stage)
CONSOLIDATED BALANCE SHEETS
APRIL 30 OCTOBER 31,
1996 1995
------------------------ ------------------
ASSETS (UNAUDITED) (DERIVED FROM
AUDITED
FINANCIAL
STATEMENTS
<S> <C> <C>
)
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $12,144,172 $789,338
REFUNDABLE DEPOSITS - Note 3 250,000
---------- ----------
TOTAL CURRENT ASSETS 12,394,172 789,338
ASSETS HELD FOR SALE, net of associated liabilities and
reserves - Note 2 - 20,700,415
LONG TERM NOTE RECEIVABLE - Note 2 5,900,000
LONG TERM NOTES RECEIVABLE - LAKE TROPICANA 806,489 806,489
PROGRAM INVENTORY, Net of Amortization 805,061 805,061
OTHER INVESTMENTS - Note 3 546,500 370,150
PROPERTY AND EQUIPMENT
net of accumulated depreciation
of $145,886 (1996) and $78,370 (1995) 206,185 260,421
OTHER ASSETS 19,500 10,770
----------- -----------
$20,677,907 $23,742,644
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE AND ACCRUED EXPENSES $275,378 $753,631
PATMORE DEPOSIT - 327,150
NOTES PAYABLE - Note 4 1,308,469 3,612,968
ACCRUED INTEREST PAYABLE 81,475 312,834
ACCRUED OFFICER'S SALARIES 521,739 586,739
--------- ---------
TOTAL CURRENT LIABILITIES 2,187,061 5,593,322
COMMITMENTS AND CONTINGENCIES - Note 2
STOCKHOLDERS' EQUITY: - Note 5
PREFERRED STOCK - SERIES A, AUTHORIZED 30,000,000 SHARES, - -
ISSUED AND OUTSTANDING - NONE
COMMON STOCK - AUTHORIZED 50,000,000
SHARES, $.001 PAR VALUE; ISSUED AND
OUTSTANDING 35,066,199 (1996) AND 28,506,816 (1995) 35,063 28,503
ADDITIONAL PAID-IN CAPITAL 47,353,984 44,166,137
DEFICIT ACCUMULATED DURING DEVELOPMENT STAGE (28,898,201) (26,045,318)
------------- --------------
TOTAL STOCKHOLDERS' EQUITY 18,490,846 18,149,322
------------- --------------
$20,677,907 $23,742,644
============ ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
LAS VEGAS ENTERTAINMENT NETWORK, INC.
AND SUBSIDIARIES
(A Company in the Development Stage)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Cumulative
Since
THREE MONTHS SIX MONTHS Inception
APRIL 30, APRIL 30, 1990) to
1996 1995 1993 1996 1995 APRIL
30,1996
--------- -------- ------ ----- ------ --------
<S> <C> <C> <C> <C> <C> <C>
REVENUES $306,600 $38,752 $339,215 $372,800 $38,752 $1,281,416
COSTS AND EXPENSES
Programming Costs - 202,500 678,168 - 202,500 2,212,170
Selling Costs - 1,016 4,315 - 5,000 71,256
General & Administrative 1,170,264 1,932,321 2,098,561 2,192,961 2,753,898 14,172,656
---------- --------- --------- --------- --------- ----------
TOTAL COSTS AND EXPENSES 1,170,264 2,135,837 2,781,044 2,192,961 2,961,398 16,456,082
LOSS BEFORE OTHER
INCOME AND (CHARGES) AND
PROVISION FOR
DISPOSAL OF ASSETS HELD FOR SALE (863,664) (2,097,085) (2,441,829) (1,820,161) (2,922,646)(15,174,666)
OTHER INCOME AND (CHARGES):
Gain (loss) on Sale of Securities and - (400,000) 950,000 200,000 950,000
Investments
Interest Income 197,224 30,500 145,708 233,830 90,233 826,936
Other Charges - Note 5 (646,875) 1,202,500 (1,365,466) (666,875) 1,270,612 (4,994,186)
Interest and Finance Costs (200,298) (159,485) (599,677) (217,610)
(1,506,285)
--------- -------- ---------- -------- --------- ----------
TOTAL OTHER INCOME AND (CHARGES) (649,949) 673,515 (269,758) (1,032,722) 1,343,235 (4,723,535)
-------- ------- -------- ---------- --------- ----------
NET LOSS BEFORE PROVISION FOR DISPOSAL
OF ASSETS HELD FOR SALE (1,423,570) (2,711,587) (2,852,883) (1,579,411)(19,898,201)
PROVISION FOR DISPOSAL OF ASSETS HELD
FOR SALE - Note 2
(9,000,000)
-------- ------ --------- --------- --------- ---------
NET LOSS
$(1,513,613$(1,423,570)$(2,711,587) $(2,852,883$(1,579,411)$(28,898,201)
========== ========== ========== ========= ========= ==========
WEIGHTED AVERAGE NUMBER OF SHARES OF
COMMON STOCK OUTSTANDING
35,024,532 20,870,038 6,235,848 31,879,502 19,767,244 6,782,131
========== ========== ========== ========= ========= ==========
LOSS PER SHARE OF COMMON STOCK $(0.04) $(0.07) $(0.43) $(0.09) $(0.08) $(4.26)
========== ========== ========== ========= ========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<TABLE>
<CAPTION>
LAS VEGAS ENTERTAINMENT NETWORK, INC. AND SUBSIDIARIES
(A Company in the Development Stage)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
INCEPTION (OCTOBER 3, 1990) T0 APRIL 30, 1996 (UNAUDITED)
Deficit
Common Accumulated
Stock
Additional During
Number Paid-in Development
of Shares Amount Capital Stage Total
--------- ------- ------- --------- ------------
<S> <C> <C> <C> <C> <C>
Issuances of
Common Stock
for :
Cash and
Contribution of
Office Equipment 2,150,000 $2,150 $11,150 $- $13,300
Net Loss for the (500) (500)
Year Ended
October 31 , 1990
--------- ------- ------- --------- ------------
BALANCE - 2,150,000 2,150 11,150 (500) 12,800
October 31, 1990
Net Loss for the (16,871) (16,871)
Year Ended
October 31, 1991
--------- ------- ------- --------- ------------
BALANCE - 2,150,000 2,150 11,150 (17,371) (4,071)
October 31, 1991
Sales of Common 1,909,000 1,909 4,655,332 4,657,241
Stock, Initial
Public Offering
Issuance of 60,000 60 178,740 178,800
