##### 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, 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
 þ 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 March 31,
    2009 (Unaudited) and December 31, 2008


4Consolidated Statements of Operations for the
    three months ended March 31, 2009 and 2008 (Unaudited)


5Consolidated Statements of Cash Flows for the
    three months ended March 31, 2009 and 2008 (Unaudited)


6Notes to Consolidated and Combined Financial
    Statements (Unaudited)


7Item 2.

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


20Item 3.

Quantitative and Qualitative Disclosures About
    Market Risk


27Item 4T.

Controls and Procedures


27PART II. OTHER INFORMATIONItem 1.

Legal Proceedings


27Item 1A.

Risk Factors


27Item 3.

Defaults Upon Senior Securities


28Item 6.

Exhibits


29EX-31.1EX-31.2EX-32.1EX-32.2   2




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EXPLANATORY
    NOTE  35-day
      Form 8-K
 3




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##### Table of Contents



FX Real
    Estate and Entertainment Inc.
 CONSOLIDATED
    BALANCE SHEETS(amounts in thousands, except share data) March 31,

December 31,2009

2008(Unaudited)ASSETSCurrent assets:Cash and cash equivalents

$
4,059


$
2,659Restricted cash


288



29,814Marketable securities


118



4,231Rent and other receivables, net of allowance for doubtful
    accounts of $53 at March 31, 2009 and $17 at
    December 31, 2008


359



124Deferred financing costs, net






54Prepaid expenses and other current assets


1,380



1,325Total current assets


6,204



38,207Investment in real estate:Land


212,624



212,624Building and improvements


32,816



32,816Furniture, fixtures and equipment


730



730Less: accumulated depreciation


(27,877
)


(27,370
)Net investment in real estate


218,293



218,800Acquired lease intangible assets, net


1,043



1,063Total assets

$
225,540


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

$
11,152


$
10,321Accrued license fees






10,000Debt in default  see note 9


454,000



475,000Notes payable






391Due to related parties


1,269



1,373Other current liabilities


532



519Acquired lease intangible liabilities, net


11



13Unearned rent and related revenue


279



36Total current liabilities


467,243



497,653Other long-term liabilities


297



309Total liabilities


467,540



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


520



520Additional
    paid-in-capital


299,915



299,142Accumulated deficit


(542,435
)


(539,554
)Total stockholders deficit


(242,000
)


(239,892
)Total liabilities and stockholders deficit

$
225,540


$
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

EndedMarch 31,
    2009

March 31,
    2008Revenue

$
4,615


$
485Operating expenses:License fees (see note 11)


(10,000
)


2,500Selling, general and administrative expenses


4,056



4,675Depreciation and amortization expense


507



6Operating and maintenance


1,131



11Debt restructuring expenses


855



Real estate taxes


448



54Total operating expenses


(3,003
)


7,246Income (loss) from operations


7,618



(6,761
)Interest income


18



106Interest expense


(10,379
)


(14,327
)Other expense


(138
)


Loss from incidental operations






(4,053
)Net loss


(2,881
)


(25,035
)Less: Net loss attributable to noncontrolling interest






(2
)Net loss attributable to FX Real Estate and Entertainment
    Inc.

$
(2,881
)

$
(25,033
)Per share information attributable to FX Real estate and
    Entertainment Inc.:Basic and diluted loss per share

$
(0.06
)

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


51,992,417



40,323,586    5




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

ConsolidatedThree Months

Three MonthsEnded

EndedMarch 31, 2009

March 31, 2008Cash flows from operating activities:Net loss

$
(2,881
)

$
(25,035
)Adjustments to reconcile net loss to cash provided by (used in)
    operating activities:Reversal of license fees


(10,000
)


Impairment of available-for-sale securities


387



Gain on sales of marketable securities


(249
)


Depreciation and amortization


507



5,403Deferred financing cost amortization


54



3,261Share-based payments


773



941Provision for accounts receivable allowance


36



323Changes in operating assets and liabilities:Receivables


(316
)


(230
)Other current and non-current assets


(35
)


(467
)Accounts payable and accrued expenses


1,181



(125
)Accrued license fees






2,500Due to related parties


(104
)


824Unearned revenue


243



65Other


(1
)


(36
)Net cash used in operating activities


(10,405
)


(12,576
)Cash flows from investing activities:Restricted cash


29,526



12,344Proceeds from sales of marketable securities


3,975



Purchase of property and equipment






(42
)Capitalized development costs






(2,123
)Net cash provided by investing activities


33,501



10,179Cash flows from financing activities:Principal payment on mortgage loan


(21,000
)


Repayment of margin loan


(741
)


Repayment of notes






(23,000
)Proceeds from sale of common stock






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






30,373Contribution from noncontrolling interest


45



349Net cash (used in) provided by financing activities


(21,696
)


10,292Net increase in cash and equivalents


1,400



7,895Cash and cash equivalents  beginning of period


2,659



2,559Cash and cash equivalents  end of period

$
4,059


$
10,454Supplemental cash flow information:Cash paid for interest

$
4,792


$
11,219Cash paid for debt restructuring expenses

$
855


$
    6




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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
    35-day
 7




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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;
    Location, configuration and zoning of the Las Vegas land, 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
   8




