UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-Q








QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE


SECURITIES EXCHANGE ACT OF 1934





For the quarterly period ended December 31, 2010


Commission file number: 333-144973





LAS VEGAS RAILWAY EXPRESS, INC.


(Exact name of Registrant as Specified in its Charter)





DELAWARE
56-2646797(State of incorporation)
(IRS Employer Identification No.)





6650 Via Austi Parkway, Suite 170


Las Vegas, NV  89119


(Address of principal executive offices)





702-583-6715


(Issuer’s telephone number)










Securities registered pursuant to Section 12(b) of the Act: None





Securities registered pursuant to Section 12(g) of the Act:





COMMON STOCK, $0.0001 PAR VALUE


(Title of Class)










Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.





Yes [ X ]  No [   ]





Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes [   ] No [ X ]





Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  Yes [   ] No [ X ]





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.





Large accelerated filer [   ] Accelerated filer [   ] Non-accelerated filer [   ] (Do not check if a smaller reporting company) Smaller reporting company [ X ]





Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).


Yes [   ] No [ X]





Aggregate market value of Common Stock held by shareholders based on the closing price of the registrant's Common Stock on the OTCBB on December 31, 2010 was $5,333,079.31





Number of outstanding shares of common stock as of December 31, 2010 was 41,023,687.





Documents Incorporated by Reference:  None.





Transitional Small Business Disclosure Format (Check one):


Yes [   ]       No [ X ]














LAS VEGAS RAILWAY EXPRESS, INC.


TABLE OF CONTENTS





PART I FINANCIAL INFORMATION
PAGEItem 1.

Financial Statements:
4Condensed Consolidated Balance Sheet – December 31, 2010 (unaudited) and March 31, 2010
4Consolidated Statements of Income for the Nine and Three Months ended December 31, 2010 and 2009 (Unaudited)
5Consolidated Statements of Cash Flows for the Nine and Three Months Ended December 31, 2010 and 2009 (Unaudited)
6Notes to Condensed Consolidated Financial Statements (Unaudited)
7Item 2.

Management's Discussion and Analysis or Plan of Operation
12Item 3.

Quantitative and Qualitative Disclosures About Market Risk
15Item 4.

Controls and Procedures
17PART II OTHER INFORMATIONItem 1.

Legal Proceedings
19Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds
19Item 3.

Defaults upon Senior Securities
19Item 4.

Other Information
19Item 5.

Exhibit - Description
19SIGNATURES
20











3





PART I   FINANCIAL INFORMATION


Item 1.  Financial Statements (unaudited)





LAS VEGAS RAILWAY EXPRESS, INC.


CONSOLIDATED BALANCE SHEETS





December 31,


March 31,2010


2010ASSETS:

(unaudited)Current assets:Cash

$
240,963


$
5,871Other current assets


22,000



50,000Total current assets


262,693



55,871Property and equipment, net


59,272



59,272Other assets:Good will


843,697



843,697Total other assets


843,697



843,697TOTAL ASSETS

$
1,165,933


$
958,840LIABILITIES AND STOCKHOLDERS' DEFICITLIABILITIESCurrent liabilities:Current maturities notes payable

$
-


$
131,250Less current unamortized discount


-



-Current maturities of long-term debt less unamortized discount


-



131,250Short term note payable


50,000



55,000Accounts payable and accrued expenses


29,252



21.633Notes payable related party


-



20,725Stock subscription payable


640,000



800,000Liabilities to be disposed of, current


923,683



1,381,402Total current liabilities


1,642,935



2,410,010Long-term debt:Principle amount of notes payable


-



93,750Less unamortized discount


-



-Long-term debt less unamortized discount


-



93,750TOTAL LIABILITIES


1,642,935



2,503,760STOCKHOLDERS’ DEFICITCommon stock, par value $0.0001, 200,000,000 shares authorized,41,023,687 and 22,889,686 issued and outstanding, as ofDecember 31, 2010 and March 31, 2010, respectively


4,102



2,289Additional paid-in capital


8,655,513



6,464,307Accumulated earnings


(9,136,618
)


(8,011,516
)Total stockholders' deficit


(477,002
)


(1,544,920
)TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

$
1,165,933


$
958,840








See accompanying notes to consolidated financial statements.


4





LAS VEGAS RAILWAY EXPRESS, INC.


CONSOLIDATED STATEMENT OF OPERATIONS


(Unaudited)





For the Three

Months Ended


For the Three

Months Ended


For the Nine

Months Ended


For the Nine

Months EndedSeptember 30,


September 30,


September 30,


September 30,2010


2009


2010


2009(Restated)





(Restated)Revenues:

$
-


$
-


$
-


$
-Cost of Sales


-



-



-



-Gross Profit


-



-



-



-Expenses:Compensation and payroll taxes


220,366



-



544,642



-Selling, general and administrative


31,677



-



184,728



-Professional fees


81,663



-



457,526



-Depreciation expense


-



-



-



-Total expenses


333,706



-



1,186,896



-Loss from continuing operations






-







-Other (expense) incomeInterest expense


(48,706
)


-



(198,116
)


-Gain on extinguishment of debt


238,374







238,374Total other (expense)


189,668



-



40,258



-Net loss from continuing operations


(144,038
)


-



(1,146,638
)


-Discontinued operations:Income from discontinued operations


6,644



(472.533
)


21,536



(1,460,180
)Total discontinued operations


6,644



(472,533
)


21,536



(1,460,180
)Net loss

$
(137,394
)

$
(472,533
)

$
(1,125,101
)

$
(1,460,180
)Net (loss) per share basic and diluted

$
(0.00
)

$
(0.03
)

$
(0.03
)

$
(0.14
)Weighted average number of common sharesshares outstanding, basic and diluted


39,909,498



16,149,453



35078,671



10,570,712








See accompanying notes to consolidated financial statements


5


LAS VEGAS RAILWAY EXPRESS, INC.


