FXRER FX Real Estate And Ent (MM)

Filed Pursuant to Rule 424(b)(3)

Registration No. 333-149032

PROSPECTUS

9,871,674 Shares of

 

Common Stock of

 

FX Real Estate and Entertainment Inc.

 

We are distributing in a rights offering at no charge transferable subscription rights to purchase one share of our common stock for every two shares of common stock owned as of March 6, 2008 at a cash subscription price of $10.00 per share. We currently have 39,790,247 shares of common stock outstanding. As part of the transaction that created our Company in June 2007, we agreed to undertake this rights offering, and certain stockholders who own, in the aggregate, 20,046,898 shares of our common stock, waived their rights to participate in this rights offering. As a result, this rights offering is being made only to stockholders who own, in the aggregate, 19,743,349 shares of our common stock as of March 6, 2008. In this prospectus, we refer to the stockholders who own these shares as of March 6, 2008 as “Holders” and we refer to March 6, 2008 as the “Record Date.” Each Holder will receive one transferable subscription right for every two shares of our common stock owned as of the Record Date. As a result, we are distributing rights to purchase up to 9,871,674 shares of common stock in this rights offering.

 

No fractional subscription rights will be distributed in the rights offering. Therefore, each Holder will receive such number of transferable subscription rights equal to the number of shares of our common stock owned as of the Record Date that are evenly divisible by two. Each transferable subscription right will entitle the holder thereof to purchase one share of our common stock at a cash subscription price of $10.00 per share.

 

The rights offering is being made to fund certain obligations, including short-term obligations, described elsewhere herein. The total purchase price of shares offered in the rights offering will be approximately $98.7 million. Robert F.X. Sillerman, our Chairman and Chief Executive Officer, and The Huff Alternative Fund, L.P., one of our principal stockholders, have agreed to purchase shares that are not otherwise subscribed for in the rights offering, if any, at the same $10.00 per share subscription price.

 

The subscription rights will expire if they are not exercised by 5:00 p.m., New York City time, on April 11, 2008, the expiration date of this rights offering. We, in our sole discretion, may extend the period for exercising the subscription rights. We will extend the duration of the rights offering as required by applicable law, and may choose to extend it if we decide that changes in the market price of our common stock warrant an extension or if we decide to give investors more time to exercise their subscription rights in this rights offering. Subscription rights that are not exercised by the expiration date of this rights offering will expire and will have no value. You should carefully consider whether or not to exercise or sell your subscription rights before the expiration date.

 

Our common stock is listed on The NASDAQ Global Market under the symbol “FXRE.” On March 6, 2008, the closing price for our common stock as reported on The NASDAQ Global Market was $4.65 per share. No public market exists for the transferable subscription rights, although a “when issued” trading market may develop for the transferable subscription rights on or shortly before the Record Date. The transferable subscription rights are listed for trading on The NASDAQ Global Market under the symbol “FXRER.” However, we cannot assure you that a trading market for the rights will develop.

 

Ownership of our common stock involves risks.  You should read this entire prospectus carefully, including the section entitled “Risk Factors” that begins on page 15 of this prospectus, which describes the material risks.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

The date of this prospectus is March 6, 2008.

 

TABLE OF CONTENTS

 

 

 

 

 

 

 

Business

 

We are a newly formed entertainment company with a plan to pursue real estate and attraction-based projects throughout the world. Through our indirect wholly owned subsidiaries, BP Parent, LLC, Metroflag BP, LLC and Metroflag Cable, LLC, we own 17.72 contiguous acres of land located at the southeast corner of Las Vegas Boulevard and Harmon Avenue in Las Vegas, Nevada, known as the Park Central site. The Park Central site is currently occupied by a motel and several commercial and retail tenants. We intend to pursue a hotel, casino, entertainment, retail, commercial and residential development project on the Park Central site.

 

Our subsidiary, FX Luxury Realty, is party to license agreements with Elvis Presley Enterprises, Inc., an 85%-owned subsidiary of CKX, Inc., and Muhammad Ali Enterprises LLC, an 80%- owned subsidiary of CKX, Inc., which allow us to use the intellectual property and certain other assets associated with Elvis Presley and Muhammad Ali in the development of our real estate and other entertainment attraction based projects. We currently anticipate that the development of the Park Central site will involve multiple elements that incorporate the Elvis Presley assets and theming. In addition, the license agreement with Elvis Presley Enterprises grants us the right to develop, and we currently intend to pursue the development of, one or more hotels as part of the master plan of Elvis Presley Enterprises, Inc. to redevelop the Graceland property and surrounding areas in Memphis, Tennessee.

 

In addition to our ownership of and plans for the redevelopment of the Park Central site, our plan to develop one or more Graceland-based hotel(s), and our intention to pursue additional real estate and entertainment based developments using the Elvis Presley and Muhammad Ali intellectual property, we own 1,410,363 shares of common stock of Riviera Holdings Corporation [AMEX:RIV], a company that owns and operates the Riviera Hotel & Casino in Las Vegas, Nevada and the Blackhawk Casino in Blackhawk, Colorado. While we do not currently have any definitive plans or agreements with Riviera Holdings Corporation related to the acquisition of Riviera, we continue to explore an acquisition of such company.

 

Company Strategy

 

	•	Develop the Park Central Site as a Premier Entertainment Destination Resort.   Our business strategy for the Park Central site is to create a flagship property for the FX Real Estate and Entertainment luxury brand,

		offering guests an exciting, interactive and multifaceted experience in a first class environment that includes entertainment, retail and gaming opportunities.

	•	Capitalize on Involvement of Robert F.X. Sillerman .  Robert F.X. Sillerman is our Chairman and Chief Executive Officer and, after the rights offering (assuming the subscription of his full pro rata amount in the rights in this offering but giving no effect to the investment agreement described elsewhere herein), will beneficially own approximately 30.2% of the outstanding shares of our common stock. Mr. Sillerman, directly and indirectly, owns approximately 29.3% of the outstanding equity interests in our affiliate Flag Luxury Properties, LLC, and through this ownership, has been involved in the acquisition of the properties that make up the Park Central site. In addition, Mr. Sillerman has previously built and managed six public companies, including most recently CKX, of which he beneficially owns approximately 31% of the outstanding shares of common stock and where he continues to serve as Chairman and Chief Executive Officer and oversee the management of the Elvis Presley and Muhammad Ali brands. CKX has entered into a merger agreement to be acquired by 19X, Inc., a company controlled by Mr. Sillerman. Upon consummation of the acquisition of CKX by 19X, Mr. Sillerman is expected to serve as the Chairman of 19X.
	•	Capitalize on the “Elvis” and “Ali” Brands.   We believe that Elvis Presley and Muhammad Ali are among the most recognized and revered names in popular culture. We intend to capitalize on this global recognition through the development of Elvis Presley and Muhammad Ali themed and branded real estate-based properties and attractions throughout the world. We have entered into an option agreement with 19X which, if and when effective, would give us an option to purchase 19X’s to-be-acquired 85% interest in the Elvis Presley business (which is currently owned and operated by CKX). This transaction, which will only become effective upon the consummation of the acquisition of CKX by 19X, would give us greater control over and provide more opportunities to capitalize on the Elvis brand.
	•	Develop Hotel(s) at Graceland.   We intend to enhance the relationship with Elvis Presley Enterprises and the association between us and Elvis Presley brands through the development and operation of one or more hotels to be built as part of Elvis Presley Enterprises’ master plan to redevelop Graceland and the surrounding properties in Memphis, Tennessee. We expect to launch our “Heartbreak Hotel” mid-market positioned, themed entertainment hotel brand with the development and construction of the first of our hotels at Graceland. The conditional option agreement with 19X referenced above provides that we take a more active role in the redevelopment of the property surrounding Graceland, working collectively with 19X on the design and development of the Graceland master redevelopment plan. In the event that the merger agreement between 19X and CKX is terminated or the merger fails to close for any reason, which would cause our option agreement with 19X to be terminated, it is likely that we would propose to CKX our more active involvement in the redevelopment of the Graceland property. We believe our active involvement represents the most logical and ultimately profitable means by which the two parties can collectively pursue their respective elements of the Graceland redevelopment.
	•	Build an Experienced and Proven Management and Operating Team .  In connection with our current development plans and future business opportunities, we will seek to attract, hire, retain and motivate talented management and other highly skilled employees with experience in all areas of our business, including the hotel, casino, retail and entertainment industries. As part of this effort, Barry A. Shier, a highly experienced gaming and hotel industry executive, has joined our senior management team as Chief Operating Officer.
	•	Leverage Our Relationship with CKX and its Senior Management Group .  We expect to have a close relationship with CKX as a result of our license agreements with CKX’s subsidiaries, our shared services agreement with CKX and the dual ownership position and executive role of Mr. Sillerman. We intend to leverage this relationship by accessing CKX’s experience and expertise in branding and in developing opportunities tied to iconic brands and content, including the Elvis Presley and Muhammad Ali brands. We also intend to capitalize on the experience of CKX’s senior management group in the development of entertainment properties and maximization of entertainment assets through access and involvement afforded under our shared services agreement as we incorporate such entertainment features into our various projects and attractions. We do not expect the acquisition of CKX by 19X to have a material impact on our relationship with CKX, its management or its brands.

	•	Pursue the Acquisition of Riviera Holdings Corporation .  While we do not currently have any definitive plans or agreements with Riviera Holdings Corporation related to the acquisition of Riviera, we continue to explore an acquisition of such company with the goal of becoming a multi-property owner and operator in Las Vegas, Nevada.

	•	We have no operating history with respect to our proposed business and we may not be able to successfully implement our business strategy.
	•	Our business plan is not expected to generate meaningful revenue for the foreseeable future.
	•	We will need to raise substantial additional debt and/or equity financing in order to implement our business plans.
	•	Our cash flow is not sufficient to meet our current obligations, and we will need to obtain additional debt and/or equity financing.
	•	We are highly leveraged and may have difficulty obtaining additional financing.
	•	We have received a “going concern opinion” from our independent registered public accounting firm expressing substantial doubt about our ability to continue as a going concern.

	•	Capitalize on Attractive and Unique Location.   The Park Central site is located on the southeast corner of Las Vegas Boulevard and Harmon Avenue in Las Vegas, Nevada. The property enjoys strong visibility with 1,175 feet of frontage on Las Vegas Boulevard (known as “the Strip”) and 600 feet of frontage on Harmon Avenue and is situated near some of the most visited hotel casino resorts and attractions on the Las Vegas Strip. It is located directly across Las Vegas Boulevard from MGM’s CityCenter project, which is currently under construction and is the largest development project in the history of Las Vegas. We believe the proximity to MGM’s CityCenter and the concentration of other hotels/casinos and other attractions will drive significant pedestrian traffic and visitation to the area. The MGM CityCenter is also expected to serve as the home of the previously announced Elvis Presley-Cirque du Soleil show. We believe that the planned Elvis Presley-themed elements of our property and the Cirque du Soleil show will complement one another and create a focal point for Elvis Presley fans while visiting Las Vegas.
	•	Launch the FX Real Estate and Entertainment Luxury Brand.   We intend the Park Central site to be home to our flagship luxury property — the first of our planned large scale and multi-purpose developments and, as such, will represent the launch of FX Real Estate and Entertainment as a brand known for and synonymous with the integration of luxury real estate and premier entertainment based attractions.
	•	Exploit Las Vegas Demand for Elvis Presley.   Elvis Presley is regarded as one of the most important figures in the history of music and popular culture and is the entertainment name most often associated with Las Vegas. We intend to incorporate an Elvis Presley inspired theme into elements of the Park Central site development, including an Elvis Presley-themed hotel to be built as part of the development.
	•	Generate Diverse Revenue Streams from Multiple and Varied Development Features.   The Park Central site redevelopment is anticipated to incorporate a number of distinct and complementary revenue generating elements and amenities, including one or more hotel(s), casino and gaming, entertainment attractions and venues, retail stores and outlets, and commercial space. Each of these elements will provide a diverse source of revenue on its own and the multi-use nature of the property will provide a mix of diverse revenue sources within the overall project.

	•	CKX irrevocably transferred and assigned a 9.5% common membership interest in FX Luxury Realty to Distribution Trust I;

	•	CKX contributed a 15.5% common membership interest in FX Luxury Realty to us in exchange for shares of our common stock as a first step in the plan to accomplish the reorganization transactions; and
	•	CKX irrevocably transferred and assigned our shares to Distribution Trust II.

	•	Mr. Sillerman is the Chairman and Chief Executive Officer of CKX, Inc.
	•	Mr. Sillerman is a director, executive officer and principal stockholder of 19X, Inc., which has entered into a merger agreement, as amended, to acquire and take CKX private in a merger transaction. Upon consummation of the acquisition of CKX by 19X, Mr. Sillerman is expected to continue to serve as Chairman of that company. His employment agreement with us will allow him to commit up to 50% of his business time on behalf of 19X.
	•	Under the terms of the merger agreement, as amended, between CKX and 19X the cash merger consideration to be paid for the acquisition of CKX ($13.75 per share) by 19X, of which Mr. Sillerman is a director, executive officer and principal stockholder, may be reduced by up to $2.00 per share, based on the trading value of our common stock during a defined measurement period yet to be determined. The cash merger consideration to be paid for the acquisition of CKX by 19X will be reduced by no less than $0.75 per share regardless of the trading value of our common stock during the measurement period if we complete the rights offering at the $10.00 per share price and for total proceeds of not less than $90 million.
	•	Mr. Sillerman currently beneficially owns approximately 31% of the outstanding common stock of CKX, approximately 29.3% of the outstanding equity of Flag Luxury Properties and, after the rights offering (assuming the purchase of all of his rights in this offering but giving no effect to the investment agreement described elsewhere herein), will beneficially own approximately 29.9% of our outstanding common stock.

		It is expected that Mr. Sillerman will continue to be a significant stockholder of 19X following the consummation of the acquisition of CKX by 19X.

	•	Mr. Sillerman has agreed to exercise all of his rights in the rights offering and has agreed to purchase 50% of the shares that are not otherwise subscribed for in the rights offering beyond the first 1.5 million shares acquired by The Huff Alternative Fund, L.P., as described elsewhere herein.

	•	Mr. Kanavos is expected to continue to serve as the Chairman and Chief Executive Officer of our affiliate Flag Luxury Properties. His employment agreement with us allows him to commit up to one-third of his business time on matters pertaining to Flag Luxury Properties.
	•	Mr. Kanavos beneficially owns approximately 29.3% of the outstanding equity of Flag Luxury Properties, and, after the rights offering, will own approximately 11.6% of our outstanding common stock.

	•	Our current cash flow is not sufficient to meet our current obligations and we will need to obtain additional debt and/or equity financing.
	•	We will need to raise substantial additional debt and/or equity financing to implement our business plans.
	•	We are highly leveraged and we may have difficulty obtaining additional financing.
	•	We have no operating history with respect to our proposed business, so it will be difficult for investors to predict our future success.
	•	We are dependent upon the continued popularity of Elvis Presley and Muhammad Ali and attractions featuring their names, images and likenesses which may, over time, decline in popularity.
	•	The concentration of ownership of our capital stock with our affiliates will limit your ability to influence corporate matters.
	•	We have entered into a number of related party transactions with CKX, 19X and Flag Luxury Properties and their affiliates and may do so in the future, on terms that some stockholders may consider not to be in their best interests.
	•	Our intellectual property rights may be inadequate to protect our business.
	•	Our business will be subject to extensive state and local regulation, and licensing and gaming authorities will have significant control over our anticipated operations, which could have a negative effect on our business.
	•	We have potential business conflicts with certain of our executive officers because of their relationships with CKX, 19X and/or Flag Luxury Properties and their ability to pursue business activities for themselves and others that may compete with our business activities.
	•	We continue to need to enhance our internal control and financial reporting system to comply with the Sarbanes-Oxley Act of 2002.
	•	Our hotel development, including our proposed Park Central site redevelopment and the Graceland hotel(s), are subject to timing, budgeting and other risks which could materially adversely affect our business.
	•	The failure of our redeveloped Park Central site to compete effectively against other casino and hotel facilities in Las Vegas and elsewhere could adversely affect our revenues and harm our financial condition.
	•	Our ability to realize the full value of the Park Central site may be limited by our inability to develop certain parcels in a timely enough fashion or on a cost effective basis because of several existing long-term commercial leases.
	•	Certain provisions of Delaware law and our charter documents could discourage a takeover that stockholders may consider favorable.

		Predecessor									FX Real Estate and Entertainment
		Metroflag									Actual				Pro Forma
		Year Ended				January 1-					May 11-December 31,				Year Ended
		December 31, 2006				May 10, 2007					2007				December 31, 2007
(amounts in thousands)															(unaudited)
Income Statement Data:
Revenue		$	5,581			$	2,079				$	3,070			$	6,091
Operating expenses (excluding depreciation and amortization)			1,290				839					30,016				31,074
Depreciation and amortization			358				128					116				298
Operating income (loss)			3,933				1,112					(27,062	)			(25,281	)
Interest income (expense), net			(26,275	)			(14,444	)				(30,657	)			(58,786	)
Other (expense)			—				—					(6,358	)			(6,358	)
Loss from retirement of debt			—				(3,507	)				—				(3,507	)
Equity in earnings (loss) of affiliates			—				—					(4,969	)			—
Minority interest			—				—					680				680
Loss from incidental operations			(17,718	)			(7,790	)				(9,373	)			(20,160	)
Net loss			(40,060	)			(24,629	)				(77,739	)			(113,412	)
Basic and diluted loss per share			—				—				$	(1.98	)		$	(2.31	)
Basic and diluted average number of common shares outstanding												39,290,247				49,161,921

 

Ownership of our common stock involves a high degree of risk. You should carefully consider the risks described below, together with all of the other information included in this prospectus. If any of the following risks and uncertainties actually occur, our business, financial condition or operating results could be harmed substantially. This could cause the trading price of our common stock to decline, perhaps significantly.

 

Risks Related to Our Business

 

Our current cash flow is not sufficient to meet our current obligations and we will need to obtain additional financing.

 

Our current cash flow and cash on hand is not sufficient to fund our current operations or to pay obligations that come due over the next six months, including paying the minimum annual guaranteed license fees under our Elvis Presley and Muhammad Ali-related license agreements, which aggregate $10 million and are due on April 1, 2008, our $23 million Riv loan, which is due on March 15, 2008, and our $475 million Park Central Loan, which matures on July 6, 2008, subject to our conditional right to extend the maturity date for up to two additional six month periods as discussed elsewhere herein. We anticipate that the initial six month extension will require us to deposit approximately $50 million into reserve accounts. Our current cash flow is also insufficient to implement our current business plan and strategy, including the redevelopment of the Park Central site and the development and construction of the Graceland-based hotel(s). In addition, we may be required to use a substantial portion of our future cash flow from operations to pay interest on our indebtedness, which will reduce the funds available to us for other purposes.

 

As a result, we will need to secure substantial capital through debt and/or equity financings in order to pay our existing obligations as they come due, including the payment of fees under our license agreements with subsidiaries of CKX, to fund the redevelopment of the Park Central site and the development of the Graceland-based hotel(s) and otherwise implement our business strategy. Our plans regarding the size, scope and phasing of the redevelopment of the Park Central site may change as we formulate and finalize our development plans. These changes may impact the timing and cost of the redevelopment. Based on preliminary budgets, management estimates total construction costs of the current plan to be approximately $3.1 billion (exclusive of land cost, capitalized interest expense and related financing and other pre-opening costs). Our management has not yet estimated the costs for development and construction of the Graceland-based hotel(s), but expects these costs to be significant. We may have a limited ability to respond to changing business and economic conditions and to withstand competitive pressures due to our limited cash flow, which may affect our financial condition.

 

We are highly leveraged and we may have difficulty obtaining additional financing.

 

We are highly leveraged. As of December 31, 2007, we have $512.7 million in total consolidated indebtedness.

 

Due to the fact that we are currently highly leveraged, and will require substantial capital to implement our business plan, there are no guarantees that we will be able to secure such additional financing on terms that are favorable to our business or at all. Our substantial indebtedness could have important consequences for you. For example:

 

 

 

The occurrence of any one of these events could have a material adverse effect on our business, financial condition, results of operations, prospects and ability to continue as a going concern.

 

Even if we are able to raise additional financing, we might not be able to obtain it on terms that are not unduly expensive or burdensome to us or disadvantageous to our existing stockholders.

 

Even if we are able to raise additional cash or obtain financing through the public or private sale of debt or equity securities, funding from joint-venture or strategic partners, debt financing or short-term loans, the terms of such transactions may be unduly expensive or burdensome to us or disadvantageous to our existing stockholders. For example, we may be forced to sell or issue our securities at a price below the subscription price for the shares of our common stock offered hereby, at significant discounts to market, or pursuant to onerous terms and conditions, including the issuance of preferred stock with disadvantageous dividend, voting or veto, board membership, conversion, redemption or liquidation provisions; the issuance of convertible debt with disadvantageous interest rates and conversion features; the issuance of warrants with cashless exercise features; the issuance of securities with anti-dilution provisions; the issuance of high-yield securities and bank debt with restrictive covenants and security packages; and the grant of registration rights with significant penalties for the failure to quickly register. If we raise debt financing, we may be required to secure the financing with all of our business assets, which could be sold or retained by the creditor should we default in our payment obligations.

 

The first $76 million of proceeds from any equity financings we complete are to be allocated for the payment of certain of our current obligations, none of which relate to our redevelopment of the Park Central site or development of the Graceland-based hotel(s).

