##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
  Form 10-Q
  þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended
    March 31, 2008ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission File
    No. 001-33902
  FX Real Estate and
    Entertainment Inc.
 (Exact name of Registrant as
    specified in its charter)
  Delaware(State or other jurisdiction
    of
    incorporation or organization)

36-4612924(I.R.S. Employer
    Identification Number)   650
    Madison Avenue
    New York, New York 10022 (Address
    of Principal Executive Offices and Zip Code)
  Registrants Telephone Number, Including Area Code:
 (212) 838-3100
   þ o
  12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer o
    Non-accelerated
    filer þ
    Smaller
    reporting
    company o   Rule 12b-2 o þ




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##### 





TABLE OF
    CONTENTS
   
 PART I. FINANCIAL INFORMATIONItem 1.


Financial StatementsConsolidated Balance Sheets as of March 31,
    2008 (Unaudited) and December 31, 2007


3Consolidated Statement of Operations (Unaudited)
    for the three months ended March 31, 2008 and Combined
    Statement of Operations (Unaudited) for the three months ended
    March 31, 2007 (Predecessor)


4Consolidated Statement of Cash Flows (Unaudited)
    for the three months ended March 31, 2008 and Combined
    Statement of Cash Flows (Unaudited) for the three months ended
    March 31, 2007 (Predecessor)


5Notes to Consolidated and Combined Financial
    Statements (Unaudited)


6Item 2.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


23Item 3.


Quantitative and Qualitative Disclosures About
    Market Risk


31Item 4T.


Controls and Procedures


31PART II. OTHER INFORMATIONItem 1.


Legal Proceedings


32Item 5.


Other Information


32Item 6.


Exhibits


33EX-3.1: CERTIFICATE OF DESIGNATIONEX-10.7: FIRST AMENDMENT TO INVESTMENT AGREEMENTEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION   2




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##### Table of Contents



FX Real
    Estate and Entertainment Inc.
  CONSOLIDATED
    BALANCE SHEETS
  March 31,


December 31,2008


2007(Unaudited)(Amounts in thousands,except share data)ASSETSCurrent assets:Cash and cash equivalents

$
10,454


$
2,559Restricted cash


48,006



60,350Marketable securities


29,068



43,439Rent and other receivables, net of allowance for doubtful
    accounts of $674 at March 31, 2008 and $368 at
    December 31, 2007


574



1,016Deferred financing costs, net


3,453



6,714Prepaid expenses and other current assets


1,538



1,031Total current assets


93,093



115,109Investment in real estate, at cost:Land


533,336



533,336Building and improvements


32,710



32,710Furniture, fixtures and equipment


607



565Capitalized development costs


8,149



6,026Less: accumulated depreciation


(16,387
)


(10,984
)Net investment in real estate


558,415



561,653Acquired lease intangible assets, net


1,182



1,222Total assets

$
652,690


$
677,984LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued expenses

$
11,681


$
10,809Accrued license fees


12,500



10,000Debt


475,000



475,000Notes payable


7,674



30,674Due to related parties


3,993



3,022Related party debt


7,054



1,020Other current liabilities


1,118



1,114Unearned rent and related revenue


65



Total current liabilities


519,085



531,639Related party debt






6,000Other long-term liabilities


10



191Total liabilities


519,095



537,830Contingently redeemable stockholders equity






180Stockholders equity:Preferred stock, $0.01 par value: authorized
    75,000,000 shares, none issued and outstanding at
    March 31, 2008 and December 31, 2007






Common stock, $0.01 par value: authorized
    300,000,000 shares, 42,827,623 and 39,290,247 shares
    issued and outstanding at March 31, 2008 and
    December 31, 2007, respectively


428



393Additional
    paid-in-capital


252,772



219,781Accumulated deficit


(102,772
)


(77,739
)Accumulated other comprehensive loss


(16,833
)


(2,461
)Total stockholders equity


133,595



139,974Total liabilities and stockholders equity

$
652,690


$
677,984    3




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FX Real
    Estate and Entertainment Inc.
  STATEMENTS
    OF OPERATIONS (UNAUDITED)
  PredecessorConsolidated



CombinedThree Months



Three MonthsEnded



EndedMarch 31, 2008



March 31, 2007(Amounts in thousands, exceptshare and per share data)Revenue

$
485



$
1,348Operating expenses:License fees


2,500




Selling, general and administrative expenses


4,675




292Depreciation and amortization expense


6




89Operating and maintenance


11




188Real estate taxes


54




106Total operating expenses


7,246




675Income (loss) from operations


(6,761
)