CONSOLIDATED STATEMENT OF CASH FLOWS


(Unaudited)





September 30,


September 30,2010


2009(Restated)Cash flows from operating activities:Net loss

$
(1,125,101
)

$
(1,460,180
)Adjustments to reconcile net loss from operations to net cash used in operations:Depreciation and amortization


-



-Amortization of debt discount


166,930



-Gain on extinguishment of debt


(238,374)Stock issued for services


231,083



528,800Stock issued for compensation


17,000Stock issued for compensation, non-cash


60,391Changes in operating assets and liabilities:(Increase) decrease in assets of discontinued operations


-



635,930(Increase) decrease in other current assets


28,000



-Increase (decrease) in liabilities of discontinued operations, net


(303,287
)


314,894Increase (decrease) in accounts payable and accrued expenses


(19,825
)


-Net cash (used in)  operating activities


(1,183,183
)


(19.,444
)Cash flows from investing activities:Net cash used in investing activities


-



-Cash flows from financing activities:Proceeds from notes payable


175,000



-Payments on notes payable


(5,000)



-Payments for related notes payable


(20,725
)


-Proceeds from issuance of common stock.


1,269,000



-Net cash provided by financing activities


1,418,275



-Net increase (decrease) in cash and cash equivalents


235,092



(19,444
)Cash and cash equivalents, beginning of period

$
5,871


$
20,304Cash and cash equivalents, end of period

$
240,963


$
859Supplemental disclosure of cash flow informationInterest paid

$
27,726


$
46,308Stock issued for debt

$
154,433


$
-Subscribed stock issued from Asset PurchaseAgreement

$
160,000


$
-








See accompanying notes to consolidated financial statements


6





LAS VEGAS RAILWAY EXPRESS, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





(1)          Organization and Basis of Presentation





Basis of Financial Statement Presentation





The accompanying Condensed Consolidated Financial Statements of Las Vegas Railways Express, Inc. (the “Company”) should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended March 31, 2010.  Significant accounting polices disclosed therein have not changed except as noted below.  Operating results of the periods ended December 31, 2010 are not necessarily indicative of the results that may be expected for the year ending March 31, 2011.  As used in these Notes to the Condensed Consolidated Financial Statements, the terms the “Company,” “we,” “us,” “our,” and similar terms refer to Las Vegas Railways Express, Inc. and, unless the context indicates otherwise its consolidated subsidiaries.  Significant accounting policies disclosed therein have not changed except as noted below.





These financial statements have been presented in accordance with the rules governing a smaller reporting company for both period December 31, 2010 and 2009.





Business Overview





Las Vegas Railway Express, Inc. was formed March 9, 2007 as Corporate Outfitters, a development stage company.  On November 3, 2008 with a share exchange, asset purchase agreement the Company acquired Liberty Capital Asset Management, a Nevada corporation, formed in July of 2008 as a holding company  for all assets of CD Banc LLC, in contemplation of the company going public via a reverse merger into a publicly trading corporation.





CD Banc LLC was formed in 2003 as a Nevada Limited Liability Corporation with the purpose of acquiring real estate assets and holding them for long term appreciation.





(2)           Summary of Significant Accounting Policies:





Restated Financial Data





Subsequent to the issuance of the March 31, 2009 financial statements the company’s management identified an error related to 1) its recognition of revenue and impairment related to its acquired mortgage loan portfolio and 2) its accounting for compensation relating to the issuance of warrants.  As a result, the Company has restated certain amounts in the accompanying consolidated financial statements to correct errors in previously reported amounts related to net finance receivables.  This restatement affected the carrying value of mortgage loan portfolio and accumulated deficit.





Going Concern:





The accompanying financial statements have been prepared assuming that the Company will continue as going concern.  As shown in the accompanying financial statements, the Company has net loss of $1,125,101 for the nine months ended December 31, 2010 and an accumulated deficit of $9,102,676 through December 31, 2010.  Although a substantial portion of the Company’s cumulative net loss is attributable to discontinued operations, management believes that it will need additional equity of debt financing to be able to sustain profitability.  These matters raise substantial doubt about the Company’s ability to continue as a going concern.





Management is attempting to raise additional equity and debt financing to sustain operations until it can market its services and achieves profitability.  The successful outcome of future activities cannot be determined at this time and there are no assurances that if achieved, the Company will have sufficient funds to execute its intended business plan or generate positive operating results.





The accompanying financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.


7





Use of Estimates:





The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported periods.





Cash and Cash Equivalents:





For the purpose of the statement of cash flows, the Company considers all highly liquid holdings with maturities of three months or less at the time of purchase to be cash equivalents.  As of December 31, 2010 and March 31, 2010, the Company had no cash equivalents.





