-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BjJTCyzk9FYAFUSTKM4NFhynlIbB5YGLdyT1iGYcvESuDGNBpTvL98GKDFA/+nwn oRkdTH33Ru/ysG23N3J3Dw== 0000872588-96-000003.txt : 19960923 0000872588-96-000003.hdr.sgml : 19960923 ACCESSION NUMBER: 0000872588-96-000003 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960731 FILED AS OF DATE: 19960920 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: LAS VEGAS ENTERTAINMENT NETWORK INC CENTRAL INDEX KEY: 0000872588 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE & VIDEO TAPE PRODUCTION [7812] IRS NUMBER: 943125854 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-21278 FILM NUMBER: 96632562 BUSINESS ADDRESS: STREET 1: 1801 CENTURY PK E 23RD FL STREET 2: STE 2300 CITY: LOS ANGELES STATE: CA ZIP: 90067 BUSINESS PHONE: 3105510011 MAIL ADDRESS: STREET 1: 1801 CENTURY PARK EAST STREET 2: 23RD FLOOR CITY: LAS ANGELES STATE: CA ZIP: 90067 10QSB 1 JULY 31, 1996 10-QSB 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 : July 31, 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 34,496,199 Title of Class Number of Shares outstanding at September 16, 1996 DOCUMENTS INCORPORATED BY REFERENCE: NONE LAS VEGAS ENTERTAINMENT NETWORK, INC. AND SUBSIDIARIES (A Company in the Development Stage) CONSOLIDATED BALANCE SHEETS
JULY 31, OCTOBER 31, 1996 1995 ASSETS UN-AUDITED) (DERIVED FROM AUDITED FINANCIAL STATEMENTS) ASSETS CURRENT ASSETS: CASH AND CASH EQUIVALENTS $11,897,424 $ 789,338 ---------- --------- - TOTAL CURRENT ASSETS 11,897,424 789,338 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 980,061 805,061 OTHER INVESTMENTS - Note 3 726,669 370,150 PROPERTY AND EQUIPMENT net of accumulated depreciation of $164,118 (1996) and $78,370 (1995) 188,516 260,421 OTHER ASSETS 19,500 10,770 ----------- ----------- $20,518,659 $23,742,644 ============ =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: ACCOUNTS PAYABLE AND ACCRUED EXPENSES $394,945 $753,631 PATMORE DEPOSIT - 327,150 INTEREST RESERVE - Note 2 611,278 - NOTES PAYABLE - Note 4 1,306,983 3,612,968 ACCRUED INTEREST PAYABLE 141,768 312,834 ACCRUED OFFICER'S SALARIES 454,239 586,739 -------- --------- TOTAL CURRENT LIABILITIES 2,909,213 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 34,496,199 (1996) AND 28,506,816 (1995) 34,493 28,503 ADDITIONAL PAID-IN CAPITAL 46,969,554 44,166,137 DEFICIT ACCUMULATED DURING DEVELOPMENT STAGE (29,394,601) (26,045,318) ------------- ------------ TOTAL STOCKHOLDERS' EQUITY 17,609,446 18,149,322 ------------- ------------ $20,518,659 $23,742,644 ============ ============ The accompanying notes are an integral part of these consolidated financial statements.
