Attached files

file filename
EX-3.8 - AMENDED BY-LAWS OF THE REGISTRANT - LAS VEGAS RAILWAY EXPRESS, INC.xtrn10k20100331ex3-8.htm
EX-3.6 - CERTIFICATE OF MERGER, AS DATED MARCH 19, 2010, BY AND BETWEEN LIBERTY CAPITAL ASSET MANAGEMENT, INC. AND LAS VEGAS RAILWAY EXPRESS. - LAS VEGAS RAILWAY EXPRESS, INC.xtrn10k20100331ex3-6.htm
EX-3.5 - AMENDED ARTICLES OF INCORPORATION AS DATED MARCH 19, 2010. - LAS VEGAS RAILWAY EXPRESS, INC.xtrn10k20100331ex3-5.htm
EX-23.1 - CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. - LAS VEGAS RAILWAY EXPRESS, INC.xtrn10k20100331ex23-1.htm
EX-11.4 - BRIDGE LOAN AND SECURITY AGREEMENT, SOUTH LAKE CAPITAL, DATED JANUARY 25, 2010 - LAS VEGAS RAILWAY EXPRESS, INC.xtrn10k20100331ex11-4.htm
EX-11.2 - PROMISSORY NOTE DATED FEBRUARY 28, 2010 BY AND BETWEEN LIBERTY CAPITAL ASSET MANAGEMENT INC. AND TRANSPORTATION MANAGEMENT SERVICES INC. - LAS VEGAS RAILWAY EXPRESS, INC.xtrn10k20100331ex11-2.htm
EX-11.3 - RAILCAR PURCHASE AGREEMENT DATED FEBRUARY 8, 2010 BY AND BETWEEN LIBERTY CAPITAL ASSET MANAGEMENT INC. AND TRANSPORTATION MANAGEMENT SERVICES INC. - LAS VEGAS RAILWAY EXPRESS, INC.xtrn10k20100331ex11-3.htm
EX-11.6 - SOUTH LAKE CAPITAL LLC WARRANT ISSUANCE AND RELEASE, DATED MAY 29, 2010 - LAS VEGAS RAILWAY EXPRESS, INC.xtrn10k20100331ex11-6.htm
EX-11.5 - SOUTH LAKE CAPITAL LLC PROMISSORY NOTE DATED JANUARY 15, 2010 - LAS VEGAS RAILWAY EXPRESS, INC.xtrn10k20100331ex11-5.htm
EX-31.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002. - LAS VEGAS RAILWAY EXPRESS, INC.xtrn10ka20100331ex31-1.htm
EX-3.4A - AMENDED BY-LAWS OF THE REGISTRANT DATED NOVEMBER 3, 2008 - LAS VEGAS RAILWAY EXPRESS, INC.xtrn10ka20100331ex3-4a.htm
EX-3.4B - AMENDED ARTICLES OF INCORPORATION - LAS VEGAS RAILWAY EXPRESS, INC.xtrn10ka20100331ex3-4b.htm
EX-32.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002. - LAS VEGAS RAILWAY EXPRESS, INC.xtrn10ka20100331ex32-1.htm
EX-3.7 - AMENDED ARTICLES OF INCORPORATION AS DATED APRIL 19, 2010. - LAS VEGAS RAILWAY EXPRESS, INC.xtrn10k20100331ex3-7.htm
EX-31.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002. - LAS VEGAS RAILWAY EXPRESS, INC.xtrn10ka20100331ex31-2.htm



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K/A (Amendment 1)

(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2010

Commission file number   
333-144973
LAS VEGAS RAILWAY EXPRESS, INC.
(Exact name of Registrant as Specified in its Charter)


Delaware
56-2646797
(State or Other Jurisdiction of Incorporation or Organization)
(I.R.S. Employer Identification Number)
 
6650 Via Austi Parkway, Suite 170
Las Vegas, NV  89119
(Address of principal executive offices)

702-583-6715
(Issuer’s telephone number)

LIBERTY CAPITAL ASSET MANAGEMENT, INC.
2470 St. Rose Parkway, Suite 314
Henderson, NV 89074
(Former name, former address and former fiscal year, if changed since last report)



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

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

COMMON STOCK, $0.0001 PAR VALUE
(Title of Class)

 
1

 

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

Yes [X ]  No [  ]

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. . Yes [  ] No [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes [  ] No [X]

Aggregate market value of Common Stock held by shareholders based on the closing price of the registrant's Common Stock on the OTCBB on June 30, 2010 was $7,122,300.

Number of outstanding shares of common stock as of June 30, 2010 was 35,611,502.

Documents Incorporated by Reference:  None.
Transitional Small Business Disclosure Format (Check one):
 
Yes [   ]       No [X]
 
 
2

 
 
 
LAS VEGAS RAILWAY EXPRESS, INC.
TABLE OF CONTENTS

PART I
 
PAGE
Item 1.
Description of Business
4
Item 2
Description Of Property
5
Item 3.
Legal Proceedings
5
PART II
   
Item 5.
Market for Common Equity and Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities
6
Item 6.
Selected Financial Data
7
Item 7.
Management's Discussion and Analysis or Plan of Operation
7
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk.
10
Item 8.
Financial Statements
13
Item 9.
Changes in Disagreements With Accountants on Accounting and Financial Disclosure
32
Item 9A.
Controls and Procedures
32
Item 9B.
Other Information
34
PART III
   
Item 10.
Directors, Executive Officers and Corporate Governance
34
Item 11.
Executive Compensation
37
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
38
Item 13.
Certain Relationships and Related Transactions and Director Independence.
40
Item 14.
Principal Accounting Fees and Services
40
PART IV
   
Item 15.
Exhibits, Financial Statement Schedules
41
SIGNATURES
43

 
 
3

 

LAS VEGAS RAILWAY EXPRESS, INC.

PART I
 
This Annual Report contains forward-looking statements about the Company's business, financial condition and prospects that reflect management's assumptions and beliefs based on information currently available. There can be no assurance that the expectations indicated by such forward-looking statements will be realized. If any of management's assumptions should prove incorrect, or if any of the risks and uncertainties underlying such expectations should materialize, Las Vegas Railway Express, Inc., actual results may differ materially from those indicated by the forward- looking statements.
 
The key factors that are not within the Company's control and that may have a direct bearing on operating results include, but are not limited to, acceptance of the Company's products and services, the Company's ability to expand its customer base, managements' ability to raise capital in the future, the retention of key employees and changes in the regulation of our industry.
 
There may be other risks and circumstances that management may be unable to predict. When used in this Report, words such as, "believes," "expects," "intends," "plans," "anticipates," "estimates" and similar expressions are intended to identify and qualify forward-looking statements, although there may be certain forward-looking statements not accompanied by such expressions. However, the forward-looking statements contained herein are not covered by the safe harbors created by Section 21E of the Securities Exchange Act of 1934.  The mortgage banking industry is continually vulnerable to current events that occur in the financial services industry. These events include the current subprime market changes in economic indicators, government regulation, interest rates, price competition, geographic shifts, disposable income, housing prices, market liquidity, market anticipation, and customer perception, as well as others. The factors that affect the industry change rapidly and can be unforeseeable.

Item 1.  Description of Business
 
Company Overview: Las Vegas Railway Express, Inc., formerly Liberty Capital Asset Management, Inc, a publicly traded Delaware Corporation, is a business development company whose plan is to re-establish a conventional  passenger train service between the Las Vegas and Los Angeles metropolitan areas. The development concept is to provide a Las Vegas style experience on the train, which would traverse the planned route in approximately 5:30 hours. The Company is in discussions with AMTRAK and the Class 1 railroads seeking to secure rail services agreements. The Company has hired Transportation Management Services, Inc. for the procurement of 20 bi-level railcars and locomotives. The planned service is targeting a start date of late 2011. On January 21, 2010, the Company completed a share exchange and asset purchase agreement with Las Vegas Railway Express, a Nevada Corporation, and subsequently changed its name from Liberty Capital Asset Management, Inc. to Las Vegas Railway Express, Inc.
 
Las Vegas Railway Express, Inc., Liberty Capital Asset Management, Inc.  (the “Company”) was formed in March 9, 2007 as Corporate Outfitters, a development stage company on November 3, 2008 with a share exchange, asset purchase agreement The Company acquired Liberty Capital Asset Management, a Nevada corporation, formed in July of 2008 as a holding company for all the assets of CD Banc LLC in contemplation of the company going public via a reverse merger into a publicly trading corporation.
 
CD Banc LLC was formed in 2003 as a Nevada limited liability corporation with the purpose of acquiring real estate assets and holding them for long-term appreciation.

Risk of Potential Competitors
 
Several competitors to the Company’s planned rail passenger service have created business plans which are competitive to ours. A Las Vegas-Los Angeles rail connection has been long-studied by a number of groups. These studies, three other rail projects have been proposed to serve the Las Vegas to Los Angeles travel market.

 
4

 

These projects are the:
 
California-Nevada Super-Speed Train. For over twenty years, this project has proposed using Magnetic Levitation (Maglev) technology to carry passengers between Southern California and Las Vegas, traveling at speeds of up to 300 mph. The 269-mile alignment would largely follow the I-15 Freeway. Station stops tentatively include Anaheim, Ontario, Victorville, Barstow, Primm, and Las Vegas (2). Travel time between Anaheim and Las Vegas via this service is estimated to be less than 90 minutes. Work on this project has been suspended at this time, though scoping for a program-level EIR/EIS and project-specific EIS for the segment between Las Vegas and Primm is new completion. There is continuing Nevada interest in providing an initial segment between Las Vegas and Primm.
 
The DesertXPress: A steel-wheel on steel rail high-speed rail service that would operate between Victorville, California, and Las Vegas, Nevada. Project proponents suggest that the service could either run within the median of Interstate I-15, or adjacent to it. This project is in preliminary discussions and an initial environmental review process is beginning shortly.
 
The Z Train:  Proposed to run on conventional rail between Las Vegas and Los Angeles. The service plan is similar to the X Train with the exception that its promoters indicate there would be mostly an up-scale orientation for passengers including book signings, wine tasting, and fine dining. No approvals have been granted to the Z Train at this time.

