##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, 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
    September 30, 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(Do not check if a smaller reporting company)   Rule 12b-2 o þ




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##### 





TABLE OF
    CONTENTS
   
 PART I. FINANCIAL INFORMATIONItem 1.


Financial StatementsConsolidated Balance Sheets as of
    September 30, 2008 (Unaudited) and December 31,
    2007


3Consolidated Statements of Operations for the
    three months ended September 30, 2008 and 2007
    (Unaudited)


4Consolidated Statements of Operations for the
    nine months ended September 30, 2008 (Unaudited) and for
    the period from May 11, 2007 through September 30,
    2007 (Unaudited) and Combined Statement of Operations for the
    period from January 1, 2007 through May 10, 2007
    (Predecessor)


5Consolidated Statements of Cash Flows for the
    nine months ended September 30, 2008 (Unaudited) and for
    the period from May 11, 2007 through September 30,
    2007 (Unaudited) and Combined Statement of Cash Flows for the
    period from January 1, 2007 through May 10, 2007
    (Predecessor)


6Notes to Consolidated and Combined Financial
    Statements (Unaudited)


7Item 2.


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


25Item 3.


Quantitative and Qualitative Disclosures About
    Market Risk


36Item 4T.


Controls and Procedures


37PART II. OTHER INFORMATIONItem 1.


Legal Proceedings


37Item 1A.


Risk Factors


37Item 3.


Defaults Upon Senior Securities


39Item 4.


Submission of Matters to a Vote of Security
    Holders


39Item 6.


Exhibits


40EX-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
 (amounts
    in thousands, except share data)
  September 30,


December 31,2008


2007(Unaudited)ASSETSCurrent assets:Cash and cash equivalents

$
9,483


$
2,559Restricted cash


37,229



60,350Marketable securities


10,366



43,439Rent and other receivables, net of allowance for doubtful
    accounts of $110 at September 30, 2008 and $368 at
    December 31, 2007


448



1,016Deferred financing costs, net


889



6,714Prepaid expenses and other current assets


1,366



1,031Total current assets


59,781



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


537,719



533,336Building and improvements


32,710



32,710Furniture, fixtures and equipment


682



565Capitalized development costs






6,026Less: accumulated depreciation


(26,877
)


(10,984
)Net investment in real estate


544,234



561,653Acquired lease intangible assets, net


1,103



1,222Total assets

$
605,118


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

$
7,177


$
10,809Accrued license fees


7,500



10,000Debt


475,000



475,000Notes payable


4,605



30,674Due to related parties


1,415



3,022Related party debt






1,020Other current liabilities


817



1,075Acquired lease intangible liabilities, net


19



39Unearned rent and related revenue


66



Total current liabilities


496,599



531,639Related party debt






6,000Other long-term liabilities


10



191Total liabilities


496,609



537,830Contingently redeemable stockholders equity






180Stockholders equity:Preferred stock, $0.01 par value: authorized
    75,000,000 shares, 1 share issued and outstanding at
    September 30, 2008 and none issued and outstanding at
    December 31, 2007






Common stock, $0.01 par value: authorized
    300,000,000 shares, 51,929,696 and 39,290,247 shares
    issued and outstanding at September 30, 2008 and
    December 31, 2007, respectively


519



393Additional
    paid-in-capital


298,419



219,781Accumulated deficit


(190,429
)


(77,739
)Accumulated other comprehensive loss






(2,461
)Total stockholders equity


108,509



139,974Total liabilities and stockholders equity

$
605,118


$
677,984    3




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##### Table of Contents



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


Three MonthsEnded


EndedSeptember 30, 2008


September 30, 2007Revenue

$
482


$
1,346Operating expenses:License fees


2,500



4,285Selling, general and administrative expenses


3,560



3,278Depreciation and amortization expense


7



86Operating and maintenance


6



145Real estate taxes


58



116Impairment of capitalized development costs


10,667



Total operating expenses


16,798



7,910Loss from operations


(16,316
)


(6,564
)Interest income


84



187Interest expense


(9,665
)


(15,707
)Other expense


(3,950
)


(5,981
)Loss before equity in loss of an unconsolidated affiliate,
    minority interest and incidental operations


(29,847
)