 

If and when we complete any equity financings, including this rights offering, the first $76 million in proceeds will be allocated to pay our current obligations as of December 31, 2007, including payment of $30 million of the $45 million priority distribution owed to Flag Luxury Properties (together with an accrued priority return of $0.4 million), repayment of the $23 million loan from an affiliate of Credit Suisse, repayment of the $1 million owed to Flag Luxury Properties, repayment of any amounts owed under the $7 million line of credit from CKX (of which $6.0 million of principal and $0.2 million of accrued interest is outstanding), payment of the initial $10 million aggregate guaranteed license fees (plus $0.1 million of accrued interest thereon) due under our Elvis Presley and Muhammad Ali license agreements with subsidiaries of CKX, payment of a $0.5 million commitment fee to The Huff Alternative Fund, L.P. in consideration of backstopping the rights offering (which fee was incurred subsequent to December 31, 2007), payment of approximately $1.9 million of accrued obligations under shared services agreements with affiliates, including CKX, and $3.1 million of accrued operating and other expenses that are immediately due and payable. Additional costs incurred subsequent to December 31, 2007 will also increase our obligations.

 

Failure to comply with the terms of our secured credit facilities may lead to acceleration of indebtedness and foreclosure on the collateral securing our indebtedness, including the Park Central site.

 

Our credit facilities are secured by certain of our real property and impose significant operating and financial restrictions on us. These restrictions limit our ability to, among other things, incur additional indebtedness. Our ability to comply with these restrictions and covenants may be affected by events beyond our control. A breach of any of the covenants contained in our secured credit facilities or our inability to comply with the required financial ratios could result in the lenders accelerating our payment obligations under these secured credit facilities or an event of default, which would allow the lenders to foreclose on the liens on certain of the real property or other assets securing the credit facilities, including the Park Central site. We would not be able to pay the amounts owed under the credit facilities if our obligations thereunder were accelerated by the lender and we cannot assure you that we would be able to refinance any such indebtedness on commercially reasonable terms, or at all.

Our independent registered public accounting firm has rendered a report expressing substantial doubt as to our ability to continue as a going concern.

 

Our independent registered public accounting firm has issued an audit report dated March 3, 2008 in connection with the audit of the consolidated financial statements of FX Real Estate and Entertainment Inc. as of December 31, 2007 and for the period from May 11, 2007 through December 31, 2007 that includes an explanatory paragraph expressing substantial doubt as to our ability to continue as a going concern due to our need to secure additional capital in order to pay obligations as they become due. Whether or not the rights offering is successful or Mr. Sillerman and The Huff Alternative Fund, L.P. backstop the rights offering, if we are not able to obtain additional debt and/or equity financing or fail to implement our proposed development projects, then we may not be able to continue as a going concern and you could lose all of the value of our common stock.

 

Because the historical financial statements and financial information of our predecessors are not representative of our business plans going forward or indicative of our planned future operating and financial results, they should not be relied upon.

 

This prospectus includes historical financial statements and pro forma financial information of our predecessors based on their historical businesses and operations. Our predecessors’ derived revenue primarily from commercial leasing activities on the properties comprising the Park Central site. Due to the fact that our business plan going forward involves a phased redevelopment of the Park Central site, we will cease engaging in these commercial leasing activities as our development projects are implemented. As such, the historical financial statements and pro forma financial information of our predecessors included in this prospectus are not representative of our planned business going forward or indicative of our future operating and financial results. These financial statements should not be relied upon by you to evaluate our business and financial condition going forward.

 

We have no operating history with respect to our proposed business, so it will be difficult for investors to predict our future success.

 

We were incorporated on June 15, 2007 and have no significant existing operations or history operating our proposed business as an integrated company. Members of our senior management have limited experience with the construction and operation of hotels and other real estate projects of the magnitude contemplated by our business plan. In addition, several members of our senior management have no experience in the gaming industry. Furthermore, we have no development agreements or gaming licenses to operate our proposed business. As a result, there is no guarantee that we will be able to successfully implement our proposed business plan. You must consider our business and prospects in light of the risks and difficulties we will encounter as a company with no operating history and senior management with limited experience in our proposed business. If we are unable to successfully address these risks and difficulties, our business and operating results could be materially adversely affected.

 

Our operations will be subject to the significant business, economic, regulatory and competitive uncertainties and contingencies frequently encountered by new businesses in competitive environments, many of which are beyond our control. Because we have no operating history in our proposed business, it may be more difficult for us to prepare for and respond to these types of risks and the risks described elsewhere in this prospectus than for a company with an established business and operating cash flow. Our failure to manage these risks successfully could negatively impact our operations.

 

Because we may be entirely dependent upon a limited number of properties for all of our cash flow, we will be subject to greater risks than a company with more operating properties.

 

We expect to have a limited number of material assets or operations. As a result, we likely will be entirely dependent upon the Park Central site and the first of the Graceland hotel(s) for all of our cash flow for the foreseeable future. Neither the Park Central site nor the Graceland hotel(s) will generate any significant revenue for us until development thereof is at least partially completed and operating, which is not expected until the fourth quarter of 2012 for the Park Central site and an as of yet to be projected date for the first Graceland hotel.

Given that our operations initially will primarily focus on the properties in Las Vegas and Memphis, we will be subject to greater degrees of risk than a company with multiple operating properties. The risks to which we will have a greater degree of exposure include the following:

 

 

Any of the factors outlined above could negatively affect our ability to generate sufficient cash flow to meet our operating needs and to make payments on or refinance our debt and borrowings under our credit facilities or to make payments under our license agreements with certain subsidiaries of CKX.

 

We are dependent upon the continued popularity of Elvis Presley and Muhammad Ali and attractions featuring their names, images and likenesses which may, over time, decline in popularity.

 

We will rely substantially upon the continued popularity of Elvis Presley and Muhammad Ali and the market for attractions and venues that exploit their names, images and likenesses. Any tarnishing of the public image of Elvis Presley or Muhammad Ali could materially negatively impact our business and results of operations. Because CKX owns and controls the names, images and likenesses of Elvis Presley and Muhammad Ali, their continued popularity could be materially impacted by the manner in which CKX operates its businesses with respect thereto, including in seeking out third parties to whom to license the rights to use such names, images, likenesses and other related intellectual property. Moreover, as the life, times and achievements of Elvis Presley and Muhammad Ali grow more distant in our past, their popularity may decline. If the public were to lose interest in either Elvis Presley or Muhammad Ali or form a negative impression of them, our business, operating results and financial condition would be materially and adversely affected.

 

The concentration of ownership of our capital stock with our affiliates will limit your ability to influence corporate matters.

 

After giving effect to the rights offering (assuming full subscription by such individuals of the rights received in this offering but giving no effect to the backstop agreements described elsewhere herein), Robert F.X. Sillerman, our Chairman and Chief Executive Officer, and Paul C. Kanavos, our President, will beneficially own approximately 29.9% and 11.6% of our outstanding capital stock, respectively, and our executive officers and directors together will beneficially own approximately 58.5% of our outstanding capital stock. Our affiliates, officers and directors therefore have the ability to influence our management and affairs and the outcome of matters submitted to stockholders for approval, including the election and removal of directors, amendments to our charter, approval of any equity-based employee compensation plan and any merger, consolidation or sale of all or substantially all of our assets. As a result of this concentrated control, unaffiliated stockholders of us do not have the ability to meaningfully influence corporate matters and, as a result, we may take actions that our unaffiliated stockholders do not view as beneficial. As a result, the market price of our common stock could be adversely affected.

There are conflicts of interest in our relationship with 19X, CKX and their respective affiliates, which could result in decisions that are not in the best interests of our stockholders.

 

There are conflicts of interest in our current and ongoing relationship with 19X, CKX and its affiliates. These conflicts include:

 

 

Because of the leverage that 19X, CKX and their respective affiliates have in negotiating with us, these agreements may not be as beneficial to our stockholders as they would be if they were negotiated at arms’ length and we cannot guarantee that future arrangements with such parties will be negotiated at arms’ length. For additional information concerning these agreements, please see “Certain Relationships” beginning on page 106 of this prospectus.

 

There are conflicts of interest in our relationship with Flag Luxury Properties and its affiliates, which could result in decisions that are not in the best interests of our stockholders.

 

There are conflicts of interest in our current and ongoing relationship with Flag Luxury Properties and its affiliates. These conflicts include:

 

 

Because of the leverage that Flag Luxury Properties has in negotiating with us, these agreements may not be as beneficial to our stockholders as they would be if they were negotiated at arms’ length and we cannot guarantee that future arrangements with Flag Luxury Properties will be negotiated at arms’ length. For additional information concerning these agreements, please see “Certain Relationships” beginning on page 106 of this prospectus.

 

We have potential business conflicts with certain of our executive officers because of their relationships with CKX, 19X and/or Flag Luxury Properties and their ability to pursue business activities for themselves and others that may compete with our business activities.

 

Potential business conflicts exist between us and certain of our executive officers, including Messrs. Sillerman and Kanavos, in a number of areas relating to our past and ongoing relationships, including:

 

 

 

We may not be able to resolve any potential conflicts with these executive officers. Even if we do so, however, because of their ownership interest in us, these executive officers will have leverage with negotiations over their performance that may result in a resolution of such conflicts that may be less favorable to us than if we were dealing with another third party.

 

We have entered into a number of related party transactions with CKX and Flag Luxury Properties and their affiliates and may do so in the future, on terms that some stockholders may consider not to be in their best interests.

 

We are a party to a shared services agreement with CKX, pursuant to which employees for each company, including management level employees, provide services for the other company. In addition, certain of our employees, including Mr. Kanavos, our President, and Mitchell J. Nelson, our General Counsel, are permitted to devote a portion of their time providing services for or on behalf of Flag Luxury Properties. We have also entered into licensing agreements with two subsidiaries of CKX pursuant to which we are required to pay to such CKX subsidiaries a percentage of the net proceeds generated at our projects that incorporate the licensed intellectual property (in excess of annual guaranteed amounts).

 

CKX, as a company subject to the rules of The NASDAQ Global Market, is subject to certain rules regarding “affiliated” transactions, including the requirement that all affiliated transactions be approved by a majority of the independent members of the board of directors. Based on Mr. Sillerman’s ownership interests in Flag Luxury Properties, the June 2007 transactions between CKX, Flag Luxury Properties and our company were deemed “affiliated” and therefore subject to the procedural requirements related to such transactions. Because we were a private company at the time we entered into these transactions, and Flag Luxury Properties remains a private company, and not subject to affiliated and related party transaction restrictions, neither Flag Luxury Properties or our company was represented by a special committee or any independent financial advisor in the negotiation and review of the transactions with CKX. As such, the fairness of the transactions between CKX, Flag Luxury Properties and FX Luxury Realty, from the point of view of Flag Luxury Properties and our company, was determined by management of Flag Luxury Properties, including Messrs. Sillerman and Kanavos, each of whom has numerous conflicting interests relating to their cross-ownership and managerial roles in the various entities. Based on these conflicting interests, some stockholders may not consider these transactions to have been in the best interest of our stockholders.

Our intellectual property rights may be inadequate to protect our business.

 

Our business is highly dependent upon the licensing of certain intellectual property rights, including the rights to the names, images, and likenesses of Elvis Presley and Muhammad Ali. We have secured the right to use the name, image, and likeness of Elvis Presley for certain purposes pursuant to a licensing agreement with Elvis Presley Enterprises, Inc., a subsidiary of CKX, and the rights to use the name, image and likeness of Muhammad Ali for certain purposes pursuant to a license agreement with Muhammad Ali Enterprises LLC, also a subsidiary of CKX. If we violate the terms of either license agreement, including if we fail to pay the license fees when due under the license agreements, or the license agreements are terminated or we otherwise lose the right to use the name, image, and likeness of Elvis Presley or Muhammad Ali, our business, operating results and financial condition would be materially adversely affected.

 

In addition, we are highly dependent on CKX to protect the intellectual property rights associated with the names, images and likenesses of Elvis Presley and Muhammad Ali. If CKX does not or cannot protect these intellectual property rights against infringement or misappropriation by third parties (whether for legal reasons or for business reasons relating, for example, to the cost of litigation), our business may be materially adversely affected.

 

If we lose the services of our key personnel, including Robert F.X. Sillerman, Paul Kanavos, Barry Shier and certain other executives of CKX, our business would suffer.

 

Our performance is dependent on the continued efforts of our executive officers, including Robert F.X. Sillerman, Paul Kanavos and Barry Shier, with whom we have employment agreements, and certain other executives of CKX, including Thomas P. Benson, the Chief Financial Officer of CKX, who provide services to us pursuant to the shared services agreement between us and CKX. Under the employment agreements with Messrs. Sillerman, Kanavos and Benson, they will be required to devote not less than one-half, two-thirds and two-thirds of their business related time to our company, respectively. The loss of the services of any of our executive officers or other key employees could adversely affect our business.

 

The termination of the shared services agreement with CKX could materially adversely affect our business.

 

Our shared services agreement with CKX can be terminated by us or CKX, in the event that the independent directors of either company determine that the terms of the shared services agreement no longer evidences arms’ length terms or meet the standards of such company for affiliated transactions. The termination of the shared services agreement with CKX could adversely affect our business because we would lose access to certain employees of CKX and we would be forced to replace their services with either newly retained employees or consultants on terms that may be less favorable than the shared services agreement. Under such circumstances, any delay in the provision of these services could adversely affect our business.

 

Our business may be harmed if we are not able to hire and retain enough additional management and other personnel to manage our growth.

 

We will need to attract, hire and retain talented management and other highly skilled employees with experience and expertise in all areas of our business to be successful. Competition for employees in the hotel, casino and entertainment industry is highly competitive. We may be unable to retain our key employees or attract, assimilate and retain other highly qualified employees in the future. If we are not able to hire and retain key employees our business and financial condition could be harmed.

 

Our executive officers will be free to compete against us upon termination of their employment.

 

Each of our executive officers is party to an employment agreement with us, which generally restricts them from competing against us during their employment. However, upon termination of employment, our executive officers will be free to compete against us. Therefore, if any of our former executive officers were to compete against us, our business could be adversely affected.

Terrorism and the uncertainty of war, as well as other factors affecting discretionary consumer spending, may harm our future operating results.

 

The strength and profitability of our business will depend on consumer demand for hotel casino resorts in general. Changes in consumer preferences or discretionary consumer spending could harm our business. The terrorist attacks of September 11, 2001, and ongoing terrorist and war activities in the United States and elsewhere, had a negative impact on travel and leisure expenditures, including lodging, gaming and tourism. We cannot predict the extent to which terrorist and anti-terrorist activities may affect us, directly or indirectly, in the future. An extended period of reduced discretionary spending and/or disruptions or declines in airline travel and business conventions could significantly harm our operations. In particular, because we expect that our business will rely heavily upon customers traveling by air to Las Vegas, both domestically and internationally, factors resulting in a decreased propensity to travel by air, like the terrorist attacks of September 11, 2001, could have a negative impact on our future operations.

 

In addition to fears of war and future acts of terrorism, other factors affecting discretionary consumer spending, including general economic conditions, disposable consumer income, fears of recession and consumer confidence in the economy, may negatively impact our business. Negative changes in factors affecting discretionary spending could reduce customer demand for the products and services we will offer, thus imposing practical limits on pricing and harming our operations.

 

We are subject to environmental regulation, which creates uncertainty regarding future environmental expenditures and liabilities.

 

We may be required to incur significant costs and expend significant funds to comply with environmental laws and regulations, including those relating to discharges to air, water and land, the handling and disposal of solid and hazardous waste, exposure to asbestos or other hazardous materials, and the cleanup of properties affected by hazardous substances. Violation of these laws and regulations could lead to substantial fines and penalties. Under these and other environmental requirements, we, as an owner and/or operator of property, may be required to investigate and clean up hazardous or toxic substances or chemical releases at that property. As an owner or operator, we could also potentially be held responsible to a governmental entity or third parties for property damage, personal injury and investigation and cleanup costs incurred by them in connection with any contamination.

 

These laws and regulations often impose cleanup responsibility and liability whether or not the owner or operator knew of, or was responsible for, the presence of hazardous or toxic substances. The liability under environmental laws has been interpreted to be joint and several unless the harm is divisible and there is a reasonable basis for allocation of the responsibility. The costs of investigation, remediation or removal of contaminants may be substantial, and the presence of contaminants, or the failure to remediate a property properly, may impair our ability to rent or otherwise use our property.

 

Our hotel development, including our proposed Park Central site redevelopment and the Graceland hotel(s), are subject to timing, budgeting and other risks which could materially adversely affect our business.

 

We intend to develop hotels as part of our redevelopment of the Park Central site and adjacent to Graceland in Memphis, Tennessee and other properties as suitable opportunities arise, taking into consideration the general economic climate. New project development has a number of risks, including risks associated with:

 

 

 

Any one of these risks could cause one of our development projects to be completed behind schedule or over budget.

 

Our subsidiaries will need to recruit a substantial number of new employees before our Las Vegas and Memphis project(s) open, which they may or may not be able to do, and these employees may seek unionization, either of which could materially adversely affect our financial performance.

 

Our subsidiaries will need to recruit a substantial number of new employees before our Las Vegas and Memphis projects open and the employees in Las Vegas and Memphis may seek union representation. We cannot be certain that our subsidiaries will be able to recruit a sufficient number of qualified employees. In addition, any employees that we or our subsidiaries might employ could also seek to collectively negotiate the terms and conditions of their employment. Unionization, pressure to unionize or other forms of collective bargaining could increase our labor costs.

 

We continue to explore opportunities to develop additional related businesses that could have an adverse impact on our business if unsuccessful.

 

We continue to explore opportunities to develop additional related businesses in Las Vegas and other markets. Any acquisition, investment or development could be expensive, disrupt our ongoing business, distract our management and employees and/or adversely affect our financial results. There is, and we expect that there will continue to be, significant competition for acquisitions of gaming and hotel properties in Las Vegas and other markets. This competition may result in the increase in the price we would be required to pay to acquire desirable properties. If we pay higher prices, our profitability may be reduced. Moreover, we may expend a substantial amount of time and capital pursuing acquisitions that we do not consummate, which could adversely affect our business, financial condition and results of operations.

 

The expansion of our operations may place a significant strain on our management, financial and other resources. Our ability to manage future growth will depend upon our ability to monitor operations, control costs and maintain effective quality controls and expand our management, technology and accounting systems, all of which will result in higher operating costs. In addition, any expansion of our business through acquisition, investment or development would likely require us to obtain additional financing and/or consent from the lenders under our credit facilities. Acquisitions also may present other risks, such as exposing our company to potential unknown liabilities associated with acquired businesses and potential difficulties and uncertainties of successfully integrating the acquired businesses with our other then businesses. Any acquisition or development may not be successful in achieving our desired strategic objectives, which also would cause our business to suffer.

 

We continue to need to enhance our internal controls and financial reporting systems to comply with the Sarbanes-Oxley Act of 2002.

 

We are subject to reporting and other obligations under the Securities and Exchange Act of 1934, as amended, and Section 404 of the Sarbanes-Oxley Act of 2002. As of December 31, 2008, Section 404 will require us to assess and attest to the effectiveness of our internal control over financial reporting and requires our independent registered public accounting firm to opine as to the effectiveness of our internal controls over financial reporting. Our independent registered public accounting firm has informed us that we have material weaknesses in internal controls over financial reporting, including internal controls over accrual accounting, accounting for bad debts, leases, acquisitions of intangible assets, derivative financial instruments and contingencies. We are working with our independent legal, accounting and financial advisors to identify those areas in which changes need to be made to our financial and management control systems to remediate these material weaknesses and manage our growth and our obligations as a public company. These areas include corporate governance, corporate control, internal audit, disclosure controls and procedures and internal control over financial reporting and accounting systems. These reporting and other obligations will place significant demands on our management, administrative and operational resources, including accounting resources.

We anticipate that we will need to hire additional tax, accounting and finance staff. We believe the cost of these additional services will result in an increase in total annual stand-alone selling, general and administrative, compensation and benefits and insurance expenses in fiscal 2008. In addition, we estimate that we will incur substantial costs to implement the assessment of controls and public reporting mandated by the Sarbanes-Oxley Act of 2002, including Section 404 thereunder. We cannot assure you that our estimates are accurate or that our transition to public reporting will progress smoothly, which could adversely impact our results. Moreover, our stand-alone expenses may increase. If we are unable to upgrade our financial and management controls, reporting systems and procedures in a timely and effective fashion, we may not be able to satisfy our obligations as a public company on a timely basis and may cause investors to lose confidence in the reliability of our financial statements, which could cause the price of our shares of common stock decline.

 

Risks Associated with Redevelopment of the Park Central Site

 

The failure of our redeveloped Park Central site to compete effectively against other casino and hotel facilities in Las Vegas and elsewhere could adversely affect our revenues and harm our financial condition.

 

Las Vegas Casino/Hotel Competition.   The casino/hotel industry is highly competitive. Hotel casinos located in Las Vegas compete with other Las Vegas hotels and casinos on the basis of overall atmosphere, range of amenities, level of service, price, location, entertainment, theme and size. Our proposed casino and hotel on the Park Central site also compete with a large number of other hotels, motels and convention centers located in and near Las Vegas, as well as other resort and convention destinations.

 

According to the Las Vegas Convention and Visitors Authority, there were approximately 132,600 hotel rooms in Las Vegas as of December 31, 2006. Currently, there are approximately 30 major gaming properties located on or near the Las Vegas Strip, approximately ten additional major gaming properties in the downtown area and many additional gaming properties located in other areas of Las Vegas. Competitors of ours will include resorts on the Las Vegas Strip, among which are Bally’s Las Vegas, The Bellagio, Caesars Palace, Excalibur, Harrah’s Las Vegas Hotel and Casino, Luxor Hotel and Casino, Mandalay Bay Resort & Casino, MGM Grand Hotel and Casino, The Mirage, The Monte Carlo Hotel and Casino, New York-New York Hotel and Casino, Paris Las Vegas, Wynn Las Vegas, Treasure Island, Planet Hollywood Resort and Casino and The Venetian, and resorts off the Las Vegas Strip, such as Las Vegas Hilton, The Palms Casino Resort and Rio All-Suite Hotel & Casino. Many of our competitors have established gaming operations, are subsidiaries or divisions of large public companies, have multiple hotel and casino properties with significantly longer operating histories and customer followings and have greater financial and other resources than we do.