LAS VEGAS ENTERTAINMENT NETWORK, INC. AND SUBSIDIARIES (A Company in the Development Stage) CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Cumulative Since Inception (Oct. 3, 1990) THREE NINE to MONTHS MONTHS ENDED JULY 31 ENDED JULY 31, July 31, 1996 1995 1996 1995 1996 REVENUES $191,204 $56,800 $ 564,005 $95,552 $1,472,621 COSTS AND EXPENSES Programming - 300,000 - 502,500 2,212,170 Selling - - - 5,000 71,256 General & Admin 742,459 1,740,669 2,935,420 4,494,567 14,915,115 ------- --------- --------- -------- ---------- TOTAL COSTS AND EXPENSES 742,459 2,040,669 2,935,420 5,002,067 17,198,541 LOSS BEFORE OTHER INCOME AND (CHARGES) AND PROVISION FOR DISPOSAL OF ASSETS HELD FOR SALE (551,255) (1,983,869) (2,371,415)(4,906,515) (15,725,920) OTHER INCOME AND (CHARGES): Gain (loss) on Sale of Securities and Investments (200,000) 950,000 Interest Income 146,152 17,500 379,982 107,733 973,088 Other Charges - Note 5 (30,000) (518,321) (696,875) 752,291 (5,024,186) Interest and Finance (61,298) (152,835) (660,975) (370,445) (1,567,583) --------- --------- -------- --------- ---------- TOTAL OTHER INCOME AND (CHARGES) 54,854 (853,656) (977,868) 489,579 (4,668,681) --------- --------- --------- ------- ---------- NET LOSS BEFORE PROVISION FOR DISPOSAL OF ASSETS HELD FOR SALE (496,401) (2,837,525) (3,349,283)(4,416,936) (20,394,601) PROVISION FOR DISPOSAL OF ASSETS HELD FOR SALE - Note 2 (9,000,000) -------- ---------- ---------- ---------- ----------- NET LOSS $(496,401) $(2,837,525) $(3,349,283)$(4,416,936 $(29,394,601) ========== ============ ========== ========== ============ WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING 34,965,247 24,079,563 32,724,078 20,618,595 7,130,539 ========== ========== ========== ========== ========= LOSS PER SHARE OF COMMON STOCK $(0.01) $(0.12) $(0.10) $(0.21) $(4.12) ========= ========== ========== ========== =========== The accompanying notes are an integral part of these consolidated financial statements.
LAS VEGAS ENTERTAINMENT NETWORK, INC. AND SUBSIDIARIES (A Company in the DevelopmentStage) CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY) INCEPTION (OCTOBER 3, 1990) T0 JULY 31, 1996 (UNAUDITED)
Deficit Common Accumulated Stock Additional During Number Paid-in Development of Shares Amount Capital Stage Total --------- ------ --------- ---------- -------- Issuance of Common Stock for; Cash and Contribution of Office Equipment 2,150,000 $2,150 $11,150 $- $13,300 Net Loss for the Year Ended (500) (500) October 31 , 1990 ---------- ------ ------- ------- ------- BALANCE - October 31, 1990 2,150,000 2,150 11,150 (500) 12,800 Net Loss for the Year Ended (16,871) (16,871) October 31, 1991 ---------- ------ ------ -------- -------- BALANCE - October 31, 1991 2,150,000 2,150 11,150 (17,371) (4,071) Sales of Common Stock, Initial Public Offering 1,909,000 1,909 4,655,332 4,657,241 Issuance of Common Stock for 60,000 60 178,740 178,800 Services Net Loss for the Year Ended (601,438) (601,438) October 31, 1992 ------------ ----- --------- -------- --------- BALANCE - October 31, 1992 4,119,000 4,119 4,845,222 (618,809) 4,230,532 Issuance of Common Stock for 107,250 107 380,565 380,672 Services Sales of Common Stock 9,341,330 9,341 23,942,149 23,951,490 Exercise of A Warrants 308,615 309 1,234,151 1,234,460 Stock Issued for Investments 450,000 450 849,550 850,000 Net Loss for the Year Ended October 31, 1993 (2,711,585) (2,711,585) ----------- ------ ---------- ---------- ----------- BALANCE - October 31, 1993 14,326,195 14,326 31,251,637 3,330,394 27,935,569 Issuance of Common Stock for 613,000 614 921,867 922,481 Services Sales of Common Stock 1,380,021 1,380 1,352,861 1,352,861 Stock Issued for Investments 2,300,000 2,300 2,997,700 3,000,000 Return of Shares on El Rancho (350,000) (350) (699,650) (700,000) Return of Escrow Shares (750,000) (750) 750 - Conversion of Debt 1,368,384 1,368 1,048,632 1,050,000 Net Loss for the Year Ended October 31, 1994 (5,053,498) 5,053,498) ---------- ------ ---------- ----------- ----------- BALANCE - October 31, 1994 18,887,600 18,888 36,872,417 (8,383,892) 28,507,413 Issuance of Common Stock for 3,081,500 3,081 3,006,508 3,009,589 Sales of Common Stock 592,858 593 399,409 400,002 Conversion of Debt 5,944,858 5,941 3,887,803 3,893,744 Net Loss for the Year Ended October 31, 1995 (17,661,426) (17,661,426) ----------- ------ --------- ----------- ------------- BALANCE - October 31, 1995 28,506,816 28,503 44,166,137 (26,045,318) 18,149,322 Issuance of Common Stock for Services 3,277,588 3,278 1,695,857 1,699,135 Sales of Common Stock 2,500,000 2,500 945,000 947,500 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 Nine Months Ended July 31, 1996 (3,349,283) (3,349,283) ---------- ------- --------- ------------ ------------ BALANCE - July 31, 1996 34,496,199 $34,493 $46,969,554 $(29,394,601) $17,609,446 ========== ======= ============ ============ =========== The accompanying notes are an integral part of these consolidated financial statements.
