##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-QSB
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended: June 30, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE EXCHANGE ACT
 For
the transition period
from:  to
 Commission
file number: 000-30375
 Las Vegas Gaming, Inc.
  Nevada
    
    88-0392994(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
  
   
  
  þ o
 o þ
 APPLICABLE ONLY TO CORPORATE ISSUERS
  o þ




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##### Table of Contents



LAS VEGAS GAMING, INC.
 FORM 10-QSB
 TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATION
    
    
    1Item 1. Financial Statements
    
    
    1Consolidated Balance Sheets
    
    
    1Consolidated Statements of Operations
    
    
    2Consolidated Statements of Stockholders Equity
    
    
    3Consolidated Statements of Cash Flow
    
    
    4Notes to Unaudited Consolidated Financial Statements
    
    
    5Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    13Critical Accounting Policies and Estimates
    
    
    13Recent Accounting Pronouncements
    
    
    15Results of Operations
    
    
    15Liquidity and Capital Resources
    
    
    16Off Balance Sheet Financing
    
    
    19Qualitative and Quantitative Disclosures about Market Risk
    
    
    19Item 3.Controls and Procedures
    
    
    19PART II  OTHER INFORMATION
    
    
    21Item 1. Legal Proceedings
    
    
    21Item 2. Unregistered Sales of Equity Securities
    
    
    21Item 3.  Defaults Upon Senior Securities
    
    
    22Item 4. Submission of Matters to a Vote of Security Holders
    
    
    22Item 5. Other Information
    
    
    22Item 6. Exhibits
    
    
    22Exhibit 31.1Exhibit 31.2Exhibit 32.1
  PortalVision, PromoVision,
SlottoVision, AdVision, Nevada Numbers, The Million Dollar Ticket,
and Nevada Keno are our trademarks. This report may contain
trademarks and trade names of other parties, corporations, and
organizations.  i 




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 LAS VEGAS GAMING, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 December 31,
    
    
    June 30,2005
    
    
    2006(Unaudited)ASSETSCurrent assetsCash and cash equivalents
    
    $
    1,672,381
    
    
    $
    2,667,155Accounts receivable, net of allowance of $27,516
    
    
    729,590
    
    
    
    473,499Inventory
    
    
    418,015
    
    
    
    508,112Prepaid expenses, deposits and other
    
    
    66,923
    
    
    
    62,876Jackpot reserve deposits
    
    
    4,180,134
    
    
    
    3,999,4737,067,043
    
    
    
    7,711,115Equipment and software, net of accumulated depreciation
    
    
    613,645
    
    
    
    549,388Other assetsGoodwill
    
    
    955,277
    
    
    
    955,277Trademarks, copyrights, patents and other identifiable intangibles,
net of accumulated amortization of $163,488 and $413,822
    
    
    833,597
    
    
    
    2,035,597Due from officers, including accrued interest
    
    
    68,942
    
    
    
    Deferred finance charges
    
    
    151,135
    
    
    
    226,950Prepaid expenses, deposits and other
    
    
    187,401
    
    
    
    57,587$
    9,877,040
    
    
    $
    11,535,914LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable and accrued expenses
    
    $
    776,791
    
    
    $
    460,190Current portion of long-term debt
    
    
    588,434
    
    
    
    1,232,920Progressive jackpot liability
    
    
    1,224,719
    
    
    
    1,332,3092,589,944
    
    
    
    3,025,419Long-term debt
    
    
    3,011,163
    
    
    
    2,650,170Conditionally redeemable equitySeries A common stock, 75,000 shares
    
    
    25,000
    
    
    
    Series B convertible preferred stock, $.001 par, 350,000 shares
authorized, 346,140 shares issued and outstanding
    
    
    1,730,700
    
    
    
    1,730,7001,755,700
    
    
    
    1,730,700Stockholders equityConvertible preferred stock, $.001 par, 10,000,000 shares authorized:Series A: 536,400 shares issued and outstanding
    
    
    536
    
    
    
    536Series C: 56,000 and 50,000 shares issued and outstanding
    
    
    56
    
    
    