Basic and Diluted Loss Per Share:





In accordance with SFAS No. 128, “Earnings Per Share,” the basic loss per common share is computed by dividing net loss available to common stockholders after reducing net income by preferred stock dividend, by the weighted average common shares outstanding during the period.  Diluted earnings per share reflect per share amounts that would have resulted if diluted potential common stock had been converted to common stock.  Common stock equivalents have not been included in the earnings per share computation for the three and nine months ended December 31, 2010 and 2009, as the amounts are anti-dilutive.





New Accounting Pronouncements:





There are no recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC that are believed by management, to have a material impact on the Company’s present or future financial statements.





Restatement





Subsequent to issuance of the Company’s March 31, 2009 financial statements the Company’s management identified an error related to 1) its recognition of revenue and impairment related to its acquired mortgage loan portfolio and 2) its accounting for compensation relating to the issuance of warrants. As a result, the Company has restated certain amounts in the accompanying consolidated financial statements to correct errors in previously reported amounts related to net finance receivables. This restatement affected the carrying value of the mortgage loan portfolio and accumulated deficit.





Subsequent to issuance of the Company’s March 31, 2010 financial statements, the Company’s management concluded that the compensation relating to the issuance of warrants were computed with erroneous variables.  As a result, the Company has restated those amounts on an amended Form 10-K/A filed with the Securities and Exchange Commission to correct errors in the previously reported amounts.


8




(3)           Notes Payable:





A summary of notes payable is as follows:


December 31,


March 31,2010


2010Notes payable - discontinued operationsSecured promissory notes, dated September 25, 2008, to two investors, bearing interest at 10% per annum, payable September 1, 2010.

$
133,417


$
194,060Unsecured promissory notes payable dated October 1, 2009 bearing interest at 10% per annum, payable September 1, 2010


27,056



76,305Notes included in liabilities from discontinued operations

$
160,473


$
270,365Notes payable - current operationsSecured promissory notes,  dated  February 28, 2010 bearing interest at 12% per annum, payable in 180 days secured by transportation equipment


50,000



55,000Long Term DebtSecured promissory notes, dated January 23, 2010, to an investor bearing interest at 10% per annum, payable September 1, 2010, if unpaid, in 12 monthly payments through September 1, 2011.


-



225,000Secured promissory notes,  dated  April 7, 2010 through April 30, 2010 to an investor bearing interest at 10% per annum, payable in 180 days, if unpaid in 12 monthly payments through October 2011.


-



-Debt Discount


-Notes payable net of unamortized discount


-



225,000Less current maturities


-



(131,250
)Long term debt

$
-


$
93,750Less long term amortization of discount


-



-Long term debt net of unamortized discount

$
-


$
93,750


Short term financing included warrants to acquire stock at prices below the market value of the shares at time of vesting.  The Company accounts for debt with detachable warrants in accordance with ASC 470:Debtand determined the fair value to be ascribed to the detachable warrants issued with the notes payable utilizing theBlack-Scholes method.  The warrants were vested in accordance with the note terms and recorded against the debt as a debt discount.  The discount is amortized over the longest potential life of the notes.  The unamortized discount, if any, upon repayment of the notes, will be expensed to financing costs.


9




The Company received notice of default on the secured promissory notes for the $400,000 included in long term debt.  On November 23, 2010, the lenders foreclosed on the notes and received collateral in exchange for release from the promissory notes and accrued interest.  The Company surrendered the active mortgage notes that remained from the discontinued operations in satisfaction of the loans.  Under ASC470-40 “Debt, Modifications and Extinguishments,” the difference between the reacquisition of the notes and the net carrying amount of the extinguished debt is recognized currently as a gain identified in a separate item in the Statement of Operations.  The Company recognized a $238,374 gain on the extinguishment of the debt, debt discount, and associated accrued interest.





Interest expense incurred under debt obligations amounted to $198,116 and $48,706, for the nine and three months ended December 31, 2010, respectively, including $166,930 and $38,401 in amortized debt discount for the nine and three months ended December 31, 2010, respectively.





(4)           Commitments and Contingencies:





In the normal course of business, the Company is involved in various legal actions.  It is the opinion of management that none of these legal actions will have a material effect on the financial position or results of operations of the Company.





The Company has filed a civil lawsuit in District Court Clark County, Nevada on April 23, 2010, whereby Las Vegas Railway Express, Inc. is the Plaintiff and Romm Doulton, Elain Doulton, J Bruce Richardson, D2 Holdings, LLC and D2 Entertainment, LLC are the Defendants.  The court granted on June 2, 2010 an injunction against the defendants.  The case was filed because defamatory and false remarks were made by the Defendants about the Plaintiff and certain executives employed by the Plaintiff.  At this time, a trial date has not been set by the court.





(5)           Derivative Instruments:





The Company accounts for debt with embedded conversion features and warrant issues in accordance with ASC 470:Debt.   Conversion features determined to be beneficial to the holder are valued at fair value and recorded to additional paid in capital.  The Company determines the fair value to be ascribed to the detachable warrants issued with the convertible debentures utilizing theBlack-Scholes method.  Any discount derived from determining the fair value to the debenture conversion features and warrants is amortized to financing cost over the life of the debenture.  The unamortized discount, if any, upon the conversion of the debentures, is expensed to financing cost on a pro rata basis.