Intellectual Property

None.

Employees

As of March 31, 2010, we had 7 full-time employees, of whom 3 were in administrative and 4 were in management.

Item 2.    Description of Property.
 
As of March 31, 2010, we lease approximately 2,600 square feet of general office space in premises located at 6650 Via Austi Parkway, Suite 170, Las Vegas, Nevada. Our lease for this space expires in February 2013 and provides for monthly payments of $5,600.
 
Item 3.    Legal Proceedings.
 
In the ordinary course of business, the Company may be or has been involved in legal proceedings from time to time. As of the date of this annual report on Form 10-K, there have been no material changes to any legal proceedings relating to the Company which previously were not reported.
 
The Company has filed a civil lawsuit in District Court Clark County, Nevada on April 23, 2010, whereby Las Vegas Railway Express, Inc. is the Plaintiff and Romm Doulton, Elaine Doulton, J Bruce Richardson, D2 Holdings, LLC. and D2 Entertainment, LLC. are the Defendants. The court granted on June 2, 2010 an injunction against the Defendants. The case was filed because defamatory and false remarks were made by the Defendants about the Plaintiff and certain executives employed by the plaintiff. At this time a trial date has not been set by the court.

Item 4.    (Reserved)

 
5

 

PART II
 

Item 5.    Market for Common Equity and Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities.
 
Our common stock was approved for quotation on the Over the Counter Bulletin Board (OTCBB) on August 18, 2008. The Company’s ticker symbol is XTRN.OB.  The following table sets forth, for the calendar periods indicated, the high and low bid information for our common stock. The quotations are interdealer prices without adjustment for retail markups, markdowns or commissions and do not necessarily represent actual transactions.
 
On January 21, 2010, the Company held its Annual Meeting of Stockholders at its corporate office, 2470 St Rose Parkway, Suite 314, Henderson, Nevada.  The Company had previously appointed Empire Stock Transfer Services to act as Inspector of Elections.  The Board of Directors had established November 24, 2009 as the record date for the determination of stockholders entitled to vote at the meeting.  As of the record date there were 17,589,686 shares outstanding.  
 
The Inspector of Election reported that 12,410,191 votes were cast in the election of the directors, with each of the nominees receiving 12,410,191 votes.  Thus, the Inspector announced that, having received a plurality of the votes cast, nominees Michael Barron, Joseph Cosio-Barron and Theresa Carlise had been duly elected to the Board of Directors to serve until the next annual meeting and until their successors have been elected and have qualified.  Mr. Barron noted that the report of the Inspector of Elections would be filed in the Company’s minute book by the Secretary of the meeting.
 
The following was reported by the Inspector of Elections that a total of 12,410,191 votes were cast, of which12,410,191 votes were cast in favor of:
 
The approval of the Asset Purchase Agreement between Liberty Capital Asset Management, Inc. and Las VegasRailway Express;
 
To amend the Articles of Incorporation to effect a name change from Liberty Capital Asset Management, Inc. toLas Vegas Railway Express;
 
To amend the By-Laws of the Corporation changing the corporation’s primary business;
 
To approve the amendment to the Articles of Incorporation to increase the authorized common Stock from75,000,000 to 200,000,000.
 
Concerning the ratification of Hamilton P.C. as the independent auditors for the fiscal year ended March 31, 2010, the Inspector of Election reported that a total of 12,410,191 votes were cast, of which 12,410,191 votes were cast in favor of the ratification and no votes were cast against and none of the votes abstained.
 
The quotations listed below reflect interim dealer prices without retail mark-up mark-down or commission and may not represent actual transactions. Trading of our stock has been minimal with limited or sporadic quotations and therefore we believe there is no established public market for the common stock.
 
The following table sets forth the high and low bid quotations per share of the Company’s registered securities for each quarter since approved for quotation, as reported by the OTCBB.

 
Common Shares
Year Ended March 31, 2010:
High
Low
Quarter Ended June 30, 2009
$0.58
$0.05
Quarter Ended September 30, 2009
$0.18
$0.02
Quarter Ended December 31, 2009
$0.25
$0.02
Quarter Ended March 31, 2010
$0.30
$0.07
     
Year Ended March 31, 2009:
High
Low
Quarter Ended June 30, 2008
--
--
Quarter Ended September 30, 2008
--
--
Quarter Ended December 31, 2008
$1.01
$0.25
Quarter Ended March 31, 2009
$1.01
$0.29


 
6

 
 
As of March 31, 2010, there were approximately 152 stockholders of record of our common stock.  The transfer agent for our Common Stock is Empire Stock Transfer.
 
We have never declared or paid any cash dividends on our common stock. We do not anticipate paying any cash dividends to stockholders in the foreseeable future. In addition, any future determination to pay cash dividends will be at the discretion of the Board of Directors and will be dependent upon our financial condition, results of operations, capital requirements, and such other factors as the Board of Directors deem relevant.

Item 6.    Selected Financial Data
 
 
Not applicable.

Item 7.    Management’s Discussion and Analysis or Plan of Operations
 
This section should be read in conjunction with Item 8. Financial Statements.
 
Forward-Looking Statements
 
Statements contained in this Form 10-K that are not historical facts are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  In addition, words such as “believes,” “anticipates,” “expects,” “intends” and similar expressions are intended to identify forward-looking statements.  Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements or events, or timing of events, to differ materially from any future results, performance or achievements or events, or timing of events, expressed or implied by such forward-looking statements.  We cannot assure that we will be able to anticipate or respond timely to the changes that could adversely affect our operating results in one or more fiscal quarters.  Results of operations in any past period should not be considered indicative of results to be expected in future periods.  Fluctuations in operating results may result in fluctuations in the price of our securities.

Critical Accounting Policies
 
The preparation of our consolidated financial statements and notes thereto requires management to make estimates and assumptions that affect the amounts and disclosures reported within those financial statements. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, workers' compensation costs, collectibles of accounts receivable, and impairment of goodwill and intangible assets, contingencies, litigation and income taxes. Management bases its estimates and judgments on historical experiences and on various other factors believed to be reasonable under the circumstances. Actual results under circumstances and conditions different than those assumed could result in differences from the estimated amounts in the financial statements. There have been no material changes to these policies during the fiscal year.
 
Disclosure, pursuant to SFAS No. 107, is required of the fair value of financial instruments.  However, since most of the Company’s financial instruments turn over within a very short time period, management discloses that the net book value approximates fair value at the balance sheet date.

 
7

 
Item 7.    Management’s Discussion and Analysis or Plan of Operations (continued)

New Accounting Pronouncements
 
In November 2004, the FASB issued SFAS No. 151, Inventory Costs, an amendment of ARB No. 43, Chapter 4. SFAS No. 151 amends the guidance in ARB No. 43, Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility expense, freight, handing costs, and spoilage. This statement requires that those items be recognized as current period charges regardless of whether they meet the criterion of "so abnormal" which was the criterion specified in ARB No. 43. In addition, this Statement requires that allocation of fixed production overheads to the cost of production be based on normal capacity of the production facilities. This pronouncement is effective for the Company beginning October 1, 2005. The Company does not believe adopting this new standard will have a significant impact to its financial statements.
 
In December 2004, the FASB issued SFAS No. 123 (revised 2004). Share-Based Payment, which is a revision of SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees and amends SFAS No. 95, Statement of Cash Flows.  Generally, the approach in SFAS No. 123(R) is similar to the approach described in SFAS No. 123. However, SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. The new standard will be effective for the Company in the first interim or annual reporting period beginning after December 15, 2005. As of March 31, 2010, the Company has 2,000,000 outstanding employee stock options.

Results of Operations

Discontinued Operations – Loan Portfolio
 
As discussed in Note 1,  prior to January 21, 2010, the Company had been actively engaged in acquiring underperforming mortgage loan portfolios and generating revenues from re-performing, sale of loans and fee revenue.  As of January 21, 2010, the Company changed its primary business and abandoned its prior business. Accordingly, the assets liabilities and results of operation related to this business have been classified as discontinued operations in the financial statements for all periods presented. As a result, the prior period comparative financial statements have been restated. Prior to this decision, the loan business represented substantially all of the Company’s operating revenue. (See footnote 12.)
 
On May 14, 2010, in conversation with regulators, the Company determined that its policy with respect to its recognition of revenue and impairment related to its acquired loan portfolio was not in accordance with the guidance for the acquisitions of loans and loan portfolios with evidence of credit deterioration. The company had been reporting asset liquidation revenue and offsetting the carrying value of the loans for the disposition of loans from the loan portfolio.   After having an outside specialist analyze the portfolio, management of the Company has determined the loans in the portfolio should be accounted for using the cost recovery method proscribed by ASC 310-30 “Loans and Debt Securities Acquired with Deteriorated Credit Quality” (See Note 3) . Under the cost-recovery method, no income is recognized until the Company has fully collected the cost of the loan, or until such time as the Company considers the timing and amount of collections to be reasonably estimable.  Based on the recovery method, the Company had not collected revenues in excess of the initial acquisition costs of the loan portfolios; therefore, no revenues should have been reported in any of the previous reporting periods.
 
Based on the change in revenue recognition, the Company concluded on May 14, 2010, to restate the Company’s audited consolidated financial statements as of March 31, 2009 and for the year then ended (the “Restatement”) to correct errors in previously reported amounts. The Restatement reflects the following adjustments related to the mortgage loan portfolio accumulated deficit and its compensation for the issuance of warrants.  See footnote 13.
 
Revenue for adminstrative services, for the year ended March 31, 2010, was $0, as compared to $69,750 for the year ended March 31, 2009, a decrease of $69,750.  For the year ended March 31, 2008, revenue for administrative services was $13,269, a decrease of $56,480.

 
8

 
Item 7.    Management’s Discussion and Analysis or Plan of Operations (continued)
 
Selling, General and Administrative, (SG&A), expenses were $729,298.62, for the year ended March 31, 2010, as compared to $1,116,494 for the year ended March 31, 2009, an decrease of $387,195 or 53%. This was primarily due to significant decreases in office, travel and medical insurance expenses.  For the year ended March 31, 2009, there was an increase of $448,609, or 40%, as compared to the March 31, 2008 amount $667,885.
 