LAS VEGAS ENTERTAINMENT NETWORK, INC. AND SUBSIDIARIES (A Company in the Development Stage) CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Cumulative Since Inception Three Nine (Oct. 3, Months Months 1990) Ended Ended to July July July 31, 31 31, 1996 1995 1996 1995 1996 ------ ------ ------ ------ CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $(496,400) $(2,837,525) $(3,349,283) $(4,416,936) $(29,394,602) Depreciation 17,976 85,492 164,185 Amortization of Program Inventory 300,000 500,000 1,284,060 Adjustments to reconcile net loss to net cash used in operating activities: (Increase) Decrease in ; Prepaid Expenses - 756,764 1,153,244) Accounts Receivable (762,975) Program Inventory (175,000) (175,000) (2,264,121) Other Assets - 10,428 (8,730) 58,475 Increase (Decrease) in; Accounts Payable 119,567 (1,079,187) (358,685) (944,963) 979,797 Accrued Expenses 81,143 192,397 528,145 Accrued Officer's Salaries (67,500) (112,500) (132,500) 62,500 454,239 --------- ----------- --------- -------- ------------ CASH USED IN OPERATING ACTIVITIES (601,357) (2,880,877) (3,938,706) (5,760,246) (28,952,797) CASH FLOWS FROM INVESTING ACTIVITIES: Marketable securities 372,706 364,021 - Repayment of Loans Receivable (19,630) 2,100,000 Advances/Deposits - Acquisitions 69,831 (683,669) (3,762,441) CountryLand Hotel 36,500,000 Pre-Opening Expenses - 688,465 3,847,450 (1,516,723) Capitalized Interest - 3,447,860 Reserve on CountryLand Hotel (9,000,000) Sale of Lark Landing 1,500,000 Writedown of Investments 72,850 564,839 1,421,501 Loan Receivable - Distributor (770,000) Reserve on Loan Receivable - Distributor 1,012,300 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 (307) (4,299) (13,588) 177,856 (342,713) --------- --------- ---------- ---------- ---------- - CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 69,524 1,110,092 34,098,053 (410,007) 1,343,654 CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of Notes Payable 850,000 900,706 10,215,953 Repayment of Notes Payable (1,486) (2,905,984) (4,908,970) Issuances and Sales of Common Stock (385,000) 1,202,304 2,646,635 4,729,535 41,712,665 Issuances of Warrants, net 65,272 65,272 Repurchase of Stock - (155,000) (155,000) (Increase) Decrease in Deferred 100,000 142,019 - Offering Costs Issuance of Notes and Loans Receivable (12,400,000) (14,700,000) Collections on Notes and Loans - Receivable 6,500,000 6,500,000 Assessment Payable - CountryLand (331,144) Interest Payable 60,293 (168,567) 165,369 Loan payable - CountryLand (13,350,001) Interest Payable - CLND (413,750) Interest Reserve 611,278 611,278 611,278 ---------- --------- ------------ ----------- ----------- CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 285,085 1,302,304 (19,051,261) 5,772,260 39,506,567 INCREASE (DECREASE) IN CASH (246,748) (468,481) 11,108,086 (397,993) 11,897,424 CASH BALANCE - BEGINNING 12,144,172 671,038 789,338 600,550 ---------- -------- ----------- --------- ----------= - CASH BALANCE - ENDING $11,897,424 $202,557 $11,897,424 $202,557 $11,897,424 =========== ======== =========== ========== ============ = NON-CASH TRANSACTIONS Conversion of Notes Payable and Accrued Interest to Equity $260,000 $5,269,244 Accrued Interest and Fees - El Rancho 695,832 1,447,726 Common Stock Issued for Services 3,700,000 Reclassification of Patmore 327,100 327,100 CASH PAID FOR Interest 84,473 1,418,581
