##### 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 June 30,
    2009ORo

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

36-4612924(State or other jurisdiction of
    incorporation or organization)

(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
  Regulation S-T
 o o
  Rule 12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer o
    Non-accelerated
    filer o
    Smaller
    reporting
    company þ   Rule 12b-2 o þ




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##### 





TABLE OF
    CONTENTS
   
 PART I. FINANCIAL INFORMATIONExplanatory Note


3Item 1.

Financial StatementsConsolidated Balance Sheets as of June 30,
    2009 (Unaudited) and December 31, 2008


4Consolidated Statements of Operations (Unaudited)
    for the three months ended June 30, 2009 and 2008


5Consolidated Statements of Operations (Unaudited)
    for the six months ended June 30, 2009 and 2008


6Consolidated Statements of Cash Flows (Unaudited)
    for the six months ended June 30, 2009 and 2008


7Notes to Unaudited Consolidated Financial
    Statements


8Item 2.

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


26Item 3.

Quantitative and Qualitative Disclosures About
    Market Risk


36Item 4T.

Controls and Procedures


36PART II. OTHER INFORMATIONItem 1.

Legal Proceedings


37Item 3.

Defaults Upon Senior Securities


37Item 6.

Exhibits


38EX-31.1EX-31.2EX-32.1EX-32.2   2




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EXPLANATORY
    NOTE             3




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FX Real
    Estate and Entertainment Inc.CONSOLIDATED BALANCE SHEETS(amounts in thousands, except share
    data)
  June 30,

December 31,2009

2008UnauditedASSETSCurrent assets:Cash and cash equivalents

$
1,266


$
2,659Restricted cash


378



29,814Marketable securities






4,231Rent and other receivables, net of allowance for doubtful
    accounts of $243 at June 30, 2009 and $17 at
    December 31, 2008


190



124Deferred financing costs, net






54Prepaid expenses and other current assets


681



1,325Total current assets


2,515



38,207Investment in real estate:Land


135,654



212,624Building and improvements


32,830



32,816Furniture, fixtures and equipment


686



730Less: accumulated depreciation


(28,370
)


(27,370
)Net investment in real estate


140,800



218,800Acquired lease intangible assets, net


1,028



1,063Total assets

$
144,343


$
258,070LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Accounts payable and accrued expenses

$
19,400


$
10,321Accrued license fees






10,000Debt in default (see note 8)


454,000



475,000Notes payable






391Due to related parties


1,281



1,373Other current liabilities


1



519Acquired lease intangible liabilities, net


10



13Unearned rent and related revenue


283



36Total current liabilities


474,975



497,653Other long-term liabilities






309Total liabilities


474,975



497,962Stockholders deficit:Preferred stock, $0.01 par value: authorized
    75,000,000 shares, 1 share issued and outstanding at
    June 30, 2009 and at December 31, 2008






Common stock, $0.01 par value: authorized
    300,000,000 shares, 51,992,417 shares issued and
    outstanding at June 30, 2009 and December 31, 2008


520



520Additional
    paid-in-capital


299,524



299,142Accumulated deficit


(630,676
)


(539,554
)Total stockholders deficit


(330,632
)


(239,892
)Total liabilities and stockholders deficit

$
144,343


$
258,070    4




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FX Real
    Estate and Entertainment Inc.CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)(amounts in thousands, except share and
    per share data)
  Three Months

Three MonthsEnded

EndedJune 30, 2009

June 30, 2008Revenue

$
4,767


$
486Operating expenses:License fees (see note 11)






2,500Selling, general and administrative expenses


2,449



3,269Depreciation and amortization


506



7Operating and maintenance


1,057



6Debt restructuring costs


1,136



Real estate taxes


471



55Impairment of land (see note 2)


76,970



Total operating expenses


82,589



5,837Loss from operations


(77,822
)


(5,351
)Interest income


2



135Interest expense


(10,342
)


(12,191
)Other expense


(79
)


(31,585
)Loss from incidental operations






(4,968
)Net loss


(88,241
)


(53,960
)Less: Net loss attributable to noncontrolling interest






10Net loss attributable to FX Real Estate and Entertainment
    Inc.