673Interest income


106




73Interest expense


(14,327
)



(10,985
)Minority interest


2




Loss from incidental operations


(4,053
)



(4,420
)Net loss

$
(25,033
)


$
(14,659
)Basic and diluted loss per share

$
(0.62
)Basis and diluted average number of common shares outstanding


40,323,586    4




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FX Real
    Estate and Entertainment Inc.
  STATEMENTS
    OF CASH FLOWS (UNAUDITED)
  PredecessorConsolidated



CombinedThree Months



Three MonthsEnded



EndedMarch 31, 2008



March 31, 2007(Amounts in thousands)Cash flows from operating activities:Net loss

$
(25,033
)


$
(14,659
)Adjustments to reconcile net loss to cash used in operating
    activities:Depreciation and amortization


5,403




5,842Deferred financing cost amortization


3,261




29Share-based payments


941




Minority interest


(2
)



Provision for accounts receivable allowance


323




5Changes in operating assets and liabilities:Receivables


(230
)



248Other current and non-current assets


(467
)



140Accounts payable and accrued expenses


(125
)



(1,427
)Accrued license fees


2,500




Due to related parties


824




22Unearned revenue


65




116Other


(36
)



31Net cash used in operating activities


(12,576
)



(9,653
)Cash flows from investing activities:Restricted cash


12,344




3,596Purchase of property and equipment


(42
)



Capitalized development costs


(2,123
)



Development of real estate including land acquired







(2
)Net cash provided by investing activities


10,179




3,594Cash flows from financing activities:Proceeds from sale of common stock


2,570




Proceeds from rights offering


30,373




Repayment of notes


(23,000
)



Contribution from minority interest


349




Proceeds from Members loans







5,972Net cash provided by financing activities


10,292




5,972Net increase (decrease) in cash and equivalents


7,895




(87
)Cash and cash equivalents  beginning of period


2,559




1,643Cash and cash equivalents  end of period

$
10,454



$
1,556Supplemental cash flow data:Cash paid for interest

$
11,219



$
9,878Supplemental Cash Flow Information:The Company had the following non-cash financing activity in the
    three months ended March 31, 2008 (in thousands):Accrued but unpaid stock issuance costs

$
997    5




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##### Table of Contents



FX Real
    Estate and Entertainment Inc.
  NOTES TO UNAUDITED CONSOLIDATED AND
    COMBINED FINANCIAL STATEMENTS
  1.
    Basis of
    Presentation  General
    Form 10-K, Form 10-K).
               6




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FX Real
    Estate and Entertainment Inc.
  NOTES TO UNAUDITED CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
  Principles
    of Consolidation
    Significant
    Accounting Policies
  Form 10-K.
  Impact
    of Recently Issued Accounting Standards
  ,
    Fair Value Measurements Investment in Riviera
  The
    Fair Value Option for Financial Assets and Financial Liabilities
  Business Combinations Noncontrolling Interests in Consolidated Financial
    Statements, an amendment of ARB No. 51
  2.
    Organization
    and Background  Business
    of the Company
   7




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##### Table of Contents



FX Real
    Estate and Entertainment Inc.
  NOTES TO UNAUDITED CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
  85%-owned
    Formation
    of the Company
             8




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##### Table of Contents



FX Real
    Estate and Entertainment Inc.
  NOTES TO UNAUDITED CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
      CKX
    Investment
        License
    Agreements
    Metroflag
    Acquisition
       9




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##### Table of Contents



FX Real
    Estate and Entertainment Inc.
  NOTES TO UNAUDITED CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
      Investment
    in Riviera
    The
    Repurchase Agreement and Contingently Redeemable
    Stock
    D-98: Classification and Measurement of Redeemable Securities.
  30-day
  Rights
    Offering and Related Investment Agreements
   10




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FX Real
    Estate and Entertainment Inc.
  NOTES TO UNAUDITED CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
    Conditional
    Option Agreement with 19X
      
    Beginning on the date of the closing of 19Xs acquisition
    of CKX and for the ensuing 48 months, the Company will have
    the right to acquire the Presley Interests for $650 million.
    Beginning 48 months following the date of the closing of
    19Xs acquisition of CKX and for the ensuing six month
    period, the Company will have the right to acquire the Presley
    Interests for $700 million.
    Beginning 54 months following the date of the closing of
    19Xs acquisition of CKX and for the ensuing six month
    period, the Company will have the right to acquire the Presley
    Interests for $750 million. 11