    50Series D: 125,000 shares issued and outstanding
    
    
    125
    
    
    
    125Series A common stock $.001 par, 25,000,000 shares authorized,
8,465,020 and 9,359,680 shares issued and outstanding
    
    
    8,465
    
    
    
    9,360Additional paid-in capital
    
    
    15,558,130
    
    
    
    19,136,521Deferred compensation
    
    
    (176,781
    )
    
    
    (92,918
    )Less stock subscription notes receivable from officers and stockholders
    
    
    (320,000
    )
    
    
    Deficit
    
    $
    (12,550,298
    )
    
    $
    (14,924,049
    )2,520,233
    
    
    
    4,129,625$
    9,877,040
    
    
    $
    11,535,914
   1 




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##### Table of Contents



LAS VEGAS GAMING, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2005
    
    
    2006
    
    
    2005
    
    
    2006RevenueCasino games
    
    $
    394,409
    
    
    $
    361,550
    
    
    $
    802,260
    
    
    $
    817,283Product sales
    
    
    644,683
    
    
    
    341,998
    
    
    
    1,182,795
    
    
    
    796,611Other
    
    
    438,242
    
    
    
    452,230
    
    
    
    951,222
    
    
    
    878,1021,477,334
    
    
    
    1,155,778
    
    
    
    2,936,277
    
    
    
    2,491,996Costs and expensesCasino games
    
    
    674,222
    
    
    
    285,536
    
    
    
    1,036,888
    
    
    
    812,407Product costs
    
    
    441,678
    
    
    
    241,381
    
    
    
    812,128
    
    
    
    556,387Other
    
    
    310,601
    
    
    
    320,793
    
    
    
    690,780
    
    
    
    650,3541,426,501
    
    
    
    847,710
    
    
    
    2,539,796
    
    
    
    2,019,148Gross operating income
    
    
    50,833
    
    
    
    308,068
    
    
    
    396,481
    
    
    
    472,848Other operating expensesSelling, general, and
administrative expenses
    
    
    553,046
    
    
    
    919,377
    
    
    
    1,133,916
    
    
    
    1,579,072Research and development
    
    
    189,878
    
    
    
    171,157
    
    
    
    387,046
    
    
    
    373,157Depreciation and amortization
    
    
    112,754
    
    
    
    194,682
    
    
    
    206,664
    
    
    
    341,710855,678
    
    
    
    1,285,216
    
    
    
    1,727,626
    
    
    
    2,293,939Operating loss
    
    
    (804,845
    )
    
    
    (977,148
    )
    
    
    (1,331,145
    )
    
    
    (1,821,091
    )Other income and expenseFinance costs
    
    
    
    
    
    
    (519,670
    )
    
    
    
    
    
    
    (660,997
    )Interest income and other
    
    
    28,117
    
    
    
    61,364
    
    
    
    193,552
    
    
    
    108,337Net loss
    
    $
    (776,728
    )
    
    $
    (1,435,455
    )
    
    $
    (1,137,592
    )
    
    $
    (2,373,751
    )Net loss per share
    
    $
    (0.10
    )
    
    $
    (0.15
    )
    
    $
    (0.15
    )
    
    $
    (0.26
    )Weighted average shares outstanding
    
    
    7,652,971
    
    
    
    9,397,435
    
    
    
    7,442,679
    
    
    
    9,129,971
   2 




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##### Table of Contents



LAS VEGAS GAMING, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 (UNAUDITED)
 Series A
    
    
    Series C
    
    
    Series DConvertible
    
    
    Convertible
    
    
    ConvertiblePreferred
    
    
    Preferred
    
    
    Preferred
    
    
    Common
    
    
    Additional
    
    
    Due FromStock Par
    
    
    Stock Par
    
    
    Stock Par
    
    
    Stock Par
    
    
    Paid-In
    
    
    Officer /Value
    
    
    Value
    
    
    Value
    
    
    Value
    
    
    Capital
    
    
    Stockholder
    
    
    DeficitBalances, January 1, 2005
    
    $
    541
    
    
    $
    76
    
    
    $
    
    
    