Common Stock
for Services
Net Loss for the (601,438) (601,438)
Year Ended
October 31, 1992
--------- ------- ------- --------- ------------
BALANCE - 4,119,000 4,119 4,845,222 (618,809) 4,230,532
October 31, 1992
Issuance of 107,250 107 380,565 380,672
Common Stock
for Services
Sales of Common 9,341,330 9,341 23,942,149
Stock 23,951,490
Exercise of A 308,615 309 1,234,151 1,234,460
Warrants
Stock Issued for 450,000 450 849,550 850,000
Investments
Net Loss for the (2,711,585)
Year Ended (2,711,585)
October 31, 1993
--------- ------- ------- --------- ------------
BALANCE - 14,326,195 14,326 31,251,637 (3,330,394)
October 31, 1993 27,935,569
<PAGE>
Issuance of 613,000 614 921,867 922,481
Common Stock
for Services
Sales of Common 1,380,021 1,380 1,351,481 1,352,861
Stock
Stock Issued for 2,300,000 2,300 2,997,700 3,000,000
Investments
Return of Shares (350,000) (350) (699,650) (700,000)
on El Rancho
Return of Escrow (750,000) (750) 750 -
Shares
Conversion of 1,368,384 1,368 1,048,632 1,050,000
Debt
Net Loss for the (5,053,498)
Year Ended (5,053,498)
October 31, 1994
--------- ------- ------- --------- ------------
BALANCE - 18,887,600 18,888 36,872,417 (8,383,892) 28,507,413
October 31, 1994
Issuance of 3,081,500 3,081 3,006,508 3,009,589
Common Stock
for Services
Sales of Common 592,858 593 399,409 400,002
Stock
Conversion of 5,944,858 5,941 3,887,803 3,893,744
Debt
Net Loss for the (17,661,426) (17,661,426)
October 31, 1995
--------- ------- ------- --------- ------------
BALANCE - October 31, 1995 28,506,816 28,503 44,166,137 (26,045,318) 18,149,322
Issuance of Common Stock for
Services 3,847,588 3,848 2,065,287 2,069,135
Sales of Common Stock 2,500,000 2,500 960,000 962,500
Conversion of Debt 604,651 605 251,895 252,500
Repurchase of Common Stock (392,856) (393) (154,607) (155,000)
Issuance of Warrants 170,800 170,800
Repurchase of Warrants (105,528) (105,528)
Net Loss for the Six
Months Ended April 30, 1996 (2,852,883) (2,852,883)
--------- ------- ------- --------- ------------
BALANCE - April 30, 1996 35,066,199 $35,063 $47,353,984 $(28,898,201) $18,490,845
========== ======= =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
LAS VEGAS ENTERTAINMENT NETWORK, INC. AND SUBSIDIARIES
(A Company in the Development Stage)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Cumulative
Since
Inception
Three Months Six Months (Oct. 3, 1990
Ended April 30, Ended April 30, to)
1996 1995 1996 1995 April 30, 1996
------ ----- ----- ----- ---------
<S> <C> <C> <C> <C> <C>
1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss (1,513,613) $(1,423,579) $(2,852,883) $(1,579,411) $(28,898,203)
Depreciation 57,516 67,516 146,209
Amortization of Program Inventory 200,000 200,000 1,284,060
Adjustments to reconcile net loss to net cash
used in operating activities:
(Increase) Decrease in ;
Prepaid Expenses 309,750 (810,008) (309,750) (1,910,008) (309,750)
Accounts Receivable (762,975)
Program Inventory (2,089,121)
Other Assets (8,730) (10,389) (8,730) (10,428) 58,475
Increase (Decrease) in;
Accounts Payable (450,713) 42,572 (478,503) 134,224 859,979
Accrued Expenses 53,125 111,254 528,145
Accrued Officer's Salaries (137,500) 87,500 (65,000) 175,000 521,739
--------- --------- ---------- ---------- ---------
CASH USED IN OPERATING ACTIVITIES (1,743,290) (1,860,779) (3,647,350) (2,879,369) (28,661,442)
CASH FLOWS FROM INVESTING ACTIVITIES:
Marketable securities 383,650 -
Repayment of Loans Receivable (136,350) 2,100,000
Advances/Deposits - Acquisitions (753,500) (753,500) (3,832,272)
CountryLand Hotel 36,500,000
Pre-Opening Expenses - CountryLand (1,022,212) 3,847,450 (2,205,188)
Capitalized Interest - CountryLand 3,447,860
Reserve on CountryLand Hotel (9,000,000)
Sale of Lark Landing 1,500,000
Writedown of Investments 514,014 491,989 1,421,501
Loan Receivable - Distributor (770,000)
Reserve on Loan Receivable - Distributor 1,012,300
Receivable From the Sale of Lark Landing -
Accounts Payable - Lark Landing (500,000)
Proceeds from sale of Marketable securities 151,959
Loss on securities held for sale 533,048
Acquisition of Office Equipment (8,255) 187,738 (13,280) 182,156 (342,405)
--------- --------- ---------- ---------- ---------
CASH PROVIDED BY (USED IN) INVESTING (761,755) (456,810) 34,028,530 (1,147,393) 1,274,131
ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Notes Payable 850,000 528,000 10,215,953
Repayment of Notes Payable (1,403,086) (272,000) (2,904,498) (4,907,484)
Issuances and Sales of Common Stock 27,125 2,984,667 3,024,134 3,527,230 42,090,164
Issuances of Warrants, net 65,272 65,272
Repurchase of Stock (155,000) 155,000 155,000
(Increase) Decrease in Deferred Offering Costs 127,138 42,019 -
<PAGE>
Issuance of Notes and Loans Receivable (12,400,000) (14,700,000)
Collections on Notes and Loans Receivable 6,500,000 6,500,000 6,500,000
Assessment Payable - CountryLand (331,144) -
Interest Payable (231,265) (221,359) 112,578
Loan payable - CountryLand (13,350,001) -
