UNITED STATES
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 : January 31,1999
[ ] 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)
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports)
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No ___
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
Common Stock, $.001 par value 1,946,167
Title of Class Number of Shares outstanding at
March 1, 1999
DOCUMENTS INCORPORATED BY REFERENCE: NONE
<PAGE>
LAS VEGAS ENTERTAINMENT NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
January 31, October 31,
1999 1998
---- ----
(UNAUDITED
<TABLE>
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ASSETS
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $ 65,550 $ 553,525
TRADING SECURITIES 41,492 106,199
----------- -----------
TOTAL CURRENT ASSETS 107,042 659,724
INVESTMENT IN & ADVANCES TO INTERNATIONAL
THOROUGHBRED BREEDERS INC. - Note 2 3,500,000 3,500,000
OTHER INVESTMENTS & ADVANCES 100,000 100,000
PROPERTY AND EQUIPMENT
net of accumulated depreciation
of $267,367 (1999) and $259,547 (1998) 81,583 89,404
OTHER ASSETS -- 56,652
----------- ------------
$ 3,788,625 $ 4,405,780
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
ACCOUNTS PAYABLE AND ACCRUED EXPENSES $ 293,486 $ 308,181
OFFICER LOAN PAYABLE 15,000
----------- ------------
TOTAL CURRENT LIABILITIES 308,486 308,181
ACCRUED OFFICER'S BENEFITS - Note 3 273,642 294,379
STOCKHOLDERS' EQUITY
PREFERRED STOCK - SERIES A, AUTHORIZED
30,000,000 SHARES, $.001 PAR VALUE;
NONE OUTSTANDING
COMMON STOCK - AUTHORIZED 50,000,000
SHARES, $.001 PAR VALUE; ISSUED AND
OUTSTANDING - 1,861,167 SHARES (1999)
and 1,831,167 SHARES (1998) 37,220 36,620
ADDITIONAL PAID-IN CAPITAL 48,520,878 48,459,312
LONG TERM INVESTMENT RESERVE (2,400,000)
DEFICIT (45,351,601) (42,292,712)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 3,206,497 3,803,220
------------ ------------
$ 3,788,625 $ 4,405,780
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
LAS VEGAS ENTERTAINMENT NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED JANUARY 31,
------------------------------
1999 1998
---- ----
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<S> <C> <C>
REVENUES $ $
- -
------------- --------------
COSTS AND EXPENSES
El Rancho Costs - Note 2 63,220
Research & Development 37,000 25,000
Write-off and Reserves - Note 2 2,400,000
General & Administrative 617,636 749,491
-------------- -------------
TOTAL COSTS AND EXPENSES 3,117,856 774,491
-------------- -------------
LOSS BEFORE OTHER
INCOME AND (CHARGES) (3,117,856) (774,491)
OTHER INCOME AND (CHARGES):
Interest Income 5,361 57,409
Gain (Loss) on Trading Securities 64,647 25,151
Other Charges (8,487) (9,251)
Interest and Finance Costs (2,554) (19,520)
-------------- ---------------
TOTAL OTHER INCOME AND (CHARGES)
58,967 53,789
-------------- ---------------
NET LOSS (3,058,889) (720,702)
============== ===============
WEIGHTED AVERAGE NUMBER OF SHARES
OF COMMON STOCK OUTSTANDING 1,836,167 1,744,941
============== ===============
BASIC AND DILUTED LOSS PER SHARE
OF COMMON STOCK (1.67) (0.41)
============== ===============
COMPREHENSIVE LOSS
NET LOSS (3,058,889) (720,702)
UNREALIZED LOSS ON INVESTMENT 2,400,000
----------------- ---------------
COMPREHENSIVE LOSS (658,889) (720,702)
================ ===============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
LAS VEGAS ENTERTAINMENT NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
THREE MONTHS ENDED JANUARY 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Common Stock Unrealized
--------------- Additional Loss on
Number Paid-In Long-Term
of Shares Amount Capital Investment Deficit Total
--------- ------ ------- ---------- ------- -----
BALANCE - November 1, 1998 1,831,167 $36,620 $48,459,312 $(2,400,000) $(42,292,712) 3,803,220
Realization of loss on ITB securities 2,400,000 2,400,000
Issuance of shares for services 30,000 600 61,566 62,166
Net loss for the three-months ended
January 31, 1999 (3,058,889) (3,058,889)
----------- ------- ----------- ------------ ---------- -----------
BALANCE - January 31, 1999 1,861,167 $37,220 $48,520,878 $ - $(45,351,601) $ 3,206,497
=========== ======= =========== ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
LAS VEGAS ENTERTAINMENT NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED JANUARY 31,
-------------------------------
1999 1998
---- ----
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<CAPTION>