    $
    7,049
    
    
    $
    13,852,317
    
    
    $
    (320,000
    )
    
    $
    (9,625,337
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,924,961
    )Issuance of Series D convertible
preferred stock and Series A
common stock
    
    
    
    
    
    
    
    
    
    
    125
    
    
    
    125
    
    
    
    499,750
    
    
    
    
    
    
    
    Conversion of warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    9,990
    
    
    
    
    
    
    
    Conversion of options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    180
    
    
    
    89,820
    
    
    
    
    
    
    
    Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    444,296
    
    
    
    
    
    
    
    Series A common stock issued in
connection with salary
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    596
    
    
    
    297,437
    
    
    
    
    
    
    
    Series A common stock issued in
connection with acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    400
    
    
    
    399,600
    
    
    
    
    
    
    
    Consulting fee re: money raising
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (35,000
    )
    
    
    
    
    
    
    Convertible preferred stock to
Series A common stock
    
    
    (5
    )
    
    
    (20
    )
    
    
    
    
    
    
    105
    
    
    
    (80
    )
    
    
    
    
    
    
    Balances, December 31, 2005
    
    $
    536
    
    
    $
    56
    
    
    $
    125
    
    
    $
    8,465
    
    
    $
    15,558,130
    
    
    $
    (320,000
    )
    
    $
    (12,550,298
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,373,751
    )Exercise of warrants and options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60
    
    
    
    87,690
    
    
    
    
    
    
    
    Issuance of warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,088,652
    
    
    
    
    
    
    
    Conversion of conditionally
redeemable equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75
    
    
    
    24,925
    
    
    
    
    
    
    
    Series C convertible preferred
stock to Series A common stock
    
    
    
    
    
    
    (6
    )
    
    
    
    
    
    
    30
    
    
    
    (24
    )
    
    
    
    
    
    
    Series A common stock issued in
connection with acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    700
    
    
    
    1,399,300
    
    
    
    
    
    
    
    Series A common stock issued to
consultants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    110
    
    
    
    219,890Shares acquired from
officer/stockholder
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (80
    )
    
    
    (242,042
    )
    
    
    190,000
    
    
    
    Payment received from
officer/stockholder
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    130,000
    
    
    
    Balances, June 30, 2006
    
    $
    536
    
    
    $
    50
    
    
    $
    125
    
    
    $
    9,360
    
    
    $
    19,136,521
    
    
    $
    
    
    
    $
    (14,924,049
    )
   3 




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##### Table of Contents



LAS VEGAS GAMING, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOW
 (UNAUDITED)
 Six Months Ended June 30,2005
    
    
    2006Operating activitiesNet loss
    
    $
    (1,137,593
    )
    
    $
    (2,373,751
    )Depreciation and amortization of property
    
    
    154,332
    
    
    
    219,376Amortization of intangibles and financing costs
    
    
    52,333
    
    
    
    712,068Stock-based compensation
    
    
    197,522
    
    
    
    173,854Other
    
    
    (10,504
    )
    
    
    Accounts receivable
    
    
    51,136
    
    
    
    256,092Inventories
    
    
    (746
    )
    
    
    (90,097
    )Prepaid expenses, deposits and other
    
    
    2,945
    
    
    
    5,010Jackpot reserve deposits
    
    
    (142,073
    )
    
    
    180,661Accounts payable and accrued expenses
    
    
    10,026
    
    
    
    (228,850
    )Progressive jackpot liability
    
    
    137,537
    
    
    
    107,590Deferred compensation
    
    
    
    
    
    
    37,329Net cash used in operating activities
    
    
    (685,085
    )
    
    
    (1,000,718
    )Investing activitiesPurchase of property and equipment
    
    
    (37,164
    )
    
    
    (79,452
    )Business acquisition
    
    
    (500,000
    )
    
    
    Collection of receivable from officer/shareholder
    
    
    8,573
    
    
    
    25,179Collection of loan to officer
    
    
    
    
    