Debt issued with the variable conversion features are considered to be embedded derivatives and are accountable in accordance with FASB 133;Accounting for Derivative Instruments and Hedging Activities.  The fair value of the embedded derivative is recorded to derivative liability.  This liability is required to be marked each reporting period.  The resulting discount on the debt is amortized to interest expense over the life of the related debt.  For the nine months ended December 31, 2010 and 2009, the Company had $60,391 and $60,391, respectively, associated with options and has recorded such expense on the Company’s statement of operations in Selling, General and Administrative. The options were vested in calculating stock based compensation, 60% and 40% for the periods ended December 31, 2010 and 2009.





On December 31, 2010, the Company had approximately $181,177 of total unrecognized compensation cost related to unvested stock options. This cost is expected to be recognized over a weighted-average period of approximately 3 years.  No options were exercised during the periods ended December 31, 2010 and 2009.





(6)           Equity:





Common Stock:  The Company is authorized to issue 200,000,000 shares of common stock.  There were 41,023,687 and 22,889,686 shares of common stock outstanding as of December 31, 2010 and March 31, 2010, respectively.  The holders of common stock are entitled to one vote per share on all matters submitted to a vote of stockholders and are not entitled to cumulate their votes in the election of directors.  The holders of common stock are entitled to any dividends that may be declared by the Board of Directors out of funds legally available therefore subject to the prior rights of holders of any outstanding shares of preferred stock and any contractual restrictions we have against the payment of dividends on common stock. In the event of our liquidation or dissolution, holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities and the liquidation preferences of any outstanding shares of preferred stock.  Holders of common stock have no preemptive or other subscription rights and no right to convert their common stock into any other securities.


10





On October 1, 2010, the Company retired $123,183 of the Pool Loan Portfolio from discontinued operations in exchange for 826,174 of the Company’s common stock.  The price of the stock from the current Private Placement Memorandum was used to determine the conversion ratio.





During the nine months ended December 31, 2010, the Company issued 2,400,000 shares of its common stock for warrants issued with long term debt.





During the nine months ended December 31, 2010, the Company issued, in a private placement, 8,049,411 shares of its common stock, for a total of $1,269,000.





During the nine months ended December 31, 2010, the Company issued 2,133,416 shares of its common stock for consulting services totaling $232,194.  The fair value of the consulting services was determined by the closing price of the stock on date of issuance.





During the nine months ended December 31, 2010, the Company issued 100,000 shares of its common stock  as compensation of employees of $17,000.  The fair value of the employee services was determined by the closing price of the stock on date of issuance.





During the nine months ended December 31, 2010, the Company issued 625,000 shares of its common stock in lieu of debt of $31,250.





The Company issued 4,000,000 shares of its common stock as part of its Asset Purchase Agreement in the acquisition of railway assets.  Stock is issued upon the completion of certain agreements by and between the Company.  Specific contracts had been agreed upon to allow issuance for the 4,000,000 shares of the Company’s stock on April 23, 2010.  The remaining shares, 16,000,000 are to be issued upon the completion of certain agreements, by and between the Company.  These agreements are deemed necessary for the continued operation of the Company’s proposed railway service.








(7)            Related-Party Transactions:





Michael A. Barron, our CEO and Chairman of the Board of Directors, is a 100% owner and President of Allegheny Nevada Holdings Corporation, “Allegheny.”  The Company is indebted to Allegheny by a certain promissory note, dated January 6, 2009, of which Allegheny loaned the Company funds for working capital needs.  Said Agreement was amended on October 1, 2009 and a portion was converted to 1,564,719 shares of the Company’s common stock at $0.50 per share.  As of December 31, 2010 and March 31, 2010, the balance on the note was $45,638 and $78,236, respectively.  The indebtedness bears interest at 12% per annum and is secured by substantially all the assets of the corporation.





On November 23, 2010, the Company entered into an Asset Purchase Agreement with Las Vegas Railway Express, a Nevada Corporation, of which Allegheny is owner of 28.6% and Mr. Barron is a 28.6% owner, independent of Allegheny.  On January 21, 2010, by shareholder approval, the Company acquired Las Vegas Railway Express for 20,000,000 share of the Company’s common stock, of which 4,000,000 has been issued on April 23, 2010.  The remaining 16,000,000 shares are to be issued upon the completion of certain agreements, by and between the Company and the shareholders.  These agreements are deemed necessary for the continued operation of the Company’s proposed railway service.





As of December 31, 2010, Allegheny Nevada Holdings has a 8.64% beneficial ownership and Mr. Barron has a 5.22% beneficial ownership in the Company.





As of December 31, 2010, Mr. Barron has accrued wages of $65,184.73.





Joseph Cosio Barron, Director and Officer of the Company is a 100% owner of CBS Consultants “CBS”, a Nevada Corporation.  CBS has 22.9% ownership of Las Vegas Railway Express at the time of acquisition.





On October 1, 2009, the Company entered into a promissory note with Mr. Cosio Barron for $86,709.  The Company converted 867,085 shares of the Company’s stock at $0.50 per share, resulting in a balance of $24,304. at December 31, 2010.





As of December 31, 2010, Mr. Cosio Barron has accrued wages of $48,720.44.


11





Item 2. Management's Discussion and Analysis of Financial Condition and Plan of Operations.





Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995





This Quarterly Report contains forward-looking statements about the Company's business, financial condition and prospects that reflect management's assumptions and beliefs based on information currently available. There can be no assurance that the expectations indicated by such forward-looking statements will be realized. If any of management's assumptions should prove incorrect, or if any of the risks and uncertainties underlying such expectations should materialize, actual results may differ materially from those indicated by the forward- looking statements.