$
(88,241
)

$
(53,950
)Per share information attributable to FX Real Estate and
    Entertainment Inc.:Basic and diluted loss per share

$
(1.70
)

$
(1.14
)Basic and diluted average number of common shares outstanding


51,992,417



47,186,090    5




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FX Real
    Estate and Entertainment Inc.CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)(amounts in thousands, except share and
    per share data)
  Six Months


Six MonthsEnded


EndedJune 30, 2009


June 30, 2008Revenue

$
9,382


$
971Operating expenses:License fees (see note 11)


(10,000
)


5,000Selling, general and administrative expenses


6,505



7,944Depreciation and amortization


1,013



13Operating and maintenance


2,188



17Debt restructuring costs


1,991



Real estate taxes


919



109Impairment of land (see note 2)


76,970



Total operating expenses


79,586



13,083Loss from operations


(70,204
)


(12,112
)Interest income


20



241Interest expense


(20,721
)


(26,518
)Other expense


(217
)


(31,585
)Loss from incidental operations






(9,021
)Net loss


(91,122
)


(78,995
)Less: Net loss attributable to noncontrolling interest






12Net loss attributable to FX Real Estate and Entertainment
    Inc.

$
(91,122
)

$
(78,983
)Per share information attributable to FX Real Estate and
    Entertainment Inc.:Basic and diluted loss per share

$
(1.75
)

$
(1.81
)Basic and diluted average number of common shares outstanding


51,992,417



43,754,838    6




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FX Real
    Estate and Entertainment Inc.CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)(amounts in thousands)
  Six Months


Six MonthsEnded


EndedJune 30, 2009


June 30, 2008Cash flows from operating activities:Net loss

$
(91,122
)

$
(78,995
)Adjustments to reconcile net loss to cash used in operating
    activities:Reversal of license fees


(10,000
)


Impairment of land


76,970



Impairment of
    available-for-sale
    securities


377



31,585Gain on sales of marketable securities


(251
)


Gain on disposal of assets


91



Depreciation and amortization


1,013



10,810Deferred financing cost amortization


54



6,520Share-based payments


382



1,658Provision for accounts receivable allowance


227



406Changes in operating assets and liabilities:Receivables


(338
)


(192
)Other current and non-current assets


525



31Accounts payable and accrued expenses


9,429



(2,163
)Accrued license fees






(5,000
)Due to related parties


(92
)


(1,545
)Unearned revenue


247



197Other


(830
)


(22
)Net cash used in operating activities


(13,318
)


(36,710
)Cash flows from investing activities:Restricted cash


29,436



23,689Proceeds from sales of marketable securities


4,105



Proceeds from sale of assets


95



Purchase of property and equipment


(15
)


(71
)Capitalized development costs






(5,120
)Net cash provided by investing activities


33,621



18,498Cash flows from financing activities:Principal payment on mortgage loan


(21,000
)


Repayment of margin loan


(741
)


Repayment of related party debt






(7,054
)Repayment of notes






(24,033
)Proceeds from sale of common stock






2,570Proceeds from rights offering and investment agreements, net






96,613Preferred distribution to related party






(31,039
)Deferred financing and leasing costs






(171
)Contribution from noncontrolling interest


45



668Net cash (used in) provided by financing activities


(21,696
)


37,554Net (decrease) / increase in cash and equivalents


(1,393
)


19,342Cash and cash equivalents  beginning of period


2,659



2,559Cash and cash equivalents  end of period

$
1,266


$
21,901Supplemental cash flow data:Cash paid for interest

$
6,993


$
21,317Cash paid for debt restructuring expenses


1,991



   Supplemental
    cash flow information:
    Capitalized but unpaid development costs

$
1,067Accrued but unpaid stock issuance costs


30    7




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FX Real
    Estate and Entertainment Inc.
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  1.
    Basis of
    Presentation  General
    Form 10-K, Form 10-K).
  2.
    Organization
    and Background  Business
    of the Company
     8




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Receiver
  A-09-591831-B, and/or
    
    The Receiver took immediate and exclusive possession of the
    Receivership Property and is holding, operating, managing and
    leasing the Receivership Property;
    The Receiver is required to take all commercially reasonable
    efforts to diligently analyze, evaluate, report with regard to,
    organize and categorize information relating to the Receivership
    Property so as to assist in the preparation for sale of the
    Receivership Property at foreclosure;
    The Receiver is required to preserve the Receivership Property
    from loss, removal, material injury, destruction, substantial
    waste and loss of income therefrom; and
    The Companys Las Vegas subsidiaries were relieved of
    possession of, and any further obligation to administer, the
    Receivership Property.      Impairment
    of Land
   9