Salary and payroll taxes were $814,362 for the year ended March 31, 2010 as compared to $1,236,284 for the year ended  March 31, 2009, a decrease of $421,922 or 34% due to the decrease in operating activities as the Company re-evaluated its operations and changed the focus of its business plan.   For the year ended March 31, 2009, there was an increase of $555,625, or 82%, as compared to the March 31, 2008 amount $680,658.
 
Professional fees were $752,552 (including expenses from discontinued operations) compared to $162,593, a increase of $589,957 or 362.8%.  This was due to the expenses required for the change in business operations and acquisition of Las Vegas Railway Express.  For the year ended March 31, 2009, there was an decrease of  $206,525 or 56% as operations were implemented in 2008 with startup costs.
 
Interest expense was $32,143, $46,768 and $0 for the year ended March 31, 2010, 2009 and 2008, respectively.   The interest fluctuations is related to the Company’s borrowing.
 
Other expenses in relation to the discontinued operations were the following; disposal of fixed assets of $210,231, receivable losses of $653,897, write down of investment of $566,326 and gain on extinguishment of debt of $142,963.
 
Loss from operations was $828,915, for the year ended March 31, 2010 as compared to loss of $2,518,667 for the year ended March 31, 2009, a decrease of 1,689,752 or 67%.  For the year ended March 31, 2009, there was an increase of $773,016, as compared to the March 31, 2008 amount $1,745,651. Net loss for the year ended March 31, 2010 was $3,700,430, as compared to net loss of $2,565,435 for the year ended March 31, 2009, a increase of $1,134,995, or 44.2%.  For the year ended March 31, 2009, there was an increase of $819,784, or 47%, as compared to the March 31, 2008 amount of $1,456,501.

Continuing Operations – Railway Passenger Train Service
 
For the year ended, March 31, 2010, there were no revenues associated with the railcar operations.    Salary, wages and payroll taxes were $329,291, Selling General and Administrative expenses were $65,961, professional fees were $432,934, depreciation expense was $728 and interest expense was $9,167, resulting in a net loss of $838,081.

Liquidity and Capital Resources
 
Liquidity is the ability of a company to generate funds to support asset growth, satisfy disbursement needs, maintain reserve requirements and otherwise operate on an ongoing basis. The company has maintained sufficient operating cash to maintain its operations and holds reserves to service its assets. These reserves have been generated from operating cash flow.

Discontinued Operations - Mortgage Loans
 
A key component to the Company’s business plan for growth was the attraction of new investment partners to provide capital such that new pools of toxic assets may be purchased.  As investor confidence began to wane during 2008, the capital markets which the Company depended upon to supply it with new capital for acquisitions began to dry up. Hedge Funds are traditional resources for capital asset firms such as Liberty to source for investment capital to acquire new assets at a discount and then restore those assets to a more valuable status and thus a potential for profit for the company.
 
It is the company’s assessment that the combination of economic uncertainty, bankruptcies of major financial institutions, massive government bailouts and restructuring of others such as AIG, together with harsh government regulations for mortgage holders, has led to the operating environment where the original business model for Liberty was not very attractive in the public markets.

 
9

 
Item 7.    Management’s Discussion and Analysis or Plan of Operations (continued)
 
Continuing Operations – Railway Passenger Train Service
 
The Company acquired Las Vegas Railway Express (LVRE) in January 2010 and began its operations as the primary business of the Company. The Company subsequently changed its name from Liberty Capital Asset Management, Inc. to Las Vegas Railway Express, Inc. and is traded under the symbol OTC:BB:XTRN.
 
LVRE is a development stage company with no revenues as of March 31, 2010. The Company has been pursuing contracts with AMTRAK, Class 1 railroads and potential site locations for station development. No agreements had been secured as of the filing date.
 
The Company is seeking to raise additional capital to pursue its new business model, through a rights offering of $1 million, to expire August 31, 2010.  Preliminary market indicators have been positive towards the offering and the Company has raised $600,000, to date.  The Company plans to pursue a second offering of $15 million.

Cash Flows
 
Net cash used in operating activities for the year ended March 31, 2010 was $662,825 as compared to net cash used in operating activities for the year ended March 31, 2009 of $834,782. The primary sources of cash used in operating activities for the year ended March 31, 2010 was from net loss of $3,683,459, depreciation of $728, stock issued for services of $331,400,  stock issued for compensation of $274,890, stock based compensation of $63,551, assets of discontinued operations of $2,087,467, increase in goodwill related to acquisition of $843,697, increase in other current assets of $50,000, liabilities of discontinued operations of $354,967, increase in stock subscription payable of $800,000 and increase in accounts payable and accrued expenses of $1,329.  The primary sources of cash used in operating activities for the year ended March 31, 2009 was from net loss of $2,548,464, depreciation of $73,046,  stock based compensation of $63,551, increase receivable  of 546,241, decrease in loan portfolio of $1,898,649, increase in other current assets of $4,589, increase in accounts payable of $229,267.
 
Net cash used for investing activities during the years ended March 31, 2010 and March31, 2009 was $60,000 and $3,500, respectively.  Net cash used for investing activities was primarily for the purchase of a railcar and software and equipment.
 
Net cash provided by financing activities for the year ended March 31, 2010 was $708,392, consisting primarily of net proceeds of notes payable of $44,850, net proceeds of notes payable related party of $24,125, warrant issued for debt of $160,000, and stock issued for reduction of debt for $247,667.
 
Net cash provided by financing activities for the year ended March 31, 2009 was $824,374, consisting primarily of net proceeds of notes payable of $356,028, net proceeds of notes payable related party of $192,236, reverse merger deficit in excess of capital of $1,426 AND stock issued for cash of $277,536.
 
Management currently believes that cash flows from operations will be sufficient to meet the Company’s current liquidity and capital needs at least through fiscal 2011.
 
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
 
The Company operates in a volatile and fragmented marketplace which recently has been subject to new financial regulation by the Federal Government. As such, these proposed changes in the law may have an impact on the liquidity of the Company’s business plan and time frames to liquidate assets may be extended. These proposed regulatory changes have not been fully introduced into the marketplace and the final legislation provisions have not been determined. The Company has discontinued its business plan which involves the process of foreclosure and liquidation of toxic assets under the current laws of each state.

 
10

 
Item 7A. Quantitative and Qualitative Disclosures About Market Risk (continued)
 
The Company has Changed its Primary Business and has No Operating History with its new Business Model and Consequently Face Significant Risks and Uncertainties.

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

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

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

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

Our business must comply with extensive and complex rules and regulations of various federal, state and local government authorities.  We may not always have been and may not always be in compliance with these requirements.  Failure to comply with these requirements may result in, among other things, revocation of our ability to operate a conventional rail system, class action lawsuits, administrative enforcement actions and civil and criminal liability.
.
Our Business Will Be Adversely Affected If We Are Unable To Protect Our Intellectual Property Rights From Third Party Challenges Or If We Are Involved In Litigation.

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

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

As of May 3, 2010, our officers and directors beneficially owned or controlled a total of 9,582,822 shares, or approximately 32.5% of our outstanding common stock.  If an investors acquires shares they may be subject to certain risks due to the concentrated ownership of our common stock.  For example, these stockholders could, if they were to act together, affect the outcome of stockholder votes, which could, among other things, affect elections of directors, delay or prevent a change in control or other transaction that might be beneficial to you as a stockholder.

Risk of Low Priced Securities.

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

Our common stock is subject to Rule 15g-9 under Securities Exchange Act of 1934, as amended (the “Exchange Act”), which imposes additional sales practice requirements on broker-dealers which sell such securities to persons other than established customers and “accredited investors” (generally, individuals with net worth in excess of $1,000,000 or annual incomes exceeding $200,000 or $300,000 together with their spouses).  For transactions covered by this rule, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to sale.  Consequently, the rule may adversely affect the ability of broker-dealers to sell the Company’s securities and may adversely affect the ability of purchasers to sell any of the securities acquired hereby in the secondary market.
Commission regulations define a “penny stock” to be any non-NASDAQ equity security that has a market price (as therein defined) of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions.  For any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in a penny stock, of a disclosure schedule prepared by the Commission relating to the penny stock market.  Disclosure is required to be made about commissions payable to both the broker-dealer and the registered representative and current quotations for the securities.  Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.  The foregoing penny stock restrictions apply to the Company’s common stock as of the date of this prospectus.  These restrictions could limit the ability of broker-dealers to sell our securities and thus the ability of purchasers of our securities to resell them in the secondary market.
 
 
11

 
Item 7A. Quantitative and Qualitative Disclosures About Market Risk (continued)
 
The Company is reliant on securing certain agreements from Amtrak and railroad companies
 
The company is in the process of securing agreements from Amtrak and the Class 1 railroad companies. Failure to secure these agreements or on terms which would be unacceptable to the company, would result in the project objectives being severely curtailed. There is no assurance that the agreements will be forthcoming even though the company is in discussions with all relevant groups at this time.

The Loss Of Any Of Our Executive Officers Or Key Personnel Would Likely Have An Adverse Effect On Our Business.
 
Our future success depends to a significant extent on the continued services of our senior management and other key personnel, particularly Michael A. Barron.  The loss of the services of Mr. Barron or other key employees would also likely have an adverse effect on our business, results of operations and financial condition.

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

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

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

 
·
General conditions in the economy and capital markets; and
 
·
Our results of operations, financial condition and business
 
 
12

 

Item 8.    Financial Statements and Supplementary Data.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
Las Vegas Railway Express, Inc.
Henderson, Nevada

We have audited the accompanying balance sheets of Las Vegas Railway Express Inc., as of March 31, 2010, 2009, 2008 and the related statements of operations, stockholders’ equity (deficit) and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Las Vegas Railway Express, Inc.  as of March 31, 2010, 2009, 2008 and the result of its operations and its cash flows for the years  then ended, in conformity with U.S. generally accepted accounting  principles.