 

Other Competition.   Our proposed Park Central site casino and hotel will also compete, to some extent, with other hotel and casino facilities in Nevada and in Atlantic City, with riverboat gaming facilities in other states, with hotel/casino facilities elsewhere in the world, with state lotteries and with Internet gaming. In addition, certain states recently have legalized, and others may or are likely to legalize, casino gaming in specific areas. Passage of the Indian Gaming Regulatory Act in 1988 has led to rapid increases in Native American gaming operations. Also, the California Constitution was amended in 2000 to allow federally recognized Native American tribes that have a ratified compact with the State of California to conduct and operate slot machines, lottery games and banked and percentage card games on Native American land in California. As a result, casino-style gaming on tribal lands in California has become a significant competitive force. The proliferation of Native American gaming in California could have a negative impact on our business and financial condition. The proliferation of gaming activities in other areas could significantly harm our business as well. In particular, the legalization of casino gaming in or near metropolitan areas, such as New York, Los Angeles, San Francisco and Boston, from which we intend to attract customers, could have a substantial negative effect on our business.

Our ability to realize the full value of the Park Central site may be limited by our inability to develop certain parcels in a timely enough fashion or on a cost effective basis because of several existing long-term commercial leases.

 

We have several long-term commercial leases on certain of the parcels that comprise the Park Central site that expire no sooner than 2011, 2012, 2013, 2014, 2019, 2045 and 2059. Although certain of these leases allow us to build on top of and around a tenant or to build improvements on, over or under other portions of the parcels not occupied by a tenant, it may not be feasible to do so because of excessive costs or engineering limitations or both. In addition, for those parcels on which we have no right to build, we would need to reach agreements with the existing tenants as to the early termination of the existing leases or relocation of the establishments in question in order to proceed with the development of such parcels. There is no guarantee that we would be able to reach agreement as to any such early terminations and/or relocations or that such terminations and/or relocations can be done on a cost effective basis. As such, we may not be able to develop these parcels in a timely enough fashion or on a cost effective basis to realize the full value of the Park Central site.

 

Due to the preliminary basis of our redevelopment plans for the Park Central site, our plans regarding the size, scope and phasing of the redevelopment may change. These changes may impact the timing and cost of the redevelopment and our ability to realize the full value of the Park Central site.

 

There are significant risks associated with major construction projects that may substantially increase the costs of the redevelopment or prevent completion of our redevelopment plans on schedule.

 

Major construction projects of the scope and scale of our proposed Park Central site redevelopment entail significant risks, including:

 

 

In addition, any changes in development plans may increase the cost of the project and negatively impact the recoverability of certain capitalized development costs (or result in the write-down of some previously capitalized costs).

 

Construction, equipment or staffing problems or difficulties in obtaining any of the requisite licenses, permits and authorizations from regulatory authorities could increase the total cost, delay or prevent the construction or opening or otherwise affect the design and features of our proposed Park Central site casino and hotel.

 

We anticipate that only some of the subcontractors engaged by the contractor to perform work and/or supply materials in connection with the redevelopment of the Park Central site will post bonds guaranteeing timely completion of a subcontractor’s work and payment for all of that subcontractor’s labor and materials. We cannot assure you that these bonds will be adequate to ensure completion of the work.

 

We cannot assure you that the proposed construction and redevelopment will commence on schedule or at all, or that construction costs for the construction and redevelopment will not exceed our preliminary estimated amounts. Failure to complete the construction and redevelopment on schedule or the incurrence of significant costs beyond estimated amounts may have a significant negative effect on our ability to continue as a going concern.

Simultaneous redevelopment of our Park Central site and construction of an Elvis Presley-themed hotel in Memphis may negatively effect our business and operations by stretching management time and resources.

 

Our Park Central site redevelopment plan is scheduled to commence in the first quarter of 2009, and we may pursue development of an Elvis Presley-themed hotel in Memphis, Tennessee in the same time period. If both projects are being built simultaneously, members of our senior management will be involved in planning and developing both projects. Developing the projects simultaneously may divert management resources from the construction and/or opening of these projects. Management’s inability to devote sufficient time and attention to either project may delay the construction or opening of both projects. This type of delay could have a negative effect on our business and operations.

 

Our business will be subject to extensive state and local regulation, and licensing and gaming authorities have significant control over our operations, which could have a negative effect on our business.

 

The opening and operation of the proposed casino on our Park Central site will be contingent upon our receipt from and maintenance with the State of Nevada and Clark County of a number of regulatory licenses, permits, approvals, registrations, findings of suitability, orders and authorizations, including gaming licenses, none of which we have applied for yet given the preliminary stage of the redevelopment of the Park Central site. The timing of such applications will be made as necessary in accordance with the governing local and state laws and regulations. Further, pursuing an acquisition of Riviera Holdings Corporation will also require us to seek from Nevada and Colorado a number of regulatory licenses, approvals, registrations, findings of suitability and gaming licenses.

 

The laws, regulations and ordinances requiring these licenses, permits and other approvals generally relate to the responsibility, financial stability and character of the owners and managers of gaming operations, as well as persons financially interested or involved in gaming operations. The scope of the approvals required to open and operate a hotel and casino is extensive. Failure to obtain or maintain the necessary approvals could prevent or delay the completion or opening of all or part of our hotel and casino or otherwise affect the design and features of our proposed Park Central site casino. We do not currently hold any state and local licenses and related approvals necessary to conduct gaming operations in Nevada and Colorado and we cannot be certain that we will obtain at all, or on a timely basis, all required approvals and licenses. Failure to obtain or maintain any of the required gaming approvals and licenses could significantly impair our financial position and results of operations.

 

The respective gaming commissions of Nevada and Colorado may, in their discretion, require the holder of any securities we issue, including the common stock distributed pursuant to this prospectus, to file applications, be investigated and be found suitable to own our securities if it has reason to believe that the security ownership would be inconsistent with the declared policies of their state.

 

Nevada, Colorado and local regulatory authorities have broad powers to request detailed financial and other information, to limit, condition, suspend or revoke a registration, gaming license or related approval and to approve changes in our operations. Substantial fines or forfeiture of assets for violations of gaming laws or regulations may be levied. The suspension or revocation of any license which may be granted to us or the levy of substantial fines or forfeiture of assets could significantly harm our business, financial condition and results of operations. Furthermore, compliance costs associated with gaming laws, regulations and licenses are significant. Any change in the laws, regulations or licenses applicable to our business or a violation of any current or future laws or regulations applicable to our business or gaming license could require us to make substantial expenditures or could otherwise negatively affect our gaming operations.

 

In the event that any of our senior executives, directors or key employees are unable to obtain a gaming license and approval from the Nevada Gaming Authorities, they will be terminated, and we will not benefit from their experience and expertise.

 

As a condition to commencing and continuing our proposed gaming operations in Nevada, no person may become an officer, director or key employee of ours without first obtaining licenses and approvals from the Nevada Gaming Authorities. If the Nevada Gaming Authorities were to find an officer, director or key employee of ours unsuitable for licensing or unsuitable to continue having a relationship with us, we would have to sever all

relationships with that person. The loss of the services of one or more of our officers, directors or key employees under such circumstances may have an adverse effect on our operations and business.

 

Our casino business is expected to rely on customers to whom we may extend credit, and we may not be able to collect gaming receivables from our credit players.

 

We intend to conduct our gaming activities on a credit as well as a cash basis. Table games players typically will be extended more credit than slot players, and high-stakes players typically will be extended more credit than patrons who tend to wager lower amounts. High-end gaming is more volatile than other forms of gaming, and variances in win-loss results attributable to high-end gaming may have a positive or negative impact on cash flow and earnings in any particular quarter.

 

We intend to extend credit to those customers whose level of play and financial resources warrant an extension of credit in the opinion of management.

 

While gaming debts evidenced by a credit instrument, including what is commonly referred to as a “marker,” and judgments on gaming debts are enforceable under the current laws of Nevada, and judgments on gaming debts are enforceable in all states under the Full Faith and Credit Clause of the United States Constitution, other jurisdictions may determine that direct enforcement of gaming debts is against public policy. Although courts of some foreign nations will enforce gaming debts directly and the assets in the United States of foreign debtors may be reached to satisfy a judgment, judgments on gaming debts from U.S. courts are not binding on the courts of many foreign nations. We cannot assure you that we will be able to collect the full amount of gaming debts owed to us by international customers, even in jurisdictions that enforce gaming debts. Our inability to collect gaming debts could have a significant negative impact on our operating results.

 

Risks Related to Our Common Stock

 

Substantial amounts of our common stock and other equity securities could be sold in the near future, which could depress our stock price.

 

We cannot predict the effect, if any, that market sales of shares of common stock or the availability of shares of common stock for sale will have on the market price of our common stock prevailing from time to time.

 

All of the outstanding shares of common stock belonging to officers, directors and other affiliates are currently “restricted securities” under the Securities Act. We expect that up to 29,682,813 shares of these restricted securities will be eligible for sale in the public market at prescribed times pursuant to Rule 144 under the Securities Act, or otherwise. Sales of a significant number of these shares of common stock in the public market or the appearance of such sales could reduce the market price of our common stock and could negatively impact our ability to sell equity in the market to fund our business plans. In addition, we expect that we will be required to issue a large amount of additional common stock and other equity securities as part of our efforts to raise capital to fund our development plans. The issuance of these securities could negatively effect the value of our stock.

 

Beginning 90 days following the consummation of this rights offering, if requested by The Huff Alternative Fund, L.P. and its affiliate, we will be required to register with the Securities and Exchange Commission such number of shares of common stock designated by The Huff Alternative Fund, L.P. and its affiliate, pursuant to registration rights granted in connection with the investment agreement. At such time as we become eligible to file a registration statement on Form S-3, upon request from The Huff Alternative Fund, L.P. and its affiliate, we will register the remaining shares not registered pursuant to the first registration; provided, however, if we are not eligible to file a registration statement on Form S-3 by January 9, 2009, we shall file a registration statement on Form S-1 to register the balance of the shares held by The Huff Alternative Fund, L.P. and its affiliate. The Huff Alternative Fund, L.P. and its affiliate are also entitled to unlimited piggyback rights. The sale or proposed sale by The Huff Alternative Fund, L.P. and/or its affiliate of all or any portion of their shares could depress the value of our stock and negatively impact our ability to sell equity in the market to fund our business plans.

We do not anticipate paying dividends on our common stock in the foreseeable future, and the lack of dividends may have a negative effect on our stock price.

 

We currently intend to retain our future earnings to support operations and to finance expansion and therefore do not anticipate paying any cash dividends on our common stock in the foreseeable future. In addition, the terms of our credit facilities prohibit, and the terms of any future debt agreements we may enter into are likely to prohibit or restrict, the payment of cash dividends on our common stock.

 

Our issuance of additional shares of our common stock, or options or warrants to purchase those shares, would dilute your proportionate ownership and voting rights.

 

Our issuance of shares of preferred stock, or options or warrants to purchase those shares, could negatively impact the value of your shares of common stock as the result of preferential voting rights or veto powers, dividend rights, disproportionate rights to appoint directors to our board, conversion rights, redemption rights and liquidation provisions granted to preferred stockholders, including the grant of rights that could discourage or prevent the distribution of dividends to you, or prevent the sale of our assets or a potential takeover of our company that might otherwise result in you receiving a distribution or a premium over the market price for your common stock.

 

We are entitled, under our certificate of incorporation to issue up to 300 million common and 75 million “blank check” preferred shares. After taking into consideration our outstanding common and preferred shares as of March 6, 2008, we will be entitled to issue up to 250,338,079 additional common shares and 75,000,000 preferred shares. Our board may generally issue those common and preferred shares, or options or warrants to purchase those shares, without further approval by our stockholders based upon such factors as our board of directors may deem relevant at that time. Any preferred shares we may issue shall have such rights, preferences, privileges and restrictions as may be designated from time-to-time by our board, including preferential dividend rights, voting rights, conversion rights, redemption rights and liquidation provisions.

 

This rights offering and, if applicable, sales of shares under the related investment agreements will dilute your proportionate ownership and voting rights if you do not participate in the rights offering.

 

In addition to this rights offering, we expect that we will be required to issue a large amount of additional securities to raise capital to further our development and marketing plans. It is also likely that we will be required to issue a large amount of additional securities to directors, officers, employees and consultants as compensatory grants in connection with their services, both in the form of stand-alone grants or under our various stock plans. We cannot give you any assurance that we will not issue additional common or preferred shares, or options or warrants to purchase those shares, under circumstances we may deem appropriate at the time.

 

We may redeem or require you to sell your shares due to regulatory considerations, either as required by gaming authorities or in our discretion, which may negatively affect your investment.

 

Our certificate of incorporation provides that, to the extent a gaming authority determines that you or your affiliates are unsuitable or to the extent deemed necessary or advisable by our board of directors, we may redeem shares of our capital stock that you or your affiliates own or control. The redemption price will be the amount, if any, required by the gaming authority or, if the gaming authority does not determine the price, the sum deemed to be the fair value by our board of directors. If we determine the redemption price, the redemption price will be capped at the closing price of the shares on the principal national securities exchange on which the shares are listed on the trading date on the day before the redemption notice is given. The redemption price may be paid in cash, by promissory note, or both, as required, and pursuant to the terms established by, the applicable gaming authority and, if not, as we elect. In the event our board of directors determines that such a redemption would adversely affect us, we shall require you and/or your affiliates to sell the shares of our common stock subject to the redemption.

Certain provisions of Delaware law and our charter documents could discourage a takeover that stockholders may consider favorable.

 

Certain provisions of Delaware law and our certificate of incorporation and by-laws may have the effect of delaying or preventing a change of control or changes in our management. These provisions include the following:

 

 

As a Delaware corporation, by an express provision in our certificate of incorporation, we have elected to “opt out” of the restrictions under Section 203 of the Delaware General Corporation Law regulating corporate takeovers. In general, Section 203 prohibits a publicly-held Delaware corporation from engaging, under certain circumstances, in a business combination with an interested stockholder for a period of three years following the date the person became an interested stockholder.

 

For more information regarding these and other provisions, please see the section entitled “Description of Capital Stock.”

 

Risks Related to the Rights Offering

 

If you do not exercise your full basic subscription right, your percentage ownership and voting rights in us will be lower than it would have been in the absence of the rights offering.

 

If you choose not to exercise your basic subscription right in full, your relative ownership interest in us will be lower than it would have been in the absence of the rights offering to the extent others exercise their basic subscription rights. Your voting rights and percentage interest in any of our net earnings will also be lowered if you do not exercise your rights in full. The Huff Alternative Fund has agreed to purchase the first 1.5 million shares that are not subscribed for in this offering, as well as 50% of the unsubscribed shares above such initial 1.5 million shares up to a maximum investment of $40 million. Mr. Sillerman has agreed to exercise 100% of the rights he receives in this offering (representing 3,037,365 shares) and to purchase 50% of the shares that are not purchased above the initial 1.5 million shares acquired by Huff as described above. Assuming all 9,871,674 of the shares of our common stock which we are offering will be purchased upon the exercise of basic subscription rights and pursuant to the backstop agreements, following the rights offering and/or the backstop, our total outstanding shares of common stock will be increased by approximately 20%. If you do not exercise any of the rights distributed to you, your percentage interest as a stockholder will be lowered by at least 19.9%.

The subscription price determined for this offering is not an indication of our value.

 

The subscription price may not necessarily bear any relationship to the book value of our assets, past operations, cash flows, losses, financial condition or any other established criteria for value. You should not consider the subscription price as an indication of our value. In addition, you should not rely on the decision of Mr. Sillerman to exercise in full the basic subscription privilege for all rights distributed to him in this offering or Mr. Sillerman’s and Huff’s commitment to backstop the rights offering as a recommendation or as an indication that the subscription price is reflective of our value.

 

You may not revoke your subscription exercise and could be committed to buying shares above the prevailing market price.

 

The public trading market price of our common stock may or may not exceed the subscription price before the subscription rights expire. If you exercise your subscription rights and, afterwards, the public trading market price of our common stock decreases below $10.00, you will have committed to buying shares of common stock at a price above the prevailing market price. Our common stock is quoted on The NASDAQ Global Market. Once you have exercised your subscription rights, you may not revoke your exercise. Moreover, you may be unable to sell your shares of our common stock at a price equal to or greater than the subscription price.

 

If the rights offering is terminated after you tender your subscription payment, your subscription payment will not be refunded to you.

 

Once you validly exercise your subscription rights and tender your subscription payment, your subscription payment will not be refunded even if the rights offering is terminated thereafter. In such an instance, you will receive shares of our common stock for which payment has been made in full.

 

You will need to act promptly and follow subscription instructions.

 

Rights holders who desire to purchase shares in the rights offering must act promptly to ensure that all required forms and payments are actually received by the subscription agent prior to April 11, 2008, the expiration date. If you fail to complete and sign the required subscription forms, send an incorrect payment amount, or otherwise fail to follow the subscription procedures that apply to your desired transaction the subscription agent may, depending on the circumstances, reject your subscription or accept it to the extent of the payment received. Neither we nor our subscription agent undertakes to contact you concerning, or attempt to correct, an incomplete or incorrect subscription form or payment. We have the sole discretion to determine whether a subscription exercise properly follows the subscription procedures.

 

If you use a personal check to pay for the shares, it may not clear in time.

 

Any personal check used to pay for shares must clear prior to the expiration date, and the clearing process may require seven or more business days from the date the subscription agent receives a personal check. If you wish to pay the subscription price by uncertified personal check, we urge you to make payment sufficiently in advance of the time the rights offering expires to ensure that your payment is received and clears by that time.

 

Some of the statements under “Prospectus Summary,” “Risk Factors,” “The Company,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this prospectus constitute forward-looking statements. These statements involve risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “would,” “could,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “continue” or the negative of these terms or other comparable terminology.

 

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. If one or more of the assumptions underlying our forward-looking statements proves incorrect, then actual results, levels of activity, performance or achievements could differ significantly from those expressed in, or implied by, the forward-looking statements contained in this prospectus. Therefore, we caution you not to place undue reliance on our forward-looking statements. Except as required by law, we do not intend to update or revise any of the forward-looking statements after the date of this prospectus to conform these statements to actual results. All forward-looking statements attributable to us are expressly qualified by these cautionary statements. Our forward-looking statements in this prospectus include, but are not limited to, statements relating to:

 

 

These forward-looking statements are subject to risks, uncertainties, and assumptions about us and our operations that are subject to change based on various important factors, some of which are beyond our control. For a description of certain of these material risks and uncertainties, please see the section entitled “Risk Factors” beginning on page 15 of this prospectus.

THE RIGHTS OFFERING

 

The Rights

 

We are distributing transferable subscription rights to the Holders who own shares of our common stock on 5:00 p.m., New York City time on the Record Date, at no cost to them. We will give each Holder one right to purchase one share of our common stock for every two shares of our common stock that the holder thereof owned on the Record Date, for a total of 9,871,674 shares. No fractional subscription rights will be distributed in the rights offering. Therefore, each Holder will receive such number of transferable subscription rights equal to the number of shares of our common stock owned as of the Record Date that are evenly divisible by two. The subscription rights will be evidenced by rights certificates. Each right will entitle the rights holder to purchase one share of our common stock for $10.00 per share. If rights holders wish to exercise their rights, they must do so before 5:00 p.m., New York City time, on April 11, 2008, the expiration date of the rights offering. After that date, the rights will expire and will no longer be exercisable unless we earlier decide to extend the expiration of the rights offering. See “— Expiration Date and Amendments” below.

 

Subscription Privilege

 

Each right entitles the holder thereof to purchase one share of our common stock for $10.00 per share. Rights holders are not required to exercise any or all of their rights. Holders will be able to exercise their subscription rights and receive shares upon payment therefor during the pendency of the rights offering until the termination or expiration of the rights offering, unless the rights offering is terminated or expires prior to the subscription agent’s receipt of the subscription documents and subscription payments. We will accept subscriptions and subscription payments from subscribers as they are received on our behalf by the subscription agent and then issue the related shares within three business days thereafter. Shares will not be issued in a certificated form. Instead, shares will be registered through the Depository Trust Company’s Direct Registration System.

 

Method of Exercising Rights

 

The exercise of rights is irrevocable and may not be cancelled or modified. Rights holders may exercise their rights as follows:

 

Subscription By Registered Holders

 

Rights holders who are registered holders of our common stock may exercise their subscription privilege by properly completing and executing the rights certificate together with any required signature guarantees and forwarding it, together with payment in full of the subscription price for each share of the common stock for which they subscribe, to the subscription agent at the address set forth under the subsection entitled “Subscription Agent and Escrow Agent,” on or prior to the expiration date.

 

Subscription By DTC Participants

 

Banks, trust companies, securities dealers and brokers that hold shares of our common stock on the rights offering record date as nominee for more than one beneficial owner may, upon proper showing to the subscription agent, exercise their subscription privilege on the same basis as if the beneficial owners were record holders on the rights offering record date through the Depository Trust Company, or DTC. Such holders may exercise these rights through DTC’s PSOP Function on the “agents subscription over PTS” procedure and instructing DTC to charge their applicable DTC account for the subscription payment for the new shares and deliver such amount to the subscription agent. DTC must receive the subscription instructions and payment for the new shares by the rights expiration date. Except as described under the subsection titled “Notice of Guaranteed Delivery,” subscriptions accepted by the subscription agent via a Notice of Guaranteed Delivery must be delivered to the subscription agent with payment before the expiration of the subscription period.

 

Subscription By Beneficial Owners

 

Rights holders who are beneficial owners of shares of our common stock and whose shares are registered in the name of a broker, custodian bank or other nominee, and rights holders who hold common stock certificates and

would prefer to have an institution conduct the transaction relating to the rights on their behalf, should instruct their broker, custodian bank or other nominee or institution to exercise their rights and deliver all documents and payment on their behalf prior to 5:00 p.m. New York City time, on April 11, 2008, the expiration date of the rights offering. To indicate your decision, you should complete and return to your broker, custodian bank or other nominee the form entitled “Beneficial Owner Election Form.” You should receive this form from your broker, custodian bank or other nominee with the other rights offering materials. A rights holder’s subscription rights will not be considered exercised unless the subscription agent receives from such rights holder, its broker, custodian, nominee or institution, as the case may be, all of the required documents and such holder’s full subscription price payment prior to 5:00 p.m. New York City time, on the expiration date.