The key factors that are not within the Company's control and that may have a direct bearing on operating results include, but are not limited to, acceptance of the Company's products and services, the Company's ability to expand its customer base, management’s ability to raise capital in the future, the retention of key employees and changes in the regulation of our industry.





There may be other risks and circumstances that management may be unable to predict. When used in this Report, words such as, "believes," "expects," "intends," "plans," "anticipates," "estimates" and similar expressions are intended to identify and qualify forward-looking statements, although there may be certain forward-looking statements not accompanied by such expressions. However, the forward-looking statements contained herein are not covered by the safe harbors created by Section 21E of the Securities Exchange Act of 1934.  The mortgage banking industry is continually vulnerable to current events that occur in the financial services industry. These events include the current subprime market changes in economic indicators, government regulation, interest rates, price competition, geographic shifts, disposable income, housing prices, market liquidity, market anticipation, and customer perception, as well as others. The factors that affect the industry change rapidly and can be unforeseeable.





Description of Business





Las Vegas Railway Express, Inc., a publicly traded Delaware Corporation, is a business development stage company whose plan is to re-establish a conventional passenger rail train service between the Las Vegas and Los Angeles metropolitan areas.  The development concept is to provide a Las Vegas style experience on the train, which would traverse the planned route in approximately 5:00 hours. The Company has an executed agreement with AMTRAK to secure rail services. The Company has negotiated the procurement of bi-level railcars needed for its train consists. The planned service is targeting a start date of early 2012. The Company has also entered into a feasibility and capacity planning agreement with Union Pacific Railroad. Burlington Northern Santa Fe has completed its feasibility and capacity planning study on behalf of the company. The Company has entered into a Memorandum of Understanding with the owners of the Plaza Hotel for use of a segment of their property as a passenger railway station in Las Vegas.





Las Vegas Railway Express, Inc. (the “Company”) was formed in March 9, 2007 as a development stage company.





The company is currently traded on the OTCBB under the symbol XTRN. The company website is www.vegasxtrain.com.





The Company maintains offices at 6650 Via Austi Parkway, Suite 170, Las Vegas, Nevada 89119.  For more information on the history of the Company, please see “Business of the Company - Historical Overview” below.


12





Risk of Potential Competitors





Several competitors to the company’s planned rail passenger service have created business plans which are competitive to ours. A Las Vegas-Los Angeles rail connection has been long-studied by a number of groups. In addition to this study, two other rail projects have been proposed to serve the Las Vegas to Los Angeles travel market.





These projects are the:





●       California-Nevada Super-Speed Train. For over twenty years, this project has proposed using Magnetic Levitation (Maglev) technology to carry passengers between Southern California and Las Vegas, traveling at speeds of up to 300 mph. The 269-mile alignment would largely follow the I-15 Freeway. Station stops tentatively include Anaheim, Ontario, Victorville, Barstow, Primm, and Las Vegas (2). Travel time between Anaheim and Las Vegas via this service is estimated to be less than 90 minutes. Work on this project has been suspended at this time, though scoping for a program-level EIR/EIS and project-specific EIS for the segment between Las Vegas and Primm have been completed. There is continuing Nevada interest in providing an initial segment between Las Vegas and Primm.





●      The DesertXPress would be a steel-wheel on steel rail high-speed service that would operate between Victorville, California, and Las Vegas, Nevada. Project proponents suggest that the service could either run within the median of Interstate I-15, or adjacent to it. This project is in preliminary discussions and an initial environmental review process is nearing a conclusion.





Intellectual Property





None.





Employees





As of December 31, 2010, we had 7 full-time employees, of whom 3 were in administrative and 4 were in management. Dianne David-Barron, our Company's Manager of Station Development is the spouse of our Chief Executive Officer, Michael A. Barron.





Description of Property.





As of December 31, 2010, we lease approximately 2,600 square feet of general office space in premises located at 6650 Via Austi Parkway, Suite 170, Las Vegas, Nevada. Our lease for this space expires in February 2013 and provides for monthly payments of $5,689.75.





Results of Operations -– Passenger Train Service





Continuing Operations – Passenger Train Service





For the nine and three months ended, December 31, 2010, there were no revenues associated with the railcar operations.    For the nine and three months ended December 31, 2010, salary wages and payroll taxes were $544,642 and $220,366; selling general and administrative expenses were $184,728 and $31,677; professional fees were $457,526 and $81,663, and interest expense was $198,116 and $48,706.   Lenders foreclosed on the notes payable issued earlier in the year.  The extinguishment of debt, associated accrued interest, net of unamortized debt discount resulted in a gain of $238,374 over the assets surrendered as collateral for the notes.  The Company had a net loss from operations of  $1,125,101 and $137,394, respectively.


13




Liquidity and Capital Resources





Liquidity is the ability of a company to generate funds to support asset growth, satisfy disbursement needs, maintain reserve requirements and otherwise operate on an ongoing basis. The company has maintained sufficient operating cash to maintain its operations and holds reserves to service its assets. These reserves have been generated from operating cash flow.  As of December 31, 2010 and March 31, 2010, the Company had a working capital deficiency of $477,002 and $1,544,920, respectively and incurred net operating cash outflows of $1,183,183 during the nine months ended December 31, 2010.  Cash provided by financing activities was $1,418,275 during the nine months ended December 31, 2010.