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss (3,058,889) (720,702)
(Gain) from Marketable Securities (64,657) (25,151)
Loss on Investments 2,400,000
Loss on Other Asset 8,496
Depreciation 7,821 16,030
Adjustments to reconcile net loss to net
cash used in operating activities:
Increase (Decrease) in;
Accounts Payable 47,471 58,235
Interest Payable 19,520
Accrued Officer's Salaries (419,843)
Accrued Officer's Benefits (20,737) 31,000
-------- ------
CASH USED IN OPERATING ACTIVITIES (680,495) (1,040,911)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Trading Securities (20,606)
Sale of Trading Securities 129,364
Advances to Nordic Gaming (200,000)
Collections (Advances) on Airplane Deposits 48,156 (11,947)
Acquisition of Property and Equipment - (298)
-------- ------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 177,520 (232,851)
CASH FLOWS FROM FINANCING ACTIVITIES:
Advance from Officer 15,000
Repayment of Notes Payable - (505)
-------- --------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 15,000 (505)
DECREASE IN CASH (487,975) (1,274,267)
CASH BALANCE - BEGINNING 553,525 2,399,491
-------- ----------
CASH BALANCE - ENDING $ 65,550 $1,125,224
========= ==========
</TABLE>
NON-CASH TRANSACTIONS
Issuance of Common Stock for services $ 62,166
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
LAS VEGAS ENTERTAINMENT NETWORK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. SUMMARY OF BUSINESS, GOING CONCERN AND SIGNIFICANT ACCOUNTING
POLICIES
Background - 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 including real estate redevelopment. The Company has also
identified a major business opportunity for the distribution of bingo
machines in Brazil, when if implemented, for which there can be no
assurance, will substantially alter the direction of the Company. The
Company is also investigating other potential businesses for
acquisition in the entertainment, gaming, lodging, and communications
industries.
Going Concern - The accompanying financial statements have been
prepared on a going concern basis which contemplates the realization
of assets and liabilities in the normal course of business. For the
three months ended January 31, 1999 and the year ended October 31,
1998, the Company experienced net losses of $3,058,889 and $4,754,530,
respectively, and has experienced operating losses since its
inception. The Company anticipates that it will continue to experience
significant losses and cash flow needs as it continues working on its
development plans.
The Company's capital requirements have been and will continue to be
significant. The Company's cash requirements to date have been funded
from proceeds received in connection with the sale of shares of its
common stock, warrants and short-term borrowings. At January 31, 1999,
the Company had cash and cash equivalents of $65,550 and trading
securities of $41,492. The Chairman of the Board has committed to
provide a $250,000 credit line to fund working capital to fund
operations up through the second fiscal quarter of 1999, at which time
the Company believes the financing for the MG contracts will be in
place, although there can be no assurance of such. The Company's
current monthly operating cash requirements are approximately
$100,000, composed of general and administrative expenses, salary and
consulting fees, legal and professional fees, marketing and travel
costs. The Company is also responsible to for managing and paying one
half of the operating costs of the El Rancho Hotel and Casino (see
Note 2) which currently approximates $50,000 per month but may
increase to a greater amount if renovation of the property begins. In
addition, the Company may be required to fund, or obtain financing
for, the acquisition of up to 1,000 electronic bingo machines per
month (up to 10,000 machines in total) that cost approximately $12,000
each to meet delivery requirements to MG Entertainment under the
Company's agreement with them. In order to preserve working capital,
the Company has reduced the number of its employees, deferred
compensation to certain of its officers, deferred or delayed the
payment of certain accounts payable, and reduced operating and capital
expenditures. The Company issued 30,000 shares of its Common Stock
during the three months ended January 31, 1999 to settle certain
accounts payable, and subsequent to January 31, 1999 has issued, or
committed to issue, an additional 230,000 shares for services and in
settlement of accounts payable.