    
    130,000Net cash provided by (used in) investing activities
    
    
    (528,591
    )
    
    
    75,727Financing activitiesLoan issue costs
    
    
    
    
    
    
    (167,000
    )Proceeds from litigation settlements
    
    
    226,912
    
    
    
    90,486Net proceeds from Senior Secured Convertible Note
    
    
    
    
    
    
    2,000,000Proceeds from other debt borrowings
    
    
    299,999
    
    
    
    Repayment of other debt borrowings
    
    
    
    
    
    
    (3,721
    )Issuance of common and preferred stock
    
    
    100,596
    
    
    
    Net cash provided by financing activities
    
    
    627,507
    
    
    
    1,919,765Net increase (decrease) in cash and cash equivalents
    
    
    (586,169
    )
    
    
    994,774Cash and cash equivalents, beginning of period
    
    
    586,169
    
    
    
    1,672,381Cash and cash equivalents, end of period
    
    $
    
    
    
    $
    2,667,155Non-cash investing and financing activitiesSeries A common stock issued for assets/acquisition
    
    $
    400,000
    
    
    $
    1,400,000Liabilities assumed in business acquisition
    
    
    278,487
    
    
    
    Elimination of conditionally redeemable equity
    
    
    
    
    
    
    25,000Issuance of warrants
    
    
    
    
    
    
    2,088,652Exercise of stock warrants and options in payment
of accrued bonus
    
    
    
    
    
    
    87,750Conversion of Series C convertible preferred stock
to Series A common stock
    
    
    
    
    
    
    30Series A common stock acquired from
officer/shareholder in payment of stock
subscription notes receivable
    
    
    
    
    
    
    242,122
   4 




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##### Table of Contents



LAS VEGAS GAMING, INC. AND SUBSIDIARIES
 
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 1. Nature of operations:
  
    
    the April 2003 acquisition of Triple Win in Nevada, Inc., a bingo supply
distributor, whereby we acquired bingo equipment and bingo service agreements;
    
    the July 2003 acquisition of Imagineering Systems, Inc., a manufacturer of keno
equipment and provider of a keno operating system, whereby we acquired keno equipment
and the platform for our current keno operating system;
    
    the February 2005 acquisition of AdLine Gaming, Inc., a subsidiary of AdLine
Network, LLC, whereby we acquired significant technology and engineering talent that
supports the PortalVision system and its related applications; and
    
    the February 2006 acquisition from AdLine Network, LLC of technology related to the
ability to accept wagers through WagerVision from the homes of players.
   2. Basis of Presentation
     5 




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##### Table of Contents



LAS VEGAS GAMING, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  3. Jackpot Reserve Deposits
  4. Equipment and Software
  June 30, 2006December 31, 2005
    
    
    UnauditedSoftware
    
    $
    248,911
    
    
    $
    248,911Production equipment
    
    
    1,117,301
    
    
    
    1,191,150Equipment, furniture, and fixtures
    
    
    257,936
    
    
    
    263,5401,624,148
    
    
    
    1,703,601Less accumulated depreciation
    
    
    1,010,503
    
    
    
    1,154,213$
    613,645
    
    
    $
    549,388
 5. Debt
      6 




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##### Table of Contents



LAS VEGAS GAMING, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
   June 30, 2006December 31, 2005
    
    
    UnauditedSenior Secured Convertible Notes
    
    $
    3,000,000
    
    
    $
    3,196,727Settlement due third parties
    
    
    509,992
    
    
    
    600,479Other notes payable
    
    
    89,605
    
    
    
    85,8843,599,597
    
    
    
    3,883,090Less amounts due within one year
    
    
    588,434
    
    
    
    1,232,920$
    3,011,163
    
    
    $
    2,650,170
   6. Stockholders Equity
    7 




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##### Table of Contents



LAS VEGAS GAMING, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
      Stock
Warrants and Options.
    8 




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##### Table of Contents



LAS VEGAS GAMING, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    Beginning
Balance, January 1, 2006
    
    
    
    5,132,922$
    2.33Granted
    
    
    