The accompanying financial statements have been prepared assuming that Las Vegas Railway Express, Inc. will continue as a going concern. As discussed in Note 2 to the financial statements, Las Vegas Railway Express, Inc. suffered recurring losses from operations which raises substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters also are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Hamilton, PC

/s/ Hamilton, PC

Denver, Colorado
July 14, 2010, except Notes 12 and 13 dated February 15, 2011



 
13

 

LAS VEGAS RAILWAY EXPRESS, INC.
CONSOLIDATED BALANCE SHEETS

   
March 31,
   
March 31,
   
March 31,
 
   
2010
   
2009
   
2008
 
ASSETS:
       
(restated)
   
(restated)
 
Current assets:
                 
Cash
  $ 5,871     $ 20,304     $ 34,210  
Other current assets
    50,000       42,074       37,485  
Loan receivable
    -       775,820       229,579  
Mortgage loan portfolio
    -       987,355       2,886,004  
Assets to be disposed of, current
    -       -       -  
Total current assets
    55,871       1,825,553       3,187,278  
                         
Property and equipment, net
    59,272       261,914       331,462  
                         
Other assets:
                       
Goodwill
    843,697       -       -  
Total other assets
    843,697       -       -  
                         
TOTAL ASSETS
  $ 958,840     $ 2,087,467     $ 3,518,740  
                         
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
                       
                         
LIABILITIES:
                       
Current liabilities:
                       
Accounts payable and accrued expenses
  $ 21,633     $ 478,172     $ 248,905  
Stock subscription payable
    800,000       -       -  
Notes payable
    280,000       356,028       -  
Notes payable related party
    20,725       192,236       -  
Liabilities to be disposed of , current
    1,381,402       -       -  
Total current liabilities
    2,503,760       1,026,436       248,905  
                         
TOTAL LIABILITIES
    2,503,760       1,026,436       248,905  
                         
Stockholders' equity (deficit):
                       
Common stock , $0.0001 par value, 200,000,000 shares
                       
authorized and 22,889,686, 8,577,779 and 0 shares
                       
issued and outstanding March 31, 2010, March 31, 2009
                       
and March 31, 2008, respectively
    2,289       858       -  
Additional paid in capital
    6,464,307       5,371,259       5,015,485  
Accumulated deficit
    (8,011,516 )     (4,311,086 )     (1,745,651 )
Total stockholders' equity (deficit)
    (1,544,920 )     1,061,031       3,269,834  
TOTAL LIABILITIES AND
                       
      STOCKHOLDERS' EQUITY (DEFICIT)    $ 958,840     $ 2,087,467     $ 3,518,740  
 
See accompanying notes to consolidated financial statements.

 
14

 
 
LAS VEGAS RAILWAY EXPRESS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 2010, 2009 AND 2008
 
   
March 31,
   
March 31,
   
March 31,
 
   
2010
   
2009
   
2008
 
         
(restated)
   
(restated)
 
                   
Revenues:
                 
Revenue
  $ -     $ 69,750     $ 13,269  
                         
Cost of Sales
    -       -       -  
                         
Gross Profit
    -       69,750       13,269  
                         
Expenses:
                       
Salary & wages & payroll taxes
    329,291       1,236,284       680,659  
Selling, general and administrative
    65,961       1,116,494       667,885  
Professional fees
    432,934       162,593       369,118  
Depreciation expense
    728       73,046       41,258  
  Total expenses
    828,916       2,588,417       1,758,920  
                         
Income (loss) from operations
    (828,916 )     (2,518,667 )     (1,745,651 )
                         
Other (expense) income
                       
Interest expense
    (9,167 )     (46,768 )     -  
  Total other (expense) income
    (9,167 )     (46,768 )     -  
                         
Net (loss) income from continuing operations
    (838,081 )     (2,565,435 )     (1,745,651 )
                         
Discontinued operations:
                       
Loss from discontinued operations
    (2,862,349 )     -       -  
Total discontinued operations
    (2,862,349 )     -       -  
                         
Net loss
  $ (3,700,430 )   $ (2,565,435 )   $ (1,745,651 )
                         
Earnings loss per share, from contining operations
  $ (0.06 )   $ (0.39 )   $ (0.81 )
Earnings loss per share, from discontining operations
  $ (0.21 )   $ -     $ -  
Earnings loss per share
  $ (0.27 )   $ (0.39 )   $ (0.81 )
                         
Weighted average number of common shares
                       
     outstanding, basic and diluted     13,484,333       6,501,650       2,156,284  

See accompanying notes to consolidated financial statements

 
15

 

LAS VEGAS RAILWAY EXPRESS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 2010, 2009 AND 2008
 
     
March 31,
   
March 31,
   
March 31,
 
     
2010
   
2009
   
2008
 
           
(restated)
   
(restated)
 
Cash flows from operating activities:
                   
    Net loss
    $ (3,700,430 )   $ (2,565,435 )   $ (1,745,651 )
                           
Adjustments to reconcile net loss from operations to net cash used in operations:
                         
   Depreciation and amortization
      728       73,046       41,258  
   Warrrant issued for debt
      160,000       -       -  
   Stock issued for services
      331,400       -       -  
   Stock issued for compensation
      274,890       -       -  
   Stock based compensation non cash
      80,522       80,522       -  
Changes in operating assets and liabilities:
                         
   Assets of discontinued operations
      2,087,467       -       -  
   (Increase) decrease in loan receivable
      -       (546,241 )     (229,579 )
   (Increase) decrease in loan portfolio
      -       1,898,649       2,129,482  
   (Increase) decrease in goodwill associated with asset purchase
      (843,697 )     -       -  
   (Increase) decrease in other current assets
      (50,000 )     (4,589 )     (37,485 )
   Liabilities of discontinued operations, net
      602,634       -       -  
   Increase (decrease) in stock subscription payable
      800,000       -       -  
   Increase (decrease) in accounts payable and accrued expenses
      1,329       229,267       248,905  
         Net cash (used in) provided by operating activities
      (255,158 )     (834,781 )     406,929  
                           
Cash flows from investing activities:
                         
    Purchase of fixed assets
      (60,000 )     (3,498 )     (372,719 )
         Net cash used in investing activities
      (60,000 )     (3,498 )     (372,719 )
                           
Cash flows from financing activities:
                         
     Proceeds of notes payable
      280,000       382,000       -  
     Payments from notes payable
      -       (25,972 )     -  
     Proceeds for related notes payable
      44,850       415,508       -  
     Payments for related notes payable
      (24,125 )     (223,272 )     -  
     Reverse merger defecit in excess of capital
      -       (1,426 )     -  
     Stock issued for cash
      -       277,536       -  
        Net cash provided by (used in) financing activities
      300,725       824,374       -  
                           
Net increase (decrease) in cash and cash equivalents
      (14,433 )     (13,905 )     34,210  
                           
Cash and cash equivalents, beginning of period
    $ 20,304     $ 34,210     $ -  
Cash and cash equivalents, end of period
    $ 5,871     $ 20,304     $ 34,210  
Supplemental disclosure of cash flow information
                         
     Interest paid
    $ 2,500     $ 19,042     $ -  
Supplemental Schedule of Non-cash Investing and Financing Activities:
 
                       
     Warrant issued for debt
 
  $ 160,000     $ -     $ -  
     Stock issued for reduction of debt
    $ 247,667     $ -     $ -  
     Acquisition of loan pool
    $ -     $ -     $ 5,015,485  
 
See accompanying notes to consolidated financial statements.

 
16

 
LAS VEGAS RAILWAY EXPRESS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE YEARS ENDED MARCH 31, 2010, 2009 AND 2008

                           
Additional
             
   
Common Stock
         
Subscriptions
   
Paid in
   
Accumulated
       
   
Shares
   
Amount
   
Warrants
   
Receivable
   
Capital
   
Deficit
   
Total
 
Balance July 1, 2007
    -     $ -       -     $ -     $ -     $ -     $ -  
  Initial capitalization
    -       -               (500,000 )     500,000       -       -  
  Asset purchase
    -       -       -       -       5,015,485       -       5,015,485  
  Cancellation of initial subscription receivable
    -       -               500,000       (500,000 )     -       -  
  HCI acquisition
    -       -               -       (1,586,877 )     -       (1,586,877 )
  Rescind HCI acquisition
    -       -               -       1,586,877       -       1,586,877  
  Net loss
    -       -       -       -       -       (1,745,651 )     (1,745,651 )
                                                         
Balance March 31, 2008 -restated
    -       -       -       -       5,015,485       (1,745,651 )     3,269,834  
                                                         
  Merger with Corporate Outfitters
    7,906,350       791       2,853,171       -       105,209       (107,426 )     (1,426 )
  To zero out Corporate Outfitters' deficit
    -       -       -       -       (107,426 )     107,426       -  
  Stock issuance at $0.35
    571,429       57       -       -       222,479       -       222,536  
  Stock issuance at $0.55
    100,000       10       -       -       54,990       -       55,000  
  Stock based compensation cost options
    -       -       -       -       80,522       -       80,522  
  Net Loss
    -       -       -       -       -       (2,565,435 )     (2,565,435 )
                                                         
Balance March 31, 2009 - restated
    8,577,779     $ 858       2,853,171     $ -     $ 5,371,259     $ (4,311,086 )   $ 1,061,031  
                                                         
  Stock issued for services
    2,710,000       271       -       -       331,129       -       331,400  
  Stock issued for compensation
    2,963,000       296       -       -       274,594       -       274,890  
  Stock issued for debt
    7,838,907       784       -       -       246,883       -       247,667  
  Warrant issued for debt
    800,000       80       -       -       159,920       -       160,000  
  Cancellation of warrants
    -       -       (2,853,171 )                                
  Stock based compensation cost options
    -       -       -       -       80,522       -       80,522  
  Net loss
    -       -       -       -       -       (3,700,430 )     (3,700,430 )
                                                         
Balance March 31, 2010
    22,889,686     $ 2,289       -     $ -     $ 6,464,307     $ (8,011,516 )     (1,544,920 )

See accompanying notes to consolidated financial statements.

 
17

 
LAS VEGAS RAILWAY EXPRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2010, MARCH 31 2009 AND MARCH 31, 2008

(1)           Description of Business:

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

CD Banc LLC was formed in 2003 as a Nevada limited liability corporation with the purpose of acquiring real estate assets and holding them for long-term appreciation.