6
<PAGE>
The Company's sources and uses for financing during 1999 and beyond
will vary based upon a number of factors, some of which are outside
the control of the Company. These factors include; the success of the
Company in meeting its delivery requirements to MG Entertainment for
the sale of up to 10,000 bingo machines; the potential sale of the El
Rancho Property and receipt of proceeds therefrom (Note 2); the
ultimate realization of other LVEN assets, and; potential legal and
political issues. In addition, the Company's business plans may change
based on changes in technology, new developments in the marketplace or
unforseen events which could require the Company to raise additional
funds. The unavailability of additional funds under acceptable terms
and conditions when needed could have a material adverse effect on the
Company.
The Company's significant operating losses and capital requirements
raise substantial doubt about the Company's ability to continue as a
going concern. The financial statements do not include any adjustments
relating to the recoverability of the recorded assets or the
classification of the liabilities that might be necessary should the
Company not be able to continue as a going concern.
The accompanying unaudited financial statements include the accounts
of LVEN, and its wholly-owned subsidiaries Las Vegas Communications
Corp. ("LVCC"), Casino-Co Corporation. and Pacific DNS, Inc, and its
majority-owned subsidiary, Electric Media Company Inc. (EMC). All
significant intercompany transactions and balances have been
eliminated.
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-month period ended January
31, 1999 are not necessarily indicative of the results that may be
expected for the year ended October 31, 1999. 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, 1998.
Stock Split - On October 16, 1998, the stockholders of the Company
ratified a one for twenty reverse stock split of the shares of the
Company's Common Stock. All disclosures and applicable per share data
have been retroactively restated to reflect this reverse split.
2. INVESTMENT IN AND ADVANCES TO INTERNATIONAL THOROUGHBRED
BREEDERS INC.
On January 22, 1996, the Company sold the assets and liabilities of
the El Rancho Hotel and Casino in Las Vegas, Nevada (the "El Rancho"
or "the Property") to International Thoroughbred Breeders Inc. ("ITB")
for consideration of $43,500,000, consisting of (i) $12,500,000 paid
at closing in cash; (ii) the issuance of an 8% unsecured promissory
note in the principal amount of $6,500,000 (the"A-Note") which A-Note
was paid in full on March 15,
7
<PAGE>
1996; (iii) the issuance of an 8% promissory note in the principal
amount of $10,500,000 (the "B-Note") and (iv) the assumption by ITB of
existing mortgage indebtedness and accrued interest of $14,000,000. In
addition, once the Property was developed, the Company was entitled to
share in a percentage of the ongoing adjusted cumulative cash flow
from the operation of the Property up to $160,000,000, as provided in
the ITB Sale Agreement (the "El Rancho Cash Flow Interest").
On May 22, 1997, the Company, ITB and Credit Suisse First Boston
Mortgage entered into a certain Bi-lateral agreement and a certain
Tri-lateral agreement whereby LVEN converted the $10.5 Million
receivable evidenced by the B-Note, together with accrued interest
thereon of $1.1 Million, into 2,093,868 restricted shares of ITB
common stock (the "Conversion Shares"). On May 22, 1997, LVEN and ITB
also agreed, subject to approval of their respective Boards of
Directors, that as soon as practicable, ITB would acquire the El
Rancho Cash Flow Interest. In order to effect such transaction, ITB
was required to issue to LVEN that number of shares of ITB common
stock (the "Acquisition Shares") equal to (i) the fair market value of
the El Rancho Cash Flow Interest, as determined in a fairness opinion
to be obtained from a nationally recognized investment banking firm,
divided by (ii) the average bid price for ITB Stock during the 20
trading days prior to the closing. Both the Conversion Shares and the
Acquisition Shares were subject to certain restrictions.
On or about October 10, 1997, certain former or current directors of
ITB filed an action against ITB and its other directors, the Company,
the Company's Chairman and certain other individuals in the Delaware
Court of Chancery, alleging, among other things, that the Company
acted improperly in connection with various transactions with ITB. The
plaintiffs sought, among other things, the recision of the issuance of
the 2,093,068 shares of ITB common stock to LVEN on May 22, 1997, and
further sought to block the issuance to LVEN of additional shares of
ITB stock in exchange for LVEN's El Rancho Cash Flow Interest. On July
2, 1998, the Company entered into a Stipulation and Agreement of
Compromise with all such parties, and on January 29, 1999, all such
parties gave their final approval to the agreement and all such
litigation has been settled and dismissed.