    3,305,000$
    1.77Exercised
    
    
    
    (80,000
    )$
    1.72Forfeited
    
    
    
    (1,555,181
    )$
    2.09Ending
Balance, June 30, 2006
    
    
    
    6,802,741$
    2.21
  Due from Officers/Stockholders.
 Redeemable Preferred Stock
  9 




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##### Table of Contents



LAS VEGAS GAMING, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity
 7. Progressive Jackpots
  December 31, 2005ProgressiveJackpot
    
    
    GrossLiability
    
    
    CommitmentNevada NumbersPresent value of $5.0 million base
progressive jackpot, payable in 20 equal
annual installments using a 4.60% discount
rate, the prevailing 20-year Treasury Bond
rate
    
    $
    3,372,291
    
    
    $
    3,372,291Less portion insured through: Conventional
insurance providers
    
    
    (2,900,000
    )
    
    
    Other participants
    
    
    (236,146
    )
    
    
    Uninsured portion of base progressive jackpot
    
    
    236,145
    
    
    
    Present value at 4.60% of the $1,197,766
increase to the progressive jackpot meter
    
    
    807,843
    
    
    
    807,843Other Games
    
    
    180,731
    
    
    
    1,180,731$
    1,224,719
    
    
    $
    5,360,865
 June 30, 2006ProgressiveJackpot
    
    
    GrossLiability
    
    
    CommitmentNevada NumbersPresent value of $5,000,000 base progressive
jackpot, payable in 20 equal annual
installments using a 5.31% discount rate, the
prevailing 20-year Treasury Bond
    
    $
    3,196,435
    
    
    $
    3,196,435Present value at 5.31% of the $1,256,147
increase to the progressive jackpot meter
    
    
    803,038
    
    
    
    803,038Less portion insured through: Conventional
insurance providers
    
    
    (2,900,000
    )
    
    
    Other Games
    
    
    232,836
    
    
    
    1,232,836$
    1,332,309
    
    
    $
    5,232,309
   10 




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##### Table of Contents



LAS VEGAS GAMING, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 8. Acquisition of Technology
  9. Segment Information
   Six months ended June 30,2005
    
    
    2006RevenueCasino Games
    
    $
    802,260
    
    
    $
    817,283Product Sales
    
    
    1,182,795
    
    
    
    796,611Other
    
    
    951,222
    
    
    
    878,102$
    2,936,277
    
    
    $
    2,491,996Operating income (loss)Casino Games
    
    $
    (234,628
    )
    
    $
    4,876Product Sales
    
    
    370,667
    
    
    
    240,224Other
    
    
    260,442
    
    
    
    227,748Unallocated
    
    
    (1,727,626
    )
    
    
    (2,431,806
    )(1331,144
    )
    
    
    (1,958,958
    )
 December 31, 2005
    
    
    June 30, 2006Identifiable assetsCasino Games
    
    $
    5,809,723
    
    
    $
    8,008,167Product Sales
    
    
    496,080
    
    
    
    527,591Other
    
    
    456,634
    
    
    
    455,122Unallocated
    
    
    3,114,603
    
    
    
    2,545,034$
    9,877,040
    
    
    $
    11,535,914
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LAS VEGAS GAMING, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  June 30,2005
    
    
    2006Capital expendituresCasino Games
    
    $
    94,005
    
    
    $
    43,680Product Sales
    
    
    5,318
    
    
    
    Other
    
    
    92,852
    
    
    
    24,914Unallocated
    
    
    90,501
    
    
    
    10,858$
    282,676
    
    
    $
    79,452
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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations.
 You should read the following discussion and analysis together with our unaudited consolidated
financial statements and the accompanying notes. This discussion contains forward-looking
statements, within the meaning of Section 27A of Securities Act of 1933, as amended, Section 21E of
the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act
of 1995, including statements regarding our expected financial position, business and financing
plans. Some of the forward-looking statements can be identified by the use of forward-looking terms
such as believes, expects, may, will, should, could, seek, intends, plans,
estimates, anticipates, or other comparable terms. Forward-looking statements involve inherent
risks and uncertainties which could cause actual results to differ materially from those in the
forward-looking statement, including those discussed herein and elsewhere in our Form 10-KSB for
the year ended December 31, 2005. We caution readers not to place undue reliance upon any such
forward-looking statements, which speak only as of the date made. These historical financial
statements may not be indicative of our future performance.
 Overview
   