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 nine month periods ended July 31, 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 6 LAS VEGAS ENTERTAINMENT NETWORK, INC. ( A Company in the Development Stage) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS amount of Six Million Five Hundred Thousand Dollars ($6,500,000) which was paid in full on March 15, 1996; (iii) 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 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 July 31, 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. Concurrent with the subsequent refinancing of the SunAmerica loan by Orion on June 4, 1996, $611,000 of this amount was returned to LVEN. The Company has reflected this amount as an interest reserve until a final settlement is made with Orion as to how much of this interest (which related to the original refinance term through December 22, 1996) will be the responsibility of 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 nine months ended July 31, 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. 7 LAS VEGAS ENTERTAINMENT NETWORK, INC. ( A Company in the Development Stage) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 4. NOTES PAYABLE Notes payable consist of the following as of July 31, 1996 and October 31, 1995;
1996 1995 -------- ------- (A) BP Group $ - $1,325,000 (B) UK Foods - 1,500,000 (C) Convertible Bridge Loans 1,300,248 778,000 (D) Other 9,968 -------- ---------- Total $1,306,983 $3,612,968 ========== ==========
(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 July 31, 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. Subsequent to July 31, 1996, $250,000 of these notes have been repaid 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 of these shares to the Company. The Company has no obligation to issue any additional shares to SunAmerica. Additionally, during the nine months ended July 31, 1996 (none during the three months ended July 31, 1996), the Company; (i) sold 2,500,000 shares of its Common Stock during January 1996 in a series of private placements made to non-U.S. purchasers, under an exemption under the Securities Act of 1933, (ii) issued 1,865,000 shares of stock for services and settlement of amounts due, and (iii), issued 604,651 shares of its Common Stock in November 1995 to extinguish outstanding convertible bridge notes payable and accrued interest. During the nine months ended July 31, 1996, the Company reacquired from certain individuals, or had returned to it, 892,856 shares of its outstanding Common Stock, including the 500,000 SunAmerica shares. 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 July 31, 1996 is $625,000 which represents the value of cash, 800,000 restricted shares of the Company's Common Stock 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 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 a multi - casino project, 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 July 31, 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 July 31, 1996 and October 31, 1995). See "Liquidity and Capital Resources - Notes Receivable". The Company presently has three (3) operating subsidiaries: 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; Las Vegas Communications Corporation (LVCC, formerly Protex Technology, Inc.), which will maintain the entertainment contracts on the Property, and; Pacific DNS, which holds the interests in the Lake Tropicana Notes Receivable. The Company will also continue to develop, produce, market and distribute television programming. 8 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 current monthly operating cash requirements 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 nine months ended July 31, 1996, the Company made $1,476,000 in advances and deposits to certain businesses, individuals or others to secure potential acquisitions or investments ($750,000 of these advances have been returned to the Company). The Company is currently in the process of evaluating these potential acquisitions or investments. The Company will continue to make deposits or advances as it deems necessary to secure potential investments or business acquisitions. As of July 31, 1996, the Company had $11,897,424 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 $1,306,983 and interest reserve of $611,278 at July 31, 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 July 31, 1996 Compared to the Three Months Ended July 31, 1995 Revenues for the three months ended July 31, 1996 increased $134,404 to $191,204 as compared to $56,800 for the corresponding period in 1995. The increase principally represented approximately $101,206 in receipts for the three months ended July 31, 1996 earned in connection with renting out the parking facilities at the El Rancho Hotel property site as compared to none for the corresponding period in 1995. The Company also earned approximately $90,000 for the three months ended July 31, 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 July 31, 1995. During the three months ended July 31, 1995 the Company realized approximately $56,800 in fees from miscellaneous program sources. There were