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and/or
    
    Loss of certain typical market participants (e.g., large hotel
    and casino operators) given their current financial condition,
    commitments and / or liquidity challenges;
    Discount from the available comparable sales which are primarily
    dated in 2007 and do not fully reflect the continued
    deterioration of the Las Vegas market values;
    Development requirements, and therefore, capital needs, to
    maximize the value and use of the Las Vegas property combined
    with the lack of available financing;
    Location, configuration and zoning of the Las Vegas property,
    each which may make it more or less attractive than other
    comparable properties; and
    Shrinking market and exposure periods in the current environment.  CKX
    Distribution
    Rights
    Offering and Related Investment Agreements
   10




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Form 10-K.
  Private
    Placement of Units
    Key
    Employee Changes
   11




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Form 8-K
    
    A contingent severance payment in an amount equal to 2% of any
    future net proceeds or fees received by the company
    and/or the
    Companys subsidiary FX Luxury, LLC (FX Luxury)
    from the sale
    and/or
    development of the Las Vegas properties owned by the
    Companys Las Vegas subsidiaries, up to a maximum of
    $600,000, provided that such 2% may be increased (but not the
    maximum amount of $600,000) in the event the company enters into
    an equivalent severance arrangement with either its President or
    Executive Vice President, both of whom are still employed by the
    Company, that provides for a percentage greater than 2%;
    A grant on the effective Date of immediately exercisable
    incentive stock options to purchase up to 1,000,000 shares
    of the Companys common stock at an exercise price equal to
    the fair market value, as determined under the Companys
    2007 Executive Equity Incentive Plan, of a share of the
    Companys common stock on the Effective Date; and the
    retention of previously granted and vested stock options to
    purchase up to 750,000 shares of the Companys common
    stock at an exercise price of $10.00 per share.    
    A contingent severance payment in an amount equal to 2% of any
    future net proceeds or fees received by the company
    and/or FX
    Luxury, from the sale
    and/or
    development of the Las Vegas properties owned by the
    Companys Las Vegas subsidiaries, up to a maximum of
    $84,375, provided that such 2% may be increased (but not the
    maximum amount of $84,375) in the event the company enters into
    an equivalent severance arrangement with either its President or
    Executive Vice President, both of whom are still employed by the
    Company, that provides for a percentage greater than 2%;
    The retention of previously granted and vested stock options to
    purchase up to 80,000 shares of the Companys common
    stock at an exercise price of $20.00 per share.  Form 8-K
      Delisting
    of Common Stock
   12




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3.
    Going
    Concern        4.
    Accounting
    Policies  Significant
    Accounting Policies
  Form 10-K.
  Impact
    of Recently Issued Accounting Standards
  , Fair Value
    Measurements
  Business
    Combinations Noncontrolling Interests in
    Consolidated Financial Statements an amendment of ARB
    No. 51
 13




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FASB Accounting Standards
    CodificationTM FASB Accounting Standards
    CodificationTM
    FAS 107-1 28-1, FAS 107-1 28-1). FAS 107-1 28-1 FAS 107-1 28-1 FAS 107-1 28-1 FAS 107-1 28-1
  FAS 115-2 FAS 124-2, Other-Than-Temporary FAS 115-2 FAS 124-2), other-than-temporary other-than-temporary FAS 115-2 FAS 124-2 other-than-temporary FAS 115-2 FAS 124-2 FAS 115-2 FAS 124-2 FAS 115-2 FAS 124-2
  FAS 157-4, FAS 157-4). FAS 157-4
 14




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FAS 157-4 FAS 157-4 FAS 157-4 FAS 157-4
    FAS 142-3, FAS 142-3), FAS 142-3 FAS 142-3 FAS 142-3 FAS 142-3
    5.
    Marketable
    Securities    Accounting for Certain Investments in Debt and Equity
    Securities,
 15




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6.
    Loss Per
    Share/Common Shares Outstanding  Earnings Per Share
  7.
    Incidental
    Operations  Accounting for Costs and Initial Operations of Real Estate
    Projects
      Three Months


Six MonthsEnded


EndedJune 30, 2008


June 30, 2008(Amounts in thousands)Revenue

$
4,460


$
9,029Depreciation


(5,401
)


(10,797
)Operating & other expenses


(4,027
)


(7,253
)Loss from incidental operations

$
(4,968
)

$
(9,021
)   8.
    Debt and
    Notes Payable  Debt
    in Default
         16




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17




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Notes
    Payable
  Riv Loan 
  Bear Stearns Loan 
    9.
    Related
    Party Debt     18