(28,065
)Equity in loss of an unconsolidated affiliate






(514
)Minority interest






335Loss from incidental operations


(3,860
)


(5,113
)Net loss

$
(33,707
)

$
(33,357
)Basic and diluted loss per share

$
(0.65
)Basic and diluted average number of common shares outstanding


51,503,841    4




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##### Table of Contents



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



CombinedConsolidated


Period from



Period fromNine Months


May 11, 2007



January 1, 2007Ended


Through



ThroughSeptember 30, 2008


September 30, 2007



May 10, 2007(Unaudited)


(Unaudited)Revenue

$
1,453


$
1,346



$
2,079Operating expenses:License fees


7,500



5,714




Selling, general and administrative expenses


11,504



3,687




421Depreciation and amortization expense


20



86




128Operating and maintenance


23



145




265Real estate taxes


167



116




153Impairment of capitalized development costs


10,667








Total operating expenses


29,881



9,748




967Income (loss) from operations


(28,428
)


(8,402
)



1,112Interest income


325



613




113Interest expense


(36,183
)


(15,944
)



(14,557
)Other expense


(35,535
)


(6,358
)



Loss before equity in loss of an unconsolidated affiliate,
    minority interest, early retirement of debt and incidental
    operations


(99,821
)


(30,091
)



(13,332
)Equity in loss of an unconsolidated affiliate






(4,969
)



Minority interest


12



579




Loss from early retirement of debt











(3,507
)Loss from incidental operations


(12,881
)


(5,113
)



(7,790
)Net loss

$
(112,690
)

$
(39,594
)


$
(24,629
)Basic and diluted loss per share

$
(2.43
)Basic and diluted average number of common shares outstanding


46,356,693    5




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##### Table of Contents



FX Real
    Estate and Entertainment Inc.



STATEMENTS
    OF CASH FLOWS

(amounts
    in thousands)  PredecessorConsolidated



CombinedConsolidated


Period from



Period fromNine Months


May 11, 2007



January 1, 2007Ended


through



ThroughSeptember 30, 2008


September, 30 2007



May 10, 2007(Unaudited)


(Unaudited)Cash flows from operating activities:Net loss

$
(112,690
)

$
(39,594
)


$
(24,629
)Adjustments to reconcile net loss to cash provided by (used in)
    operating activities:Loss on exercise of derivative






6,358




Impairment of available-for-sale securities


35,535








Impairment of capitalized development costs


10,667








Equity in loss of an unconsolidated affiliate






4,969




36Depreciation and amortization


15,892



5,449




8,472Deferred financing cost amortization


7,493



3,631




41Share-based payments


2,448








Minority interest


(12
)


(579
)



Provision for accounts receivable allowance


(258
)







Changes in operating assets and liabilities:Receivables


475








(171
)Other current and non-current assets


(533
)


(1,318
)



(933
)Accounts payable and accrued expenses


(3,571
)


3,324




(2,486
)Accrued license fees


(2,500
)


5,714




Due to related parties


(1,607
)


1,053




22Unearned revenue


66








991Other


(266
)







27Net cash used in operating activities


(48,861
)


(10,993
)



(18,630
)Cash flows from investing activities:Restricted cash


37,979



(10,443
)



11,541Purchase of additional interest in Metroflag






(172,500
)



Purchase of property and equipment


(117
)







Capitalized development costs


(9,034
)







(45
)Purchase of Riviera interests






(21,842
)



Purchase of shares in Riviera






(13,197
)



Net cash provided by (used in) investing activities


28,828



(217,982
)



11,496Cash flows from financing activities:Proceeds from private placement of units


7,925








Payment of mortgage loan extension costs


(14,988
)







Repayment of related party debt


(7,054
)







Repayment of notes


(26,069
)







Proceeds from sale of common stock


2,570



2,000




Proceeds from rights offering and investment agreements, net


96,613








Preferred distribution to related party


(31,039
)







Deferred financing and leasing costs


(1,669
)


(3,737
)



(10,536
)Contribution from minority interest


668



466




Proceeds from members loans











5,972Members capital contributions






100,000




Repayment of members loans






(7,605
)