no such fees earned during the three months ended July 31, 1996. General and Administrative expenses decreased $998,210 to $742,459 during the three months ended July 31, 1996 as compared to $1,740,669 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 three months July 31, 1995. In connection therewith, professional and consulting fees decreased $563,000 to $37,000 during the quarter ended July 31, 1996 as compared to $600,000 for the corresponding period in 1995. Professional advisory and investment banking fees also decreased $157,000 to none during the three months ended July 31, 1996 as compared to $157,000 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. Travel and related costs also decreased $138,000 to $60,000 during the three months ended July 31, 1996 as compared to $198,000 in the corresponding period in 1995. 9 Offsetting the decreases above, management salaries and consulting costs increased $135,000 to $527,000 during the three months ending July 31, 1996 as compared to $392,000 in the corresponding period in 1995. The majority of the increase is due to an increase in officers' salary of $60,000 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 $128,652 to $146,152 for the three months ended July 31, 1996 as compared to $17,500 for corresponding period in 1995. The interest income relates to interest earned on the Company's cash investments, and the increase is consistent with the increase in the average cash outstanding during the three months ended July 31, 1996 as compared to the corresponding period in 1995. Interest expense and finance costs decreased $91,537 to $61,298 for the three months ended July 31, 1996 as compared to $152,835 for corresponding period in 1995. The decrease was due to; (i) a decrease of loan fees of $60,000 which were incurred during the three months ending July 31, 1995 for which no such costs were incurred during the period ending July 31, 1996 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 July 31, 1996 as compared to the corresponding period in 1995. Other Income and Charges. 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 July 31, 1996 and 1995. These shares were initially sold by the Company during the three months ended January 31, 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 reduced this gain by approximately $500,000 during the three months ended July 31, 1995. The Company and the purchaser of the Sky shares subsequently 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 July 31, 1996. Nine Months Ended July 31, 1996 Compared to the Nine Months Ended July 31, 1995 Revenues for the nine months ended July 31, 1996 increased by $468,453 to $564,005 during the nine months ended July 31, 1996 as compared to $95,552 for the corresponding period in 1995. The increase principally represented approximately $309,000 in receipts for the nine months ended July 31, 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 $255,000 for the nine months ended July 31, 1996 in management and entertainment fees earned from Orion in managing the El Rancho Property site. There were no corresponding management fees for the nine months ended July 31, 1995. During the nine months ended July 31, 1995 the Company realized approximately $68,000 in fees from miscellaneous program sources. There were no such fees earned during the nine months ended July 31, 1996. General and Administrative expenses decreased $1,559,147 to $2,935,420 during the nine months ended July 31, 1996 as compared to $4,494,567 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 nine months of 1995. In connection therewith, professional and consulting fees decreased $1,365,000 to $325,000 during the quarter ended January 31, 1996 as compared to $1,690,000 for the corresponding period in 1995. Professional advisory and investment banking fees also decreased $363,000 to $50,000 during the nine months ended July 31, 1996 as compared to $413,000 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 Offsetting the decreases above, management salaries and consulting costs increased $329,000 to $1,319,000 during the nine months ending July 31, 1996 as compared to $990,000 in the corresponding period in 1995. The increase is due to an increase in officers' salary of $150,000, and for the accrual of $93,000 in retirement benefits under a plan which did not exist in the first nine 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 $272,248 to $379,982 for the nine months ended July 31, 1996 as compared to $107,733 for