 (2)           Summary of Significant Accounting Policies:
 
Restated Financial Data
 
Subsequent to issuance of the Company’s March 31, 2009 financial statements the Company’s management identified an error related to 1) its recognition of revenue and impairment related to its acquired mortgage loan portfolio and 2) its accounting for compensation relating to the issuance of warrants. As a result, the Company has restated certain amounts in the accompanying consolidated financial statements to correct errors in previously reported amounts related to net finance receivables. This restatement affected the carrying value of the mortgage loan portfolio and accumulated deficit. See Note (3) Mortgage Loan portfolio and Note (12) Restatement of Previously Issued Financial Statements.

Basis of Presentation:

The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America. Our Consolidated Financial Statements include the accounts of the parent and all subsidiaries. Intercompany transactions and accounts are eliminated in consolidation.  The Company's policy is to prepare its financial statements on the accrual basis of accounting. The fiscal year end is March 31.

Going Concern:

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying financial statements, the Company has net loss of $3,700,430 for the year ended March 31, 2010. Although a substantial portion of the Company’s cumulative net loss is attributable to discontinued operations, management believes that it will need additional equity or debt financing to be able to sustain profitability.  These matters raise substantial doubt about the Company’s ability to continue as a going concern.

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

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

Risks and Uncertainties:

The Company operates in a highly competitive industry that is subject to intense competition and potential government regulations.  Significant changes in interest rates or the underlying economic condition of the United States or any specific region of the United States real estate market could have a matrially adverse impact on the Company’s operations.

 
18

 
LAS VEGAS RAILWAY EXPRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2010, MARCH 31 2009 AND MARCH 31, 2008
 
Use of Estimates:

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

Cash and Cash Equivalents:

For the purpose of the statement of cash flows, the Company considers all highly liquid holdings with maturities of three months or less at the time of purchase to be cash equivalents.

Mortgage Loans:

The Company acquires pools of non-performing loans and then re-performs those loans by restructuring the financial parameters such that the defaulted borrower can return to making payments in a timely manner again, sale of the loans or liquidated for cash through foreclosure.

In accounting for this portfolio of loans, the Company follows the guidance in acquisitions of loans and loan portfolios with evidence of credit deterioration. This guidance addresses accounting differences between contractual cash flows and cash flows expected to be collected from an investor's initial investment in acquired loans if those differences are attributable, at least in part, to deterioration in credit quality. The guidance also requires acquired loans with credit deterioration to be initially recorded at fair value and prohibits "carrying over" or the creation of valuation allowances in the initial accounting of acquired loans that are within its scope. The excess cash flows expected at acquisition over the loan portfolio's purchase price is recorded as interest income over the life of the portfolio.

The amounts paid for the loan portfolio reflect the Company's determination that the loans have experienced deterioration in credit quality since origination and that it is probable the Company will be unable to collect all amounts due according to the contractual terms of the underlying loans. At acquisition, the Company reviews the individual loans to determine whether there is evidence of deterioration of credit quality since origination and if it is probable that the Company will be unable to collect all amounts due according to the loan's contractual terms. If both conditions exist, the Company determines whether each such loan is to be accounted for individually or whether such loans will be assembled into static pools based on common risk characteristics (primarily loan type and collateral). Static pools of individual loan accounts may be established and accounted for as a single economic unit for the recognition of income, principal payments and loss provision. Once a static loan pool is established, individual accounts are generally not added to or removed from the pool (unless the Company sells, forecloses or writes-off the loan). At acquisition, the Company determines the excess of the scheduled contractual payments over all cash flows expected to be collected for the loan or loan pool as an amount that should not be accreted ("nonaccretable difference"). The excess of the cash flows from the loan or loan pool expected to be collected at acquisition over the initial investment ("accretable difference") is recognized as interest income over the remaining life of the loan or loan pool on a level-yield basis ("accretable yield"). The discount (i.e. the difference between the cost of each loan or static pool and the related aggregate contractual receivable balance) is not recorded because the Company does not expect to fully collect each contractual receivable balance for the loan or loan pool. As a result, these loans and loan pools are recorded at cost (which approximates fair value) at the time of acquisition.

The Company accounts for such portfolios of loans using either the interest method or a non-accrual method (through application of the cost-recovery or cash basis method of accounting). Application of the interest method is dependent on management's ability to develop a reasonable expectation as to both the timing and amount of cash flows expected to be collected. In the event the Company cannot develop or establish a reasonable expectation as to both the timing and amount of cash flows expected to be collected, the Company uses the cost-recovery or cash basis method of accounting.

 
19

 
LAS VEGAS RAILWAY EXPRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2010, MARCH 31 2009 AND MARCH 31, 2008

Interest method of accounting.    Under the interest method, an effective interest rate, or IRR, is applied to the cost basis of the loan or loan pool. The excess of the contractual cash flows over expected cash flows cannot be recognized as an adjustment of income or expense or on the balance sheet. The IRR that is calculated when the loan is purchased remains constant as the basis for subsequent impairment testing (performed at least quarterly) and income recognition. Significant increases in actual, or expected future cash flows, are used first to reverse any existing valuation allowance for that loan or loan pool; and any remaining increase may be recognized prospectively through an upward adjustment of the IRR over the remaining life of the loan or loan pool. Any increase to the IRR then becomes the new benchmark for impairment testing and income recognition. Subsequent decreases in projected cash flows do not change the IRR, but are recognized as an impairment of the cost basis of the loan or loan pool (to maintain the then-current IRR), and are reflected in the consolidated statements of operations through provisions charged to operations, with a corresponding valuation allowance offsetting the loan or loan pool in the consolidated balance sheets. The Company establishes valuation allowances for loans and loan pools acquired with credit deterioration to reflect only those losses incurred after acquisition—that is, the cash flows expected at acquisition that are no longer expected to be collected. Income from loans and loan pools accounted for under the interest method is accrued based on the IRR of each loan or loan pool applied to their respective adjusted cost basis. Gross collections in excess of the interest accrual and impairments will reduce the carrying value of the loan or loan pool, while gross collections less than the interest accrual will increase the carrying value. The IRR is calculated based on the timing and amount of anticipated cash flows using the Company's proprietary collection models.

Cost-recovery method of accounting.    If the amount and timing of future cash collections on a loan are not reasonably estimable, the Company accounts for such asset on the cost-recovery method. The Company adopted the cost recovery method for its loan portfolio due to the economic downturn and significant deterioration of the mortgage industry, causing an inability to reasonably determine the probability of collecting against any of the portfolios acquired to date or reasonably estimate the amount of funds collected there from. Under the cost-recovery method, no income is recognized until the Company has fully collected the cost of the loan, or until such time as the Company considers the timing and amount of collections to be reasonably estimable and begins to recognize income based on the interest method as described above.  The Company has performed  an evaluation to determine if the remaining amount that is probable of collection is less than the carrying value of the loan or loan pool, and if so, recognizes impairment through provisions charged to operations. The carrying value of the portfolio of loans accounted for under the cost-recovery method approximated $987,355 at March 31, 2009 and $2.9 million of loans at March 31, 2008.  The Company discontinued its operations in regards to its mortgage loan business on January 21, 2010..

Debt Portfolio Reserves

The Company acquired portfolios of defaulted consumer debt obligations at a substantial discount to the contractual value of the obligations. The negotiated discount is based on the Company’s determination of the deterioration of the credit quality of the obligations between the time of origination and acquisition by the Company.  If the Company determined subsequent to the acquisition of the portfolios that it may be unable to recover its investment in its acquired portfolios, it will establish in the period of determination, a valuation allowance sufficient to provide for the expected losses.  The valuation allowance subsequently will be reviewed periodically for changes in the expected losses and adjusted accordingly.  

Property and Equipment:

Property and equipment are stated at cost, less accumulated depreciation.  Depreciation is recorded using the straight-line method over the estimated useful lives of the related assets, ranging from three to thirty years. Total depreciation expense related to property and equipment was $727, $74,793 and $73,046 for the years ended March 31, 2010 and March 31, 2009 and March 31, 2008, respectively. Maintenance and repairs are charged to operations when incurred.  Major betterments and renewals are capitalized.  Gains or losses are recognized upon sale or disposition of assets.

 
20

 
LAS VEGAS RAILWAY EXPRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2010, MARCH 31 2009 AND MARCH 31, 2008
 
Long-Lived Assets:

The Company accounts for its long-lived assets in accordance with SFAS No. 144, “Accounting For The Impairment or Disposal of Long-Lived Assets” which requires that long-lived assets and certain identifiable intangibles to be held and used by any entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Pursuant to SFAS 144, management of the Company assesses the recoverability of property and equipment by determining whether the depreciation of such assets over their remaining lives can be recovered through projected undiscounted cash flows.  The amount of impairment, if any, is measured based on fair value (projected discounted cash flows) and is charged to operations in the period in which such impairment is determined by management.  To date, management has not identified any impairment of property and equipment.  There can be no assurance, however, that market conditions or demands for the Company’s services will not change which could result in future long-lived asset impairment.

Intangible Assets:

The Company has adopted FASB 142.  Under guidance of SFAS 142, net assets of companies acquired in purchase transactions are recorded at fair value at the date of acquisition, as such, the historical cost basis of individual assets and liabilities are adjusted to reflect their fair value.  Identified intangibles are amortized on an accelerated or straight-line basis over the period benefited.  Goodwill is not amortized, but is reviewed for potential impairment on an annual basis at the reporting unit level.  The impairment test is performed in two phases.  The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of the reporting unit with its carrying amount, including goodwill.  If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired; however, if the carrying amount of the reporting unit exceeds its fair value, an additional procedure must be performed.  That additional procedure compares the implied fair value of the reporting units’ goodwill (as defined in SFAS 142) with the carrying amount of that goodwill.  An impairment loss is recorded to the extent that the carrying amount of goodwill exceeds its implied fair value.  As of March 31, 2010, 2009 and 2008, the Company had recorded Goodwill of $843,697, 0 and 0, respectively.