Continuing Operations – Passenger Train Service





The Company acquired Las Vegas Railway Express (LVRE) in January 2010 and began its operations as the primary business of the Company. The Company subsequently changed its name from Las Vegas Railway Express,  to Las Vegas Railway Express, Inc. and is traded under the symbol OTC:BB:XTRN.





LVRE is a development stage company with no revenues as of December 31, 2010. The Company has been pursuing contracts with AMTRAK, Class 1 railroads and potential site locations for station development.  The Company has an executed Memo of Understanding with AMTRAK to secure rail services. The Company has negotiated the procurement of bi-level railcars needed for its train consists. The planned service is targeting a start date of early 2012. The Company has also entered into a feasibility and capacity planning agreement with Union Pacific Railroad. Burlington Northern Santa Fe has completed its feasibility and capacity planning study on behalf of the company. The Company has entered into a Memorandum of Understanding with the Plaza Hotel for use of a segment of their property as a passenger railway station in Las Vegas.





The Company Filed with the SEC to raise capital.  It raised $1,269,000 and $588,000 for the nine and three months ended December 31, 2010.





Cash Flows





Net cash used in operating activities for the nine months ended December 31, 2010 was $1,183,183 as compared to net cash used in operating activities for the quarter ended December 31, 2009 of $19,444. Net cash used in operating activities for the three months ended December 31, 2010 was $379,171 as compared to net cash used in operating activities for the quarter ended September 30, 2009 of $1,038. The primary sources of cash used in operating activities for the nine months ended December 31, 2010 was from net loss of $1,125,101 and payments made on discontinued operations debt of $303,287, net of amortization of debt discount of $166,930, stock issued for services of $232,195 and stock issued for compensation of $17,000, stock based compensation of $60,391, decrease in other current assets of $28,000, and increases in accounts payable and accrued expenses of $19,825.  In 2009, the net loss of $1,460,180 was offset by disposition of assets and liabilities of he discontinued operations of $950,824.





Net cash provided by financing activities for the nine months ended December 31, 2010 was $1,418,275, consisting primarily of proceeds from sale of stock of $1,269,000 and proceeds of notes payable of $175,000, net of payments made on notes payable of $25,725.  Net cash provided by financing activities for the three months ended December 31, 2010 was $56,000, consisting  of proceeds from sale of stock of $56,000.





Management currently believes that cash flows from equity investment and borrowings will be sufficient to meet the Company’s current liquidity and capital needs at least through fiscal 2011.





Critical Accounting Policies





The preparation of our consolidated financial statements and notes thereto requires management to make estimates and assumptions that affect the amounts and disclosures reported within those financial statements. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, workers' compensation costs, collectibles of accounts receivable, and impairment of goodwill and intangible assets, contingencies, litigation and income taxes. Management bases its estimates and judgments on historical experiences and on various other factors believed to be reasonable under the circumstances. Actual results under circumstances and conditions different than those assumed could result in differences from the estimated amounts in the financial statements. There have been no material changes to these policies during the fiscal year.





Disclosure, pursuant to SFAS No. 107, is required of the fair value of financial instruments.  However, since most of the Company’s financial instruments turn over within a very short time period, management discloses that the net book value approximates fair value at the balance sheet date.


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Item 3. Quantitative and Qualitative Disclosures About Market Risk.





The Company operates in a volatile and fragmented marketplace which recently has been subject to new financial regulation by the Federal Government. As such, these proposed changes in the law may have an impact on the liquidity of the Company’s business plan and time frames to liquidate assets may be extended. These proposed regulatory changes have not been fully introduced into the marketplace and the final legislation provisions have not been determined. The Company has discontinued its business plan which involves the process of foreclosure and liquidation of toxic assets under the current laws of each state.





The Company has Changed its Primary Business and has No Operating History with its new Business Model and Consequently face Significant Risks and Uncertainties.





The Company has changed its business model from financing services to transportation services which is a start up venture and has no operating history.  As a result of no operating history in the current business environment, we will need to expand operational, financial and administrative systems and control procedures to enable us to further train and manage our employees and coordinate the efforts of our accounting, finance, marketing, and operations departments.





We Have a Limited Operating History and Consequently face Significant Risks and Uncertainties.





As a result of our limited operating history, our recent growth and our reporting responsibilities as a public company, we may need to expand operational, financial and administrative systems and control procedures to enable us to further train and manage our employees and coordinate the efforts of our accounting, finance, marketing, and operations departments.





If We Fail To Comply With The Numerous Laws And Regulations That Govern Our Industry, Our Business Could Be Adversely Affected.





Our business must comply with extensive and complex rules and regulations of various federal, state and local government authorities.  We may not always have been and may not always be in compliance with these requirements.  Failure to comply with these requirements may result in, among other things, revocation of our ability to operate a conventional rail system, class action lawsuits, administrative enforcement actions and civil and criminal liability.





Our Business Will Be Adversely Affected If We Are Unable To Protect Our Intellectual Property Rights From Third Party Challenges Or If We Are Involved In Litigation.





Trademarks and other proprietary rights, if any, are important to our success and our competitive position.  Although we seek to protect our trademarks and other proprietary rights through a variety of means, we cannot assure that the actions we have taken are adequate to protect these rights.  We may also license content from third parties in the future and it is possible that we could face infringement actions based upon the content licensed from these third parties.