corresponding period in 1995. The majority of the increase relates to (i) interest of $75,000 earned on the Company's receivables due from Orion during the nine months ended July 31, 1996, for which there was none in the comparable period in 1995, and (ii) interest of $305,000 earned on the Company's cash investments during the nine months ended July 31, 1996 as compared to $50,000 in the comparable period in 1995. The increase in interest income is consistent with the increase in the average cash outstanding during the nine months ended July 31, 1996 as compared to the corresponding period in 1995. Interest expense and finance costs increased $290,530 to $660,975 for the nine months ended July 31, 1996 as compared to $370,445 for corresponding period in 1995. The increase was due to; (i) loan fees of $446,000 incurred during the nine months ended July 31, 1996 to provide for certain stand-by financing and upon repayment of certain outstanding debt as compared to loan fees of $78,500 for the corresponding period in 1995, offset by (ii) a $17,000 increase in interest expense on outstanding indebtedness. The increase in interest expense is consistent with the increase in the average indebtedness outstanding during the nine months ended July 31, 1996 as compared to the corresponding period in 1995. Other Income and Charges. Included in other charges as of July 31, 1996 is $625,000 which represents the value of cash, 800,000 restricted shares of the Company's Common Stock and 167,000 shares of Common Stock of Satellite Networks Inc., a newly formed subsidiary, paid 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 January 31, 1996 and 1995. These shares were sold by the Company during the nine months ended January 31, 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 reduced this gain by $500,000 in the three months ended July 31, 1995. The Company and the purchaser of the Sky shares subsequently 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 July 31, 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 nine months ended July 31, 1996 (but none during the three months ended July 31, 1996), the Company; (i) received net proceeds of $945,000 during January 1996 in a series of private placements made to non-U.S. purchasers, under an exemption under the Securities Act of 1933, (ii) issued $1,695,857 of its Common Stock for services provided, and (iii) issued 604,651 shares of its Common Stock in November 1995 to extinguish outstanding convertible bridge notes payable and accrued interest. 11 As of July 31, 1996, the Company had outstanding $1,306,983 of notes and loans payable which become due during the current fiscal year. Subsequent to July 31, 1996, the Company repaid $250,000 of these notes. The Company intends to repay the remaining notes, along with all other outstanding notes and accrued interest during the current fiscal year. 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 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 July 31, 1996, the Company has reflected a reserve of $4,600,000 against the remaining note. As of July 31,1996 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 July 31, 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). 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 considered the purchase option as terminated. The Company received $327,150 of unsolicited funds from Patmore in an effort by 12 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. In July, 1996, an unaffiliated third party filed a complaint against the company seeking payment of consulting fees, a success fee and recovery of certain damages due him under terms of a 1992 retainer agreement. The Company believes there are no funds due, and that the case is without merit. Management intends to vigorously defend the lawsuit. 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. 13 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: September 16, 1996 By: /s/ Carl Sambus Carl Sambus Executive Vice President and Chief Financial Officer (chief financial officer and accounting officer and duly authorized officer) EX-27 2 FDS -- 7/31/96 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 0000872588 Las Vegas Entertainment Netork Inc. $US dollars 9-Mos Oct-31-1996 Jul-31-1996 11,897,424 0 0 0 0 11,897,424 352,634 164,118 20,518,659 2,909,213 0 0 0 34,493 46,969,554 20,518,659 0 564,005 0 2,935,420 696,875 0 660,975 (3,349,283) 0 (3,349,283) 0 0 0 (3,349,283) ($.10) ($.10)
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