Interest Payable - CLND (413,750)
--------- --------- ---------- ---------- ----------
CASH PROVIDED BY (USED IN) FINANCING 4,737,774 2,839,805 (19,026,346) 4,097,249 39,531,483
ACTIVITIES
INCREASE (DECREASE) IN CASH 2,232,729 522,216 11,354,834 70,487 12,144,172
CASH BALANCE - BEGINNING 9,911,443 148,821 789,338 600,550
--------- -------- ---------- ----------
CASH BALANCE - ENDING $12,144,172 $671,037 $12,144,172 $671,037 $12,144,172
========== ======== ========== ========== ===========
NON-CASH TRANSACTIONS
Conversion of Notes Payable and Accrued Interest to 260,000 5,269,244
Equity
Accrued Interest and Fees - El Rancho 58,129 695,832 1,447,726
Common Stock Issued for Services 3,700,000
Reclassification of Patmore Deposit 327,100 327,100 327,100
CASH PAID FOR
Interest 380,370 84,473 84,473
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
LAS VEGAS ENTERTAINMENT NETWORK, INC.
( A Company in the Development Stage)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Background and Business - Las Vegas Entertainment Network, Inc. ("LVEN" or "The
Company") was incorporated in October 1990, and is engaged in the business of
acquiring, developing and operating media and gaming facilities and businesses.
The Company's primary project to date was the renovation, expansion and
operation of the El Rancho Hotel & Casino (the "El Rancho" or the "Property")
which was acquired on November 24, 1993 and sold on January 22, 1996 (see Note
2). The Company is also active in the development of media related
opportunities, including formulating a business plan to develop, produce, market
and distribute television programming. The Company is also investigating other
potential businesses for acquisition in the entertainment, lodging or
communications industries.
The accompanying financial statements include the accounts of LVEN,
and its wholly-owned subsidiaries, CountryLand Properties, Inc. (CLND),
Casino-Co Corp., Las Vegas Communications Corp. (formerly Protex Technology
Inc.), Las Vegas Development Corporation and Pacific DNS, Inc. All significant
intercompany transactions and balances have been eliminated.
On March 11, 1996, the Company incorporated Satellite Networks Inc.
("SNI"), a new subsidiary in which the Company and its management own a combined
55% interest in the 6,000,000 currently issued and outstanding shares. The
Company, which is in a development stage with no operations to date, was formed
to explore various options in the telecommunication industry. On April 14, 1996,
SNI filed a registration statement, which is subject to significant revision, on
Form SB-2 with the Securities and Exchange Commission to register 1,000,000
shares of its common stock and 2,000,000 redeemable warrants to raise capital
for the intended operations of SNI. There can be no assurance that the public
offering will be successful.
The Company is a development stage company which has had no
substantial operations or financial operating history.
Basis of Presentation - The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-QSB. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three and six month periods ended April 30,
1996 are not necessarily indicative of the results that may be expected for the
year ended October 31, 1996. The unaudited consolidated financial statements
should be read in conjunction with the consolidated financial statements and
footnotes thereto included in the Company's Form 10-KSB for the year ended
October 31, 1995.
2. HOTEL AND CASINO PROPERTY
On January 22, 1996 the Company sold the assets and certain liabilities
of the El Rancho Hotel and Casino to Orion Casino Corporation ("Orion"), a
wholly-owned subsidiary of International Thoroughbred Breeders Inc. ("ITB"), for
consideration of Forty-Three Million Five Hundred Thousand Dollars
($43,500,000). The Company also received a fifty percent (50%) interest in the
future adjusted cumulative cash flow from the Property, if any , of up to
$160,000,000 (see below). The purchase price was paid as follows: (i) Twelve
Million Five Hundred Thousand Dollars ($12,500,000) paid at closing in cash;
(ii) an 8% unsecured promissory note in the principal amount of Six Million Five
Hundred Thousand Dollars ($6,500,000) which was paid in full on March 15, 1996;
(iii)
6
<PAGE>
LAS VEGAS ENTERTAINMENT NETWORK, INC.
( A Company in the Development Stage)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
an 8% promissory note in the principal amount of Ten Million Five Hundred
Thousand Dollars ($10,500,000), secured by a subordinated junior position in
assets of the Property (which may be further subordinated if additional
borrowing is made against the Property), and is due upon the successful raising
of financing to develop the Property, or upon the ultimate sale of the Property,
and (iv) assumption of existing mortgage indebtedness and accrued interest of
$14,000,000. As of April 30, 1996, the Company has reflected a reserve of
$4,600,000 against the remaining note.