Borrowings under loan agreement and notes payable






141,674




306,543Retirement of mortgage loans











(295,000
)Net cash provided by financing activities


26,957



232,798




6,979Net increase (decrease) in cash and equivalents


6,924



3,823




(155
)Cash and cash equivalents  beginning of period


2,559








1,643Cash and cash equivalents  end of period

$
9,483


$
3,823



$
1,488Supplemental cash flow information:Cash paid for interest

$
30,189


$
12,772



$
17,102Non-cash financing activity:Contributions of assets for membership interests

$



$
103,421



$
    6




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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).
               7




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##### Table of Contents



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 Formation of the
    Company
  The
    Fair Value Option for Financial Assets and Financial Liabilities
  Business Combinations Noncontrolling Interests in Consolidated Financial
    Statements an amendment of ARB No. 51
  Disclosure of Certain Loss
    Contingencies, an amendment of FASB Statements No. 5 and
    141(R)
 8




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##### Table of Contents



FX Real
    Estate and Entertainment Inc.
  NOTES TO
    UNAUDITED CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
    2.
    Organization
    and Background  Business
    of the Company
         9




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##### Table of Contents



FX Real
    Estate and Entertainment Inc.
  NOTES TO
    UNAUDITED CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
      Formation
    of the Company
           10




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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
     11




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##### Table of Contents



FX Real
    Estate and Entertainment Inc.
  NOTES TO
    UNAUDITED CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
  The
    Repurchase Agreement and Contingently Redeemable
    Stock
      30-day
  Rights
    Offering and Related Investment Agreements
     12




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##### Table of Contents



FX Real
    Estate and Entertainment Inc.
  NOTES TO
    UNAUDITED CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
      and/or
    Form 10-Q
  Conditional
    Option Agreement with 19X
      Private
    Placement of Units
   13




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##### Table of Contents



FX Real
    Estate and Entertainment Inc.
  NOTES TO
    UNAUDITED CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
    3.
    Going
    Concern  Form 10-K
      4.
    Marketable
    Securities  Accounting for Certain Investments in Debt and Equity
    Securities
 14




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##### Table of Contents



FX Real
    Estate and Entertainment Inc.
  NOTES TO
    UNAUDITED CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
    5.
    Loss Per
    Share/Common Shares Outstanding  Earnings Per Share
  6.
    Incidental
    Operations  Accounting for Costs and
    Initial Operations of Real Estate Projects
      PredecessorPeriod from



Period fromThree Months


Three Months



Nine Months


May 11, 2007



January 1, 2007Ended


Ended



Ended


Through



ThroughSeptember 30, 2008


September 30, 2007



September 30, 2008


September 30, 2007



May 10, 2007(Amounts in thousands)Revenue

$
4,445


$
3,395



$
13,474


$
3,395



$
5,326Depreciation


(5,076
)


(5,365
)



(15,873
)


(5,365
)



(8,343
)Operating & other expenses


(3,229
)


(3,143
)



(10,482
)


(3,143
)



(4,773
)Loss from incidental operations

$
(3,860
)

$
(5,113
)


$
(12,881
)

$
(5,113
)


$
(7,790
)   7.
    Debt and
    Notes Payable   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
       16




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##### Table of Contents



FX Real
    Estate and Entertainment Inc.
  NOTES TO
    UNAUDITED CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
      8.
    Related
    Party Debt      9.
    License
    Agreements with Related Parties  Elvis
    Presley License Agreement
  Grant of
    Rights
  and/or
 17




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##### Table of Contents



FX Real
    Estate and Entertainment Inc.
  NOTES TO
    UNAUDITED CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
  Hotel at
    Graceland
    Royalty
    Payments and Minimum Guarantees
        Termination
    Rights
    Conditional
    Amendment to Elvis Presley Enterprises License
    Agreement
   18




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##### Table of Contents



FX Real
    Estate and Entertainment Inc.
  NOTES TO
    UNAUDITED CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
  Muhammad
    Ali License Agreement
  Grant of
    Rights
    Royalty
    Payments and Minimum Guarantees
        Termination
    Rights
    Accounting
    for Minimum Guaranteed License Payments
   19




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##### Table of Contents



FX Real
    Estate and Entertainment Inc.
  NOTES TO
    UNAUDITED CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
  Impact
    of Financial Condition on License Agreements
    10.
    Acquired
    Lease Intangibles      September 30, 2008