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Rights
    Offering and Related Investment Agreements
        Form 10-K.
  Private
    Placement of Units
   9




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3.
    Going
    Concern  35-day
      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
 10




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5.
    Marketable
    Securities    Accounting for Certain Investments in Debt and Equity
    Securities
  6.
    Comprehensive
    Income    Three MonthsEnded,March 31, 2008(Amounts in thousands)Net loss

$
(25,035
)Unrealized loss on marketable securities


(14,372
)(39,407
)Net loss attributable to noncontrolling interest


2Comprehensive loss

$
(39,405
)   Accounting for Certain Investments in
    Debt and Equity Securities
  7.
    Loss Per
    Share/Common Shares Outstanding  Earnings Per Share
  8.
    Incidental
    Operations  Accounting for Costs and
    Initial Operations of Real Estate Projects
 11




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Three MonthsEndedMarch 31, 2008(Amounts in thousands)Revenue

$
4,569Depreciation


(5,396
)Operating & other expenses


(3,226
)Loss from incidental operations

$
(4,053
)   9.
    Debt and
    Notes Payable  Debt
    in Default
           12




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35-day
    Notes
    Payable
  Riv Loan 
  Bear Stearns Loan 
 13




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10.
    Related
    Party Debt      11.
    Terminated
    License Agreements with Related Parties    and/or
  Accounting
    for Minimum Guaranteed License Payments
    12.
    Acquired
    Lease Intangibles   14




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March 31, 2009


December 31, 2008AssetsAbove-market leases

$
582


$
582In-place leases


1,320



1,320Accumulated amortization


(859
)


(839
)Net

$
1,043


$
1,063LiabilitiesBelow-market leases

$
111


$
111Accumulated accretion


(100
)


(98
)Net

$
11


$
13   13.
    Derivative
    Financial Instruments  Accounting for Derivative Instruments and Hedging
    Activities
  14.
    Share-Based
    Payments    15.
    Income
    Taxes          16.
    Litigation   15




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17.
    Related
    Party Transactions  Shared
    Services Agreement and Arrangements
        and/or
    Flag
    Shared Services Arrangement
       16




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Preferred
    Priority Distribution
        19X
    Payment
    650
    Madison Avenue Office Space
      18.
    Subsequent
    Events   17




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35-day
    Form 8-K
 18




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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.
 19




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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
    35-day
     20




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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;
    Location, configuration and zoning of the Las Vegas land, 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
     21




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Revenue
    Operating
    Expenses
    Depreciation
    and Amortization Expense
    Interest
    Income/Expense
    Loss
    from Incidental Operations
      Income
    Taxes
    Liquidity
    and Capital Resources
  Introduction
 22




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35-day
        Rights Offering 
  Shier Stock Purchase 
  Private Placement of Units 
 23




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##### Table of Contents



Riv Loan
  CKX Line of Credit
    Bear Stearns Margin Loan
 24




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Preferred Priority Distribution
  Cash Flow
    for the Three Months Ended March 31, 2009 and
    2008
  Operating
    Activities
      Investing
    Activities
      Financing
    Activities
     25




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Uses of
    Capital
    Capital
    Expenditures
    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
 26




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Off
    Balance Sheet Arrangements
    Seasonality
    ITEM 3.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK    Interest
    Rate Risk
    ITEM 4T.
    CONTROLS
    AND PROCEDURES  Evaluation
    of Disclosure Controls and Procedures
  Rules 13a-15(e) 15d-15(e)) Rules 13a-15 15d-15,
  Changes
    in Internal Control over Financial Reporting
  Rules 13a-15 15d-15
 PART II 
    OTHER INFORMATION  ITEM 1.
    LEGAL
    PROCEEDINGS    ITEM 1A.
    RISK
    FACTORS  Form 10-K.
 27




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Form 10-K
  Due to its financial condition, the Company may be unable
    to retain key personnel necessary to manage and operate our Las
    Vegas property and maintain an effective internal control
    environment.
    ITEM 3.
    DEFAULTS
    UPON SENIOR SECURITIES  35-day
     28




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ITEM 6.
    EXHIBITS  Exhibits
    ExhibitNumber

Description10
.1

Termination, Settlement and Release Agreement entered into
    March 9, 2009 by and among FX Luxury, LLC and FX Real
    Estate and Entertainment Inc., Elvis Presley Enterprises, Inc.
    and Muhammad Ali Enterprises, LLC(1)31
.1

Certification of Principal Executive Officer31
.2

Certification of Principal Accounting Officer32
.1

Section 1350 Certification of Principal Executive Officer32
.2

Section 1350 Certification of Principal Accounting Officer     (1)
    
    Incorporated by reference from the registrants Current
    Report on Form
    8-K dated
    March 9, 2009. 29




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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/  STEPHEN
    A. JARVIS  Stephen A. Jarvis
 Principal Accounting Officer
   30




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INDEX TO
    EXHIBITS
    ExhibitNumber

Description31
.1

Certification of Principal Executive Officer31
.2

Certification of Principal Accounting Officer32
.1

Section 1350 Certification of Principal Executive Officer32
.2

Section 1350 Certification of Principal Accounting Officer  31