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##### Table of Contents



FX Real
    Estate and Entertainment Inc.
  NOTES TO UNAUDITED CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
   
    Beginning 60 months following the date of the closing of
    19Xs acquisition of CKX and for the ensuing six month
    period, the Company will have the right to acquire the Presley
    Interests for $800 million.
    Beginning 66 months following the date of the closing of
    19Xs acquisition of CKX and for the ensuing six month
    period, the Company will have the right to acquire the Presley
    Interests for $850 million.        
    Year one annual payment  $15 million
    Year two annual payment  $15 million
    Year three annual payment  $20 million
    Year four annual payment  $25 million
    Year five annual payment  $30 million       12




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##### Table of Contents



FX Real
    Estate and Entertainment Inc.
  NOTES TO UNAUDITED CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
  3.
    Comprehensive
    Income    Three MonthsEnded,March 31, 2008(Amounts in thousands)Net loss

$
(25,033
)Other comprehensive loss:Unrealized loss on marketable securities


(14,372
)Comprehensive loss

$
(39,405
)   Accounting for Certain Investments in Debt and Equity
    Securities
  4.
    Going
    Concern  Form 10-K
  5.
    Loss Per
    Share/Common Shares Outstanding  Earnings Per Share
 13




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##### Table of Contents



FX Real
    Estate and Entertainment Inc.
  NOTES TO UNAUDITED CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
    6.
    Incidental
    Operations  Accounting for Costs and
    Initial Operations of Real Estate Projects
    PredecessorThree Months


Three MonthsEnded,


Ended,March 31, 2008


March 31, 2007(Amounts in thousands)Revenue

$
4,569


$
3,551Depreciation


(5,396
)


(5,752
)Operating & other expenses


(3,226
)


(2,219
)Loss from incidental operations

$
(4,053
)

$
(4,420
)   7.
    Debt and
    Notes Payable       14




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##### Table of Contents



FX Real
    Estate and Entertainment Inc.
  NOTES TO UNAUDITED CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
      Predecessor
      8.
    Related
    Party Debt      9.
    License
    Agreements with Related Parties  Elvis
    Presley License Agreement
  Grant of
    Rights
   15




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##### Table of Contents



FX Real
    Estate and Entertainment Inc.
  NOTES TO UNAUDITED CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
  and/or
  Hotel at
    Graceland
    Royalty
    Payments and Minimum Guarantees
        Termination
    Rights
    Conditional
    Amendment to Elvis Presley Enterprises License
    Agreement
   16




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##### Table of Contents



FX Real
    Estate and Entertainment Inc.
  NOTES TO UNAUDITED CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
  1 2
    Muhammad
    Ali License Agreement
  Grant
    of Rights
    Royalty
    Payments and Minimum Guarantees
        Termination
    Rights
   17




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FX Real
    Estate and Entertainment Inc.
  NOTES TO UNAUDITED CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
  Ali-related
  Accounting
    for Minimum Guaranteed License Payments
    10.
    Acquired
    Lease Intangibles      March 31, 2008


December 31, 2007AssetsAbove-market leases

$
582


$
582In-place leases


1,320



1,320Accumulated amortization


(720
)


(680
)Net

$
1,182


$
1,222LiabilitiesBelow-market leases

$
111


$
111Accumulated accretion


(79
)


(72
)Net

$
32


$
39   11.
    Derivative
    Financial Instruments   18




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##### Table of Contents



FX Real
    Estate and Entertainment Inc.
  NOTES TO UNAUDITED CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
  12.
    Commitments
    and Contingencies  Operating
    Leases
    13.
    Stockholders
    Equity      14.
    Share-Based
    Payments  Stock
    Option Grants
  Share-Based Payment No. 96-18, Accounting for Equity Instruments That are Issued to Other
    Than Employees for Acquiring, or in Conjunction with Selling,
    Goods or Services
    Risk-free rate


3.74%Volatility


39.0%Weighted average expected life remaining at March 31, 2008


6.25 yearsDividend yield


0.0%        19




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##### Table of Contents



FX Real
    Estate and Entertainment Inc.
  NOTES TO UNAUDITED CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
  15.
    Income
    Taxes          16.
    Litigation        17.
    Related
    Party Transactions  Shared
    Services Agreement and Arrangements
   20