Pursuant to the Settlement Stipulation; (i) the Company was granted
the exclusive right to market and sell the El Rancho for a 120-day
period, which period expired on November 20, 1998; (ii) from November
20, 1998 until April 19, 1999, the Company has a right, coextensive
with ITB, to market and sell the El Rancho Property site, iii) if the
Company closes a sale of the El Rancho prior to April 19, 1999, then
the Company receives the proceeds of such sale in excess of $44.2
million; (iv) in order to exercise its coextensive rights, ITB must
close a sale of the El Rancho prior to April 19, 1999 for at least
$56.2, out of which amount approximately $10 million would be paid to
the Company, (v) if, on or before April 17, 1999, the Company
consummates a refinancing of the El Rancho that results in loan
proceeds of at least $44.2 Million, then the Company may continue to
market the El Rancho for an additional period that is 50% of the
period of the refinancing loan. In exchange for the foregoing rights,
the Company was obligated to; (i) release all claims against the
parties to the litigation, CSFB and certain law firms; (ii) return to
ITB for cancellation the 2,093,868 shares of ITB common stock that
were previously issued to Casino-Co Corporation, a subsidiary of the
Company, in consideration for the prior cancellation of a $10.5
million promissory note from ITB to the Company; (iii) release any
interest in certain shares of ITB stock held by NPD, Inc. which shares
are to be repurchased
8
<PAGE>
by ITB; (iv) pay 50% of the carrying cost on the El Rancho during a
portion of the period for which the Company has the right to market
and sell the El Rancho (presently estimated to be $50,000 per month);
and (v) consent to the cancellation of all contracts between ITB and
the Company, including those involving future profit-participation
rights in the El Rancho as well as the Company's entertainment
management contract for the El Rancho Property Site.
Upon the effectiveness of the Settlement as to LVEN, all prior
agreements between or among LVEN and ITB, including without
limitation, that certain Bi-Lateral Agreement, and that certain
Tri-Party Agreement pursuant to which ITB issued to LVEN 2,093,868
shares of ITB Common Stock, were terminated and the Company returned
all such shares to ITB for cancellation. The Company recognized a
$2,400,00 loss during the three months ended January 31, 1999 upon
return of the shares in accordance with Financial Accounting Standards
Board Statement No. 115. This amount had previously been provided for
as a reduction in stockholders equity. As of January 31, 1999, the
Company has valued its interest in its right to sell the Property at
its historical carrying cost, which approximates market value.
Pursuant to the Company's rights under the settlement, the Company has
developed three alternatives of which there can be no assurance any
can be achieved. The first alternative is to repurchase and resell the
Property. The remaining two alternatives are redevelopments under
which the Company would receive a similar participation as described
in the initial ITB transaction. Each redevelopment plan requires the
potential partners to finance either the construction and
redevelopment of additional rooms and gaming and entertainment
attractions and/or the remodeling of the existing facilities which
consist of approximately 20 acres, 100 hotel rooms, a 52-lane bowling
alley, a parking structure for 600 cars and approximately 100,000
square feet of gaming and retail space. The Company expects to
finalize a partnership plan or an outright sale of the Property by the
end of the second fiscal quarter, however no assurance can be made
that such plan or outright sale can be made.
3. Accrued Officers Benefit
As of October 31, 1998, Mr. Corazzi agreed to terminate any past or
future amounts due him under his retirement benefit in exchange for
cash payment of $192,000 and the issuance of 85,000 registered shares
of common stock of the Company. These shares have been issued
subsequent to January 31, 1999.
4. Capital Stock Transactions
During the three months ended January 31, 1999, the Company issued
15,000 shares of its Common Stock in settlement for certain accounts
payable. The shares were valued at $66,120, the value of the amount of
accounts payable setteled (average price of $4.40 per share).