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10.
    Terminated
    License Agreements with Related Parties    and/or
  Accounting
    for Minimum Guaranteed License Payments
    11.
    Acquired
    Lease Intangibles      June 30, 2009


December 31, 2008AssetsAbove-market leases

$
582


$
582In-place leases


1,320



1,320Accumulated amortization


(874
)


(839
)Net

$
1,028


$
1,063LiabilitiesBelow-market leases

$
111


$
111Accumulated accretion


(101
)


(98
)Net

$
10


$
13   12.
    Derivative
    Financial Instruments  Accounting for Derivative Instruments
 19




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and Hedging Activities
  13.
    Share-Based
    Payments      14.
    Income
    Taxes          15.
    Litigation      16.
    Related
    Party Transactions  Shared
    Services Agreement and Arrangement
   20




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and/or
           21




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Preferred
    Priority Distribution
        19X
    Payment
    650
    Madison Avenue Office Space
      17.
    Fair
    Value of Financial Instruments    Cash and
    Cash Equivalents
   22




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Investment
    in Marketable Securities
    Long-term
    Debt
      June 30, 2009


December 31, 2008Carrying


Fair


Carrying


FairAmount


Value


Amount


ValueFinancial assets:Cash and cash equivalents

$
1,266


$
1,266


$
2,659


$
2,659Investment in marketable securities










4,231



4,231   18.
    Fair
    Value Measurements    
    Level 1: Observable inputs such as quoted prices in active
    markets for identical assets or liabilities.
    Level 2: Inputs other than quoted prices that are
    observable for the asset or liability, either directly or
    indirectly; these include quoted prices for similar assets or
    liabilities in active markets and quoted prices for identical or
    similar assets or liabilities in markets that are not active.
    Level 3: Unobservable inputs that reflect the reporting
    entitys own assumptions.      Quoted Prices inActive Markets for


Significant Other


SignificantIdentical Assets or


Observable Inputs


Unobservable Inputs


December 31, 2008Liabilities (Level 1)


(Level 2)


(Level 3)


TotalAssets:Investment in marketable securities

$
4,231


$



$



$
4,231     19.
    Subsequent
    Events   23




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Former
    Office Space Lease
   24




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FORWARD
    LOOKING STATEMENTS
  In addition to historical information, this
    Form 10-Q
    (this Quarterly Report) contains forward-looking
    statements within the meaning of Section 27A of the
    Securities Act of 1933, as amended, and Section 21E of the
    Securities Exchange Act of 1934, as amended. Forward-looking
    statements are those that predict or describe future events or
    trends and that do not relate solely to historical matters. You
    can generally identify forward-looking statements as statements
    containing the words believe, expect,
    will, anticipate, intend,
    estimate, project, assume or
    other similar expressions, although not all forward-looking
    statements contain these identifying words. All statements in
    this Quarterly Report regarding our future strategy, future
    operations, projected financial position, estimated future
    revenue, projected costs, future prospects, and results that
    might be obtained by pursuing managements current plans
    and objectives are forward-looking statements. You should not
    place undue reliance on our forward-looking statements because
    the matters they describe are subject to known and unknown
    risks, uncertainties and other unpredictable factors, many of
    which are beyond our control. Our forward-looking statements are
    based on the information currently available to us and speak
    only as of the date on which this Quarterly Report was filed
    with the Securities and Exchange Commission (SEC).
    We expressly disclaim any obligation to issue any updates or
    revisions to our forward-looking statements, even if subsequent
    events cause our expectations to change regarding the matters
    discussed in those statements. Over time, our actual results,
    performance or achievements will likely differ from the
    anticipated results, performance or achievements that are
    expressed or implied by our forward-looking statements, and such
    difference might be significant and materially adverse to our
    stockholders.
 25




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ITEM 2.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  The following managements discussion and analysis of
    financial condition and results of operations of the Company
    should be read in conjunction with the historical audited
    consolidated financial statements and footnotes of the
    registrant included in its Annual Report on
    Form 10-K
    for the year ended December 31, 2008. Our future results of
    operations may change materially from the historical results of
    operations reflected in our historical financial statements.
  Business
    of the Company
         26




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and/or
        Impairment
    of Land
  and/or
    
    Loss of certain typical market participants (e.g., large hotel
    and casino operators) given their current financial condition,
    commitments and / or liquidity challenges;
    Discount from the available comparable sales which are primarily
    dated in 2007 and do not fully reflect the continued
    deterioration of the Las Vegas market values;
    Development requirements, and therefore, capital needs, to
    maximize the value and use of the Las Vegas property combined
    with the lack of available financing; 27