 Critical Accounting Policies and Estimates
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Revenue Recognition
 PortalVision.
 Casino Games.
 Products.
 Other.
 Goodwill
  Long-lived Assets
 Accounting for Impairment of Long-lived Assets
 Income
Taxes
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Recent Accounting Pronouncements
 Accounting for Certain Hybrid Financial
Instruments Accounting for Derivative Instruments and Hedging Activities Accounting for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities  a replacement of FASB Statement No. 125
 Accounting
for Uncertainty in Income Taxes  An Interpretation of FASB
Statement No. 109 (FIN 48).
 
 Results of Operations
 Six Months Ended June 30, 2006 Compared with Six Months Ended June 30, 2005
 Revenue.
   Costs and Expenses.
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Other Operating Expenses.
  Finance
Costs.
 Interest Income and Other.
 
 Liquidity and Capital Resources
 Cash
  Capital Expenditures
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
    
    the purchase of LCD monitors associated with the increased placement of Gamblers
Bonus Million Dollar Ticket through United Coin Machine Company and
    
    the purchase of PCUs for the rollout of our PortalVision System.
  Sources of Capital
   
    
    the right to prepay, in cash, all or a portion of the CAMOFI note for an amount
equal to 115% of the principal amount to be repaid;
    
    the obligation to convert 30% of the aggregate principal amount outstanding on the
CAMOFI note into shares of Series A common stock at the lesser of $1.345 or 75% of the
effective price per share received in any equity financing of at least $10.0 million
upon the closing of such financing;
    
    the obligation to prepay, in cash, 110% of the aggregate principal amount of the
CAMOFI note not converted to Series A common stock upon the closing of any equity
financing of at least $10.0 million;
    
    for as long as the CAMOFI note is outstanding, we must make quarterly financing fee
payments of $125,000 to CAMOFI on July 1, October 1, January 1, and April 1 of each
year, which commenced July 1, 2006;
    
    on the first business day of each month, commencing on April 2, 2007 and ending upon
the full redemption of the note, the mandatory redemption of $208,333 on the CAMOFI
note, including other amounts provided in the CAMOFI note upon certain contingencies;
and
    
    the obligation to repay an amount equal to 120% of the principal amount to be repaid
upon the occurrence of an Event of Default, which is defined to include the failure
to pay any amount due, the failure to observe certain covenants, the default under
certain material agreements, the breach of our representations and warranties, a change
in control, and the failure to meet our registration obligations.
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
    
    a Warrant Agreement to purchase 2,500,000 shares of our Series A common stock at an
exercise price of $1.48 for five years beginning on March 31, 2006, but subject to the
limitation that the shares issued upon exercise, together with shares issuable under
the CAMOFI note, cannot result in CAMOFI owning more than 4.99% of our issued and
outstanding shares of Series A common stock;
    
    a Registration Rights Agreement that requires us to file with the SEC by July 29,
2006, and have declared effective by the SEC by September 27, 2006, a registration
statement for the offer and sale of 125% of the following:
 -
    
    all of the shares of Series A common stock issuable upon
conversion of the CAMOFI note assuming all of the CAMOFI note is converted;-
    
    all shares issuable as amortization payments on the CAMOFI note
assuming all permissible amortization payments are made in shares of Series A
common stock and the CAMOFI note is held until maturity;-
    
    all of the shares of Series A common stock issuable upon
exercise of the Warrant Agreement;-
    
    any securities issued or issuable upon any stock split,
dividend, or other distribution recapitalization, or similar event with respect
to the foregoing; and-
    
    any additional shares issuable in connection with any
anti-dilution provision in the CAMOFI note or Warrant Agreement.
 