 

Payment Method

 

Payments must be made in full in U.S. currency by:

 

 

Any personal check used to pay for shares of common stock must clear the appropriate financial institutions prior to the expiration date. The clearing house may require seven or more business days. Accordingly, rights holders who wish to pay the subscription price by means of a uncertified personal check are urged to make payment sufficiently in advance of the expiration date to ensure such payment is received and clears by such date. Rights certificates received after that time will not be honored, and we will return payment to the sender, without interest or deduction.

 

The subscription agent will be deemed to receive payment upon:

 

 

Rights holders wishing to subscribe should read the instruction letter accompanying the rights certificate carefully and strictly follow it. DO NOT SEND RIGHTS CERTIFICATES OR PAYMENTS TO US. Except as described below under “— Notice of Guaranteed Delivery,” we will not consider a subscription received until the subscription agent has received delivery of a properly completed and duly executed rights certificate and payment of the full subscription amount. The risk of delivery of all documents and payments is on each rights holder or its nominee, not us or the subscription agent.

 

The method of delivery of rights certificates and payment of the subscription amount to the subscription agent will be at the risk of the holders of rights, but, if sent by mail, we recommend that rights holders send those certificates and payments by overnight courier or by registered mail, properly insured, with return receipt requested, and that a sufficient number of days be allowed to ensure delivery to the subscription agent and clearance of payment before the expiration of the subscription period. Because uncertified personal checks may take at least seven or more business days to clear, we strongly urge rights holders to pay or arrange for payment by means of certified or cashier’s check or money order to avoid missing the opportunity to exercise their subscription rights should they decide to exercise such subscription rights.

 

Unless a rights certificate provides that the shares of common stock are to be delivered to the record holder of such rights or such certificate is submitted for the account of a bank or a broker, signatures on such rights certificate must be guaranteed by an “Eligible Guarantor Institution,” as such term is defined in Rule 17Ad-15 of the Exchange Act, subject to any standards and procedures adopted by the subscription agent.

 

Calculation Of Subscription Rights Exercised

 

Rights holders who do not indicate the number of subscription rights being exercised, or do not forward full payment of the total subscription price payment for the number of subscription rights that they indicate are being

exercised, will be deemed to have exercised their subscription privilege with respect to the maximum number of subscription rights that may be exercised with the aggregate subscription price payment they delivered to the subscription agent. If we do not apply a rights holder’s full subscription price payment to its purchase of shares of our common stock, the subscription agent will return the excess amount to such rights holder by mail, without interest or deduction, as soon as practicable after the expiration date of the rights offering.

 

Expiration Date, Extension and Amendments

 

The subscription period, during which rights holders may exercise their subscription privilege, expires at 5:00 p.m., New York City time, on April 11, 2008, the expiration date, unless terminated or extended. If such holders do not exercise their rights prior to that time, their rights will expire and will no longer be exercisable. We will not be required to issue shares of our common stock to a rights holder if the subscription agent receives such holder’s rights certificate or payment after that time, regardless of when such holder sent the rights certificate and payment, unless such holder sends the documents in compliance with the guaranteed delivery procedures described below. If the commencement of the rights offering is delayed for a period of time, the expiration date of the rights offering will be similarly extended.

 

We will extend the duration of the rights offering as required by applicable law and may choose to extend it if we decide that changes in the market price of our common stock warrant an extension or if we decide to give investors more time to exercise their subscription rights in the rights offering. We may extend the expiration date of the rights offering by giving oral or written notice to the subscription agent on or before the scheduled expiration date. If we elect to extend the expiration of the rights offering, we will issue a press release announcing such extension no later than 9:00 a.m., New York City time, on the next business day after the most recently announced expiration date.

 

We reserve the right, in our sole discretion, to amend or modify the terms of the rights offering.

 

Subscription Price

 

Our board of directors, in consultation with our senior management, determined the subscription price based upon the consideration of a number of factors, including, our business prospects; our immediate capital requirements; the price at which The Huff Alternative Fund, L.P. and Mr. Sillerman were willing to backstop the rights offering; and general conditions in the securities markets.

 

The subscription price is not necessarily related to our book value, net worth or any other established criteria of value and may or may not be considered the fair value of the common stock to be offered in the rights offering.

 

We cannot assure rights holders that the market price of our common stock will not decline during or after the rights offering. We also cannot assure rights holders that they will ever be able to sell shares of our common stock purchased during the rights offering at a price equal to or greater than the subscription price. We urge all rights holders to obtain a current quote for our common stock before exercising their rights.

 

Termination

 

We may terminate the rights offering, in whole or in part, at any time after the distribution and at any time before completion of the rights offering if there is any judgment, order, decree, injunction, statute, law or regulation entered, enacted, amended or held to be applicable to the rights offering that in the sole judgment of our board of directors would or might make the rights offering or its completion, whether in whole or in part, illegal or otherwise restrict or prohibit completion of the rights offering. We may waive any of these conditions and choose to proceed with the rights offering even if one or more of these events occur. If we terminate the rights offering, in whole or in part, all affected subscription rights will expire without value, and all subscription payments received by the subscription agent prior to such termination will not be refunded and such subscribers will receive shares of our common stock in the manner set forth in this prospectus.

Intended Purchases; Backstop Agreements

 

The Huff Alternative Fund, L.P., which, according to public filings, is the beneficial owner of 2,802,442 shares of our common stock, has agreed, pursuant to the terms of an investment agreement, to purchase the first $15 million of shares (1.5 million shares at $10 per share) that are not subscribed for in the rights offering, if any, and 50% of any other unsubscribed shares, up to a total investment of $40 million; provided, however, Huff is not obligated to purchase any shares beyond its initial $15 million investment in the event that Mr. Sillerman does not purchase an equal number of shares at the $10 price per share pursuant to the terms of his investment agreement with us as discussed below. In consideration for its commitment described above, Huff will receive a commitment fee in the amount of $500,000 payable upon consummation of the rights offering.

 

Huff is entitled to certain registration rights for each of the shares held by Huff pursuant to registration rights granted in connection with the investment agreement. We will file a registration statement on Form S-1 registering such number of Huff’s shares as Huff shall designate within ninety (90) days after closing of the rights offering. At such time as we become eligible to file a registration statement on Form S-3, upon request from Huff, we will register the remaining Huff shares not registered pursuant to the first registration; provided, however, if we are not eligible to file a registration statement on Form S-3 by January 9, 2009, we must file a registration statement on Form S-1 to register the balance of the shares held by Huff. Huff is also entitled to unlimited piggyback rights.

 

In addition to the shares of common stock purchased by Huff, upon the closing of the purchase of additional shares pursuant to the Huff investment agreement (or earlier under certain circumstances), Huff will purchase one share of our special preferred stock for a purchase price of $1.00. The share of special preferred stock will entitle Huff to certain rights, including:

 

 

Once Huff ceases to own 20% of such shares, we have the right to convert the Special Preferred Stock into one share of our common stock.

 

The investment agreement with Huff may be terminated at any time (a) by mutual written consent of the parties; (b) by either party, if (i) the closing under the rights offering shall not have occurred on or before May 15, 2008, (ii) the closing date under the investment agreement shall not have occurred within twenty days after the consummation of the rights offering, or (iii) the closing of the Rights Offering shall not have occurred on or before April 1, 2008, and we are not, as of such date, using diligent efforts to continue to pursue consummation of the rights offering; (c) by either party if any court or governmental entity shall have issued, enacted, entered, promulgated or enforced any law, order, judgment, decree, injunction or ruling or taken any other action (that has not been vacated, withdrawn or overturned) restraining, enjoining or otherwise prohibiting the transactions contemplated hereby and

such law, order, judgment, decree, injunction, ruling or other action shall have become final and non-appealable; (d) by us, (i) if there shall have occurred, on the part of Huff, a breach of any representation, warranty, covenant or agreement of Huff that is not curable or, if curable, is not cured within ten calendar days after written notice of such breach is given by us to Huff or (ii) upon the failure of a closing condition that is not curable; (e) by Huff, (i) if there shall have occurred, on our part, a material breach of any representation, warranty, covenant or agreement contained in the investment agreement that is not curable or, if curable, is not cured on or prior to the earlier of (x) ten calendar days after written notice of such breach is given by Huff to us and (y) the date on which all conditions to the consummation of the transactions contemplated hereby not related to such breach have been satisfied or (ii) upon the failure of a closing condition that is not curable; and (f) by us in our sole discretion and without cause; provided, however , that we shall immediately pay the $500,000 commitment fee in immediately available funds in accordance with the investment agreement to the extent not paid, and pay directly to Huff’s legal counsel, or reimburse Huff for, its fees and expenses.

 

We have also entered into an investment agreement with Robert F.X. Sillerman, our Chairman and Chief Executive Officer, pursuant to which Mr. Sillerman has agreed to subscribe for his full pro rata amount of shares in the rights offering (representing 3,037,365 shares), as well as to purchase up to 50% of the shares that remain unsold in the rights offering after Huff’s initial $15 million investment at the same subscription price per share being offered to our stockholders. Mr. Sillerman will not receive any consideration for entering into his investment agreement. Mr. Sillerman has notified the Company that he intends to subscribe and pay for all 3,037,365 shares underlying his rights immediately upon commencement of the rights offering. We intend to use $23 million of the proceeds from this purchase to repay the $23 million loan from an affiliate of Credit Suisse (which is guaranteed by Mr. Sillerman) prior to its maturity on March 15, 2008.

 

The investment agreement with Mr. Sillerman may be terminated at any time (a) by mutual written consent of the parties (b) by either party, if the closing under the rights offering shall not have occurred on or before May 15, 2008; (c) by either party if any court or governmental entity shall have issued, enacted, entered, promulgated or enforced any law, order, judgment, decree, injunction or ruling or taken any other action (that has not been vacated, withdrawn or overturned) restraining, enjoining or otherwise prohibiting the transactions contemplated hereby and such law, order, judgment, decree, injunction, ruling or other action shall have become final and non-appealable; (d) by us, (i) if there shall have occurred, on the part of Mr. Sillerman, a breach of any representation, warranty, covenant or agreement of Mr. Sillerman that is not curable or, if curable, is not cured within ten calendar days after written notice of such breach is given by us to Mr. Sillerman or (ii) upon the failure of a closing condition that is not curable; (e) by Mr. Sillerman, (i) if there shall have occurred, on our part, a material breach of any representation, warranty, covenant or agreement contained in the investment agreement that is not curable or, if curable, is not cured on or prior to the earlier of (x) ten calendar days after written notice of such breach is given by Mr. Sillerman to us and (y) the date on which all conditions to the consummation of the transactions contemplated hereby not related to such breach have been satisfied or (ii) upon the failure of a closing condition that is not curable; and (f) by us in our sole discretion and without cause.

 

Because Mr. Sillerman is our Chairman and Chief Executive Officer, the investment agreement with Mr. Sillerman is deemed an affiliated transaction and therefore required the review and oversight of a special committee of our independent directors. A special committee comprised of independent directors Messrs. David M. Ledy and Harvey Silverman was established to review and oversee the transaction. The special committee engaged independent legal counsel to assist in its review and oversight of the transaction. Our board of directors, acting upon the unanimous recommendation of the special committee, has (except for an abstention by Mr. Sillerman) unanimously approved the transaction.

 

The maximum number of shares that are required to be purchased pursuant to the terms of the investment agreements described above is 9,537,365, which would result in total gross proceeds of $95.4 million. In addition to these investment agreements, we have received strong indications of an intention to exercise rights from certain stockholders, including members of senior management. As a result of the investment agreements with Huff and Mr. Sillerman, and taking into account the expressed intentions of these other stockholders, we expect to sell all of the shares that are being offered hereunder.

 

If a rights holder delivers subscription documents, rights certificates or notices of guaranteed delivery in a manner different than that described in this joint proxy statement/prospectus, then we may not honor the exercise of such holder’s subscription privileges.

 

Rights holders should direct any questions or requests for assistance concerning the method of subscribing for the shares of common stock to The Bank of New York Mellon Corporation, by mail at the address listed above or by telephone at (877) 243-3815 (Toll Free) for domestic callers and (201) 680-6579 (Collect) for foreign callers. Rights holders should direct any requests for additional copies of this prospectus to Mitchell J. Nelson, by mail at 650 Madison Avenue, New York, New York 10022 or by telephone at (212) 838-3100.

 

Fees and Expenses

 

We will pay all fees charged by the subscription agent in connection with the distribution and exercise of the rights. Rights holders are responsible for paying all other commissions, fees, taxes or other expenses incurred in connection with the exercise or transfer of the rights. Neither we nor the subscription agent will pay such expenses.

 

Medallion Guarantee May Be Required

 

Signature of rights holders on each subscription rights certificate must be guaranteed by an eligible institution, such as a member firm of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States, subject to standards and procedures adopted by the subscription agent, unless:

 

 

Notice To Beneficial Holders

 

If a rights holder is a broker, a trustee or a depositary for securities who holds shares of our common stock for the account of others on the Rights Offering Record Date, such holder should notify the respective beneficial owners of such shares of the rights offering as soon as possible to find out their intentions with respect to exercising or selling their subscription rights. Such rights holders should obtain instructions from the beneficial owner with respect to their subscription rights, as set forth in the instructions we have provided to rights holders for their distribution to beneficial owners. If the beneficial owner so instructs, a rights holder should complete the appropriate subscription rights certificates and submit them to the subscription agent with the proper payment. If a rights holder holds shares of our common stock for the account(s) of more than one beneficial owner, such holder may exercise the number of subscription rights to which all such beneficial owners in the aggregate otherwise would have been entitled had they been direct record holders of our common stock on the Rights Offering Record Date, provided that the rights holder, as a nominee record holder, make a proper showing to the subscription agent by submitting the form entitled “Nominee Holder Certification” that we will provide to rights holders with their rights offering materials. Rights holders who did not receive this form should contact the subscription agent to request a copy.

Beneficial Owners

 

If a rights holder is a beneficial owner of shares of our common stock or will receive subscription rights through a broker, custodian bank or other nominee, we will ask such holder’s broker, custodian bank or other nominee to notify such holder of the rights offering. If a rights holder wishes to exercise or sell its subscription rights, such holder will need to have its broker, custodian bank or other nominee act for it. If a rights holder holds certificates of our common stock directly and would prefer to have its broker, custodian bank or other nominee act for it, such holder should contact its nominee and request it to effect the transactions for such holder. To indicate its decision with respect to its subscription rights, rights holders should complete and return to their broker, custodian bank or other nominee the form entitled “Beneficial Owners Election Form.” Rights holders should receive this form from their broker, custodian bank or other nominee with the other rights offering materials. If a rights holder wishes to obtain a separate subscription rights certificate, it should contact the nominee as soon as possible and request that a separate subscription rights certificate be issued to it. Rights holders should contact their broker, custodian bank or other nominee if they do not receive this form, but believe they are entitled to participate in the rights offering. We are not responsible if a rights holder does not receive the form from its broker, custodian bank or nominee or if a rights holder receives it without sufficient time to respond.

 

Notice of Guaranteed Delivery

 

The subscription agent will grant rights holders three business days after the expiration date of the rights offering to deliver the rights certificate if they follow the following instructions for providing the subscription agent notice of guaranteed delivery. On or prior to the expiration date, the subscription agent must receive payment in full for all shares of common stock subscribed for through the exercise of the subscription privilege, together with a properly completed and duly executed notice of guaranteed delivery substantially in the form accompanying this prospectus either by hand, mail, telegram or facsimile transmission, that specifies the name of the holder of the rights and the number of shares of common stock subscribed for. If applicable, it must state separately the number of shares of common stock subscribed for through the exercise of the subscription privilege and a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States must guarantee that the properly completed and executed rights certificate for all shares of common stock subscribed for will be delivered to the subscription agent within three business days after the expiration date. The subscription agent will then conditionally accept the exercise of the privileges and will withhold the certificates for shares of common stock until it receives the properly completed and duly executed rights certificate within that time period.

 

In the case of holders of rights that are held of record through DTC, those rights may be exercised by instructing DTC to transfer rights from that holder’s DTC account to the subscription agent’s DTC account, together with payment of the full subscription price. The notice of guaranteed delivery must be guaranteed by a commercial bank, trust company or credit union having an office, branch or agency in the United States or by a member of a Stock Transfer Association approved medallion program such as STAMP, SEMP or MSP. Notices of guaranteed delivery and payments should be mailed or delivered to the appropriate addresses set forth under “— Subscription Agent and Escrow Agent.

 

Regulatory Limitation

 

We will not be required to issue to you shares of our common stock pursuant to the rights offering if, in our opinion, you would be required to obtain prior clearance or approval from any state or federal regulatory authorities to own or control such shares if, at the time the rights offering expires, you have not obtained such clearance or approval.

 

Method of Transferring and Selling Subscription Rights

 

The subscription rights are listed for trading on The NASDAQ Global Market under the symbol “FXRER.” We expect that subscription rights may be purchased or sold through usual investment channels until the close of business on the last trading day preceding the expiration time. However, there has been no prior public market for the subscription rights, and we cannot assure you that a trading market for the subscription rights will

develop or, if a market develops, that the market will remain available throughout the subscription period. We also cannot assure you of the prices at which the subscription rights will trade, if at all. If you do not exercise or sell your subscription rights you will lose any value inherent in the rights. See “— General Considerations Regarding the Partial Exercise, Transfer or Sale of Subscription Rights” below.

 

Transfer of Subscription Rights

 

You may transfer subscription rights in whole by endorsing the rights certificate for transfer. Please follow the instructions for transfer included in the information sent to you with your subscription rights certificate. If you wish to transfer only a portion of the subscription rights, you should deliver your properly endorsed rights certificate to the subscription agent. With your subscription rights certificate, you should include instructions to register such portion of the subscription rights evidenced thereby in the name of the transferee (and to issue a new subscription rights certificate to the transferee evidencing such transferred subscription rights). You may only transfer whole subscription rights and not fractions of a subscription right. If there is sufficient time before the expiration of the rights offering, the subscription agent will send you a new subscription rights certificate evidencing the balance of the subscription rights issued to you but not transferred to the transferee. You may also instruct the subscription agent to send the subscription rights certificate to one or more additional transferees. If you wish to sell your remaining subscription rights, you may request that the subscription agent send you certificates representing your remaining (whole) subscription rights so that you may sell them through your broker or dealer. You may also request that the subscription agent attempt to sell your subscription rights for you, as described below.

 

If you wish to transfer all or a portion of your subscription rights, you should allow a sufficient amount of time prior to the time the subscription rights expire for the subscription agent to:

 

• receive and process your transfer instructions; and

 

 

If you wish to transfer your subscription rights to any person other than a bank or broker, the signatures on your subscription rights certificate must be guaranteed by an eligible institution.

 

Sales of Subscription Rights Through the Subscription Agent

 

If you choose not to sell your subscription rights through your broker or dealer, you may seek to sell your subscription rights through the subscription agent. If you wish to have the subscription agent seek to sell your subscription rights, you must deliver your properly executed subscription rights certificate, with appropriate instructions, to the subscription agent. If you want the subscription agent to seek to sell only a portion of your subscription rights, you must send the subscription agent instructions setting forth what you would like done with the subscription rights, along with your subscription rights certificate.

 

If the subscription agent sells subscription rights for you, it will send you a check for the net proceeds from the sale of any of your subscription rights as soon as practicable after the expiration date. If your subscription rights can be sold in whole or in part, the sale will be deemed to have been made at the weighted average net sale price of all subscription rights sold by the subscription agent. The aggregate fees charged by the subscription agent for selling subscription rights will be deducted from the aggregate sale price for all such subscription rights in determining the weighted average net sale price of all such subscription rights. We cannot assure you, however, that a market will develop for the subscription rights or that the subscription agent will be able to sell your subscription rights.

 

You must have your order to sell your subscription rights to the subscription agent before 11:00 a.m., New York City time, on April 4, 2008, the fifth business day before the expiration date. If less than all sales orders received by the subscription agent are filled, it will prorate the sales proceeds among you and the other holders of subscription rights based on the number of rights that each holder has instructed the subscription agent to sell during that period, irrespective of when during the period the instructions are received by it or the subscription rights are sold. The subscription agent is required to sell your subscription rights only if it is able to find buyers. If the subscription agent cannot sell your subscription rights by 5:00 p.m., New York City time, on April 8, 2008, the third business day

before the expiration date, the subscription agent will return your subscription rights certificate to you by overnight delivery.

 

If you sell your subscription rights through your broker or dealer, you will likely receive a different amount of proceeds than if you sell the same amount of subscription rights through the subscription agent. If you sell your subscription rights through your broker or dealer instead of the subscription agent, your sales proceeds will be the actual sales price of your subscription rights rather than the weighted average sales price described above.

 

General Considerations Regarding the Partial Exercise, Transfer or Sale of Subscription Rights

 

The amount of time needed by your transferee to exercise or sell its subscription rights depends upon the method by which the transferor delivers the subscription rights certificates, the method of payment made by the transferee and the number of transactions which the holder instructs the subscription agent to effect. You should also allow up to ten business days for your transferee to exercise or sell the subscription rights transferred to it. Neither we nor the subscription agent will be liable to a transferee or transferor of subscription rights if subscription rights certificates or any other required documents are not received in time for exercise or sale prior to the expiration date.

 

You will receive a new subscription rights certificate upon a partial exercise, transfer or sale of subscription rights only if the subscription agent receives your properly endorsed subscription rights certificate no later than 5:00 p.m., New York City time, on April 4, 2008, five business days before the expiration date. The subscription agent will not issue a new subscription rights certificate if your subscription rights certificate is received after that time and date. If your instructions and subscription rights certificate are received by the subscription agent after that time and date, you will not receive a new subscription rights certificate and therefore will not be able to sell or exercise your remaining subscription rights.