Once the Property has been developed, which the Company will
provide no assurance can be achieved, Casino-Co will receive as additional
consideration for entering into the sale agreement (but not as part of the
purchase price for the Property) a fifty percent (50%) interest in the adjusted
cumulative cash flow (as defined) from the operation of the Property as so
developed for a period of six (6) years following the opening of the first
casino on the Property and the commencement of operations, and thereafter a
twenty-five percent (25%) interest in adjusted cash flow from operations until
such time as it has received an aggregate of One Hundred Sixty Million Dollars
($160,000,000), but only after Orion and the Company first receive 100% of the
adjusted cash flow until all invested amounts, plus $8,000,000, have been
recouped, plus any other additional costs incurred, together with interest
thereon at the rate of eight percent (8%) per annum from the closing date.
Furthermore, commencing with the development of the Property, the Company's Las
Vegas Communications Corporation subsidiary ("LVCC") was granted an exclusive
contract for up to twenty (20) years to provide entertainment at the Property
site which will provide for minimum annual fees of $800,000, plus additional
commissions.
The El Rancho property had been encumbered by a first mortgage promissory
note in the face amount of $12,000,000, which was initially due November 24,
1994, and was secured by the real and personal property assets comprising the
former El Rancho Hotel & Casino. On January 22, 1996, the Company replaced this
loan with a one year, 13%, $14,000,000 mortgage note, secured by a first deed of
trust on the El Rancho Property, due SunAmerica Life Insurance Company. In
connection therewith, the Company issued to SunAmerica 1,912,588 shares of its
Common Stock. This note was assumed by Orion as part of the El Rancho sale
agreement. As part of the sale agreement, the Company agreed to co-guarantee the
assumed note for a certain amount of time. The SunAmerica note has subsequently
been retired by Orion, and in accordance with the agreement, 500,000 shares of
the Company's Common Stock have been returned, and the co-guarantee of the note
by LVEN has been released. In addition to the above, the Company initially
agreed to be responsible for one-half (1/2) of the interest on the refinance
loan, limited to its original stated maturity of one year at 13% interest per
annum. Such funds, aggregating $950,000, were escrowed at closing of the sale of
the El Rancho. In accordance with the subsequent refinancing of the SunAmerica
loan by Orion, approximately $290,000 of this amount will be returned to the
Company.
The Company recorded a reserve of $9,000,000 as of October 31, 1995 to
reflect the net realizable value of the El Rancho Hotel and Casino based on the
January 22, 1996 sale. No further adjustments were made during the three months
or six months ended April 30, 1996 to reflect the sale of the Property. The net
assets of the Property have been segregated on the Balance Sheet as of October
31, 1995 as "Assets Held for Sale."
3. OTHER INVESTMENTS AND REFUNDABLE DEPOSITS
Other investments and refundable deposits represent advances and deposits
the Company has made to certain businesses, individuals or others to secure
potential acquisitions or investments. The Company is currently in the process
of evaluating these potential acquisitions or investments. Subsequent to April
30, 1996, $250,000 of these advances have been returned to the Company.
7
<PAGE>
LAS VEGAS ENTERTAINMENT NETWORK, INC.
( A Company in the Development Stage)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4. NOTES PAYABLE
<TABLE>
<CAPTION>
Notes payable consist of the following as of April 30, 1996 and October 31, 1995;
1996 1995
<S> <C> <C>
(A) BP Group $ - $1,325,000
(B) UK Foods - 1,500,000
(C) Convertible Bridge Loans 1,300,248 778,000
(D) Other 8,221 9,968
--------- ---------
Total $1,308,469 $3,612,968
========= ========
</TABLE>
(A) The BP Group note consisted of a $1,325,000, 8% unsecured bridge loan.
The note and all outstanding interest was repaid in full on February 20,
1996
(B) The UK Foods note consisted of a $1,500,000, 8% unsecured bridge loan to
LVCC (the Company's wholly owned subsidiary). The note and all
outstanding interest was repaid on January 31, 1996.
(C) Convertible bridge loans consist of various one-year unsecured notes. The
notes accrue interest at a rate of 8% per annum until the principal and
accrued interest become due and payable at various dates prior to April
30, 1997. The notes and any accrued interest are convertible at the
lender's option into shares of the Company's common stock at a price of
$1.25 per share, or approximately 90% of the market price, which ever is
less, at any time prior to the repayment by the Company.
5. OTHER
In connection with arranging the financing of the sale of the El Rancho,
the Company issued 1,912,588 shares of its common stock to SunAmerica Insurance
(the lender providing the replacement mortgage financing, see Note 2). This loan
has subsequently been retired by Orion, and in accordance with the loan
agreement, as the loan was repaid in six (6) months or less, SunAmerica has
returned 500,000 shares to the Company. The Company has no obligation to issue
any additional shares to SunAmerica. Additionally, during the six months ended
April 30, 1996, the Company; (i) sold 2,500,000 shares of its Common Stock in a
series of private placements made to non-U.S. purchasers, under an exemption
under the Securities Act of 1933, (ii) issued 3,847,588 shares of stock for
services and settlement of amounts due, and (iii), issued 604,651 shares of its
common stock to extinguish outstanding convertible bridge notes payable and
accrued interest. Additionally, during the six months ended April 30, 1996, the
Company reacquired from certain individuals 392,856 shares of its outstanding
Common Stock.