December 31, 2007AssetsAbove-market leases

$
582


$
582In-place leases


1,320



1,320Accumulated amortization


(799
)


(680
)Net

$
1,103


$
1,222LiabilitiesBelow-market leases

$
111


$
111Accumulated accretion


(92
)


(72
)Net

$
19


$
39   11.
    Derivative
    Financial Instruments   20




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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.
    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


3.16%Volatility


52.0%Weighted average expected life remaining at September 30,
    2008


5.77 yearsDividend yield


0.0%    21




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##### Table of Contents



FX Real
    Estate and Entertainment Inc.
  NOTES TO
    UNAUDITED CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
    Risk-free rate


3.28%Volatility


40.0%Weighted average expected life


6.25 yearsDividend yield


0.0%         14.
    Income
    Taxes          15.
    Litigation     22




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##### Table of Contents



FX Real
    Estate and Entertainment Inc.
  NOTES TO
    UNAUDITED CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
    16.
    Related
    Party Transactions  Shared
    Services Agreement and Arrangements
        and/or
     23




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##### Table of Contents



FX Real
    Estate and Entertainment Inc.
  NOTES TO
    UNAUDITED CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
    and/or
  Preferred
    Priority Distribution
        17.
    Subsequent
    Events          24




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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. In August 2008, FX Luxury
    Realty, LLC changed its name to FX Luxury, LLC, BP Parent, LLC
    changed its name to FX Luxury Las Vegas Parent, LLC, Metroflag
    BP, LLC changed its name to FX Luxury Las Vegas I, LLC and
    Metroflag Cable, LLC changed its name to FX Luxury Las Vegas II,
    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
    subsidiaries refer to Metroflag BP, LLC and Metroflag
    Cable, LLC, each as renamed as indicated above. 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
    through the Park Central subsidiaries. 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. As a result of
    the disruption in the capital markets and the economic downturn
    in the United States, and Las Vegas in particular, we have
    determined not to proceed with our originally proposed plan for
    the redevelopment plan of the Park Central site. We intend to
    consider alternative plans with respect to the redevelopment of
    the site. Until such time as an alternative development plan, if
    any, is adopted, we intend to continue the sites current
    commercial leasing activities.
     25




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##### Table of Contents



FX Real
    Estate and Entertainment Consolidated Operating
    Results
           26




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##### Table of Contents



Metroflag
    Operating Results
        Metroflag
    Results for the Three Months Ended September 30, 2008 and
    2007
  Three Months


Three MonthsEnded


EndedSeptember 30, 2008


September 30, 2007


Variance(Amounts in thousands)Revenue

$
482


$
1,440


$
(958
)Operating expenses


(11,470
)


(489
)


(10,981
)Depreciation and amortization


(7
)


(92
)


85Income (loss) from operations


(10,995
)


859



(11,854
)Interest expense, net


(9,541
)


(15,854
)


6,313Loss from incidental operations


(3,860
)


(5,418
)


1,558Net loss

$
(24,396
)

$
(20,413
)

$
(3,983
)   Revenue
   27




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##### Table of Contents



Operating
    Expenses
    Depreciation
    and Amortization Expense
    Interest
    Income/Expense
    Loss
    from Incidental Operations
    Metroflag
    Results for the Nine Months Ended September 30, 2008 and
    2007
  Period fromJanuary 1, 2007


Period from



Nine MonthsNine Months



Through


May 11, 2007



EndedEnded



May 10,


Through



September 30,September 30, 2008



2007


September 30, 2007



2007


Variance(Amounts in thousands)Revenue

$
1,453



$
2,079


$
2,287



$
4,366


$
(2,913
)Operating expenses


(13,619
)



(839
)


(677
)



(1,516
)


(12,103
)Depreciation and amortization


(20
)



(128
)


(140
)



(268
)


248Income (loss) from operations


(12,186
)



1,112



1,470




2,582



(14,768
)Interest expense, net


(34,817
)



(14,444
)


(22,680
)



(37,124
)


2,307Loss from early retirement of debt







(3,507
)







(3,507
)


3,507Loss from incidental operations


(12,881
)



(7,790
)


(8,112
)



(15,902
)


3,021Net loss

$
(59,884
)


$
(24,629
)