 

You are responsible for all commissions, fees and other expenses (including brokerage commissions and transfer taxes) incurred in connection with the purchase, sale or exercise of your subscription rights, except that we will pay all fees of the subscription agent associated with the exercise of subscription rights. Any amounts you owe the subscription agent will be deducted from your account.

 

If you do not exercise your subscription rights before the expiration date, your subscription rights will expire and will no longer be exercisable.

 

Rights of Subscribers

 

Rights holders will have no rights as a stockholder with respect to shares of common stock for which they subscribe in the rights offering until the shares of common stock are issued to such holders and registered through DTC’s Direct Registration System. Rights holders will have no right to revoke their subscriptions after they deliver their completed rights certificate, payment and other required documents to the subscription agent.

 

No Revocation or Change

 

Once a rights holder submits the form of rights certificate to exercise any rights, such holder is not allowed to revoke or change the exercise or request a refund of monies paid. All exercises of rights are irrevocable, even if a rights holder learns subsequently information about us that it considers to be unfavorable. Rights holders should not exercise their rights unless they are certain that they wish to purchase shares of our common stock at the subscription price.

 

U.S. Federal Income Tax Treatment of Rights Distribution

 

For U.S. federal income tax purposes, rights holders will not recognize income as a result of the receipt or exercise of their rights. See “Certain Federal Income Tax Consequences.”

 

No Recommendation to Rights Holders

 

Our board of directors is not making any recommendations to rights holders as to whether or not they should exercise their rights. Rights holders should make their decision based on their own assessment of their best interests after reading this prospectus. Rights holders should not view the backstop arrangements with Huff and Mr. Sillerman as a recommendation or other indication that the exercise of their rights is in their best interest.

 

Shares of Common Stock Outstanding After the Rights Offering

 

Based on the 39,790,247 shares of our common stock that are currently outstanding and assuming issuance of 9,871,674 shares in this rights offering, 49,661,921 shares of our common stock will be issued and outstanding after the rights offering expires.

 

Foreign Stockholders

 

We will not mail rights certificates to stockholders on the Record Date whose addresses are outside the United States. Instead, we will have the subscription agent hold the rights certificates for those holders’ accounts. To exercise their rights, foreign holders must notify the subscription agent before 5:00 p.m., New York City time, on April 8, 2008, three business days prior to the expiration date, and must establish to the satisfaction of the subscription agent that such exercise is permitted under applicable law. If a foreign holder does not notify and provide acceptable instructions to the subscription agent by such time (and if no contrary instructions have been received), such foreign holder’s rights will be cancelled.

 

Other Matters

 

We are not making the rights offering in any state or other jurisdiction in which it is unlawful to do so, nor are we distributing or accepting any offers to purchase any shares of our common stock from subscription rights holders who are residents of those states or other jurisdictions or who are otherwise prohibited by federal or state laws or regulations to accept or exercise the subscription rights. We may delay the commencement of the rights offering in those states or other jurisdictions, or change the terms of the rights offering, in whole or in part, in order to comply with the securities law or other legal requirements of those states or other jurisdictions. Subject to state securities laws and regulations, we also have the discretion to delay allocation and distribution of any shares you may elect to purchase by exercise of your privilege in order to comply with state securities laws. We may decline to make modifications to the terms of the rights offering requested by those states or other jurisdictions, in which case, if you are a resident in those states or jurisdictions or if you are otherwise prohibited by federal or state laws or regulations from accepting or exercising the subscription rights you will not be eligible to participate in the rights offering.

 

We do not expect to pay cash dividends in the foreseeable future. We are prohibited under the terms of our subsidiaries’ credit facilities, and will likely be prohibited or restricted under the terms of any future credit agreements we may enter into, from paying any dividends on our common stock.

 

DILUTION

 

Purchasers of our common stock in the rights offering will experience an immediate dilution of the net tangible book value per share of our common stock. Our net tangible book value as of December 31, 2007 is approximately $140.0 million, or $3.52 per share of our common stock (based upon 39,790,247 shares of our common stock outstanding). Net tangible book value per share is equal to our total net tangible book value, which is our total tangible assets less our total liabilities, divided by the number of shares of our outstanding common stock. Dilution per share equals the difference between the amount per share paid by purchasers of shares of common stock in the rights offering and the net tangible book value per share of our common stock immediately after the rights offering. Based on the aggregate offering of $98.7 million and after deducting estimated offering expenses payable by us of $1.25 million, and the application of the estimated $97.5 million of net proceeds from the rights offering, our pro forma net tangible book value as of December 31, 2007 would have been approximately $237.4 million, or $4.78 per share. This represents an immediate increase in pro forma net tangible book value to existing stockholders of $1.26 per share and an immediate dilution to purchasers in the rights offering of $5.22 per share. The dilution does not take into account the planned payment of $30 million of the $45 million priority distribution to Flag Luxury Properties out of certain proceeds from the rights offering and, if applicable, sales under the related investment agreements. The following table illustrates this per share dilution (based upon 49,661,921 shares of our common stock that would be outstanding following the consummation of the rights offering and, if applicable, sales under the related investment agreements):

 

 

The following table sets forth (i) our actual capitalization as of December 31, 2007 and (ii) our pro forma capitalization after giving effect to the consummation of the rights offering and the use of the proceeds therefrom.

 

 

 

 

General

 

We are a newly formed entertainment company with a plan to pursue real estate and attraction-based projects throughout the world. Through our indirect wholly owned subsidiaries, BP Parent, LLC, Metroflag BP, LLC and Metroflag Cable, LLC, we own 17.72 contiguous acres of land located at the southeast corner of Las Vegas Boulevard and Harmon Avenue in Las Vegas, Nevada known as the Park Central site. If we are able to obtain adequate financing, we intend to redevelop such property into a hotel, casino, retail and, commercial project, to develop Elvis Presley-themed hotels at or near Graceland and to develop Elvis Presley and Muhammad Ali themed hotels and attractions worldwide, pursuant to license agreements we recently entered into with subsidiaries of CKX.

 

Our license agreements with Elvis Presley Enterprises, Inc., an 85%-owned subsidiary of CKX, and Muhammad Ali Enterprises LLC, an 80%-owned subsidiary of CKX, allow us to use the intellectual property and certain other assets associated with Elvis Presley and Muhammad Ali in the development of our real estate and other entertainment attraction based projects. We currently anticipate that the development of the Park Central site will involve multiple elements that incorporate the Elvis Presley assets and theming. In addition, the license agreement with Elvis Presley Enterprises grants us the right to develop one or more hotels as part of the master plan of Elvis Presley Enterprises to redevelop the Graceland property and surrounding areas in Memphis, Tennessee.

 

In addition to our ownership of and plans for the redevelopment of the Park Central site, our plan to develop one or more Graceland-based hotel(s), and our intention to pursue additional real estate and entertainment based developments using the Elvis Presley and Muhammad Ali intellectual property, we own 1,410,363 shares of common stock of Riviera Holdings Corporation. While we do not currently have any definitive plans or agreements with Riviera Holdings Corporation related to the acquisition of Riviera, we continue to explore an acquisition of such company.

 

The viability of our Company and the successful implementation of our business plan, including the redevelopment of the Park Central site, is dependent on our ability to obtain adequate financing. We do not currently have any definitive financing plans, although we expect to pursue debt and/or equity financing. As to our redevelopment of the Park Central site, we may or may not start construction on any of the proposed phases of our development plans before obtaining adequate financing to complete the project.

 

Company Strategy

 

 

 

The Park Central Site

 

The Park Central site, consisting of six contiguous parcels aggregating 17.72 acres of land, is located on the southeast corner of Las Vegas Boulevard and Harmon Avenue in Las Vegas, Nevada. The property enjoys strong visibility with 1,175 feet of frontage on Las Vegas Boulevard, known as “the Strip,” and 600 feet of frontage on Harmon Avenue. The entire 17.72 acre parcel is zoned H-1, Limited Resort and Apartment District, and allows for casino gaming through its designation as a Gaming Enterprise District, or GED, and can support a variety of development alternatives, including hotels/resorts, entertainment venue(s), a casino, condominiums, hotel-condominiums, residences and retail establishments.

 

Las Vegas Boulevard is a major north-south traffic route through the city and Harmon Avenue is a heavily used east-west thoroughfare that provides convenient access to McCarran International Airport. We believe the corner of Las Vegas Boulevard and Harmon Avenue is one of the most concentrated areas of pedestrian traffic on the Las

Vegas strip. We expect to capitalize on this pool of potential customers by leveraging the property’s significant frontage on Las Vegas Boulevard and Harmon Avenue through attractions, theming and architectural design.

 

The site is directly adjacent to the MGM Grand and across the street from MGM’s CityCenter project, which is scheduled to open its first phase in late 2009 with the entire project scheduled to open in 2010. MGM has announced that the approximately $7.8 billion CityCenter project is planned to include approximately 2,800 units of luxury condominiums; a 4,000-room luxury hotel and casino; two 400-room, non-gaming boutique hotels; and over 665,000 square feet of retail, dining and entertainment venues. The completion of MGM’s CityCenter project will solidify the intersection of Las Vegas Boulevard and Harmon Avenue as one of the most important on the Las Vegas strip. Planet Hollywood, The Bellagio, Paris, The Monte Carlo and New York New York , among other major resorts are also in the property’s immediate area. We believe that the “cluster effect” associated with the close proximity of these facilities will further drive pedestrian traffic and visitation.

 

The following map illustrates the location of the Park Central site on the Las Vegas Strip and its proximity to the hotels, casinos, resorts and other attractions in the area:

 

 

Significant redevelopment has occurred and is continuing to occur along Harmon Avenue. There are several separate mixed-use condominium/hotel/casino developments currently planned or underway along the Harmon Avenue corridor which has been reported to represent approximately $20 billion of investment. While each of these

projects is being pursued independently and is in various stages of development, several, including the MGM CityCenter, Cosmopolitan, Panorama Towers and the Chateau (a new major Marriott Vacation Club development), are currently under construction.

 

In response to this rapid development, Clark County has begun a series of major improvements to Harmon Avenue. The County has ear-marked $11 million to be spent on widening roads, improving access/egress, completing an extension of Harmon Avenue by constructing a bridge over I-15 and constructing improvements to Valley View Boulevard. The goal is to replicate the improvements made to Las Vegas Boulevard which would enhance both pedestrian and vehicular traffic as well as the overall beautification of the area. In addition, the Las Vegas Monorail has announced plans for a $1.3 billion expansion that would connect the Convention Center and resort properties on both sides of the Strip with McCarran International Airport and the Thomas & Mack Center, however the project has not yet received funding necessary to realize the plan.

 

We believe that the planned new developments as well as the redevelopment, improvement and expansion plans for the area around the Park Central site, including infrastructure, will substantially increase exposure, access and visitation and therefore enhance the opportunities available for development of the property.

 

Development Plans

 

We have contracted an international consulting firm with a focus on economic analysis for the entertainment and leisure development industry to conduct a feasibility study on the site to examine the potential development options for the site. Based on the study, management believes that the site is well suited for, but not limited to, a multi-use development which would include a mix of hotel, casino, entertainment venue(s), condominium, and retail establishments.

 

The Park Central site will serve as the home of our flagship luxury property, with the launch of the new Elvis inspired luxury brand utilizing the marketing power of our Elvis Presley intellectual property. The property, consisting of six contiguous parcels aggregating 17.72 acres of land, is located on the southeast corner of Las Vegas Boulevard and Harmon Avenue and enjoys strong visibility with 1,175 feet of frontage on the Las Vegas Strip and 600 feet of frontage on Harmon Avenue.

 

The information set forth below describes our current plan for the development of the Park Central site. The description provided assumes completion of the development in accordance with the current plan. There can be no assurance this current plan will not change as design development proceeds. Furthermore, our ability to implement this plan and any variation thereof is subject to numerous risks, uncertainties and other factors, including those set forth in the “Risk Factors” beginning on page 15 of this prospectus. We plan to commence construction in the first quarter of 2009 with a targeted completion date in the fourth quarter of 2012.

 

We are designing the project to compete within the upper strata of the luxury market.

 

The initial phase of the project is multi-faceted and will contain diverse and distinctive elements to appeal to a range of clientele. We have designed a first-class environment of elegance, sophistication and luxury intended to appeal to all Las Vegas visitors, while a premium level of luxury, amenities and service is expected to attract high-roller and premium gaming clientele, as well as middle market clientele. The development will incorporate elements of entertainment appealing to all demographics, offering daytime and nighttime entertainment options not otherwise available in the market.

 

The initial phase will include over approximately 8 million square feet (exclusive of parking) consisting of a luxury hotel casino, the first for our Elvis-inspired luxury brand, and a major luxury branded 5-star hotel. The luxury hotel casino is expected to include 2,269 rooms and be wholly owned and operated by us. The major luxury branded 5-star hotel is expected to include approximately 778 rooms and approximately 147 residential units.

 

Although we have determined the overall scope and design of our planned development of the Park Central site, we will continue to evaluate the design in relation to the demands of the Las Vegas market. As a result, all of the features described below are based on our current plans for the site, and therefore, the design of specific elements may be refined in the future. We have designed the luxury hotel casino, to feature approximately 93,000 square feet of gaming area that will house approximately 2,200 electronic games and 130 gaming tables. This square footage

does not include the space allocated for a high limit area, race and sports book, and poker room. We also plan for the facility to feature convention space of approximately 206,000 square feet which will include banquet space, ballrooms and break out meeting rooms with direct access to our 1605 seat multi-use theater/showroom. We expect to feature approximately 100,000 square feet of entertainment venues, a portion of which will be dedicated to Elvis themed attractions. These will include an interactive multi media experience, a boutique and a superstore. The Elvis inspiration will highlight an expansive wedding chapel complex which is expected to include several chapels, bridal and flower shop, wedding reception, and banquet areas. Our current plans include approximately 94,000 square feet of retail space, distributed throughout the facility and 14 restaurants with an aggregate of approximately 3,400 seats and various bar/lounge areas seating approximately 675 in total. The hotel tower will be crowned with a roof top restaurant over 600 feet above the Las Vegas Strip which will convert to an ultra lounge in the evening. Our plan provides for 2,269 rooms which includes 1,866 standard rooms of approximately 611 square feet and 396 suites ranging from 855 to over 6,400 square feet. The property will also contain 7 spacious villas over looking the pool area for our most discerning guests.

 

The second hotel in the first phase, which we expect will be branded by a 5-star luxury hotel operator, will be designed to meet the brand standard. This is currently contemplated to include a meeting room component of approximately 37,200 square feet, and a restaurant, bar/lounge, health club and spa. The 147 residences are expected to feature 1, 2 and 3-bedroom units averaging 2,274 net sellable square feet. We have had and continue to have discussions with potential hotel operators regarding this hotel, though such discussions are still preliminary in nature.

 

Based on preliminary budgets, management estimates total construction costs of the current plan to be approximately $3.1 billion (exclusive of land cost and related financing and other pre-opening costs).

 

A future phase is intended to include a 1,000 room hotel constructed either solely by us or with a joint venture partner. The subterranean and above ground infrastructure to support the future development are intended to be constructed during this initial phase. The cost of such subterranean and above ground infrastructure is included in the construction costs for the initial phase outlined above.

Our current operations do not generate sufficient revenue, when combined with cash on hand, to support our development plans for the Park Central site. Therefore, the redevelopment of the Park Central site is dependent upon our ability to raise significant amounts of additional capital, likely through debt and/or equity financings.

 

 

To implement the current development scheme as depicted in the chart above, we are negotiating agreements with W.A. Richardson Builders. The principals of W.A. Richardson have over 25 years of experience in designing, building and opening large scale resort properties including Mandalay Bay Resort and Casino, Monte Carlo Resort and Casino and a 2000 room addition to the Luxor Hotel and Casino. W.A. Richardson is currently serving as a development consultant, though we have not yet finalized the definitive terms of this consultancy. We are also negotiating agreements pursuant to which W.A. Richardson will serve as the general contractor for the construction of the improvements.

 

Klai Juba Architects and YWS Architects, two professional design, architecture and planning firms specializing in hospitality and gaming resort projects, have been engaged to work on the design development plans, although we are still in the process of negotiating definitive agreements with such firms.

Zoning and Development Restrictions

 

The Park Central site is currently zoned within the GED district the standard designation for casino properties, on all of the property’s acres and has H-1 zoning for density, which would permit the development of casinos, hotels, condominiums, apartments, office and retail space.

 

Given the site’s proximity to McCarran International Airport, we have acquired Federal Aviation Administration approval to build up to 600 feet above ground level. The approval was initially scheduled to lapse on September 30, 2007, but upon our request it was automatically extended until February 10, 2009. Future extensions are not automatic and would be at the discretion of the Federal Aviation Administration.

 

Parcels 2 and 3 are subject to a Grant of Reciprocal Easements and Covenants, Conditions and Restrictions, or the REA, the fundamental purpose of which was to create cross-easements to establish a coordinated pattern for the flow of traffic to, from and within those parcels and the adjacent properties east of the parcels (known as Polo Towers and the Chateau Parcel), and to and from Harmon Avenue and Las Vegas Boulevard, the major streets adjoining the parcels. In addition to various specific access easements and restrictions, the REA also contains ancillary provisions relating to signage, utility rights, and parking rights, which benefit and burden one or more of Parcels 2 and 3, none of which, we believe, are materially adverse to the development in the manner currently contemplated. The REA does not affect any of Parcels 4, 5 and 6.

 

The REA contains two restrictions which could affect the value of Parcels 2 and 3: (i) a height restriction on construction on Parcel 3, and (ii) a general restriction on the sale of timeshare interests in improvements constructed on Parcels 2 and 3.

 

The Parcel 3 height restrictions permit unlimited construction up to 41 feet and prohibit all construction above 160 feet. Improvements between 41 feet and 80 feet are permitted upon the payment of an amount of up to $2 million to buy timeshare interests held in the west-facing units located on the 4 ^th  to 8 ^th  floors of the Polo Towers building, a building located immediately to the east of Parcel 3, whose west-facing (only) view corridor (the Las Vegas Boulevard side) may be obstructed. If we choose to build above 80 feet and up to a maximum of 160 feet, the purchase of timeshare interests would also be required, but without limitation as to the aggregate cost. In either case, the purchase price for a timeshare unit would be basically the cost to construct a similar timeshare unit in another building. In either case, the obligation to purchase arises only if a timeshare owner demands of the Polo Towers developer that it repurchase the interest because of the obstruction of the view caused by our improvements. The current plans provide for the height of the improvements affected by the limitation on Parcel 3 to reach up to 160 feet. Based on such plans, we will need to estimate the cost of the purchase obligation, but we have not yet done so.

 

The height restrictions do not affect improvements constructed anywhere on the parcels other than Parcel 3, which is directly West of the Polo Towers building. All these restrictions can be modified or terminated if agreed to by developers of the Polo Towers, without any required consent of the timeshare owners or any condominium or homeowners’ association. Although some discussions regarding the lifting or modification of such restrictions have taken place, there is no assurance that they will be lifted or modified and, if so, at what cost.

 

The timeshare provision remains in effect until 2025 and would prohibit sales of timeshare interests, or hotel interests which would be substantially the same as timeshare interests, located within improvements constructed on Parcels 2 and 3. It does not prohibit the sale of “luxury” fractional interests.

 

Las Vegas Market

 

Overview.   Las Vegas is one of the most recognized destination resort markets in the world, consisting of mega-casino resorts that offer a vast array of amenities, including hotel accommodations, food and beverage outlets, retail shopping, entertainment venues, extensive convention and meeting facilities and, recently, increasing residential components. Las Vegas is the second largest gaming market in the world, the number one convention city in the United States and one of the fastest growing leisure, lodging and entertainment markets in the country. According to the Las Vegas Convention and Visitors Authority, the number of visitors traveling to Las Vegas has continued to increase at a steady and significant rate, reaching a record 38.9 million visitors in 2006, and total Las

Vegas visitor spending has grown over 75% in the last decade (5.8% compound annual growth rate), exceeding growth in visitation.

 

Recent Growth.   The Las Vegas metropolitan area has undergone a tremendous transformation during the last decade from a gaming destination to a mainstream city and experienced a boom of development to support the rapid growth. The increase in tourism has necessitated an increased supply of hotel rooms and conference centers as well as single-family residential units to house the approximately 6,000 people who join the Las Vegas workforce each month. The surge in supply has been met with ongoing demand, as hotel occupancy rates have been stable at around 90% for the past 14 years.

 

The expansion of the multi-faceted tourist sector has generated the need for service employees. Job growth has been a major factor in the explosive growth in the population of Las Vegas, making Las Vegas the fastest growing urban area in the United States. The service industry employs 29% of the Las Vegas workforce.

 

Known historically for its gaming experience, the Las Vegas landscape has changed considerably over the past decade with the opening of destination mega-resorts including The Venetian , Wynn Las Vegas , The Bellagio and Mandalay Bay . The effect of these openings has been to broaden Las Vegas’ traditional market by appealing to a broader customer base consisting of leisure tourists interested not only in gaming but dining, entertainment, shopping and other lifestyle experiences as well. The rapid and large scale development is expected to continue with over $27 billion in development projects planned over the next five years, representing the construction of almost 40,000 hotel/motel rooms and 2.6 million square feet of convention space.

 

Las Vegas as a Convention Center Attraction.   Las Vegas has rapidly expanded its convention business, with delegates growing four-fold over the past 20 years and almost doubling over the last 10 years. This growth made Las Vegas the leading convention city for the tenth consecutive year in 2005. The city had a 22% market share of the top-200 shows in 2005, as compared to only 13% for its nearest competitor. In addition, the size of all of Las Vegas’ large shows increased by 22% to a collective 22.6 million square feet during such period, which represents more than one-third of all the square footage combined for the 200 largest shows. Conventions provide impressive lead time on revenues for hotel operators, as they book upwards of six months in advance, providing an opportunity to increase room rates significantly. Furthermore, the convention business has driven mid-week occupancy up to approximately 88% in 2006, an increase of 7% from 2002.