In connection with arranging the financing of the sale of the El Rancho,
the Company issued warrants to a third party to purchase 400,000 shares of its
Common Stock at $.10 per share (see Note 2). In connection with the repayment of
the UK Foods debt obligations (Note 4), the Company re-acquired certain
outstanding warrants for $105,208. Included in other charges as of April 30,
1996 is $625,000 which represents the value of cash, 800,000 restricted shares
of the Company's common stock (previously issued as of January 31, 1996 and
167,000 shares of common stock of Satellite Networks Inc., a newly formed
subsidiary (see Note 1) paid in connection with arranging certain financing.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
General
Background. Las Vegas Entertainment Network, Inc. ("LVEN") was formed
in October 1990 to develop, produce and distribute television programming
utilizing Las Vegas themes. Upon receipt of the $4,657,241 of the net proceeds
from its initial public offering in February 1992, LVEN commenced the
development and production of the Las Vegas Tonight Show. The first programming
developed, called "Las Vegas Tonight," featured excerpts from Las Vegas shows
and was sold outside the United States. In connection with development of "Las
Vegas Tonight" Management became aware that, while the casino hotels on the Las
Vegas Strip had adopted various themes, such as Egyptian (at the Luxor),
medieval (at the Excalibur Hotel & Casino) and Roman (at Caesars Palace), there
was no hotel casino on the Las Vegas Strip with a country music theme. In light
of the popularity of country music and based on management's experience in that
genre and in the Las Vegas marketplace (acquired in connection with developing
"Las Vegas Tonight"), management believed that a hotel casino utilizing a
country music theme could be successful. Since then, LVEN focused its business
on acquiring and developing the property on the Las Vegas Strip known as the El
Rancho Hotel, and developing Las Vegas entertainment based television
programming.
On November 24, 1993, the Company acquired the El Rancho, a 1,006-room
hotel with 90,000 square feet of casino and ancillary space and a 52-lane
bowling alley, located on the Las Vegas Strip. The purchase price for the El
Rancho was $36.5 million, including cash of $21.5 million, an 8%, $12 million
purchase money mortgage secured by a deed of trust on the Property that was
initially due November 24, 1994 (the "El Rancho Note"), and 2.3 million shares
of LVEN common stock valued at $3 million.
On January 22, 1996, the Company's CountryLand Properties Inc.
subsidiary sold the El Rancho to Orion Casino Corporation, a subsidiary of
International Thoroughbred Breeders, Inc. for $43,500,000 of cash, notes and
assumption of debt. It is the current intention of the new owners of the El
Rancho to develop "Starship Orion" a planned one billion dollar development with
seven casinos, for which the Company's wholly-owned subsidiary, Casino-Co, has
the option of developing one of the casinos. As part of the sale agreement, once
the Property is opened and invested amounts have been recouped by Orion and the
Company, which the Company can provide no assurance will be achieved, Casino-Co
will also receive a continuing fifty percent (50%) interest in the adjusted
cumulative cash flow from the operation of the Property as so developed for a
period of six (6) years following the opening of the first casino on the
Property, and thereafter a twenty-five percent (25%) interest in the adjusted
cash flow until such time as the Company has received an aggregate of One
Hundred Sixty Million Dollars ($160,000,000). In addition, commencing with the
development of the Property, the Company's Las Vegas Communications Corporation
subsidiary ("LVCC") was granted an exclusive contract for up to twenty (20)
years to provide entertainment at the Property site which will provide for
minimum annual fees of $800,000 plus additional fees.
On July 24, 1993, the Company acquired for $806,488, a 45% interest in
a venture which owns the Lake Tropicana 184 unit apartment complex in Las Vegas,
Nevada. The complex is being converted into a vacation interval ownership (time-
share) project. During 1994, the managing general partner of the joint venture,
a subsidiary of MPTV, Inc., agreed to purchase one-half of the Company's
interest (22.5%) for $1,868,643. The purchase price was payable by a promissory
note bearing interest at a rate of 8% per annum, secured by a deed of trust on
the property. During 1994 the managing general partner filed for bankruptcy
protection. During 1995, the project emerged from bankruptcy protection and
reorganized its debt with its creditors . As part of the reorganization, the
Company replaced its original $1,868,000 principal note for a new note of the
same amount dated March 22, 1995, and sold to MPTV its remaining 22.5% interest
in the project for an additional note of $1,868,000. Accordingly, as of April
30, 1996, Notes Receivable, Lake Tropicana represents two (2) separate notes
payable to the Company with a face value of $1,868,000 each (which have been
reflected on the Company's balance sheet, net of applicable reserves, at
$806,489 as of April 30, 1996 and October 31, 1995). See "Liquidity and Capital
Resources - Notes Receivable".
The Company presently has three (3) operating subsidiaries:
CountryLand Properties, Inc. (CLND); Casino-Co, which in connection with the
sale of the El Rancho will maintain the continuing interest in the cumulative
adjusted cash flow from operations of the property and has the option of
developing a casino on the site, and; Las Vegas Communications Corporation
(LVCC, formerly Protex Technology, Inc.), which will maintain the entertainment
contracts on the Property. The Company will also continue to develop, produce,
market and distribute television programming.
8
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On March 11, 1996, the Company incorporated Satellite Networks
Inc. ("SNI"), a new subsidiary in which the Company and its management own a
combined 55% interest in the 6,000,000 currently issued and outstanding shares.
The Company, which is in a development stage with no operations to date, was
formed to explore various options in the telecommunication industry. On April
14, 1996, SNI filed a registration statement, which is subject to significant
revision, on Form SB-2 with the Securities and Exchange Commission to register
1,000,000 shares of its common stock and 2,000,000 redeemable warrants to raise
capital for the intended operations of SNI.