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
    Location, configuration and zoning of the Las Vegas property,
    each which may make it more or less attractive than other
    comparable properties; and
    Shrinking market and exposure periods in the current environment.  Consolidated
    Operating Results Three Months Ended June 30, 2009 Compared
    to Three Months Ended June 30, 2008
      Revenue
    Operating
    Expenses
    Depreciation
    and Amortization
    Interest
    Income/Expense
    Loss
    from Incidental Operations
   28




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Income
    Taxes
    Consolidated
    Operating Results Six Months Ended June 30, 2009 Compared
    to Six Months Ended June 30, 2008
    Revenue
    Operating
    Expenses
    Depreciation
    and Amortization
    Interest
    Income/Expense
   29




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Loss
    from Incidental Operations
      Income
    Taxes
    Liquidity
    and Capital Resources
  Introduction
          and/or
   30




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Rights Offering 
  Shier Stock Purchase 
  Private Placement of Units 
  Riv Loan
 31




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CKX Line of Credit
    Bear Stearns Margin Loan
  Preferred Priority Distribution
 32




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Cash Flow
    for the Six Months Ended June 30, 2009 and 2008
  Operating
    Activities
  available-for-sale
    Investing
    Activities
      Financing
    Activities
      Uses of
    Capital
    Capital
    Expenditures
   33




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Dividends
    Commitments
    and Contingencies
    Inflation
    Application
    of Critical Accounting Policies
  Form 10-K,
  Impact
    of Recently Issued Accounting Standards
  , Fair Value
    Measurements
  Business
    Combinations Noncontrolling Interests in
    Consolidated Financial Statements an amendment of ARB
    No. 51
   34




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FASB Accounting Standards CodificationTM FASB Accounting Standards
    CodificationTM
    FAS 107-1 28-1, FAS 107-1 28-1). FAS 107-1 28-1 FAS 107-1 28-1 FAS 107-1 28-1 FAS 107-1 28-1
  FAS 115-2 FAS 124-2, Other-Than-Temporary FAS 115-2 FAS 124-2), other-than-temporary other-than-temporary FAS 115-2 FAS 124-2 other-than-temporary FAS 115-2 FAS 124-2 FAS 115-2 FAS 124-2 FAS 115-2 FAS 124-2
  FAS 157-4, FAS 157-4). FAS 157-4 FAS 157-4 FAS 157-4 FAS 157-4 FAS 157-4
   35




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FAS 142-3, FAS 142-3), FAS 142-3 FAS 142-3 FAS 142-3 FAS 142-3
    Off
    Balance Sheet Arrangements
    Seasonality
    ITEM 3.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK    Interest
    Rate Risk
   36




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ITEM 4T.
    CONTROLS
    AND PROCEDURES  Changes
    in Internal Control over Financial Reporting
  Due to
    recent changes in personnel, we have material weaknesses in our
    internal controls over financial reporting.
    Evaluation
    of Disclosure Controls and Procedures
   PART II 
    OTHER INFORMATION ITEM 1.
    LEGAL
    PROCEEDINGS    ITEM 1A.
    RISK
    FACTORS  Form 10-K.
  ITEM 3.
    DEFAULTS
    UPON SENIOR SECURITIES   37




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38




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ITEM 6.
    EXHIBITS  Exhibits
    ExhibitNumber

Description10
.1

Employment Separation Agreement and Release entered into
    April 30, 2009 by and between FX Real Estate and
    Entertainment Inc. and Barry A. Shier(1)10
.2

Employment Separation Agreement and Release entered into
    April 30, 2009 by and between FX Real Estate and
    Entertainment Inc. and Brett Torino(1)10
.3

Letter Agreement entered into June 23, 2009 by and between
    FX Real Estate and Entertainment Inc. and Paul C. Kanavos(2)10
.4

Letter Agreement entered into June 23, 2009 by and between
    FX Real Estate and Entertainment Inc. and Mitchell J. Nelson(2)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     (1)
    
    Incorporated by reference from the registrants Current
    Report on
    Form 8-K
    dated April 30, 2009.(2)
    
    Incorporated by reference from the registrants Current
    Report on
    Form 8-K
    dated June 23, 2009. 39




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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/  GARY McHENRY  Gary McHenry
 Principal Financial Officer
  40




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INDEX TO
    EXHIBITS
    ExhibitNumber

Description31
.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  41