$
(29,322
)


$
(53,951
)

$
(5,933
)   Revenue
    Operating
    Expenses
   28




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##### Table of Contents



Depreciation
    and Amortization Expense
    Interest
    Income/Expense
    Loss
    from Early Retirement of Debt
    Loss
    from Incidental Operations
    Liquidity
    and Capital Resources
  Introduction
     29




---



##### Table of Contents



Rights Offering 
  Shier Stock Purchase 
  Private Placement of Units 
  Riv Loan
 30




---



##### Table of Contents



CKX Line of Credit
      Mortgage Loan 
 31




---



##### Table of Contents



and/or
  Mortgage Loan Default
  Bear Stearns Margin Loan
 32




---



##### Table of Contents



Preferred Priority Distribution
  Cash Flow
    for the Nine Months Ended September 30, 2008
  Operating
    Activities
    Investing
    Activities
    Financing
    Activities
    Cash Flow
    for the Period from May 11, 2007 to September 30,
    2007
    Investing
    Activities
   33




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##### Table of Contents



Financing
    Activities
    Metroflag 
    Historical Cash Flow for the Period from January 1, 2007
    through May 10, 2007
  Operating
    Activities
    Investing
    Activities
    Financing
    Activities
    Uses of
    Capital
    and/or
 34




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##### Table of Contents



Capital
    Expenditures
      Dividends
    Commitments
    and Contingencies
    Inflation
    Application
    of Critical Accounting Policies
  Form 10-K,
  Impact
    of Recently Issued Accounting Standards
  , Fair Value
    Measurements Formation of
    the Company
 35




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##### Table of Contents



The
    Fair Value Option for Financial Assets and Financial Liabilities
  Business Combinations Noncontrolling Interests in Consolidated Financial
    Statements, an amendment of ARB No. 51
  Disclosure of Certain Loss
    Contingencies, an amendment of FASB Statements No. 5 and
    141(R)
  Off
    Balance Sheet Arrangements
    Seasonality
    ITEM 3.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK    Interest
    Rate Risk
     36




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##### Table of Contents



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
    PART II 
    OTHER INFORMATION  ITEM 1.
    LEGAL
    PROCEEDINGS    ITEM 1A.
    RISK
    FACTORS   37




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##### Table of Contents



Form 10-K, Form 10-K)
  Form 10-K.
  Our
    Park Central subsidiaries are in default under the
    $475 million mortgage loan secured by the Park Central
    site.
    Because
    of the disruptions in the capital markets and the economic
    downturn in the U.S. in general and Las Vegas in particular, we
    have decided to not continue with the redevelopment plan for the
    Park Central site as originally proposed and intend to continue
    commercial leasing activities on the Park Central site until
    such time as an alternative redevelopment plan, if any, is
    adopted.
  and/or
  Disruptions
    in the capital markets, as have been experienced during 2008,
    could adversely affect our ability to service our financial
    obligations and fund our short-term liquidity
    needs.
   38




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##### Table of Contents



ITEM 3.
    DEFAULTS
    UPON SENIOR SECURITIES    ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS                For


WithheldRobert F.X. Sillerman


50,733,474



328,512Paul C. Kanavos


50,326,045



735,941Barry A. Shier


50,626,045



435,941Thomas P. Benson


50,626,045



435,941David M. Ledy


50,802,793



259,913Harvey Silverman


50,802,793



259,913Michael J. Meyer


50,802,773



259,213      39




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##### Table of Contents



ITEM 6.  EXHIBITS  Exhibits
    ExhibitNumber

Description10
.1

Form of Subscription Agreement(1)10
.2

Form of $4.50 Warrant(1)10
.3

Form of $5.50 Warrant(1)10
.4

Form of Option Agreement for FX Real Estate and Entertainment
    Inc. 2007 Long-Term Incentive Compensation Plan(2)10
.5

Form of Option Agreement for FX Real Estate and Entertainment
    Inc. 2007 Executive Equity Incentive Plan(2)31
.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 from the registrants Current
    Report on
    Form 8-K
    dated July 17, 2008.(2)
    
    Incorporated by reference from the registrants Current
    Report on
    Form 8-K
    dated September 29, 2008. 40




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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
   41




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##### Table of Contents



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  42