Revenue and Cost Recognition:

In accounting for this portfolio of loans, the Company follows the guidance of ASC 310-30 “Loans and Debt Securities Acquired with Deteriorated Credit Quality” in acquisitions of loans and loan portfolios with evidence of credit deterioration. This guidance addresses accounting differences between contractual cash flows and cash flows expected to be collected from an investor's initial investment in acquired loans if those differences are attributable, at least in part, to deterioration in credit quality. The guidance also requires acquired loans with credit deterioration to be initially recorded at fair value and prohibits "carrying over" or the creation of valuation allowances in the initial accounting of acquired loans that are within its scope

Under the cost-recovery method, no income is recognized until the Company has fully collected the cost of the loan, or until such time as the Company considers the timing and amount of collections to be reasonably estimable and begins to recognize income based on the interest method as described above, see “Loans”.

Basic and Diluted Loss Per Share:

In accordance with SFAS No. 128, “Earnings Per Share,” the basic loss per common share is computed by dividing net loss available to common stockholders after reducing net income by preferred stock dividend, by the weighted average common shares outstanding during the period.  Diluted earnings per share reflect per share amounts that would have resulted if diluted potential common stock had been converted to common stock.  Common stock equivalents have not been included in the earnings per share computation for the years ended March 31, 2010, 2009 and 2008 as the amounts are anti-dilutive.

 
21

 
LAS VEGAS RAILWAY EXPRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2010, MARCH 31 2009 AND MARCH 31, 2008
 
Advertising:
 
The Company expenses advertising costs as incurred.  The advertising costs for the year ended March 31, 2010, March 31, 2009 and the year ended March 31, 2008  were $0, $800 and $0, respectively.

Income Taxes:

The Company accounts for income taxes under SFAS No. 109, “Accounting for Income Taxes.”  Under the asset and liability method of SFAS No. 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  Under SFAS No. 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs.  A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.

Stock Issued for Services:

The Company accounts for equity instruments issued to non-employees in accordance with the provisions of SFAS No. 123 and Emerging Issues Task Force (“EITF”) Issue No. 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services”. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued whichever is more reliably measurable. The measurement date of the fair value of the equity instrument issued is the earlier of the date on which the counter party’s performance is complete or the date on which it is probable that performance will occur.

The amounts that have been charged against income for those services were approximately $331,400, $0 and $0 for 2010, 2009 and 2008, respectively.

Fair Value of Financial Instruments:

The Company's financial instruments as defined by FASB ASC 825-10-50 include cash, trade accounts receivable, accounts payable and accrued expenses.  All instruments are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at March 31, 2010.  The amounts shown for notes payable approximate fair value because current interest rates and terms offered to the Company for similar debt are substantially the same.

FASB ASC 820 defines fair value, establishes a framework for measuring fair value, in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. FASB ASC 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

Level 1. Observable inputs such as quoted prices in active markets;

Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3. Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions.

 The mortgage loan portfolio we report at fair value in our consolidated financial statements fall within the Level 2 category and are valued primarily utilizing inputs and assumptions that are observable in the marketplace or that can be derived from observable market data compared with instruments with similar characteristics.

 
22

 
LAS VEGAS RAILWAY EXPRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2010, MARCH 31 2009 AND MARCH 31, 2008
 
In the absence of such information or if we are not able to corroborate these prices by other available relevant market information, we estimate their fair values by using internal calculations or discounted cash flow techniques that incorporate prepayment rates, discount rates and delinquency and default and cumulative loss expectations, that are implied by market prices for similar securities and collateral structure types. Because this valuation technique relies on significant unobservable inputs, the fair value estimation is classified as Level 3. The process for determining fair value using unobservable inputs is generally more subjective and involves a high degree of management judgment and assumptions. These assumptions may have a significant effect on our estimates of fair value, and the use of different assumptions as well as changes in market conditions could have a material effect on our results of operations or financial condition.
 
New Accounting Pronouncements:
 
In November 2004, the FASB issued SFAS No. 151, Inventory Costs, an amendment of ARB No. 43, Chapter 4. SFAS No. 151 amends the guidance in ARB No. 43, Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility expense, freight, handing costs and spoilage. This statement requires that those items be recognized as current period charges regardless of whether they meet the criterion of "so abnormal" which was the criterion specified in ARB No. 43. In addition, this Statement requires that allocation of fixed production overheads to the cost of production be based on normal capacity of the production facilities. This pronouncement is effective for the Company beginning October 1, 2005. The Company does not believe adopting this new standard will have a significant impact to its financial statements.

In December 2004, the FASB issued SFAS No. 123 (revised 2004). Share-Based Payment, which is a revision of SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 123(R) effective December 15, 2005, supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees and amends SFAS No. 95, Statement of Cash Flows.  Generally, the approach in SFAS No. 123(R) is similar to the approach described in SFAS No. 123. However, SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. As of March 31, 2010, the Company has 2,000,000 outstanding employee stock options.

(3)           Mortgage Loan Portfolio:
 
As described in Note 2, the Company follows the guidance of ASC 310-30 “Loans and Debt Securities Acquired with Deteriorated Credit Quality.”  In December 2007, the Company acquired a portfolio of 4,466 mortgage loans with a unpaid principal balance of $17.1 million in exchange for the issuance of 2,900,000 shares of common stock and a warrant to purchase 2,853,171 shares of common stock at an exercise price of $1.50 per share.  As the fair value of transaction was based on the fair value of the portfolio acquired which was $5,015,485, resulting in a purchase cost of 29% of the unpaid principal.  ASC 505-50-30-6 “Equity Based Payments to Non-Employees” states “If the fair value of goods or services received in a share-based payment transaction with nonemployees is more reliably measurable than the fair value of the equity instruments issued, the fair value of the goods or services received shall be used to measure the transaction.”
 
At the time of the transaction with South Lake Capital, the Company was a private enterprise with no market price for its stock or history to determine valuation of the warrants.  The agreement required the Company registering shares under the Securities and Exchange Act or completing a reverse merger with a shell company in order to register the South Lake Capital owned shares.  The Company determined under ASC 505-50-30-6 that the valuation of the consideration was more reliably measurable at the initial measurement date of December 31, 2007 and used that valuation for the shares.

 
23

 
LAS VEGAS RAILWAY EXPRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2010, MARCH 31 2009 AND MARCH 31, 2008
 
The Company adopted the cost recovery method for its loan portfolio due to the economic downturn and significant deterioration of the mortgage industry causing an inability to reasonably determine the probability of collecting against any of the portfolios acquired to date or reasonably estimate the amount of funds collected there from. Under the cost-recovery method, no income is recognized until the Company has fully collected the cost of the loan, or until such time as the Company considers the timing and amount of collections to be reasonably estimable.

A summary of the loans on non-accrual status is as follows:
 
   
March 31, 2010
   
March 31, 2009
   
March 31, 2008
 
   
Carrying
Value
   
Unpaid
Principal
Balance
   
Carrying
Value
   
Unpaid
Principal
Balance
   
Carrying
Value
   
Unpaid
Principal
Balance
 
                                     
Mortgage loans on real estate on non-accrual status:
                                   
Multi family residential performing
  $ -     $ 1,227,300     $ 987,355     $ 12,385,968     $ 2,886,004     $ 14,299,876  
                                                 
                      -       -       -       -  
                                                 
Total loans on non-accrual status
  $ -     $ 1,227,300     $ 987,355     $ 12,385,968     $ 2,886,004     $ 14,299,876  

 

(4)           Property and Equipment:

Property and equipment are stated at cost, less accumulated depreciation.  Depreciation is recorded using the straight-line method over the estimated useful lives of the related assets, ranging from three to thirty years. Total depreciation expense related to property and equipment was $728, 73,046 and 41,258  for the year ended March 31, 2010, 2009 and 2008.  For the year ended March 31, 2010, the Company disposed of assets totalling $191,839.
 
A summary is as follows:
 
   
March 31,
   
March 31,
   
March 31,
 
   
2010
   
2009
   
2008
 
Furniture and fixtures
  $ 112,413     $ 112,413     $ 112,413  
Equipment
    173,823       173,823       172,323  
Leasehold improvements, net
    63,250       63,250       63,250  
Software
    30,722       26,732       24,734  
Transportation
    60,000       -       -  
      440,208       376,218       372,720  
                         
Less accumulated depreciation
    (189,096 )     (114,304 )     (41,258 )
Less disposal of assets
    (191,839 )     -       -  
                         
Property and equipment, net
  $ 59,272     $ 261,914     $ 331,462  

 
24

 
LAS VEGAS RAILWAY EXPRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2010, MARCH 31 2009 AND MARCH 31, 2008
 
(5)           Notes payable:

A summary of notes payable is as follows:

   
March 31,
   
March 31,
   
March 31,
 
   
2010
   
2009
   
2008
 
                   
Secured promissory notes,  dated June 25, 2008, to two
  $ 194,060     $ 356,028     $ -  
investors, bearing interest at 10% per annum, payable
                       
September 1, 2010.
                       
                         
Secured promissory notes,  dated  January 23, 2010, to
                       
an investor bearing interest at 10% per annum, payable
                       
September 1, 2010.
    225,000       -       -  
                         
Unsecured promisory notes payable dated October 1, 2009
                       
bearing interest at 10% per annum, payable September 1, 2010
    76,305       -       -  
                         
Total notes payable
    495,365       356,028       -  
                         
Less current maturities
    (495,365 )     (356,028 )     -  
                         
    $ -     $ -     $ -  

 
The following table summarizes the aggregate maturities of notes payable:


Years ending
     
2011
  $ 495,365  
         
Thereafter
    --  
    $ 495,365  

Interest expense incurred under debt obligations amounted to$9,167, $46,768 and $0, for the year ended March 31, 2010, 2009 and 2008.

(6)           Commitments and Contingencies:

Operating Leases

The Company leases its facilities that expire through the year 2013.  These agreements generally provide that the Company pay operating costs such as taxes, insurance, and maintenance.

Future annual minimum payments under operating leases are as follows:
 
Years ending March 31,
     
2011
  $ 67,200  
2012
    67,200  
2013
    67,200  
         
Thereafter
    --  
      201,600  

Rental expense under operating leases for the year ended March 31, 2010, 2009 and 2008 was $82,843, $104,163 and $31,962, respectively.