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##### Table of Contents



FX Real
    Estate and Entertainment Inc.
  NOTES TO UNAUDITED CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
      and/or
        and/or
  Preferred
    Priority Distribution
   21




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##### Table of Contents



FORWARD
    LOOKING STATEMENTS
    Form 10-K,
  
    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 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.
    The audit opinion from our independent registered public
    accounting firm dated March 3, 2008 included in the
    Form 10-K
    includes an explanatory paragraph expressing substantial doubt
    about our ability to continue as a going concern due to our need
    to secure additional financing to implement our proposed
    development projects.
    We have entered into a number of related party transactions with
    CKX, Inc., 19X, Inc. and Flag Luxury Properties, LLC 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 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. 22




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##### Table of Contents



ITEM 2.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  In this Managements Discussion and Analysis of
    Financial Condition and Results of Operations, the words
    we, us, our,
    FXRE, and the Company collectively refer
    to FX Real Estate and Entertainment Inc., and its consolidated
    subsidiaries, FX Luxury Realty, LLC, BP Parent, LLC, Metroflag
    BP, LLC and Metroflag Cable, LLC. The words
    Metroflag or Metroflag entities refer to
    FX Luxury Realty and its predecessors, including BP Parent, LLC,
    Metroflag BP, LLC, Metroflag Cable, LLC, Metroflag Polo, LLC,
    CAP/TOR, LLC, Metroflag SW, LLC, Metroflag HD, LLC and Metroflag
    Management, LLC, the predecessor entities through which our
    historical business was conducted prior to September 27,
    2007. The word Park Central site refers to the 17.72
    contiguous acres of land located at the southeast corner of Las
    Vegas Boulevard and Harmon Avenue in Las Vegas, Nevada and owned
    by us. The word CKX Distribution refers to the
    distribution of 19,743,349 shares of our common stock to
    CKX, Inc.s stockholders of record as of December 31,
    2007 as a result of which we became a publicly traded company on
    January 10, 2008.
  This Managements Discussion and Analysis of Financial
    Condition and Results of Operations should be read in
    conjunction with the historical financial statements and notes
    thereto and financial information of the Company and Metroflag,
    as predecessor, included in the Companys Annual Report on
    Form 10-K,
    as amended, for the year ended December 31, 2007. However,
    this Managements Discussion and Analysis of Financial
    Condition and Results of Operations and such historical
    financial statements and information should not be relied upon
    by you to evaluate our business and financial condition going
    forward because they are not representative of our planned
    business going forward or indicative of our future operating and
    financial results. For example, as described below and in the
    historical financial statements, our predecessor Metroflag
    derived revenue primarily from commercial leasing activities on
    the properties comprising the Park Central site. We intend to
    cease engaging in these commercial leasing activities as we
    implement our redevelopment of the Park Central site.
       23




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FX Real
    Estate and Entertainment Operating Results
          Metroflag
    Operating Results
         24




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##### Table of Contents



Metroflag
    Results for the three months ended March 31, 2008 and
    2007
  Three Months,


Three MonthsEnded


EndedMarch 31, 2008


March 31, 2007


Variance(Amounts in thousands)Revenue

$
485


$
1,348


$
(863
)Operating expenses


(1,036
)


(586
)


(450
)Depreciation and amortization


(6
)


(89
)


83Income (loss) from operations


(557
)


673



(1,230
)Interest expense, net


(13,288
)


(10,912
)


(2,376
)Loss from incidental operations


(4,053
)


(4,420
)


367Net loss

$
(17,898
)

$
(14,659
)

$
(3,239
)   Revenue
    Operating
    Expenses
    Depreciation
    and Amortization Expense
    Interest
    Income/Expense
    Loss
    from Incidental Operations
    Liquidity
    and Capital Resources
  Introduction
 25




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##### Table of Contents



Riv Loan 
  Park Central Loan  30-day 30-day
 26




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##### Table of Contents



CKX Line of Credit 
  Bear Stearns Margin Loan
  Debt Covenants
 27




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##### Table of Contents



Preferred Priority Distribution
  Shier Stock Purchase 
  Cash Flow
    for the three months ended March 31, 2008
  Operating
    Activities
    Investing
    Activities
    Financing
    Activities
    Metroflag 
    Historical Cash Flow for the three months ended March 31,
    2007
  Operating
    Activities
    Investing
    Activities
    Financing
    Activities
   28




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##### Table of Contents



Uses of
    Capital
      and/or
  Capital
    Expenditures
      Dividends
   29