There can be no assurance that the public offering will be successful.
Cash Requirements. The Company's monthly operating cash requirements
as currently proposed are approximately $250,000, composed of general and
administrative expenses, salary and consulting costs and interest payments on
existing debt. The Company is also responsible for managing and paying the
operating costs of the El Rancho Property, but is reimbursed by Orion on a
monthly basis for these costs in amounts sufficient to cover the company's cash
outlay, which currently approximates $60,000 per month. The Company may also
incur other professional fees in the development and financing of its business
activities. During the six months ended April 30, 1996, the Company made
$806,000 in advances and deposits to certain businesses, individuals or others
to secure potential acquisitions or investments. The Company is currently in the
process of evaluating these potential acquisitions or investments. Subsequent to
April 30, 1996, $250,000 of these advances have been returned to the Company.
The Company will continue to make deposits or advances as it deems necessary to
secure potential investments or business acquisitions.
As of April 30, 1996, the Company had $12,144,172 in cash. Management
believes that its current cash and receivables (including funds received from
the sale of the El Rancho Hotel ) and potential placements of its securities
will be sufficient to meet those cash requirements for the next 12 months as
well as the repayment of existing debt of $1,308,469 at April 30, 1996 without
regard to the successful completion of a public offering or other significant
financing. However, these sources of cash may not be sufficient to enable the
Company to fund the renovation, expansion and commencement of operations if it
elects to develop one of the casinos at the Starship Orion site, or to fund the
expansion and commencement of operations of its planned television programming.
The Company may obtain such funds, if required, from a public offering or other
significant financing. If a public offering or other form of financing is not
successful, the Company will be required to seek other funding therefor. There
can be no assurance such other funding will be available on terms satisfactory
to the Company or at all.
Results of Operations
Three Months Year Ended April 30, 1996 Compared to the Three Months
Ended April 30, 1995
Revenues for the three months ended April 30, 1996 increased $267,848
to $306,600 during the three months ended April 30, 1996 as compared to $38,752
for the corresponding period in 1995. The increase principally represented
approximately $141,000 in receipts for the three months ended April 30, 1996
earned in connection with renting out the parking facilities at the El Rancho
Hotel property site as compared to $27,000 for the corresponding period in 1995.
The Company also earned approximately $165,000 for the three months ended April
30, 1996 in management and entertainment fees earned from Orion in managing the
El Rancho Property site. There were no corresponding management fees for the
three months ended April 30, 1995.
General and Administrative expenses decreased $762,057 to $1,170,264
during the three months ended April 30, 1996 as compared to $1,932,321 in the
corresponding period in 1995. The majority of the decrease relates in part to
legal, accounting and professional fees previously incurred in connection with
investigating and negotiating various alternatives to developing the El Rancho
and various other business opportunities during the first three months of 1995.
In connection therewith, professional and consulting fees decreased $822,000 to
$197,000 during the quarter ended January 31, 1996 as compared to $1,019,000 for
the corresponding period in 1995. Professional advisory and investment banking
fees also decreased $161,000 to $50,000 during the three months ended April 30,
1996 as compared to $211,000 in the corresponding period in 1995. The majority
of the decrease relates to 1995 fees that were incurred in preparation of
certain intended underwritings, a proposed spin-off of the Company's LVCC
subsidiary and public registration of its shares, and the potential spin-off of
CLND. These offerings were terminated during the first quarter of 1996 given the
sale of the El Rancho, but management may decide to pursue such spin-offs or
offerings at a later date.
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Offsetting the decreases above, management salaries and consulting
costs increased $83,000 to $418,000 during the three months ending April 30,
1996 as compared to $335,000 in the corresponding period in 1995. The increase
is due to an increase in officers' salary of $50,000 and for the accrual of
$33,000 in retirement benefits under a plan which did not exist in the first
three months of 1995.
Significant general and administrative expenses are expected to
continue while the Company is in the development stage.
Interest Income and Expense. Interest income increased $166,724 to
$197,224 for the three months ended April 30, 1996 as compared to $30,500 for
corresponding period in 1995. The majority of the increase relates to $75,000
interest earned on the Company's receivables due from Orion, and interest of
$115,000 earned on the Company's cash investments. Interest expense and finance
costs increased $40,813 to $200,298 for the three months ended April 30, 1996 as
compared to $159,485 for corresponding period in 1995. The net increase was due
to; (i) an increase in loan fees of $72,500 that resulted from a loan fee of
$151,000 being paid to BP upon repayment of its outstanding debt during the
three months ending April 30, 1996, as compared to loan fees of $78,500 in the
same period in 1995, and (ii) a $31,888 decrease in interest expense on
outstanding indebtedness in the 1996 period as compared to 1995. The decrease in
interest expense is consistent with the decrease in the average indebtedness
outstanding during the three months ended April 30, 1996 as compared to the
corresponding period in 1995.
Other Income and Charges. Included in other charges as of April 30,
1996 is $625,000 which represents the value of cash, 800,000 restricted shares
of the Company's Common Stock (previously issued during the January 31, 1996 and
reflected as a prepaid asset), and 167,000 shares of Common Stock of Satellite
Networks Inc., a newly formed subsidiary in connection with arranging certain
financing.