 

Continuing High Occupancy Rates.   With all of these factors driving growth in visitation, the Las Vegas market has demonstrated an ability to absorb significant new room inventory and maintain occupancy levels at around 90% in 2006, significantly above the national average of approximately 61%. Furthermore, upscale properties such as The Bellagio and Wynn , which are similar in amenities to the planned Park Central site development, maintain occupancy rates at around 95%.

 

History and Current Operations on the Park Central Site

 

The Park Central site consists of six contiguous parcels that comprise a collective 17.72 acres of land. The property is currently occupied by a motel and several commercial and retail tenants with a mix of short and long-term leases. The Park Central site’s six parcels generated total rental income and other income of approximately $21.4 million for the fiscal year ended December 31, 2007.

 

Set forth below is a summary of the parcels, including a description of the land, the year in which it was acquired and the purchase price, the current tenant(s), the current total annual rental income and the current term(s) of the lease(s).

 

Parcel 1.   Parcel 1 consists of 0.996 acres of land with 115 linear feet of frontage on Las Vegas Boulevard and 150 linear feet of frontage on Harmon Avenue. One tenant currently occupies Parcel 1. The lease for the property is terminable at any time by either party upon 120 days’ prior written notice and without the payment of a termination fee. This lease generated rental income of $1.6 million for the fiscal year ended December 31, 2007. We acquired the property in May 2006 for a total purchase price of $36.6 million.

 

Parcel 2.   Parcel 2 consists of 5.135 acres of land with 210 linear feet of frontage on Las Vegas Boulevard and 450 linear feet of frontage on Harmon Avenue. The property is currently occupied by a Travelodge motel which we

own in fee, as well as several retail, billboard and parking lot tenants. The Travelodge motel is being operated by WW Lodging pursuant to a management agreement. The management agreement is terminable upon 30 days’ prior notice and a payment of a termination fee equal to 4% of the trailing 12 months room revenue multiplied by 200%. The property’s retail, billboard and parking lot leases are month-to-month. We intend to maintain only month-to-month leases on the property in order to accommodate our development of the parcel. These current leases generated total rental income of $5.2 million for the fiscal year ended December 31, 2007. We completed the acquisition of the ground lease and the motel in March 2003 for $3.5 million, and acquired the underlying fee title to the land in December 2006 for $55 million.

 

Parcel 3.   Parcel 3 consists of 2.356 acres of land, with 275 linear feet of frontage on Las Vegas Boulevard. The property currently hosts the Hawaiian Marketplace, which consists of multiple retail tenants. All but six of the leases on this property are terminable at any time upon 30 days’ (in one instant upon 180 days’) advance written notice and without payment of a termination fee. All six leases not so terminable with notice are terminable by us at any time upon the exercise of options to either repurchase, recapture or relocate the premises. We estimate the aggregate cost to exercise the options to repurchase, recapture or relocate the tenants in connection with these six leases to be $4.0 million to $4.5 million, assuming we elect to do so in the next twelve months.

 

The current leases generated total rental income of $4.9 million for the fiscal year ended December 31, 2007. We completed the acquisition of the parcel for $25.8 million in March 2003. In 2004, we completed construction of the Hawaiian Marketplace for a total cost of $33.6 million.

 

Parcel 4.   Parcel 4 consists of 4.49 acres of land with 270 linear feet of frontage on Las Vegas Boulevard. The property is currently occupied by several tenants. The current leases are month-to-month, except for a lease with a single tenant. Such tenant’s lease term expires in May 2009, which may be extended for an additional five years at the option of the tenant. If we are unable to reach an agreement with respect to an early termination of this lease, a relocation of the existing establishment, or granting us the right to build above or around this tenant, the development of this parcel could be delayed. These leases generated total rental income of $2.8 million for the fiscal year ended December 31, 2007. We acquired the property for $90 million in January 2005.

 

Parcel 5.   Parcel 5 consists of 3.008 acres of land, with 180 linear feet of frontage on Las Vegas Boulevard. The property accommodates 51,414 square feet of retail space and is currently occupied by several restaurant and retail tenants. One lease term expires in January 2012, but is terminable earlier upon 120 days’ advance written notice and, if terminated after February 2010, payment of a termination fee of $200,000. Another lease term expires in December 2009, with the tenant holding two options to extend the lease for five year periods. If we are unable to reach an agreement with respect to an early termination of this lease, a relocation of the existing establishment, or granting us the right to build above or around this tenant, the development of this parcel could be delayed. A third lease term expires in March 2008, with the tenant holding an option to extend the lease for an additional five years. This lease is terminable earlier than March 2008, or thereafter if extended, upon 6 months’ advance written notice and payment of a termination fee of $450,000. A fourth lease term expires in August 2012, with the tenant holding an option to extend the lease for an additional five years. However, under such lease, we have the right to build on top of and around the tenant, although we are obligated to reimburse the tenant for loss of reasonable profits if construction causes closure of the restaurant. A fifth lease term expires in May 2059. However, because the tenant’s store is a separate box structure, it is capable of being integrated into future development plans. Parcel 5 is subject to a covenant that allows us to construct a building containing one or more floors upon and above such tenant’s building and to utilize and extend the structural members and replace the exterior service facilities, as may be reasonably necessary to serve any new construction. These leases generated total rental income of $4.3 million for the fiscal year ended December 31, 2007. We acquired the property for $17 million in March 1998.

 

Parcel 6.   Parcel 6 consists of 1.765 acres of land, with 125 linear feet of frontage on Las Vegas Boulevard. The property accommodates 2,094 square feet of retail space and is currently occupied by a restaurant and several retail tenants. One lease term expires in December 2013, another lease term expires in April 2011 and a third lease term expires in January 2009, with the tenant holding two options to extend the lease term for 5 year periods. A fourth lease term expires in May 2045, although we have the right to construct improvements on, over and under other portions of Parcel 6. These leases generated total rental income of $2.6 million for the fiscal year ended December 31, 2007. We acquired the land and the fourth lease for $30.1 million in May 2005.

Transaction With and Involving Elvis Presley Enterprises

 

Hotel(s) at Graceland

 

Graceland, the 13.5 acre estate which served as the primary residence of Elvis Presley from 1957 until his passing in 1977, is located in Memphis, Tennessee. Graceland was first opened to public tours in 1982. Over the past five years, Graceland has averaged approximately 565,000 visitors per year. The focal point of the Graceland business is a guided mansion tour, which includes a walk through the historic residence, as well as an extensive display of Elvis’ gold records and awards, career mementos, stage costumes, jewelry, photographs and more. The tour also includes a visit to the Meditation Garden, where Elvis and members of his family have been laid to rest.

 

In February 2006, CKX and Elvis Presley Enterprises disclosed that they had held meetings with government officials in Memphis, Tennessee regarding preliminary plans to redevelop and expand the Graceland attraction as the centerpiece of the Whitehaven section of Memphis. In April 2006, CKX commissioned Robert A.M. Stern Architects to develop a master plan for Graceland and the surrounding properties owned by CKX. The master plan incorporates approximately 104 acres surrounding and contiguous to the Graceland mansion property. CKX also engaged Economics Research Associates to provide an analysis of the economic potential of the redevelopment. The master plan is expected to include a new visitor center, exhibition space, retail, hotel, convention facilities, public open space and parking on both sides of Elvis Presley Boulevard.

 

Under the terms of our license agreement with Elvis Presley Enterprises described below, we have the option to construct and operate one or more of the hotels to be developed as part of the master plan for Graceland. If we elect to pursue this development, Elvis Presley Enterprises will either grant to us a fee title to the land for the first such hotel, or if such fee title cannot be transferred, grant us a long term lease, with a term of not less than 99 years, at de minimus annual cost. We will be required to pay Elvis Presley Enterprises a royalty of 3% of gross revenue derived from any hotel we construct at Graceland. Under the terms of the license agreement, we delivered written notice on November 21, 2007 to Elvis Presley Enterprises exercising our right to develop the first hotel as part of the Graceland master plan, however, no definitive plans have been prepared and we have yet to finalize a development budget for the project. We expect to launch our “Heartbreak Hotel” mid-market positioned, themed entertainment hotel brand with the development and construction of the first of our hotels at Graceland.

 

The development of the Graceland master plan and the incorporation of the aforementioned hotels into such development is an important part of our business plan. We have been advised by CKX and Elvis Presley Enterprises that the master plan remains a work in progress and that no plans have been finalized with respect to the relative size, layout and integration of the various elements, including the hotel(s) we intend to develop. We believe the expertise and experience of our senior management in the areas of hotel and property development may prove valuable to the development process as CKX and Elvis Presley Enterprises seek to maximize the visitor experience as well as the revenue potential for the property.

 

Under the terms of our conditional option agreement with 19X, we have agreed to undertake an expanded role in the overall development of the Graceland master plan. The parties have agreed to reasonably cooperate with one another in good faith to prepare a master plan for the development of the Graceland site, with each party bearing 50% of the costs associated with the preparation of the master plan, provided that 19X shall be reimbursed costs in excess of $2.5 million by us at the first to occur of (i) we terminate our involvement in the master plan process, (ii) we exercise the right to acquire the Presley Interests or (iii) we terminate the option agreement as a result of certain actions by 19X. In the event the parties cannot agree on the design for the master plan, then 19X shall have the right to complete the development in its sole discretion, subject to our rights under our license agreement w ith Elvis Presley Enterprises as described below, provided, however, that we shall have the right to provide input into the redevelopment and be reasonably informed as to the status thereof, although all final decisions in respect thereof shall be made by 19X in its sole discretion.

 

Under the terms of the license agreement amendment described below, we may lose our right to construct the hotel(s) referenced above (i) in the event we approve a master plan but subsequently fail to deliver a notice within ten days of such approval of our intent to proceed with the hotels contemplated in the master plan or, (ii) if we fail to deliver our notice of intent to proceed within ninety days of presentation of a master that 19X has agreed to undertake but which we have not approved.

If our option agreement with 19X becomes effective and we were to exercise the option to acquire the Presley business, we would assume control of the entire redevelopment.

 

If our conditional option agreement with 19X does not become effective and either CKX and Elvis Presley Enterprises seeks our increased involvement in the development of the overall plans, or the hotel complexes to be developed by us become a larger element of the overall project, including becoming more integrated into the visitor and mansion experience, we may seek to expand our relationship with Elvis Presley Enterprises to allow and compensate us, for this increased involvement and oversight.

 

Elvis Presley License Agreement

 

Strength of the Elvis Presley Brand

 

The Elvis Presley license agreement offers us the opportunity to brand our properties with the name, image and likeness of Elvis Presley, regarded as one of the most important figures in 20th century music and popular culture. Elvis Presley is the best selling solo musical recording artist in U.S. history, having sold more than one billion albums and singles worldwide and having set records for the most albums and singles that have been certified Gold and Platinum by the Recording Industry Association of America.

 

The Elvis Presley name and brand remains to this day among the most important and recognized throughout the world. Over the past five years, an average of approximately 565,000 people have visited Graceland annually. “Elvis 30 #1 Hits,” released in 2002, and “Elvis Second to None,” released in 2003, have sold more than ten million and two million units, respectively, worldwide to date. In 2006, Honda launched a year long advertising campaign for its 2006 CR-V using Elvis’ remixed Burning Love and visuals, which targeted an audience between 25 and 35 year olds. Nike launched its year long international 2002 World Cup Campaign using a remix of “Little Less Conversation.” The remix went to #1 on charts in the U.S. and the U.K., as well as 20 other countries.

 

Since Graceland was opened to the public in 1982, 15 million people have visited Elvis’ home and the demographics of the visitors have remained relatively young, which further illustrates Elvis’ current appeal among later generations. Approximately 76% of all visitors to Graceland are first time visitors, approximately 45% are under the age of 35 and approximately 83% are 50 years old or younger.

 

In August 2006 CKX and Elvis Presley Enterprises, together with Cirque Du Soleil, entered into an agreement with MGM MIRAGE to create a permanent Elvis Presley show at MGM’s CityCente r. The show is expected to open at that property, located directly across Las Vegas Boulevard from the Park Central site, in November 2009. The show will consist of a creative combination of live musicians and singers, projections, dance and the latest in multimedia sound and lighting technology intended to offer an emotional bond with the audience.

 

Grant of Rights

 

The license agreement with Elvis Presley Enterprises grants us the exclusive right to use Elvis Presley-related intellectual property in connection with designing, constructing, operating, and promoting Elvis Presley-themed real estate and attraction based properties, including Elvis Presley-themed hotels, casinos, theme parks and lounges (subject to certain restrictions, including, but not limited to, certain approval rights of Elvis Presley Enterprises). The license also grants us the non-exclusive right to use Elvis Presley-related intellectual property in connection with designing, constructing, operating and promoting Elvis Presley-themed restaurants. Under the terms of the license agreement, we have the right to manufacture and sell merchandise relating to each Elvis Presley property at the applicable property, but Elvis Presley Enterprises will have final approval over all such merchandise that we may sell. If we have not opened an Elvis Presley-themed restaurant, theme park and/or lounge by June 1, 2017, then the rights for the category we have not exploited revert to Elvis Presley Enterprises.

 

Elvis Presley Experiences

 

Under the terms of the license agreement, we have the right to participate, under certain circumstances, in the development by Elvis Presley Enterprises of any “Elvis Presley Experience,” defined as any permanent, non-touring interactive entertainment, educational and retail experiences incorporating music, artifacts, and audiovisual works focusing on the life and times of Elvis Presley. As defined in the license agreement, an Elvis Presley Experience

does not include a permanent live show of the type that is being created and produced by CKX and Cirque du Soleil and performed at MGM’s CityCenter. As such, we have no ownership, economic interest or other participation in such show.

 

If Elvis Presley Enterprises intends to create an Elvis Presley Experience in collaboration with a third party, we have the right to invest in up to 50% of the economic and beneficial interests owned by Elvis Presley Enterprise in such project. If Elvis Presley Enterprises desires to create an Elvis Presley Experience without third party collaboration, we have the right to participate in such project such that (i) Elvis Presley Enterprises shall bear the initial production costs (until opening) of such Elvis Presley Experience, (ii) we shall provide and construct the premises or venue for the public presentation of such Elvis Presley Experience and shall be entitled to a rental payment to be negotiated by the parties in good faith, and (iii) we shall each own and share in 50% of the profits and losses of such Elvis Presley Experience.

 

In all cases, if we request that Elvis Presley Enterprises create an Elvis Presley Experience at one of our properties, provided that Elvis Presley Enterprises has the right to do so, it shall use reasonable best efforts to create such Elvis Presley Experience at our requested property.

 

We have been notified by Elvis Presley Enterprises that they are a party to a global agreement with Cirque du Soleil for the creation of Elvis Presley themed projects worldwide, including the development of Elvis Presley Experiences. In the event that Elvis Presley Enterprises develops one or more Elvis Presley Experience(s) with Cirque du Soleil, we have the right to participate for up to 50% of Elvis Presley Enterprises’ economic participation, as described above for projects involving third party collaboration. We also intend to request that Elvis Presley Enterprises and Cirque du Soleil, together with our participation, develop the first Elvis Presley Experience at the Park Central site. We believe that the planned Elvis-themed elements at the site, including our plans with respect to the development of an Elvis Presley Experience on site, and the Cirque du Soleil show at the MGM CityCenter will complement one another and create a focal point for Elvis Presley fans while visiting Las Vegas.

 

Royalty Payments and Minimum Guarantees

 

We are required to pay to Elvis Presley Enterprises an amount equal to 3% of gross revenues generated at any Elvis Presley property (including gross revenues derived from lodging, entertainment attractions, ticket sales, sale of food and beverages, and rental space, but excluding gambling if payment of percentage of gambling royalty revenues would be contrary to law or require Elvis Presley Enterprises to be licensed) and 10% of gross revenues with respect to the sale of site-specific merchandise. In addition, we will pay Elvis Presley Enterprises a set dollar amount per square foot of casino floor space at each Elvis Presley property where percentage royalties are not paid on gambling revenues.

 

We are required to pay a guaranteed minimum royalty payment (against royalties payable for the year in question) to Elvis Presley Enterprises of $9 million in each of 2007, 2008 and 2009, $18 million each of 2010, 2011 and 2012, $22 million in each of 2013, 2014, 2015 and 2016, and increasing by 5% for each year thereafter. The initial payment (for 2007) under the license agreement, as amended, will be due on the earlier of the completion of the rights offering described elsewhere herein, or April 1, 2008, provided that because the initial payment will be made after December 1, 2007, it shall bear interest at the then current prime rate as quoted in The Wall Street Journal plus 3% per annum between December 1, 2007 and December 31, 2007, plus 3.5% per annum from January 1, 2008 through January 31, 2008, plus 4.0% from February 1, 2008 through February 29, 2008, and plus 4.5% from and after March 1, 2008.

 

Beginning on the date of the agreement and ending on the eighth anniversary of the opening of the first Elvis Presley-themed hotel, we have the right to buy out all remaining royalty payment obligations due to Elvis Presley Enterprises under the license agreement by paying Elvis Presley Enterprises $450 million. We would also be required to buy out royalty payments due to Muhammad Ali Enterprises under our license agreement with Muhammad Ali Enterprises discussed below at the same time that we exercise our buyout right under the Elvis Presley Enterprises license agreement.

Termination Rights

 

Unless we exercise our buy-out right, either we or Elvis Presley Enterprises will have the right to terminate the license upon the date that is the later of (i) June 1, 2017, or (ii) the date on which our buy-out right expires, which is the eighth anniversary of the opening of the first Elvis Presley-themed hotel. Thereafter, either we or Elvis Presley Enterprises will again have the right to so terminate the license on each tenth anniversary of such date. In the event that we exercise our termination right, then (x) the license agreement between us and Muhammad Ali Enterprises will also terminate and (y) we will pay to Elvis Presley Enterprises a termination fee of $45 million. Upon any termination, the rights granted to us (and the rights granted to any project company to develop an Elvis Presley-themed real estate property) will remain in effect with respect to all Elvis Presley-related real estate properties that are open or under construction at the time of such termination, provided that royalties, but no minimum guarantees, continue to be paid to Elvis Presley Enterprises.

 

Conditional Amendment

 

We have entered into an agreement with 19X to amend the License Agreement between our Company and Elvis Presley Enterprises, or EPE, which amendment shall only become effective upon the closing of 19X’s acquisition of CKX.

 

If and when effective, the amendment to the License Agreement will provide that, if, by the date that is 7 1 / 2 years following the closing of 19X’s acquisition of CKX, EPE has not achieved certain financial thresholds, we will be entitled to a reduction of $50 million against 85% of the payment amounts due under the license agreement, with such reduction taken ratably over the ensuing three year period provided, however, that if we have failed in our obligations to build any hotel to which we had previously committed under the definitive Graceland master plan, then this reduction shall not apply.

 

As described under “—Hotel(s) at Graceland,” the amendment to the License Agreement also provides that we may lose our right to construct the hotel(s) as part of the Graceland master redevelopment plan (i) in the event we approve a master plan (as contemplated under the Option Agreement with 19X) but subsequently fail to deliver a notice within ten days of such approval of our intent to proceed with the hotels contemplated in the master plan or, (ii) in the alternative, if we fail to deliver our notice of intent to proceed in accordance with the definitive master plan within ninety days of presentation of a master plan that 19X has agreed to undertake but which we have not approved.

 

Conditional Option Agreement with 19X

 

We have entered into an Option Agreement with 19X, Inc. pursuant to which, in consideration for annual option payments as described below, we would have the right to acquire an 85% interest in the Elvis Presley business currently owned and operated by CKX, Inc. through its Elvis Presley Enterprises subsidiaries at an escalating price over time as set forth below. Because 19X will only own those rights upon consummation of its pending acquisition of CKX, the effectiveness of the Option Agreement is conditioned upon the closing of 19X’s acquisition of CKX. In the event that the merger agreement between 19X and CKX is terminated without consummation or the merger fails to close for any reason, the proposed Option Agreement with 19X will also terminate and thereafter have no force and effect.

 

Upon effectiveness of the proposed Option Agreement, and in consideration for annual option payments described below, we would have the right (but not the obligation) to acquire the 85%-interest in the Elvis Presley business (the “Presley Interests”), structured as follows:

 

 

 

If, as of the calendar month immediately preceding the sixth anniversary of the date of closing of 19X’s acquisition of CKX, EPE has not achieved certain financial thresholds, we will have the right to extend the deadline to exercise our right to acquire the Presley Interests by twelve (12) months. If, as of the calendar month immediately preceding the seventh anniversary of the date of closing of 19X’s acquisition of CKX, EPE has still not achieved the financial thresholds, we will have the right to extend the deadline to exercise our right to acquire the Presley Interests an additional six (6) months.

 

If, at the end of such six month extension period, EPE has still not achieved the financial thresholds, we will have the right to either (i) reduce the purchase price for the acquisition by $50 million and proceed with the acquisition, or (ii) elect not to proceed with the acquisition.

 

The total amount of the option payments will be $105 million payable over five years, with each annual payment set forth below payable in four equal cash installments (except as described below) per year:

 

 

The first installment for year one’s annual payment shall become due and payable on the later of (i) the closing of 19X’s acquisition of CKX, and (ii) August 15, 2008. The date on which such first installment is paid is referred to as the “Initial Installment Date.” The three remaining installments for year one’s annual payment shall be due on the 90th, 180th and 270th day after the Initial Installment Date. For each subsequent annual payment for years two through five, the first installment will be due on the ensuing anniversary date of the Initial Installment Date and the three remaining installments will be due on the 90th, 180th and 270th day thereafter.