Subsequent to January 31, 1999, the Company has issued, or committed
to issue, an additional 230,000 shares for services and in settlement
of accounts payable to be valued at $1.50 - $2.00 per share.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Important Factors Relating to Forward Looking Statements. - In
connection with certain forward-looking statements contained in this Form 10-QSB
and those that may be made in the future by or on behalf of the Company which
are identified as forward-looking, the Company notes that there are various
factors that could cause actual results to differ materially from those set
forth in any such forward-looking statements. The forward-looking statements
contained in this Form 10-QSB were prepared by management and are qualified by,
and subject to, significant business, economic, competitive, regulatory and
other uncertainties and contingencies, all of which are difficult or impossible
to predict and many of which are beyond the control of the Company. Accordingly,
there can be no assurance that the forward-looking statements contained in this
Form 10-QSB will be realized or the actual results will not be significantly
higher or lower. These forward looking statements have not been audited by,
examined by, compiled by or subjected to agreed-upon procedures by independent
accountants, and no third-party has independently verified or reviewed such
statements. Readers of this Form 10-QSB should consider these facts in
evaluating the information contained herein. In addition, the business and
operations of the Company are subject to substantial risks which increase the
uncertainty inherent in the forward-looking statements contained in this Form
10-QSB. The inclusion for the forward-looking statements contained in this Form
10-QSB should not be regarded as a representation by the Company or any other
person that the forward-looking statements contained in this Form 10-QSB will be
achieved. In light of the foregoing, readers of this Form 10-QSB are cautioned
not to place undue reliance on the forward-looking statements contained herein.
Results of Operations
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 including real estate
redevelopment. The Company has also identified a major business opportunity for
the distribution of bingo machines in Brazil, when if implemented, for which
there can be no assurance, will substantially alter the direction of the
Company. The Company is also investigating other potential businesses for
acquisition in the entertainment, gaming, lodging, and communications
industries.
Three months ended January 31, 1999 compared to three months ended January 31,
1998
Research and Development expenses which relate to the development of
voice, video and data communication technology increased $12,000 to $37,000
during the three-months ended January 31, 1999 as compared to $25,000 in the
corresponding period in 1998. The majority of the costs related to the payment
of consulting fees paid to individuals developing technology to be used in the
Company's intended telephone operations in Brazil. The Company has temporarily
put on hold further development of this project.
Write-Downs and Reserves for the three-months ended January 31, 1999
consists of a charge of $2,400,000. This charge relates to the effectiveness of
the Settlement Agreement between LVEN and ITB, whereby the agreement pursuant to
which ITB issued to LVEN 2,093,868 shares of ITB Common Stock was terminated and
the Company returned all such shares to ITB for cancellation. In return, the
Company received certain rights in the El Rancho Property including the
conditional right to sell such property. Upon return of the shares on January
29, 1999, and in accordance with Financial Accounting Standards Board Statement
No. 115, the Company recognized a $2,400,00 non-cash loss that had previously
been provided as a reduction in stockholders equity .
10
<PAGE>
General and Administrative expenses decreased $131,855 to $617,636
during the three- months ended January 31, 1999 as compared to $749,491 in the
corresponding period in 1998. The majority of the decrease relates to reduced
operating and capital expenditures in order to preserve working capital of the
Company.
Interest Income and Expense. Interest income earned on cash balances
and marketable securities decreased $52,048 to $5,361 for the three-months ended
January 31, 1999 as compared to $57,409 for the corresponding period in 1998.
The decrease is consistent with the decrease in the average cash and marketable
securities outstanding during the three-months ended January 31, 1999 as
compared to the corresponding period in 1998. The Company had realized and
unrealized gains from marketable securities of $64,647 during the three-months
ended January 31, 1999 compared to a gain of $25,151 in the comparable period in
1998. Interest expense and finance costs decreased $16,966 to $2,554 for the
three-months ended January 31, 1999 as compared to $19,520 for the corresponding
period in 1998. The decrease is due to the reduction in average outstanding
indebtedness for the three months ended January 31, 1999 as compared to the
corresponding period in 1998.