A large percentage of our stock is owned by relatively few people, including officers and directors.





As of December 31, 2010, our officers and directors beneficially owned or controlled a total of 10,880,679 shares, or approximately 26.52% of our outstanding common stock.  If an investor acquires shares they may be subject to certain risks due to the concentrated ownership of our common stock.  For example, these stockholders could, if they were to act together, affect the outcome of stockholder votes, which could, among other things, affect elections of directors, delay or prevent a change in control or other transaction that might be beneficial to you as a stockholder.


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Risk of Low Priced Securities.





We do not currently satisfy the criteria for quotation of our common stock on the NASDAQ Small Cap Market.  As a result, investors could find it more difficult to dispose of, or to obtain accurate quotations as to the price of, our common stock.





Our common stock is subject to Rule 15g-9 under Securities Exchange Act of 1934, as amended (the “Exchange Act”), which imposes additional sales practice requirements on broker-dealers which sell such securities to persons other than established customers and “accredited investors” (generally, individuals with net worth in excess of $1,000,000 or annual incomes exceeding $200,000 or $300,000 together with their spouses).  For transactions covered by this rule, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to sale.  Consequently, the rule may adversely affect the ability of broker-dealers to sell the Company’s securities and may adversely affect the ability of purchasers to sell any of the securities acquired hereby in the secondary market.





Commission regulations define a “penny stock” to be any non-NASDAQ equity security that has a market price (as therein defined) of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions.  For any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in a penny stock, of a disclosure schedule prepared by the Commission relating to the penny stock market.  Disclosure is required to be made about commissions payable to both the broker-dealer and the registered representative and current quotations for the securities.  Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.  The foregoing penny stock restrictions apply to the Company’s common stock as of the date of this prospectus.  These restrictions could limit the ability of broker-dealers to sell our securities and thus the ability of purchasers of our securities to resell them in the secondary market.





The Company is reliant on securing certain agreements from AMTRAK and railroad companies





The company is in the process of securing Operating and Services Agreements with AMTRAK and the Class 1 railroad companies.  Failure to complete these agreements or on terms which would be unacceptable to the company, would result in the project objectives being severely curtailed. There is no assurance that the agreements will be forthcoming even though the company is in discussions with all relevant groups at this time.





The Loss Of Any Of Our Executive Officers Or Key Personnel Would Likely Have An Adverse Effect On Our Business.





Our future success depends to a significant extent on the continued services of our senior management and other key personnel, particularly Michael A. Barron.  The loss of the services of Mr. Barron or other key employees would also likely have an adverse effect on our business, results of operations and financial condition.





We do not anticipate paying dividends.





We have never paid any cash dividends on our common stock since our inception, and we do not anticipate paying cash dividends in the foreseeable future.  Any dividends, which we may pay in the future, will be at the discretion of our Board of Directors and will depend on our future earnings, any applicable regulatory considerations, our financial requirements and other similarly unpredictable factors.  For the foreseeable future, we anticipate that earnings, if any, will be retained for the operation and expansion of our business.





Possible conflicts of interest exist in related party transactions.





Our Board of Directors consists of Michael A. Barron and Joseph A. Cosio-Barron, both of whom are executive officers and principal shareholders of the Company. Our Manager of Station Development is the spouse of our CEO. Thus, there has in the past existed the potential for conflicts of interest in transactions between the Company and such individuals or entities in which such individuals have an interest.  We have attempted to ensure that any such transactions were entered into on terms that were no less favorable than could have been obtained in transactions with unrelated third parties.





Forward looking Statements:





Some of the statements contained in this Annual Report that are not historical facts are “forward-looking statements” which can be identified by the use of terminology such as “estimates”, “projects,” “plans,” “believes,” “expects,” “anticipates,” “intends,” or the negative or other variations, or by discussions of strategy that involve risks and uncertainties. We urge you to be cautious of the forward-looking statements that such statements, which are contained in this Annual Report, reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties and other factors affecting our operations, market growth, services, and products. No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of the risks we face, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events. Factors that may cause actual results, our performance of achievements, or industry results, to differ materially from those contemplated by such forward-looking statements include without limitation:





·
General conditions in the economy and capital markets; and





·
Our results of operations, financial condition and business




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Item 4T.   Controls and Procedures.





Evaluation of Disclosure Controls and Procedures and Changes in Internal Control over Financial Reporting





Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of December 31, 2007.   For the periods March 31, 2009, June 30, 2009, September 31, 2009, December 31, 2009 and March 31, 2010, we determined that the internal controls were deficient and material weaknesses were noted.





Subsequent to issuance of the Company’s March 31, 2009 financial statements the Company’s management identified an error related to 1) its recognition of revenue and impairment related to its acquired mortgage loan portfolio and 2) its accounting for compensation relating to the issuance of warrants. As a result, the Company has restated certain amounts in the accompanying consolidated financial statements to correct errors in previously reported amounts related to net finance receivables. This restatement affected the carrying value of the mortgage loan portfolio and accumulated deficit that are now included in discontinued operations.





Subsequent to issuance of the Company’s March 31, 2010 financial statements, the Company’s management concluded that the compensation relating to the issuance of warrants were computed with erroneous variables.  As a result, the Company has restated those amounts on an amended Form 10-K/A filed with the Securities and Exchange Commission to correct errors in the previously reported amounts.