In connection with the sale of its Tunica, Mississippi based assets
during 1994, the Company received 4,000,000 shares of Common Stock of Sky
Scientific Inc. ("Sky"), which it held as of April 30, 1996 and 1995. These
shares were sold by the Company during the three months ended April 30, 1995,
and a gain of $1,250,000 was recognized. Due to the subsequent decline in the
value of the shares, and other factors, the Company and the purchaser of the Sky
shares agreed to cancel the sales agreement, and the shares were returned to the
Company by October 31, 1995. The Company did not assign any value to the
returned shares and subsequently recorded a loss of $500,000 for the year ended
October 31, 1995 to reflect the net effect of these transactions. There were no
such transactions during the quarter ending April 30, 1996.
Six Months Year Ended April 30, 1996 Compared to the Six Months Ended
April 30, 1995
Revenues for the six months ended April 30, 1996 increased $334,048 to
$372,800 during the six months ended April 30, 1996 as compared to $38,752 for
the corresponding period in 1995. The increase principally represented
approximately $200,000 in receipts for the six months ended April 30, 1996
earned in connection with renting out the parking facilities at the El Rancho
Hotel property site as compared to $27,000 for the corresponding period in 1995.
The Company also earned approximately $165,000 for the six months ended April
30, 1996 in management and entertainment fees earned from Orion in managing the
El Rancho Property site. There were no corresponding management fees for the six
months ended April 30, 1995.
General and Administrative expenses decreased $560,937 to $2,192,961
during the six months ended April 30, 1996 as compared to $2,961,368 in the
corresponding period in 1995. The majority of the decrease relates in part to
legal, accounting and professional fees previously incurred in connection with
investigating and negotiating various alternatives to developing the El Rancho
and various other business opportunities during the first six months of 1995. In
connection therewith, professional and consulting fees decreased $898,000 to
$238,000 during the quarter ended January 31, 1996 as compared to $1,136,000 for
the corresponding period in 1995. Professional advisory and investment banking
fees also decreased $206,000 to $50,000 during the six months ended April 30,
1996 as compared to $256,000 in the corresponding period in 1995. The majority
of the decrease relates to 1995 fees that were incurred in preparation of
certain intended underwritings, a proposed spin-off of the Company's LVCC
subsidiary and public registration of its shares, and the potential spin-off of
CLND. These offerings were terminated during the first quarter of 1996 given the
sale of the El Rancho, but management may decide to pursue such spin-offs or
offerings at a later date.
10
<PAGE>
Offsetting the decreases above, management salaries and consulting
costs increased $162,000 to $760,000 during the six months ending April 30, 1996
as compared to $598,000 in the corresponding period in 1995. The increase is due
to an increase in officers' salary of $100,000, and for the accrual of $66,000
in retirement benefits under a plan which did not exist in the first six months
of 1995.
Significant general and administrative expenses are expected to
continue while the Company is in the development stage.
Interest Income and Expense. Interest income increased $143,597 to
$233,830 for the six months ended April 30, 1996 as compared to $90,233 for
corresponding period in 1995. The majority of the increase relates to $75,000
interest earned on the Company's receivables due from Orion, and interest of
$135,000 earned on the Company's cash investments. Interest expense and finance
costs increased $382,067 to $599,677 for the six months ended April 30, 1996 as
compared to $217,610 for corresponding period in 1995. The increase was due to;
(i) a $295,000 loan fee incurred during the quarter ended January 31, 1996 to
provide for certain stand-by financing as compared to loan fees of $78,500 for
the corresponding period in 1995, (ii) an additional $151,000 loan fee being
paid to BP upon repayment of its outstanding debt, and (iii) a $14,000 increase
in interest expense on outstanding indebtedness. The increase in interest
expense is consistent with the increase in the average indebtedness outstanding
during the six months ended April 30, 1996 as compared to the corresponding
period in 1995.
Other Income and Charges. Included in other charges as of April 30,
1996 is $625,000 paid in connection with arranging certain financing.
See "Other Income and Charges - Three months Ended April 30, 1996 vs. April
30, 1995."
In connection with the sale of its Tunica, Mississippi based assets
during 1994, the Company received 4,000,000 shares of Common Stock of Sky
Scientific Inc. ("Sky"), which it held as of January 31, 1996 and 1995. These
shares were sold by the Company during the six months ended April 30, 1995, and
a gain of $1,250,000 was recognized. Due to the subsequent decline in the value
of the shares, and other factors, the Company and the purchaser of the Sky
shares agreed to cancel the sales agreement, and the shares were returned to the
Company by October 31, 1995. The Company did not assign any value to the
returned shares and subsequently recorded a loss of $500,000 for the year ended
October 31, 1995 to reflect the net effect of these transactions. There were no
such transactions during the quarter ending January 31, 1996.
Disposal of El Rancho Hotel and Casino. On January 22 , 1996, the
Company sold the El Rancho to Orion Casino Corporation for consideration of
Forty-Three Million Five Hundred Thousand Dollars ($43,500,000) of cash, notes
and assumption of existing indebtedness. The Company has previously reflected
the effects of the above transaction as if it had occurred as of October 31,
1995 and accordingly provided a reserve as of that date of $9,000,000 for
accounting purposes reflecting an adjustment to the net realizable value of the
El Rancho Property. No further adjustments were made during the six-months ended
April 30, 1996. The tax effects and benefits of the sale will be accounted for
in the fiscal year ending October 31, 1996 based upon the ultimate satisfaction
of the notes receivable.
Liquidity and Capital Resources
The Company's cash requirements to date have been funded from
proceeds received in connection with the sale of the El Rancho Hotel, shares of
its Common Stock, warrants and short-term borrowing. The Company's cash has been
used for selling, general and administrative expenses and for investments.