 
25

 
LAS VEGAS RAILWAY EXPRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2010, MARCH 31 2009 AND MARCH 31, 2008
 
Litigation

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

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

(7)           Derivative Instruments:

The Company accounts for debt with embedded conversion features and warrant issues in accordance with EITF 98-5: Accounting for convertible securities with beneficial conversion features or contingency adjustable conversion and EITF No. 00-27: Application of issue No 98-5 to certain convertible instruments.  Conversion features determined to be beneficial to the holder are valued at fair value and recorded to additional paid in capital.  The Company determines the fair value to be ascribed to the detachable warrants issued with the convertible debentures utilizing the Black-Scholes method.  Any discount derived from determining the fair value to the debenture conversion features and warrants is amortized to financing cost over the life of the debenture.  The unamortized discount, if any, upon the conversion of the debentures is expensed to financing cost on a pro rata basis.

Debt issue with the variable conversion features are considered to be embedded derivatives and are accountable in accordance with FASB 133; Accounting for Derivative Instruments and Hedging Activities.  The fair value of the embedded derivative is recorded to derivative liability.  This liability is required to be marked each reporting period.  The resulting discount on the debt is amortized to interest expense over the life of the related debt.  For the years ended March 31, 2010, 2009 and 2008, the Company had $80,522, $80,522 and $0, respectively, associated with options and has recorded such expense on the Company’s statement of operations in Selling, General and Administrative. The options were vested in calculating stock based compensation of 40%, 20% and 0% for the years ended March 31, 2010, 2009 and 2008.

At March 31, 2010, the Company had approximately $241,568 of total unrecognized compensation cost related to unvested stock options. This cost is expected to be recognized over a weighted-average period of approximately 3 years.  No options were exercised during the years ended March 31, 2010, 2009 and 2008.  (See footnote 9)

(8)           Equity:

Common Stock The Company is authorized to issue 200,000,000 shares of common stock.   There were 22,889,686, 8,577,779 and 2,597,500 shares of common stock outstanding as of March 31, 2010, 2009 and 2008, respectively.  The holders of common stock are entitled to one vote per share on all matters submitted to a vote of stockholders and are not entitled to cumulate their votes in the election of directors.  The holders of common stock are entitled to any dividends that may be declared by the Board of Directors out of funds legally available therefore subject to the prior rights of holders of any outstanding shares of preferred stock and any contractual restrictions we have against the payment of dividends on common stock. In the event of our liquidation or dissolution, holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities and the liquidation preferences of any outstanding shares of preferred stock.  Holders of common stock have no preemptive or other subscription rights and no right to convert their common stock into any other securities.

Warrants As of March 31, 2010, 2009 and 2008, there are warrants outstanding to purchase a total of 0, 2,853,175, 2,853,175 shares of our common stock, respectively.  These warrants were granted in conjunction with the loan pool purchase on December 31, 2007 and are valued as part of the acquisition. The warrants may be exercised at price of $1.50 and expire on November 1, 2013.  In December 2009, the warrants were cancelled in conjunction with the decision to discontinue the mortgage loan pool operations.  In accordance with ASC 718-20-35-9 “Compensation – Stock Compensation”, the cancellation of the 2,853,175 warrants without a replacement award or other valuable consideration is treated as a repurchase without consideration.  All value had been recognized at the grant date; therefore, no value is expensed at the cancellation date.

 
26

 
LAS VEGAS RAILWAY EXPRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2010, MARCH 31 2009 AND MARCH 31, 2008
 
(9)           Stock Option Plan:

In December 2004, the FASB issued SFAS No. 123 (revised 2004). Share-Based Payment, which is a revision of SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 123(R) effective December 15, 2005, supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees and amends SFAS No. 95, Statement of Cash Flows.  Generally, the approach in SFAS No. 123(R) is similar to the approach described in SFAS No. 123. However, SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. As of March 31, 2010, 2009 and 2008, the Company has 2,000,000, 2,000,000 and 0 outstanding employee stock options, respectively.  In December 2009, the options were cancelled with the discontinuance of the mortgage loan pool operations.  Effective January 1, 2010, the options were re-affirmed with the same rights and terms as originally issued.  The re-affirmation was treated as a modification of the original options.  As the terms and conditions remained the same, the recognition of expense was recorded in accordance with the original terms of the options.

We generally recognize compensation expense for grants of restricted stock units using the value of a share of our stock on the date of grant. We estimate the value of stock option grants using the Black Scholes valuation model. Stock compensation is recognized straight line over the vesting period.

2008 Stock Option Plan provides for the grant of 4,000,000 incentive or non-statutory stock options to purchase common stock. Employees, who share the responsibility for the management growth or protection of the business of the Company and certain Non-Employee (“Selected Persons”), are eligible to receive options which are approved by a committee of the Board of Directors.  These options vest over five years and are exercisable for a ten-year period from the date of the grant.

The fair value for these options was estimated at the date of grant, November 1, 2008 using a Black-Scholes option pricing model with the following weighted-average assumptions for an estimated 5 year term ; risk free rate of 3.5%; no dividend yield; volatility factors of the expected market price of the Company's common stock of (51%), the market value of the Company’s stock on grant date was $0.45.

For the years ended March 31, 2010, 2009 and 2008, the Company had $80,522, $80,522 and $0, respectively, associated with the options and has recorded such expense on the Company’s statement of operations in Selling, general and administrative. The options were vested 40%, 20% and 0% for the years ended March 31, 2010, 2009 and 2008.

At March 31, 2010, the Company had approximately $241,568 of total unrecognized compensation cost related to unvested stock options. This cost is expected to be recognized over a weighted-average period of approximately 3 years.  No options were exercised during the years ended March 31, 2010, 2009 and 2008.  

 
27

 
LAS VEGAS RAILWAY EXPRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2010, MARCH 31 2009 AND MARCH 31, 2008

A summary of the Company’s stock option activity follows:
 
   
March 31, 2010
   
March 31, 2009
   
March 31, 2008
 
         
Weighted
         
Weighted
         
Weighted
 
         
Average
         
Average
         
Average
 
         
Exercise
         
Exercise
         
Exercise
 
   
Options
   
Price
   
Options
   
Price
   
Options
   
Price
 
Outstanding -
                                   
  beginning of year
    2,000,000     $ 0.50       -     $ -       -     $ -  
                                                 
Granted
    -       -       2,000,000     $ 0.50       -       -  
                                                 
Exercised
    -       -       -               -       -  
                                                 
Cancelled
    -       -       -       -       -       -  
                                                 
Outstanding -
                                               
  end of year
    2,000,000     $ 0.50       2,000,000     $ 0.50       -     $ -  
                                                 
Excercisable - end of year
    400,000     $ 0.50       -     $ -       -     $ -  
 

(10)         Deferred Income Taxes:

Income taxes are generally provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the basis of fixed assets for financial and income tax reporting.

As of March 31, 2010, the Company has a net operating loss carry forward of approximately $7.9 million for tax purposes, which will be available to offset future taxable income.  If not used, this carry forward will begin to expire in 2023 and 2024.  The deferred tax assets relating to the net operating loss carry forward has been fully reserved as of March 31, 2010.  There were timing differences between tax and book income of $733,392, related to stock based compensation.

(11)        Related-Party Transactions:
 
Michael A. Barron, our CEO and Chairman of the Board of Directors, is a 100% owner and President of Allegheny Nevada Holdings Corporation, “Allegheny”.  The Company is indebted to Allegheny by a certain promissory note, dated January 6, 2009, of which Allegheny loaned the Company funds for working capital needs.  Said Agreement was amended on October 1, 2009 and a portion was converted to 1,564,719 shares of the Company’s common stock at $0.50 per share.  As of March 31, 2010, the balance of the note was $78,236.
 
On November 23, 2009, the Company entered into an Asset Purchase Agreement with Las Vegas Railway Express, a Nevada Corporation, of which Allegheny is owner of 28.6% and Mr. Barron is a 28.6% owner, independent of Allegheny.  On January 21, 2010, by shareholder approval the Company acquired Las Vegas Railway Express for 20,000,000 shares of the Company’s stock, of which 4,000,000 has been issued on April 23, 2010.  The remaining shares, 16,000,000 are to be issued upon the completion of certain agreements, by and between the Company.  These agreements are deemed necessary for the continued operation of the Company’s proposed railway service.
 
As of March 31, 2010, Allegheny Nevada Holdings has an 10.5% beneficial ownership in the Company.

Mr. Barron advanced the Company $29,868, for the fiscal year ended March 31, 2010.  The Company has made payments of the advances in the amount of $21,375, resulting in a balance of $8,493 at March 31, 2010.  The Company has since reimbursed Mr. Barron for the remaining balance of the advances.

 
28

 
LAS VEGAS RAILWAY EXPRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2010, MARCH 31 2009 AND MARCH 31, 2008
 
As of March 31, 2010, Mr. Barron has accrued wages of $118,500.

Joseph Cosio Barron, Director and Officer of the Company is a 100% owner of CBS Consultants “CBS”, a Nevada Corporation.  CBS has 22.9% ownership of Las Vegas Railway Express at the time of acquisition.
On October 1, 2009, the Company entered into a promissory note with Mr. Cosio Barron for $86,709.  The Company converted 867,085 shares of the Company’s stock at $0.50 per share, resulting in a balance of $43,354 on March 31, 2010.

As of March 31, 2010, Mr. Cosio Barron has accrued wages of $88,774.

As of March 31, 2010, Ms. Carlise, CFO, has accrued wages of $20,275.

(12)
Discontinued Operations:

As discussed in Note 1, prior to January 21, 2010, the Company had been actively engaged in acquiring underperforming mortgage loan portfolios and generating revenues from re-performing, sale of loans and fee revenue.  As of January 21, 2010, the Company changed its primary business and abandoned the prior business. Accordingly, the assets and liabilities and results of operation related to this business have been classified as discontinued operations in the financial statements for all periods presented. As a result, the prior period comparative financial statements have been restated. Prior to this decision, the loan business represented substantially all of the Company’s operating revenue.