Liquidity and Capital Resources
The Company's financial statements for the three months ending
January 31, 1999 have been prepared on a going concern basis which, which
contemplates the realization of assets and liabilities in the normal course of
business. For the three months ended January 31, 1999 and the year ended October
31, 1998, the Company experienced net losses of $3,058,889 and $4,754,530,
respectively, and has experienced operating losses since its inception. The
Company anticipates that it will continue to experience significant losses and
cash flow needs as it continues working on its development plans. The Company's
capital requirements have been and will continue to be significant. As a result,
and until financing arrangements have been finalized, the Company's independent
auditors have expressed substantial doubt about the Company's ability to
continue as a going concern
Cash Requirements. The Company's capital requirements have been and
will continue to be significant. The Company's cash requirements to date have
been funded from proceeds received in connection with the sale of shares of its
common stock, warrants and short-term borrowings. At January 31, 1999, the
Company had cash and cash equivalents of $65,550 and trading securities of
$41,492. The Chairman of the Board has committed to provide a $250,000 credit
line to fund working capital to fund operations up through the second fiscal
quarter of 1999, at which time the Company believes the financing for the MG
contracts will be in place, although there can be no assurance of such. The
Company's current monthly operating cash requirements are approximately
$100,000, composed of general and administrative expenses, salary and consulting
fees, legal and professional fees, marketing and travel costs. The Company is
also responsible to for managing and paying one half of the operating costs of
the El Rancho Hotel and Casino (see Note 2) which currently approximates $50,000
per month but may increase to a greater amount if renovation of the property
begins. In addition, the Company may be required to fund, or obtain financing
for, the acquisition of up to 1,000 electronic bingo machines per month (up to
10,000 machines in total) that cost approximately $12,000 each to meet delivery
requirements to MG Entertainment under the Company's agreement with them. In
order to preserve working capital, the Company has reduced the number of its
employees, deferred compensation to certain of its officers, deferred or delayed
the payment of certain accounts payable, and reduced operating and capital
expenditures. The Company issued 30,000 shares of its Common Stock during the
three months ended January 31, 1999 to settle certain accounts payable, and
subsequent to January 31,
11
<PAGE>
1999 has issued, or committed to issue, an additional 230,000 shares for
services and in settlement of accounts payable.
The Company's sources and uses for financing during 1999 and beyond
will vary based upon a number of factors, some of which are outside the control
of the Company. These factors include; the success of the Company in meeting its
delivery requirements to MG Entertainment for the sale of up to 10,000 bingo
machines; the potential sale of the El Rancho Property and receipt of proceeds
therefrom; the ultimate realization of other LVEN assets, and; potential legal
and political issues. In addition, the Company's business plans may change based
on changes in technology, new developments in the marketplace or unforseen
events which could require the Company to raise additional funds. The
unavailability of additional funds under acceptable terms and conditions when
needed could have a material adverse effect on the Company.
Notes Receivable.
As of January 31, 1999, the Company made accumulated advances to
Malbec, Inc., an unaffiliated company, of $912,606 for the purpose of developing
and operating a hotel project in Miami Beach, Florida. As of January 31, 1999,
$46,678 of such advances have been returned to the Company The advances accrued
interest at the rate of 8% per annum, and were due July 31, 1997. Due to
difficulties in finalizing a purchase agreement, and on going litigation
involving the hotel property, the Company and Malbec Inc. have discontinued any
attempt at further development of this property. The Company has previously
provided a $812,606 allowance against this advance, for a net investment of
$100,000 as of January 31, 1999.
12
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PART 11. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company has filed an action against American Pastime West ("APW") seeking
among other things to collect advance deposits it made to APW, and seeking
clarification of any APW rights pertaining to the Stipulation Agreement and the
sale of the El Rancho. The matter is still pending and the Company intends to
vigorously pursue its rights.
The Company is not involved in, or a party to, any other material legal
proceedings at this time. At various times, the Company and its subsidiaries are
involved in various matters of litigation, including matters involving
settlement of fees and outstanding invoices, and consider these legal
proceedings not to be material and in the ordinary course of business.
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
None
13
<PAGE>
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: March 15, 1999
By: /s/ Carl Sambus
Carl Sambus Executive Vice
President and Chief
Financial Officer (chief
financial officer and
accounting officer and
duly authorized officer)
14
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<CIK> 0000872588
<NAME> Las Vegas Entertainment Network, Inc.
<S> <C>
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<PERIOD-START> Jan-31-1999
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0
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