 

Notwithstanding the foregoing, during each of the first two years, we can pay up to two installment payments in any twelve month period by delivery of an unsecured promissory note (rather than cash) which shall become due and payable on the earlier of (i) the closing of the acquisition of the Presley Interests, and (ii) the termination of the Option Agreement. The promissory notes shall bear interest at the rate of 10.5% per annum.

 

Pursuant to the Option Agreement, subject to it becoming effective, 19X has made certain representations and warranties regarding the Presley Interests and the Elvis Presley business and has made certain covenants regarding the ownership of the Presley Interests and ownership and operation of the Elvis Presley business during the term of the Option Agreement. 19X is required, upon our request, to annually reaffirm these representations and warranties and covenants to us. Subject to certain limitations, 19X has agreed to indemnify us for breach of such representations and warranties and covenants. In limited and specified circumstances, our obligation to make annual option payments shall cease and 19X shall be obligated to refund certain prior payments.

 

As more fully described under “— Hotel(s) at Graceland,” the Option Agreement also provides that the parties shall work collectively on the master plan for redevelopment of the property surrounding Graceland.

 

Under the Option Agreement, we are not entitled to exercise our right to acquire the Presley Interests without the unanimous approval of the independent directors of our board based upon the recommendation of a special committee of the board composed entirely of independent directors empowered to review and oversee such exercise if such a recommendation of a special committee of independent directors and such approval by the independent directors of the board is advisable under applicable law based upon the advice of our counsel. If we elect to exercise the our right to acquire the Presley Interests, the closing of the acquisition will be contingent upon regulatory approval and the satisfaction of customary closing conditions.

If the Option Agreement becomes effective, we will need to seek financing to fund the annual option payments that are not otherwise payable by delivery of the unsecured promissory notes, as our current cash flow and cash on hand are not sufficient to fund these cash payments.

 

The Presley business, which is currently owned 85% by CKX, Inc. and 15% by the Promenade Trust, consists of entities which own and/or control the commercial utilization of the name, image and likeness of Elvis Presley, the operation of the Graceland museum and related attractions, as well as revenue derived from Elvis Presley’s television specials, films and certain of his recorded musical works, collectively referred to herein as the “Presley Business.” The Presley Business consists primarily of two components: first, intellectual property, including the licensing of the name, image, likeness and trademarks associated with Elvis Presley, as well as other owned and/or controlled intellectual property and the collection of royalties from certain motion pictures, television specials and recorded musical works and music compositions; and second, the operation of the Graceland museum and related attractions and retail establishments, including Elvis Presley’s Heartbreak Hotel and other ancillary real estate assets in Memphis, Tennessee. As described under “— Hotel(s) at Graceland” above, Elvis Presley Enterprises has disclosed preliminary plans to redevelop and expand the Graceland attraction, incorporating 104 acres surrounding and contiguous to the Graceland mansion property. The master plan is expected to include a new visitor center, exhibition space, retail, hotel, convention facilities, public open space and parking on both sides of Elvis Presley Boulevard. The Presley business has also announced that it has entered into an exclusive arrangement with Cirque du Soleil for the creation, development, production and promotion of “Elvis Presley Projects,” featuring touring and permanent shows, as well as multimedia interactive “Elvis Experiences,” throughout the world. Elvis Presley Enterprises, together with Cirque Du Soleil, has entered into an agreement with MGM MIRAGE to create a permanent Elvis Presley show at the CityCenter hotel/casino, which is currently under construction in Las Vegas. The show, which is expected to open with the hotel in November 2009, will consist of a creative combination of live musicians and singers, projections, dance and the latest in multimedia sound and lighting technology intended to offer an emotional bond with the audience.

 

Because our Chairman and Chief Executive Officer, Robert F.X. Sillerman, is also the Chairman and President of 19X, the Option Agreement and the Amendment to the Elvis Presley Enterprises License Agreement with 19X are deemed affiliated transactions and therefore required the review and oversight of a special committee of our independent directors. A special committee comprised of independent directors Messrs. David M. Ledy and Harvey Silverman was established to review and oversee the transaction. The special committee engaged The Salter Group to serve as its independent financial advisor in connection with the review of the financial terms of the Option Agreement and engaged independent legal counsel to assist in its review and oversight of the transactions. Our board of directors, acting upon the unanimous recommendation of the special committee, has (except for abstentions by directors affiliated with 19X or Elvis Presley Enterprises) unanimously approved the transaction.

 

Muhammad Ali License Agreement

 

Strength of Muhammad Ali Brand

 

Muhammad Ali is widely recognized as the greatest athlete of the twentieth century and ambassador to the world. Over forty years after he burst onto the scene as a gold-medal winner at the 1960 Rome Olympics, Mr. Ali remains one of the world’s most recognized figures, known and loved around the globe. Muhammad Ali has been named the “Athlete of the Century” by USA Today and Sports Illustrated and he continues to receive praise for his contribution to sports. Muhammad Ali was also named the BBC’s “Sports Personality of the Century,” and the World Sports Award’s “World Sportsman of the Century.”

 

In addition, Muhammad Ali has been the recipient of countless awards for his humanitarian efforts. In addition to being honored by Amnesty International with their “Lifetime Achievement Award,” the Secretary-General of the United Nations appointed him “United Nations Messenger of Peace.” Muhammad Ali was named the “International Ambassador of Jubilee 2000,” a global organization dedicated to relieving debt in developing nations, cited as “Mr. International Friendship” by former President Jimmy Carter and, in November 2005, he was honored with the Presidential Medal of Freedom Award.

Grant of Rights

 

The license agreement with Muhammad Ali Enterprises, which we entered into simultaneously with entering into the Elvis Presley Enterprises license agreement, grants us the right to use Muhammad Ali-related intellectual property in connection with designing, constructing, operating, and promoting Muhammad Ali-themed real estate and attraction based properties, including Muhammad Ali-themed hotels and retreat centers, subject to certain restrictions, including, but not limited to, certain approval rights of Muhammad Ali Enterprises. We currently envision Muhammad Ali retreat centers as retreat locations, incorporating the intellectual property of Muhammad Ali, where groups, companies, and/or organizations can come to focus board and staff members on key issues such as strategic planning, enhancing communication, teamwork, collaboration, problem-solving and creative thinking, all utilizing the ideals of Muhammad Ali to drive and enhance their experience. Under the terms of the license agreement, we have the right to manufacture and sell merchandise relating to each Muhammad Ali property at the applicable property, but Muhammad Ali Enterprises will have final approval over such merchandise that we may sell. While we are continually exploring opportunities to use the Muhammad Ali-related intellectual property as described above, we have no current plans with respect to specific uses of the Muhammad Ali-related intellectual property.

 

Royalty Payments and Minimum Guarantees

 

We are required to pay to Muhammad Ali Enterprises an amount equal to 3% of gross revenues generated at any Muhammad Ali property, including gross revenues derived from lodging, entertainment attractions, ticket sales, sale of food and beverages and rental space, and 10% of gross revenues with respect to the sale of merchandise.

 

We are required to pay a guaranteed annual minimum royalty payment (against royalties payable for the year in question) to Muhammad Ali Enterprises of $1 million in each of 2007, 2008 and 2009, $2 million in each of 2010, 2011 and 2012, $3 million in each of 2013, 2014, 2015 and 2016 and increasing by 5% for each year thereafter. The initial payment (for 2007) under the license agreement, as amended, will be due on the earlier of the completion of the rights offering described elsewhere herein or April 1, 2008, provided that if the initial payment is made after December 1, 2007, it shall bear interest at the then current prime rate as quoted in The Wall Street Journal plus 3% per annum between December 1, 2007 and December 31, 2007, plus 3.5% per annum from January 1, 2008 through January 31, 2008, plus 4.0% from February 1, 2008 through February 29, 2008, and plus 4.5% from and after March 1, 2008.

 

Beginning on the effective date of the license, which is June 1, 2007, and ending on the date that is the eighth anniversary of the opening of the first Elvis Presley-themed hotel, we have the right to buy-out all remaining royalty payment obligations due to Muhammad Ali Enterprises under the license agreement by paying Muhammad Ali Enterprises $50 million. We would be required to buy-out royalty payments due to Elvis Presley Enterprises under the Elvis Presley license agreement at the same time that we exercise our buy-out right under the Muhammad Ali license agreement.

 

Termination Rights

 

Unless we exercise our buy-out right, either we or Muhammad Ali Enterprises will have the right to terminate the license upon the date that is the later of (i) 10 years after the effective date of the license, or (ii) the date on which our buy-out right expires. Thereafter, either we or Muhammad Ali Enterprises will again have the right to so terminate the license on each tenth anniversary of such date. In the event that we exercise our termination right, then (x) the Elvis Presley license agreement will also terminate and (y) we will pay to Muhammad Ali Enterprises a termination fee of $5 million. Upon any termination, the rights granted to us (and the rights granted to any project company to develop a Muhammad Ali-themed real estate property) will remain in effect with respect to all Muhammad Ali-related real estate properties that are open or under construction at the time of such termination, provided that royalties, but no minimum guarantees, continue to be paid to Muhammad Ali Enterprises.

 

The Riviera

 

In addition to our ownership of the Park Central site, through subsidiaries we own 1,410,363 shares of common stock in Riviera Holdings Corporation, which owns and operates the Riviera Hotel & Casino in Las Vegas, Nevada

and the Blackhawk Casino in Blackhawk, Colorado. We acquired 573,775 of these shares on September 26, 2007 as a result of exercising an option in which we owned a 50% beneficial ownership interest to acquire an additional 1,147,550 shares of Riviera Holdings Corporation at a price of $23 per share. Our ownership of 1,410,363 shares of common stock in Riviera Holdings Corporation represents approximately 11.32% of the outstanding common stock of Riviera as of August 3, 2007. On May 16, 2007, we, through a subsidiary, submitted a proposal to the board of directors of Riviera Holdings Corporation to acquire through a merger the remaining outstanding shares of Riviera Holdings Corporation at a price of $34 per share. At that time the board of directors of Riviera Holdings Corporation rejected this offer.

 

We continue to explore an acquisition of Riviera Holdings Corporation with the goal of becoming a multi-property owner and operator in Las Vegas, Nevada. However, we have not entered into any agreements with Riviera Holdings Corporation related to the acquisition of Riviera. Pursuing an acquisition of Riviera Holdings Corporation is independent of our strategy to redevelop the Park Central site. We believe that an acquisition of Riviera Holdings Corporation would provide us with a competitive advantage in Las Vegas as an owner and operator of multiple gaming operations on the strip. No assurance can be given that we will be successful in acquiring Riviera Holdings Corporation. The price per share that we would be willing to pay in an acquisition of Riviera Holdings Corporation would be based on a number of factors, including, without limitation, the then prevailing market price per share of Riviera Holdings Corporation common stock, the assumption or repayment of outstanding indebtedness, if any, of Riviera Holdings Corporation, prevailing market conditions and our ability to finance the acquisition on reasonable terms. The $34 per share merger price that we proposed to the board of directors of Riviera Holdings Corporation in May 2007 is not indicative of the price we would be willing to pay at this time and should not be relied upon in calculating the total capital that could be necessary to consummate such an acquisition. Based on the closing price of Riviera Holdings Corporation’s common stock on March 6, 2008, which was $19.90 per share, Riviera Holdings Corporation has a market capitalization of $248 million (or $219.9 million excluding the shares we own). Our ability to consummate an acquisition of Riviera Holdings Corporation is dependent upon, among other things, our ability to raise the financing necessary to pay for such an acquisition.

 

Regulation and Licensing

 

Hospitality

 

Our proposed businesses will be subject to numerous laws, including those relating to the preparation and sale of food and beverages, such as health and liquor license laws. Our proposed businesses will also be subject to laws governing employees in our proposed hotels in such areas as minimum wage and maximum working hours, overtime, working conditions, hiring and firing employees and work permits. Also, our ability to implement our proposed hotel projects may be dependent upon our obtaining necessary building permits or zoning variances from local authorities.

 

Under the Americans with Disabilities Act, or ADA, all public accommodations are required to meet federal requirements related to access and use by disabled persons. These requirements became effective in 1992. Although we expect to invest significant amounts to ensure that our hotels comply with ADA requirements, a determination that our hotels are not in compliance with the ADA could result in a judicial order requiring compliance, imposition of fines or an award of damages to private litigants. We intend to be in compliance in all material respects with all statutory and administrative government regulations with respect to our proposed business when we become subject to such requirements.

 

Our proposed hotel properties and current commercial leasing activities of the Park Central site could expose us to environmental liabilities, including liabilities related to activities that predated our acquisition or operation of a property. Under various federal, state and local laws, ordinances and regulations, a current or previous owner or operator of real estate may be required to investigate and clean up certain hazardous substances released at the property and may be held liable to a governmental entity or to third parties for property damages and for investigation and cleanup costs incurred by such parties in connection with the contamination. Environmental liability can be incurred by a current owner or operator of a property for environmental problems or violations that occurred on a property prior to acquisition or operation. These laws and regulations often impose cleanup responsibility and liability whether or not the owner or operator knew of, or was responsible for, the presence of

hazardous or toxic substances. The liability under environmental laws has been interpreted to be joint and several unless the harm is divisible and there is a reasonable basis for allocation of the responsibility. In addition, some environmental laws create a lien on the contaminated site in favor of the government for damages and costs it incurs in connection with the contamination. The presence of contamination or the failure to remediate contamination may adversely affect the owner’s ability to sell or lease real estate or to borrow using the real estate as collateral. The owner or operator of a site may be liable under common law to third parties for damages and injuries resulting from environmental contamination emanating from the site.

 

Gaming

 

Nevada

 

Introduction

 

The ownership and operation of casino gaming facilities in the State of Nevada are subject to the Nevada Gaming Control Act and the regulations made under such Act, as well as various local ordinances. Once the hotel is open, the operations of our proposed casino on the Park Central site will be subject to the licensing and regulatory control of the Nevada Gaming Commission, the Nevada State Gaming Control Board and the Clark County Liquor and Gaming Licensing Board, which we refer to collectively as the Nevada Gaming Authorities.

 

Policy Concerns of Gaming Laws

 

The laws, regulations and supervisory procedures of the Nevada Gaming Authorities are based upon declarations of public policy. These public policy concerns include, among other things:

 

 

Changes in these laws, regulations and procedures could have significant negative effects on our proposed Park Central site casino’s proposed gaming operations and our financial condition and results of operations.

 

Owner and Operator Licensing Requirements

 

Before we can open our proposed casino on the Park Central site, we will be required to seek approval from and be licensed by the Nevada Gaming Authorities as a company licensee. We would also be required to seek such approval and licensing in connection with an acquisition of Riviera Holdings Corporation. The licensing process consists of submitting a detailed application and undergoing a thorough investigation by the Nevada Gaming Authorities of the company and its key employees. As applicant, we would be required to pay all costs of investigation, and the Nevada Gaming Authorities may deny an application for licensing for any reason they deem reasonable.

 

If granted, the gaming license will not be transferable and may be conditioned or restricted. The requirements to maintain the gaming license include compliance with any conditions or restrictions placed on the gaming license, the payment of applicable fees and the periodic submission of detailed reports to the Nevada Gaming Authorities.

 

Nevada gaming regulations require a casino operator to have a minimum bankroll in cash physically at the casino to fund and support the gambling games. The bankroll is a predetermined amount for each gaming device and live game placed on the casino floor. Currently, Nevada gaming regulations require a minimum bankroll of $250 per slot machine and $2,000 for each live table game. Nevada gaming regulations also require a minimum bankroll of $4,000 for a pari-mutuel race book and $7,500 for sports book. The actual minimum bankroll for the Park Central site will depend upon the number of gaming devices and live table games placed on the casino floor upon opening of the Park Central site.

We cannot assure you that we will be able to obtain all approvals and licenses from the Nevada Gaming Authorities on a timely basis or at all. In the event that our key executives fail to obtain the required gaming licenses, their employment with us would be terminated and we would no longer have access to their experience and expertise.

 

Company Registration Requirements

 

Before we can open our proposed casino on the Park Central site, we will be required to be registered by the Nevada Gaming Commission as a publicly traded corporation, referred to as a registered company, for purposes of the Nevada Gaming Control Act. We will also be required to seek such a registration in connection with an acquisition of Riviera Holdings Corporation. Obtaining such registrations requires that we maintain a current ledger of the ownership of all shares of the company, provide detailed information as to the ownership, management and financial position of the company, and apply for an order of registration from the commission. The Nevada Gaming Authorities may make such investigation of the company or any of its officers, directors, securities holders or any other persons associated therewith as it deems necessary, and may deny granting an order of registration for any reason they deem reasonable. We cannot assure you that we can obtain an order of registration from the Nevada Gaming Authorities on a timely basis or at all.

 

We will be required to maintain and periodically submit detailed ownership, financial and operating reports to the Nevada Gaming Authorities and to provide any other information that the Nevada Gaming Authorities may require. Substantially all of our material loans, leases, sales of securities and similar financing transactions must be reported to, or approved by, the Nevada Gaming Authorities.

 

Individual Licensing Requirements

 

No person may become a stockholder or member of, or receive any percentage of the profits of, an intermediary company or company licensee without first obtaining licenses and approvals from the Nevada Gaming Authorities. The Nevada Gaming Authorities may investigate any individual who has a material relationship to, or material involvement with, us to determine whether the individual is suitable or should be licensed as a business associate of a gaming licensee. Our officers, directors and certain key employees will be required to file applications with the Nevada Gaming Authorities and may be required to be licensed or found suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities may deny an application for licensing for any cause which they deem reasonable. A finding of suitability is comparable to licensing, and both require submission of detailed personal and financial information followed by a thorough investigation. An applicant for licensing or an applicant for a finding of suitability must pay for all the costs of the investigation. Changes in licensed positions must be reported to the Nevada Gaming Authorities and, in addition to their authority to deny an application for a finding of suitability or licensing, the Nevada Gaming Authorities have the jurisdiction to disapprove a change in a corporate position.

 

If the Nevada Gaming Authorities were to find an officer, director or key employee unsuitable for licensing or unsuitable to continue having a relationship with us, we would have to sever all relationships with that person. In addition, the Nevada Gaming Commission may require us to terminate the employment of any person who refuses to file appropriate applications. Determinations of suitability or questions pertaining to licensing are not subject to judicial review in Nevada.

 

Redemption or Mandatory Sale of Securities Owned By an Unsuitable Person

 

Our certificate of incorporation provides that, to the extent a gaming authority makes a determination of unsuitability or to the extent deemed necessary or advisable by our board of directors, we may redeem shares of our capital stock that are owned or controlled by an unsuitable person or its affiliates. The redemption price will be the amount, if any, required by the gaming authority or, if the gaming authority does not determine the price, the sum deemed by the board of directors to be the fair value of the securities to be redeemed. If we determine the redemption price, the redemption price will be capped at the closing price of the shares on the principal national securities exchange on which the shares are listed on the trading date on the day before the redemption notice is given. If the shares are not listed on a national securities exchange, the redemption price will be capped at the closing sale price of the shares as quoted on an inter-dealer quotation system, or if the closing price is not reported, the mean between the bid and asked prices, as quoted by any other generally recognized reporting system. The

redemption price may be paid in cash, by promissory note, or both, as required, and pursuant to the terms established by, the applicable gaming authority and, if not, as we elect. In the event our board of directors determines that such a redemption would adversely affect us, we shall require such person and/or its affiliates to sell the shares of our capital stock subject to the redemption.

 

Consequences of Violating Gaming Laws

 

If the Nevada Gaming Commission decides that we violated the Nevada Gaming Control Act or any of its regulations, it could limit, condition, suspend or revoke our registrations and gaming license. In addition, we and the persons involved could be subject to substantial fines for each separate violation of the Nevada Gaming Control Act, or of the regulations of the Nevada Gaming Commission, at the discretion of the Nevada Gaming Commission. Further, the Nevada Gaming Commission could appoint a supervisor to operate our proposed casino and, under specified circumstances, earnings generated during the supervisor’s appointment (except for the reasonable rental value of the premises) could be forfeited to the State of Nevada. Limitation, conditioning or suspension of any of our gaming licenses and the appointment of a supervisor could, and revocation of any gaming license would, have a significant negative effect on our gaming operations.

 

Requirements for Beneficial Securities Holders

 

Regardless of the number of shares held, any beneficial holder of our voting securities, may be required to file an application, be investigated and have that person’s suitability as a beneficial holder of voting securities determined if the Nevada Gaming Commission has reason to believe that the ownership would otherwise be inconsistent with the declared policies of the State of Nevada. If such beneficial holder of our voting securities who must be found suitable is a corporation, partnership, limited partnership, limited liability company or trust, it must submit detailed business and financial information including a list of beneficial owners. The applicant must pay all costs of the investigation incurred by the Nevada Gaming Authorities in conducting any investigation.

 

The Nevada Gaming Control Act requires any person who acquires more than 5% of the voting securities of a registered company to report the acquisition to the Nevada Gaming Commission. The Nevada Gaming Control Act requires beneficial owners of more than 10% of a registered company’s voting securities to apply to the Nevada Gaming Commission for a finding of suitability within 30 days after the Chairman of the Nevada State Gaming Control Board mails the written notice requiring such filing. Under certain circumstances, an “institutional investor,” as defined in the Nevada Gaming Control Act, which acquires more than 10%, but not more than 15%, of the registered company’s voting securities may apply to the Nevada Gaming Commission for a waiver of a finding of suitability if the institutional investor holds the voting securities for investment purposes only. An institutional investor will not be deemed to hold voting securities for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investor and not for the purpose of causing, directly or indirectly, the election of a majority of the members of the board of directors of the registered company, a change in the corporate charter, bylaws, management, policies or operations of the registered company, or any of its gaming affiliates, or any other action which the Nevada Gaming Commission finds to be inconsistent with holding our voting securities for investment purposes only. Activities which are not deemed to be inconsistent with holding voting securities for investment purposes only include:

 

 

Our certificate of incorporation includes provisions intended to help us implement the above restrictions. See “Description of Capital Stock — Prohibitions on the Receipt of Dividends, the Exercise of Voting or Other Rights or the Receipt of Other Remuneration.”