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##### Table of Contents



Commitments
    and Contingencies
    Inflation
    Application
    of Critical Accounting Policies
  Form 10-K,
  Impact
    of Recently Issued Accounting Standards
  ,
    Fair Value Measurements Investment in Riviera
  The
    Fair Value Option for Financial Assets and Financial Liabilities
  Business Combinations Noncontrolling Interests in Consolidated Financial
    Statements, an amendment of ARB No. 51
  Off
    Balance Sheet Arrangements
    Seasonality
   30




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##### Table of Contents



ITEM 3.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK    Interest
    Rate Risk
      Foreign
    Exchange Risk
    ITEM 4T.
    CONTROLS
    AND PROCEDURES  Evaluation
    of Disclosure Controls and Procedures
  Managements
    Annual Report on Internal Control Over Financial
    Reporting
  Form 10-Q
      Rules 13a-15(e) 15d-15(e)) Rules 13a-15 15d-15,
  Changes
    in Internal Control over Financial Reporting
  Rules 13a-15 15d-15
 31




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##### Table of Contents



PART II 
    OTHER INFORMATION ITEM 1.
    LEGAL
    PROCEEDINGS    ITEM 5.
    OTHER
    INFORMATION         32




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##### Table of Contents



Form S-1 Form S-3, Form S-3 Form S-1
      ITEM 6.
    EXHIBITS  Exhibits
    ExhibitNumber

Description3
.1

Certificate of Designation of Non-Voting Designated Preferred
    Stock of the registrant10
.1

Fourth Amended and Restated Limited Liability Company Operating
    Agreement of FX Luxury Realty, LLC, dated as of March 3,
    2008(1)10
.2

Investment Agreement by and between the registrant and The Huff
    Alternative Fund, L.P. and The Huff Alternative Parallel Fund,
    L.P. dated as of January 9, 2008(2)10
.3

Investment Agreement by and between the registrant and Robert
    F.X. Sillerman, dated as of January 9, 2008(2)10
.4

Call Agreement, dated as of March 3, 2008, by and between
    19X, Inc. and the registrant(1)10
.5

Letter Agreement, dated March 3, 2008, by and between 19X,
    Inc. and the registrant and Form of Amendment No. 2 to
    License Agreement by and between Elvis Presley Enterprises, Inc.
    and FX Luxury Realty, LLC(1)10
.6

First Amendment dated as of March 31, 2008 to Investment
    Agreement by and between the registrant and The Huff Alternative
    Fund, L.P. and The Huff Alternative Parallel Fund, L.P., dated
    as of January 9, 2008(3)10
.7

First Amendment dated as of March 31, 2008 to Investment
    Agreement by and between the registrant and Robert F.X.
    Sillerman, dated as of January 9, 200831
.1

Certification of Principal Executive Officer31
.2

Certification of Principal Financial Officer32
.1

Section 1350 Certification of Principal Executive Officer32
.2

Section 1350 Certification of Principal Financial Officer     
    
    Filed herewith(1)
    
    Incorporated by reference to Amendment No. 1 to the
    registrants Registration Statement on
    Form S-1
    (Registration
    No. 333-149032),
    filed with the Commission on March 3, 2008.(2)
    
    Incorporated by reference from the registrants Current
    Report on Form
    8-K dated
    January 9, 2008.(3)
    
    Incorporated by reference from the registrants Current
    Report on Form
    8-K dated
    March 31, 2008. 33




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##### Table of Contents



SIGNATURES
    FX Real Estate and Entertainment Inc.
  By:
    /s/  ROBERT
    F.X. SILLERMAN  Robert F.X. Sillerman
 Chief Executive Officer and Chairman of the Board
  By:
    /s/  THOMAS
    P. BENSON  Thomas P. Benson
 Chief Financial Officer, Executive Vice President
 and Treasurer
   34




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##### Table of Contents



INDEX TO
    EXHIBITS
    ExhibitNumber

Description3
.1

Certificate of Designation of Non-Voting Designated Preferred
    Stock of the registrant10
.7

First Amendment dated March 31, 2008 to Investment
    Agreement by and between the registrant and Robert F.X.
    Sillerman, dated as of January 9, 2008.31
.1

Certification of Principal Executive Officer.31
.2

Certification of Principal Financial Officer32
.1

Section 1350 Certification of Principal Executive Officer32
.2

Section 1350 Certification of Principal Financial Officer  35