To initially address this material weakness, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.





Remediation of Material Weakness





To remediate the material weakness in our disclosure controls and procedures identified above, we have done or intend to do the following subsequent to the fiscal year ended March 31, 2010. In August 2010, we appointed a new CFO and contracted with an outside certified public accountant who has expertise in public company financial reporting compliance, to replace the position left vacant by the resignation of the former CFO.





We seek guidance from financial consultants who are certified public accountants with the requisite background and experience to assist us in identifying and evaluating complex accounting and reporting matters as they arise. In addition, we are in the process of defining new internal processes for identifying and disclosing both routine and non-routine transactions and for researching and determining proper accounting treatment for those transactions. With the engagement of outside financial consultant to perform these processes with adequate technical and other resources to help ensure the proper application of accounting principles and the timely and appropriate disclosure of routine and non-routine transactions we believe we have put in place the procedures to remediate the material weakness in internal controls to ensure that our reporting obligations are satisfied.





Management is unable, however, to estimate our expenditures related to fees that will be paid to financial consultants in connection with their guidance in identifying and evaluating complex accounting and reporting matters. Management is also unable to estimate our expenditures related to the development of new internal processes for identifying and disclosing both routine and non-routine transactions and for researching and determining proper accounting treatment for those transactions. In addition, management is unable to estimate our expenditures related to fees to be paid to our independent legal professionals who have expertise in public company reporting compliance.


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Management’s Responsibility for Financial Statements





Our management is responsible for the integrity and objectivity of all information presented in this Quarterly Report on Form 10-Q. The consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America and include amounts based on management’s best estimates and judgments. Management believes the consolidated financial statements fairly reflect the form and substance of transactions and that the financial statements fairly represent the Company’s financial position and results of operations.





Management’s Report on Internal Control Over Financial Reporting





Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal controls over financial reporting. The Company's internal control system over financial reporting is a process designed under the supervision of the Company's Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements in accordance with U.S. generally accepted accounting principles.





The Company's management, including its principal executive officer and principal financial officer, conducted an evaluation of the effectiveness of its internal control over financial reporting based on the framework in "Internal Control-Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on its evaluation under the framework in "Internal Control-Integrated Framework", the Company's management concluded that the Company's internal control over financial reporting was effective as of December 31, 2010.





All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions.





This quarterly report does not include an attestation report of the company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the company's registered public accounting firm pursuant to temporary rules of the SEC that permit the company to provide only management's report in this quarterly report.





Changes in Internal Control Over Financial Reporting





The changes in our controls over the selection of appropriate assumptions and factors affecting our accounting methodology for the acquisition of the loan pool and compensation expense as it relates to employee stock options and our commitment to use more care in the selection of appropriate assumptions and factors affecting our accounting methodology, are the only changes during our most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.


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PART II - OTHER INFORMATION





Item 1.  Legal Proceedings





In the ordinary course of business, the Company may be or has been involved in legal proceedings from time to time. As of the date of this quarterly report on Form 10-Q, there have been no material changes to any legal proceedings relating to the Company which previously were not reported.





The Company has filed a civil lawsuit in District Court Clark County, Nevada on April 23, 2010, whereby Las Vegas Railway Express, Inc. is the Plaintiff and Romm Doulton, Elaine Doulton, J Bruce Richardson, D2 Holdings, LLC. and D2 Entertainment, LLC. are the Defendants. The court granted on June 2, 2010 an injunction against the Defendants. The case was filed because defamatory and false remarks were made by the Defendants about the Plaintiff and certain executives employed by the plaintiff. At this time a trial date has not been set by the court.





Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds





During the 3 months ended December 31, 2010, the Company issued shares of its common stock to the following:





●  1,374,917 shares issued to various investors (PPM) for a total value of $205,000.00





●  2,140,625 shares issued to various investors (Warrant) for a total value of $383,000.65





●  826,174 shares issued to Alix Capital, LLC (PPM) in exchange for a loan pool purchase agreement with a total value of $123,182.59





●  150,000 shares issued to Ramsgate Group, Inc., a contractor for a total value of $17,250.00





●  478,416 shares issued to Dan Rudden, a Consultant for a total value of $62,194.08





●  100,000 shares issued to John Marino, an employee as a stock award for a total value of $10,000.00





Item 3.  Default Upon Senior Securities





The Company received notice of default on the secured promissory notes for the $400,000 included in long term debt.  On November 23, 2010, the lenders foreclosed on the notes and received collateral in exchange for release from the promissory notes and accrued interest.  The Company surrendered the active mortgage notes that remained from the discontinued operations in satisfaction of the loans.  Under ASC470-40 “Debt, Modifications and Extinguishments,” the difference between the reacquisition of the notes and the net carrying amount of the extinguished debt is recognized currently as a gain identified in a separate item in the Statement of Operations.  The Company recognized a $238,374 gain on the extinguishment of the debt, debt discount, and associated accrued interest.





Item 4.  Other Information.





None





Item 5.  Exhibits.





Exhibit No.

Description31.1

Section 302 Certification of Chief Executive31.2

Section 302 Certification of Chief Financial Officer32

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act Of 2002








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SIGNATURES








Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.





Date: February 22, 2010
Las Vegas Railway Express, Inc.By: /s/ Michael A. BarronChief Executive Officer












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