 

Consequences of Being Found Unsuitable

 

Any person who fails or refuses to apply for a finding of suitability or a license within 30 days after being ordered to do so by the Nevada Gaming Commission or by the Chairman of the Nevada State Gaming Control

Board, or who refuses or fails to pay the investigative costs incurred by the Nevada Gaming Authorities in connection with the investigation of its application, may be found unsuitable. The same restrictions apply to a record owner if the record owner, after request, fails to identify the beneficial owner. Any person found unsuitable and who holds, directly or indirectly, any beneficial ownership of any voting security or debt security of a registered company beyond the period of time as may be prescribed by the Nevada Gaming Commission may be guilty of a criminal offense. We will be subject to disciplinary action if, after we receive notice that a person is unsuitable to hold an equity interest or to have any other relationship with, we:

 

 

Gaming Laws Relating to Securities Ownership

 

The Nevada Gaming Commission may, in its discretion, require the holder of any debt or similar securities of a registered company to file applications, be investigated and be found suitable to own the debt or other security of the registered company if the Nevada Gaming Commission has reason to believe that such ownership would otherwise be inconsistent with the declared policies of the State of Nevada. If the Nevada Gaming Commission decides that a person is unsuitable to own the security, then under the Nevada Gaming Control Act, the registered company can be sanctioned, including the loss of its approvals, if without the prior approval of the Nevada Gaming Commission, it:

 

 

We will be required to maintain a current stock ledger in Nevada which may be examined by the Nevada Gaming Authorities at any time. If any securities are held in trust by an agent or by a nominee, the record holder may be required to disclose the identity of the beneficial owner to the Nevada Gaming Authorities. A failure to make the disclosure may be grounds for finding the record holder unsuitable. We will be required to render maximum assistance in determining the identity of the beneficial owner of any of our voting securities. The Nevada Gaming Commission has the power to require the stock certificates of any registered company to bear a legend indicating that the securities are subject to the Nevada Gaming Control Act. We do not know whether this requirement will be imposed on us.

 

Approval of Public Offerings

 

Once we become a registered gaming company, we may not make a public offering of our securities without the prior approval of the Nevada Gaming Authorities.

 

By regulation, the Nevada Gaming Authorities consider all relevant material facts in determining whether to grant an approval of public offerings. The Nevada Gaming Authorities may further consider not only the effects of the action or approval requested by the applicant, but whatever other facts are deemed relevant, including but not limited to the following:

 

 

 

To avoid delays which might otherwise be occasioned by investigative, analytical or other processing time, prior approval is typically sought through a Shelf Approval process. Shelf Approvals are obtained by submitting an application to the Nevada Gaming Authorities and are generally subject to certain restrictions. Such restrictions may include a limited life for the Shelf Approval, the ability of the Nevada Gaming Authorities to rescind the approval for good cause shown, restrictions on the ability to encumber gaming subsidiaries and approval for gaming subsidiaries to guarantee performance of obligations evidenced by a security.

 

We cannot assure you that we can obtain approval of a shelf registration or any other registration in a timely manner, or at all. Neither can we assure you what restrictions may be placed on any future application for approval of a sale of our securities.

 

Approval of Changes in Control

 

Once we become a registered company, we will be required to obtain prior approval of the Nevada Gaming Commission with respect to a change in control through:

 

 

Entities seeking to acquire control of a registered company must satisfy the Nevada State Gaming Control Board and Nevada Gaming Commission with respect to a variety of stringent standards before assuming control of the registered company. The Nevada Gaming Commission may also require controlling stockholders, officers, directors and other persons having a material relationship or involvement with the entity proposing to acquire control to be investigated and licensed as part of the approval process relating to the transaction.

 

Approval of Defensive Tactics

 

The Nevada legislature has declared that some corporate acquisitions opposed by management, repurchase of voting securities and corporate defense tactics affecting Nevada gaming licenses, and registered companies that are affiliated with those operations, may be harmful to stable and productive corporate gaming. The Nevada Gaming Commission has established a regulatory scheme to reduce the potentially adverse effects of these business practices upon Nevada’s gaming industry and to further Nevada’s policy to:

 

 

Once we become a registered company, approvals may be required from the Nevada Gaming Commission before we can make exceptional repurchases of voting securities above their current market price and before a corporate acquisition opposed by management can be consummated. The Nevada Gaming Control Act also requires prior approval of a plan of recapitalization proposed by a registered company’s board of directors in response to a tender offer made directly to its stockholders for the purpose of acquiring control.

 

Fees and Taxes

 

License fees and taxes, computed in various ways depending on the type of gaming or activity involved, are payable to the State of Nevada and to the counties and cities in which the licensed subsidiaries respective operations

are conducted. Depending upon the particular fee or tax involved, these fees and taxes are payable either monthly, quarterly or annually and are based upon either:

 

 

A casino entertainment tax is also paid by casino operators where entertainment is furnished in connection with the selling or serving of food or refreshments or the selling of merchandise. While we expect these fees and taxes to be significant, until we have an operating gaming facility it is impossible for us to determine with any specificity the impact such fees and taxes will have on our revenues.

 

Foreign Gaming Investigations

 

Any person who is licensed, required to be licensed, registered, required to be registered, or is under common control with those persons, collectively referred to herein as licensees, and who proposes to become involved in a gaming venture outside of Nevada, is required to deposit with the Nevada State Gaming Control Board, and thereafter maintain, a revolving fund in the amount of $10,000 to pay the expenses of investigation of the Nevada State Gaming Control Board of the licensee’s or registrant’s participation in such foreign gaming. We may be subject to these investigations in the event that we acquire or construct a gaming facility in a jurisdiction outside of Nevada. For example, in the event that we acquire control of the Riviera, we would become the owners of the Blackhawk Casino in Blackhawk, Colorado, thereby making us subject to these provisions. The revolving fund is subject to increase or decrease in the discretion of the Nevada Gaming Commission. Licensees and registrants are required to comply with the reporting requirements imposed by the Nevada Gaming Control Act. A licensee or registrant is also subject to disciplinary action by the Nevada Gaming Commission if it:

 

 

License for Conduct of Gaming and Sale of Alcoholic Beverages

 

The conduct of gaming activities and the service and sale of alcoholic beverages at the casino on the Park Central site will be subject to licensing, control and regulation by the Clark County Liquor and Gaming Licensing Board. In addition to approving our company, the Clark County Liquor and Gaming Licensing Board has the authority to approve all persons owning or controlling the stock of any corporation controlling a gaming license. All licenses are revocable and are not transferable. The county agency has full power to limit, condition, suspend or revoke any license. Any disciplinary action could, and revocation would, have a substantial negative impact upon our operations.

 

period, including the Bellagio, the Luxor Hotel and Casino, Mandalay Bay Resort & Casino and Caesars Palace. Each of these properties incorporates a variety of commercial elements, including but not limited to hotel, casino, retail, entertainment and restaurant operations. As a result, the casino/hotel industry in Las Vegas is highly competitive across a broad array of categories. The Park Central site is located on the Las Vegas Strip and is anticipated to compete in each of the aforementioned categories with these and other luxury-oriented properties.

 

The Park Central site will also compete, to some extent, with other hotel/casino facilities in Nevada and Atlantic City, riverboat gaming facilities in other states, casino facilities on Native American lands and elsewhere in the world, state lotteries, and other forms of gaming. The continued proliferation of Native American gaming in California and elsewhere could have a negative impact on our operations. In particular, the legalization of casino gaming in or near metropolitan areas from which we attract customers, could have a negative effect on our business. In addition, new or renovated casinos in Macau or elsewhere in Asia could draw Asian gaming customers, including high-rollers, away from Las Vegas.

 

In addition to the existing casinos with which the Park Central site is anticipated to compete, several new resorts are expected to open on or near the Las Vegas Strip before 2011, each of which is expected to include a variety of commercial elements, including but not limited to hotel, casino, retail, entertainment and restaurant operations. The major projects, which have either been announced or are currently under construction include, but are not limited to:

 

 

 

Intellectual Property

 

We intend to protect our intellectual property rights through a combination of patent, trademark, copyright, rights of publicity, and other laws, as well as licensing agreements and third party nondisclosure and assignment agreements. With respect to applications to register trademarks that have not yet been accepted, we cannot assure you that such applications to register trademarks that have not yet been accepted, we cannot assure you that such applications will be approved. Third parties may oppose the trademark applications, seek to cancel existing registrations or otherwise challenge our use of the trademarks. If they are successful, we could be forced to re-brand our products and services, which could result in loss of brand recognition, and could require us to devote resources to advertising and marketing new brands. Because of the differences in foreign trademark, patent and other laws concerning proprietary rights, our intellectual property rights may not receive the same degree of protection in one country as in another. Our failure to obtain or maintain adequate protection of our intellectual property rights for any reason could have a material adverse effect on our business, financial condition and results of operations.

 

Pursuant to our license agreements with subsidiaries of CKX, we have the right to use intellectual property or certain other proprietary rights related to Elvis Presley and Muhammad Ali that are owned or controlled by, or licensed to such CKX subsidiaries, including, without limitation, certain trademarks owned in connection with the design, construction, operation, advertising and promotion of certain real estate properties and the design, manufacture, sale and promotion of themed merchandise. If we wish to (i) use the trademarks in connection with the design, construction, operation and promotion of properties or attractions or the design, manufacture, sale, and promotion of related merchandise, in each case, outside the countries and product classes in which the trademarks are presently registered or where applications for registrations are pending, or (ii) use the trademarks in connection with products or services for which they have not been registered, we may request that the relevant CKX subsidiary register the trademark(s) in such territory or for such products or services and such CKX subsidiary will file, at its sole costs and expense, an application for registration of the applicable trademark(s) in the requested territory or product class and will take all other actions that are reasonably necessary to pursue such applications. Notwithstanding the foregoing, each CKX subsidiary may refuse to file a new application for good cause.

 

With respect to other Elvis Presley or Muhammad Ali-related trademarks that are not owned by such CKX subsidiaries, or similar thereto or derivative thereof, and that we adopt for use in connection with a themed property in accordance with the license agreements, we have the right to own such trademarks and file such applications and registrations for use solely in connection with hotel and casino services (but not gaming or gambling equipment or products), in the case of Elvis Presley related trademarks, and lodging property services in the case of Muhammad Ali-related trademarks.

 

In February 2005, CKX acquired 85% of Elvis Presley Enterprises Inc. and 85% of Elvis Presley Enterprises, LLC, which together own the name, image, likeness, certain trademarks and other intellectual property related to Elvis Presley. The Presley acquisition was effected pursuant to an agreement with The Promenade Trust, whose sole beneficiary is Lisa Marie Presley. The Trust historically directly owned and operated the assets and businesses of Elvis Presley which existed at the time of his death and owned and operated the businesses and assets acquired and/or created after Elvis’ death through its ownership of 100% of Elvis Presley Enterprises, Inc. Prior to consummation of the Presley Acquisition, the Trust contributed the Presley assets and businesses not owned by Elvis Presley Enterprises Inc. to a newly formed Tennessee limited liability company, Elvis Presley Enterprises, LLC. As a result of the acquisition of Elvis Presley Enterprises, Inc. and Elvis Presley Enterprises LLC as described above, CKX succeeded to ownership and control of the intellectual property held in such companies.

 

In April 2006, CKX acquired from Muhammad Ali an 80%-interest in the name, image, likeness and all other rights of publicity of Muhammad Ali, certain trademarks owned by Mr. Ali and his affiliates and the rights to all existing Ali license agreements. CKX contributed these assets to, and operates the Muhammad Ali business through, Muhammad Ali Enterprises, LLC, which was formerly named G.O.A.T. LLC.

 

Our rights to the Elvis Presley and Muhammad Ali-related intellectual property are only those as are specifically set forth in the respective license agreements. We may only exploit such intellectual property in the categories and in the manners specifically provided for in the agreements. Elvis Presley Enterprises and Muhammad Ali Enterprises exploit their intellectual property in numerous commercial categories to which we have no right. We do not participate in any way in such commercial exploitations nor can we prevent such uses.

 

FX Real Estate and Entertainment Inc. was recently organized as a Delaware corporation in preparation for the CKX Distribution. On September 26, 2007, holders of common membership interests in FX Luxury Realty, LLC, a Delaware limited liability company, exchanged all of their common membership interests for shares of common stock of FX Real Estate and Entertainment. Following this reorganization, FX Real Estate and Entertainment owns 100% of the outstanding common membership interests of FX Luxury Realty. We hold our assets and conduct our operations through our subsidiary FX Luxury Realty and its subsidiaries. All references to FX Real Estate and Entertainment for the periods prior to the date of the reorganization shall refer to FX Luxury Realty and its consolidated subsidiaries. For all periods as of and subsequent to the date of the reorganization, all references to FX Real Estate and Entertainment shall refer to FX Real Estate and Entertainment and its consolidated subsidiaries, including FX Luxury Realty.

 

Prior to May 11, 2007, the date upon which Flag Luxury Properties contributed its interests in the Metroflag entities which directly owned 50% of the Park Central site to FX Luxury Realty, FX Luxury Realty was a company with no operations. The following summary historical data is derived from the financial statements of FX Real Estate and Entertainment, FX Luxury Realty and Metroflag (as predecessor) appearing elsewhere in this prospectus and should be read in conjunction with our consolidated financial statements and notes thereto and Metroflag’s Combined Financial Statements and Notes thereto, included elsewhere in this prospectus, as well as the information appearing in “Unaudited Pro Forma Condensed Consolidated Financial Information,” “Selected Historical Financial Information” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

The Unaudited Pro Forma Condensed Consolidated Financial Information is being presented to reflect the pro forma impact of (i) the consummation of the various transactions that resulted in our acquisition of the 50% of the Metroflag entities that we did not already own on July 5, 2007 and the related financing and (ii) the consummation of the rights offering and use of the related proceeds.

 

Purchase of Additional 50% Interest in Metroflag

 

On July 6, 2007, we acquired the 50% we did not own of the Metroflag entities that collectively own the Park Central site. As a result of this purchase, we own 100% of Metroflag and have consolidated the operations of Metroflag from this date. The total consideration paid for the remaining 50% interest in Metroflag was $180 million.

 

Park Central Loan

 

On July 6, 2007, Metroflag increased the size of its senior loan from an affiliate of Credit Suisse from $370 million to $475 million. The loan is secured by Metroflag’s interest in the Park Central site. The additional loan proceeds were used to provide funding for the acquisition of the other 50% of Metroflag and to increase the amount held by Metroflag in escrow accounts to fund future pre-development spending and interest on the debt. The loans, which are comprised of three separate tranches, expire on July 6, 2008, but can be extended for up to two six month periods by Metroflag, subject to specified conditions.

 

Rights Offering and Use of Related Proceeds

 

Pursuant to this prospectus, we are distributing in a rights offering to Holders at no charge transferable subscription rights to purchase one share of our common stock for every two shares of common stock owned as of the Record Date at a cash subscription price of $10.00 per share. No fractional subscription rights will be distributed in the rights offering. Therefore, each Holder will receive such number of transferable subscription rights equal to the number of shares of our common stock owned as of the Record Date that are evenly divisible by two. Anticipated proceeds are expected to be approximately $98.7 million, for a fully subscribed issuance of 9,871,674 shares of common stock. Robert F.X. Sillerman, our Chairman and Chief Executive Officer, and The Huff Alternative Fund, L.P., one of our principal stockholders, have agreed to purchase shares that are not otherwise subscribed for in the rights offering, if any, at the same $10.00 per share subscription price. The first $76 million of proceeds from the rights offering will be used to satisfy certain current obligations as more fully described under “Use of Proceeds.”

Basis of Presentation of Unaudited Pro Forma Condensed Consolidated Financial Information

 

Our Unaudited Pro Forma Condensed Consolidated Balance Sheet as of December 31, 2007 reflects the receipt and use of the related proceeds from the rights offering and the issuance of 9,871,674 shares of our common stock (assuming full subscription in the rights offering) as if the rights offering had been completed on December 31, 2007. The number of shares outstanding prior to the rights offering of 39,290,247 shares as of December 31, 2007 represent the actual number of shares outstanding on December 31, 2007.

 

Our Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 2007 is presented as if we had completed on January 1, 2007 (i) the various transactions that resulted in our acquisition of the 50% interest of Metroflag that we did not already own on July 6, 2007 and the related financing and (ii) the rights offering and use of the related proceeds.

 

Metroflag is our predecessor company. Therefore, the operations of Metroflag are reflected in the pro forma adjustments for the year ended December 31, 2007.

 

Our Unaudited Pro Forma Condensed Consolidated Financial Statements are based upon available information and upon certain estimates and assumptions as described in the Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements. These estimates and assumptions are preliminary and have been made solely for purposes of developing these Unaudited Pro Forma Condensed Consolidated Financial Statements. The allocation of the purchase price of Metroflag is preliminary and may be adjusted for changes in the valuations of the fair value of the assets acquired and liabilities assumed.

 

Our Unaudited Pro Forma Condensed Consolidated Financial Statements are based upon, and should be read in conjunction with, our historical financial statements and the related notes to such financial statements and the historical financial statements of Metroflag, the predecessor to FX Luxury Realty.

 

Our Unaudited Pro Forma Condensed Consolidated Financial Statements do not purport to be indicative of the results that would have been reported had such events actually occurred on the dates specified. Metroflag derived revenue primarily from commercial leasing activities on the properties comprising the Park Central site. Due to the fact that our business plan going forward involves a redevelopment of the Park Central site, we will cease engaging in these commercial leasing activities as our development projects are implemented. As such, our Unaudited Pro Forma Condensed Consolidated Financial Statements are not representative of our planned business going forward or indicative of our future operating and financial results. These financial statements should not be relied upon by you to evaluate our business and financial condition going forward.

 

See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

 

Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

 

(amounts in thousands)

 

 

These adjustments are necessary to present our pro forma results of operations for the year ended December 31, 2007 to reflect our purchase of the additional 50% interest in Metroflag on July 6, 2007 and the related financing and the rights offering and use of the related proceeds.

 

 

 

 

 

 

FX Luxury Realty and Metroflag have historically operated as partnerships and, therefore, have not been subject to income taxes. As a result of the reorganization transactions described elsewhere herein, we are a corporation subject to corporate income taxes. No adjustments have been reflected for income taxes in the accompanying pro forma condensed consolidated statements of operations, as we have incurred substantial losses during the periods presented in the pro forma financial statements and have substantial doubts about our ability to utilize any future tax benefits arising therefrom.

 

We expect to incur incremental corporate expenses over our historical expense levels as we pursue redevelopment of the Park Central site and pursues similar real estate and attraction based projects throughout the world. We have yet to commit to any significant incremental expenses; the degree and timing of committing to and incurring such expenses is dependent on our executing our business plans; therefore, no pro forma adjustment can be estimated at this time.

 

FX Real Estate and Entertainment Inc. was recently organized as a Delaware corporation in preparation for the CKX Distribution. On September 26, 2007, holders of common membership interests in FX Luxury Realty, LLC, a Delaware limited liability company, exchanged all of their common membership interests for shares of common stock of FX Real Estate and Entertainment. Following this reorganization, FX Real Estate and Entertainment owns 100% of the outstanding common membership interests of FX Luxury Realty. We hold our assets and conduct our operations through FX Luxury Realty and its subsidiaries. All references to FX Real Estate and Entertainment for the periods prior to the date of the reorganization shall refer to FX Luxury Realty and its consolidated subsidiaries. For all periods as of and subsequent to the date of the reorganization, all references to FX Real Estate and Entertainment shall refer to FX Real Estate and Entertainment and its consolidated subsidiaries, including FX Luxury Realty.

 

Prior to May 11, 2007, the date upon which Flag Luxury Properties contributed its interests in the Metroflag entities which directly owned 50% of the Park Central site to FX Luxury Realty, FX Luxury Realty was a company with no operations. The following historical data is derived from the financial statements of FX Real Estate and Entertainment, FX Luxury Realty and Metroflag (as predecessor) appearing elsewhere in this prospectus and should be read in conjunction with our consolidated financial statements and notes thereto and Metroflag’s Combined Financial Statements and Notes thereto, included elsewhere in this prospectus, as well as the information appearing in “Unaudited Pro Forma Condensed Consolidated Financial Information” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

Our selected historical financial data for the period from May 11, 2007 through December 31, 2007 includes the results of Metroflag accounted for under the equity method of accounting through July 5, 2007 and reflect the consolidation of Metroflag from July 6, 2007 through December 31, 2007. Our selected statement of operations data for the period from January 1, 2007 to May 10, 2007 reflects the results of Metroflag for the entire period (as predecessor).

 

Our selected historical financial data for each of the four years ended December 31, 2006 and as of December 31, 2003, 2004, 2005 and 2006 is represented by Metroflag (as predecessor) which have been derived from Metroflag’s audited Combined Financial Statements and Notes thereto, as of December 31, 2005 and 2006, and for each of the three years in the period ended December 31, 2006, and should be read in conjunction therewith. Metroflag’s selected historical financial data as of December 31, 2003 and 2004 and for the year ended December 31, 2003 have been derived from the unaudited Combined Financial Statements and Notes thereto as of December 31, 2003 and 2004 and for the year ended December 31, 2003, which are not included within this prospectus.

 

In the opinion of management, Metroflag’s unaudited financial statements have been prepared on the same basis as the audited financial statements and contain all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of our results of operations for these periods and financial position at those dates. This prospectus includes historical financial statements and pro forma financial information of our predecessor, Metroflag, based on its historical businesses and operations. Metroflag derived revenue primarily from commercial leasing activities on the properties comprising the Park Central site. Due to the fact that our business plan going forward involves a phased redevelopment of the Park Central site, we will cease engaging in these commercial leasing activities as our development projects are implemented. As such, the historical financial statements included in this prospectus are not representative of our planned business going forward or indicative of our future operating and financial results. These financial statements should not be relied upon by you to evaluate our business and financial condition going forward.