The following table summarizes results from discontinued operations for the year ended March 31, 2010:
 
   
March 31,
   
March 31,
 
   
2010
   
2009
 
         
(Restated)
 
             
Revenue
    46,943       69,750  
Cost of Sales
    -       -  
Gross Profit
    46,943       69,750  
Expenses:
               
Salary & wages & payroll taxes
    485,071       1,219,313  
Selling, general and administrative
    729,299       1,116,494  
Professional fees
    319,616       162,593  
Depreciation expense
    55,673       73,046  
Total expenses
    1,589,659       2,571,446  
Income (loss) from operations
    (1,542,716 )     (2,501,696 )
Other (expense) income
               
Interest expense
    (32,143 )     (46,768 )
Loss on asset disposal
    (210,231 )     -  
Gain on extinguishment of debt
    142,963       -  
Loan receivable loss
    (653,897 )        
Write down of investment
    (566,326 )     -  
Total other (expense) income
    (1,319,633 )     (46,768 )
Net loss
    (2,862,349 )     (2,548,464 )
 
 
29

 
LAS VEGAS RAILWAY EXPRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2010, MARCH 31 2009 AND MARCH 31, 2008

The following table summarizes assets and liabilities classified as discontinued operations

   
March 31,
 
   
2010
 
       
       
Cash
    -  
Other current assets
    -  
Loans
    -  
Property and equipment, net
    -  
Assets to be disposed of, current
    -  
         
Accounts payable and accrued expenses
    956,954  
Notes payable
    270,365  
Notes payable related party
    154,084  
Liabilities to be disposed of , current
    1,381,402  


(13)
Restatement of Previously Issued Financial Statements:

The Company concluded on May 14, 2010, to restate the Company’s audited consolidated financial statements as of March 31, 2009 and for the year then ended (the “Restatement”) to correct errors in previously reported amounts. The Restatement reflects the following adjustments related to the mortgage loan portfolio accumulated deficit and its compensation for the issuance of warrants.
 
Events Causing the Restatement
 
On May 14, 2010, in conversation with regulators, the Company determined that its policy with respect to its recognition of revenue and impairment related to its acquired loan portfolio was not in accordance with the guidance for the acquisitions of loans and loan portfolios with evidence of credit deterioration. The Company had been reporting asset liquidation revenue and offsetting the carrying value of the loans for the disposition of loans from the loan portfolio.   After having an outside specialist analyze the portfolio, management of the Company has determined the loans in the portfolio should be accounted for using the cost recovery method proscribed by ASC 310-30 “Loans and Debt Securities Acquired with Deteriorated Credit Quality” (See Note 3) . Under the cost-recovery method, no income is recognized until the Company has fully collected the cost of the loan, or until such time as the Company considers the timing and amount of collections to be reasonably estimable.  Based on the recovery method, the Company had not collected revenues in excess of the initial acquisition costs of the loan portfolios; therefore, no revenues should have been reported in any of the previous reporting periods.

Additionally, employee stock options for 2,000,000 shares of the Company’s common stock granted during fiscal year ended March 31, 2009 were not properly accounted for and recorded as an expense.

The impact of the adjustments for the Restatement of the Balance Sheet at March 31, 2009 and March 31, 2008, was a decrease in loans held for sale and in accumulated deficit of $3,507,243 and $1,058,271. The impact of the adjustments for the Restatement of the Statement of Operations was a decrease in revenue of $2,695,252 and $2,129,481, a decrease in impairment charge of $246,180 and $1,167,266, and an increase in net loss of $2,512,623 and $1,058,271, for the year ended March 31, 2009 and March 31, 2008. These changes are detailed below.

 
30

 
LAS VEGAS RAILWAY EXPRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2010, MARCH 31 2009 AND MARCH 31, 2008
 
   
March 31, 2009
   
March 31, 2008
 
   
As Reported
   
As Restated
   
As Reported
   
As Restated
 
Balance sheets
                       
Loans
    4,494,598       987,355       3,944,275       2,886,044  
Additional paid in capital
    5,290,737       5,354,288       5,015,485       5,015,485  
Accumulated deficit
    (723,321 )     (4,311,086 )     (687,380 )     (1,745,651 )
                                 
                                 
                                 
   
March 31, 2009
   
March 31, 2008
 
   
As Reported
   
As Restated
   
As Reported
   
As Restated
 
Statement of Operations
                               
Revenue
  $ 2,765,002     $ 69,750     $ 2,142,750     $ 13,269  
Cost of Sales
    259,336       -       375,468       -  
Stock based compensation expense
    -       80,522       -       -  
Write down of investment
    246,180       -       1,167,266       -  

 
Impacts on the Quarterly Consolidated Financial Statements

The Company also restated the quarterly consolidated financial statements for each of the quarters in fiscal year 2010 on the following pages in this annual report on Form 10-K, in lieu of separately amending each Form 10-Q for the respective quarters in fiscal year 2010.

Balance Sheets

   
As Reported
   
Adjustment
   
As Restated
 
For the three months ended June 30, 2009
                 
Loan receivable
    758,804       (758,804 )     -  
Loans
    4,494,598       (3,050,557 )     1,444,041  
Additional paid in capital
    5,313,157       63,616       5,376,773  
Accumulated deficit, current period
    (39,299 )     (281,026 )     (320,325 )
Retained Earnings
    (723,321 )     (3,587,765 )     (4,311,086 )
                         
For the six months ended September 30, 2009
                       
Loan receivable
    653,897       (653,897 )     -  
Loans
    3,262,868       (2,005,734 )     1,257,134  
Additional paid in capital
    5,382,046       63,551       5,445,597  
Accumulated deficit, current period
    (1,835,245 )     847,598       (987,647 )
Retained Earnings
    (723,321 )     (3,587,765 )     (4,311,086 )
                         
For the nine months ended December 31, 2009
                       
Loan receivable
    653,897       (653,897 )     -  
Loans
    3,262,868       (2,041,866 )     1,221,002  
Additional paid in capital
    5,779,746       (79,412 )     5,700,334  
Accumulated deficit, current period
    (2,271,660 )     954,443       (1,317,217 )
Retained Earnings
    (723,321 )     (3,587,765 )     (4,311,086 )

 
 
31

 
LAS VEGAS RAILWAY EXPRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2010, MARCH 31 2009 AND MARCH 31, 2008
 
Statement of Operations
 
   
As Reported
   
Adjustment
   
As Restated
 
                   
For the three months ended June 30, 2009
                 
Revenue
    302,118       (302,118 )     -  
Cost of Sales
    18,207       (18,207 )     -  
Net (loss)
    (39,299 )     (301,922 )     (341,221 )
                         
For the three months ended Septembe 30, 2009
                       
Revenue
    173,252       (173,252 )     -  
Cost of Sales
    95,536       (95,536 )     -  
Write down of investment
    (1,231,730 )     1,231,730       -  
Net (loss)
    (1,796,156 )     1,149,730       (646,426 )
                         
For the three months ended December 31, 2009
                       
Revenue
    36,132       (36,132 )     -  
Net (loss)
    (430,000 )     (42,533 )     (472,533 )
 

(14)
Subsequent Event

On April 23, 2010, the Board of Directors accepted the resignation of Theresa Carlise as Director.

On May 14, 2010, the Company filed a Form 8-K, concerning Item 4.02 Non Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.  In evaluating the Company’s accounting treatments for certain account transactions relating to the current years audit of our March 31, 2010 financial statements, the Company’s new Chief Financial Officer and new independent auditors have concluded that the valuation of its Loans Held for Investment for the prior year ended March 31, 2009 should have been accounted for under FASB ASC 310.30, “Loans and Debt Securities Acquired with Deteriorated Credit Quality”.  Accordingly, the Company has restated its financial statements with the filing of this Form 10-K.

On April 30, 2010, the Company entered into a promissory note with investors totaling $100,000.  The notes bear interest at 10% per annum and are due to expire in 180 days from date of issuance.

On May 15, 2010, the Company through a private placement memorandum, issued 4.2 million shares of the Company‘s common stock for a total of $625,000.
 
 
Item 9.    Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures.

Evaluation Disclosure Controls and Procedures

We conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of  March 31, 2009 and the quarterly periods then ended June 30, 2009, September 30, 2009 and December 31, 2009, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities Exchange Commission's rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of March 31, 2010, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weakness described below.

 
32

 
LAS VEGAS RAILWAY EXPRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2010, MARCH 31 2009 AND MARCH 31, 2008

Unremediated Material Weakness

A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 2) or combination of control deficiencies, which result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

Subsequent to issuance of the Company’s March 31, 2009 financial statements the Company’s management identified an error related to 1) its recognition of revenue and impairment related to its acquired mortgage loan portfolio and 2) its accounting for compensation relating to the issuance of warrants. As a result, the Company has restated certain amounts in the accompanying consolidated financial statements to correct errors in previously reported amounts related to net finance receivables. This restatement affected the carrying value of the mortgage loan portfolio and accumulated deficit. See Note (3) – Mortgage Loan portfolio and Note (13) – Restatement of Previously Issued Financial Statements.

The Company concluded on May 14, 2010, to restate the Company’s audited consolidated financial statements as of March 31, 2009 and for the year then ended (the “Restatement”) to correct errors in previously reported amounts. The Restatement reflects the following adjustments related to the mortgage loan portfolio accumulated deficit and its compensation for the issuance of warrants.

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

Remediation of Material Weakness

To remediate the material weakness in our disclosure controls and procedures identified above, we have done or intend to do the following subsequent to the fiscal year ended March 31, 2009. On December 1, 2009, we appointed a CFO who has expertise in public company financial reporting compliance, to replace the position left vacant by the resignation of the former CFO.

We are seeking guidance from financial consultants who are certified public accountants with the requisite background and experience to assist us in identifying and evaluating complex accounting and reporting matters. In addition, we intend to define new internal processes for identifying and disclosing both routine and non-routine transactions and for researching and determining proper accounting treatment for those transactions. We plan to develop with the engagement of outside financial consultants to perform these processes and plan to provide those individuals with adequate technical and other resources to help ensure the proper application of accounting principles and the timely and appropriate disclosure of routine and non-routine transactions. We also intend to seek additional assistance from independent legal professionals who have expertise in public company reporting compliance who will work with our Chief Financial Officer and our current lega