    
    a Security Agreement that secures the repayment of the CAMOFI note and our
performance under the related agreements and grants to CAMOFI a security interest in
our assets, including all goods, all contract rights and intangibles, all accounts,
documents, letter-of-credit rights, instruments and chattel paper, all commercial tort
claims, all deposit accounts and cash, excluding cash tied to jackpot requirements, all
investment property, all supporting obligations, all filed, records, books of account,
business papers and computer programs, and all products and proceeds of the forgoing
collateral.
    
    a Subsidiary Guarantee that obligates our subsidiaries to guarantee our performance
under the CAMOFI note and related agreements.
    
    a Lock-Up Agreement that restricts Russell R. Roth from selling his shares of Series
A common stock for a period of six months following the effective date of the
registration statement.
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Outlook
   
 Off Balance Sheet Financing
  
 Qualitative and Quantitative Disclosures about Market Risk
  
 Item 3. Controls and Procedures
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PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 2. Unregistered Sales of Equity Securities.
  1.
    
    In April 2006, in connection with our bridge financing, we issued to CAMOFI
Master LDC warrants to purchase 2,500,000 shares of our Series A common stock at an
exercise price of $1.48 per share, subject to adjustment, and a $5.0 million senior
secured convertible note convertible into Series A common stock at $1.345 per share,
subject to adjustment. The warrant and the note replaced a previously issued warrant
to purchase 1,050,000 shares of our Series A common stock and a $3.0 million senior
secured convertible note.2.
    
    In April 2006, we issued 60,000 shares of Series A common stock to one
individual upon the exercise of outstanding warrants and options.3.
    
    In April 2006, we issued an aggregate of 110,000 shares of Series A common
stock to two consultants in consideration for services rendered.4.
    
    In May 2006, we issued warrants to purchase an aggregate of 35,000 shares of
Series A common stock at an exercise price of $2.00 per share to two employees as
consideration for services rendered.5.
    
    In June 2006, we issued 30,000 shares of Series A common stock to one investor
upon conversion of 6,000 shares of Series C convertible preferred stock at a ratio of
five shares of Series A common stock for one share of Series C convertible preferred
stock. We issued the shares of Series A common stock in reliance upon Section 3(a)(9)
of the Securities Act of 1933 as an exchange by an issuer with an existing security
holder exclusively where no commission or other remuneration was paid or given directly
or indirectly for soliciting the exchange.6.
    
    In June 2006, we issued warrants to purchase an aggregate of 20,000 shares of
Series A common stock at an exercise price of $3.00 per share to two directors for
board compensation.7.
    
    In June 2006, we issued warrants to purchase an aggregate of 500,000 shares of
Series A common stock at an exercise price of $3.00 per share to two officers as an
inducement to employment.8.
    
    In June 2006, we issued 700,000 shares of Series A common stock to 12 members
of AdLine Network, LLC as consideration for a general waiver and release and the
acquisition of additional rights to technology in February 2006.9.
    
    In June 2006, we issued warrants to purchase an
aggregate of 20,000 shares of Series A common stock at an
exercise price of $3.00 per share to two consultants for services
rendered.
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Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  Abstentions/BrokerFor
    
    Against/Withheld
    
    Non-VotesRussell R. Roth
    
    
    4,502,461
    
    
    
    157,400
    
    
    
    Richard H. Irvine
    
    
    4,502,461
    
    
    
    157,400
    
    
    
    Kyleen A. Cane
    
    
    4,502,461
    
    
    
    157,400
    
    
    
    Stephen A. Crystal
    
    
    4,502,461
    
    
    
    157,400
    
    
    
    
 
 Item 5. Other Information.
  
 Item 6. Exhibits
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SIGNATURE
  Las Vegas Gaming, Inc.(Registrant)Date: August 14 , 2006
    
    By:
    
    /s/ Russell R. RothRussell R. RothIts:
    
    Chief Executive Officer,
Chairman and Secretary
(Principal Executive
Officer)
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EXHIBIT INDEX
 Exhibit
    
    Document Description31.1
    
    Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  24 