During the six months ended April 30, 1996, the Company; (i)
received net proceeds of $962,500 in a series of private placements made to
non-U.S. purchasers, under an exemption under the Securities Act of 1933, (ii)
issued $2,069,235 of its Common Stock for services provided, and (iii) issued
604,651 shares of its Common Stock to extinguish outstanding convertible bridge
notes payable and accrued interest.
As of April 30, 1996, the Company had outstanding $1,308,469 of notes
and loans payable which become due during the current fiscal year. The Company
intends to repay these notes, along with all other outstanding notes and accrued
interest during the current fiscal year.
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Refinance Obligations. In connection with the sale of El Rancho, the
Company refinanced the existing El Rancho indebtedness with a Fourteen Million
Dollar ($14,000,000) 13% first mortgage note due SunAmerica Life Insurance
Company. Orion then assumed CLND's obligations under the refinance Note due
December 20, 1996, a related Deed of Trust and a related Security Agreement
(collectively, the "Refinance Obligations"). The Company and LVCC conditionally
guaranteed the Refinance Obligations, and in the event Orion did not repay the
Refinance Obligation when due, the Company may have been required to do so. On
June 4, 1996, Orion retired the existing SunAmerica obligation, and in
accordance with the initial loan agreement, the Company, CLND and LVCC were
released from all obligations under the Refinance Obligations.
Notes Receivable. In connection with the sale of the El Rancho, the
Company has received two promissory notes from Orion and ITB as co-makers under
the notes. The first note was an 8% unsecured promissory note co-signed by Orion
and ITB in the principal amount of Six Million Five Hundred Thousand Dollars
($6,500,000) which was paid in full on March 15, 1996. The second note is an 8%
promissory note in the principal amount of Ten Million Five Hundred Thousand
Dollars ($10,500,000), secured by a subordinated junior position in the deed of
trust on the El Rancho Hotel and Casino Property. This note is due upon the
successful raising of financing to develop the Property by Orion, or upon the
ultimate sale of the Property. If the Property is sold through foreclosure or
other forced sale or based upon mutual decision of Orion and the Company, the
proceeds of such sale shall be paid in the following order of priority: (i)
first, to pay in full all principal, interest and costs owing under the
Refinancing Loan or any substitution or additional mortgage refinancing thereof;
(ii) second, to repay Orion for its investment in the property or any additions
thereto in the amount of all cash payments comprising a part of the purchase
price plus $2,000,000 and any and all reasonable documented costs, expenses and
any additional investment in, or debt incurred in furtherance of the development
of the Property, together with an accrued return thereon in the amount of eight
percent (8%) per annum; (iii) third, to pay the Company the outstanding balance
of principal and accrued interest owing under the Note, plus an additional
$4,000,000, together with an accrued return thereon in the amount of eight
percent (8%) per annum. Any excess will then be allocated fifty percent (50%) to
Orion and fifty percent (50%) to the Company. As of April 30, 1996, the Company
has reflected a reserve of $4,600,000 against the remaining note.
As of April 30,1996 the Company has outstanding two (2) separate notes
receivable of $1,868,000 ($3,736,000 in total) from MPTV, Inc. arising from the
sale of the Company's Lake Tropicana investment. The first note bears interest
at a rate of 8% per annum, is payable monthly, and is secured by a fifth
position in a deed of trust on the underlying time share-project. The first
interest payment is due one month after the borrower has completed certain
refinancing currently in process. The second note is unsecured and non-interest
bearing. Principal payments for both notes will be at a rate of $205 ($410 for
both notes) as each time-share interval is sold until August 1, 1998, when any
remaining outstanding principal is due in full. The notes contain a
cross-default provision so that a default under one note shall also be deemed a
default on the other. The joint venture is currently reorganizing its debt
position, and with such financing, is anticipated to have the funds to commence
development and sale of the time-share units. It is also anticipated that with
such reorganization, the Company's secured note receivable will move up to a
second position. As of April 30, 1996, the Company has reflected a reserve of
$2,929,511 against these notes (including a reserve for imputed interest on the
non-interest bearing note).
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PART 11. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
During the year ended October 31, 1993, the Company acquired an option
to acquire Patmore Radio Broadcasting for $515,258. Notice of exercise of the
option by LVEN was given in September 1993, with the closing originally
scheduled to occur by March 31, 1994. The purchase price was to be paid by the
cancellation of the $400,000 loan and the issuance of the Company's Common Stock
in the value of $1,400,000. The Company was to forgive the loan to Patmore if
the acquisition was effected; if the acquisition was not closed, $100,000 of the
loan was to be repaid. Patmore alleges that the purchase option expired in March
1994, and informed the Company they consider the purchase option as terminated.
The Company received $327,150 of unsolicited funds from Patmore in an effort by
Patmore to terminate LVEN's right to purchase the radio station. Management
became aware that Patmore subsequently attempted to sell the Station to Compass
Communications on November 7, 1995. The Company obtained a temporary restraining
order to block the sale of the station on February 23, 1996, however on March 6,
1996 the restraining order was dissolved, allowing Patmore the ability to
proceed with its sale. Management considered its purchase option as valid, and
continues to investigate and pursue various options. At various times, the
Company and its subsidiaries are involved in various other matters of
litigation, including matters involving settlement of fees and outstanding
invoices.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The Company filed a current report on Form 8-K dated January 24, 1996
to report the sale of the El Rancho property. No financial statements were filed
with the Form 8-K.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused the report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: June 20, 1996
By: /s/ Carl Sambus
Carl Sambus
Executive Vice President and
Chief Financial Officer (chief
financial officer and accounting
officer and duly authorized officer)
