UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

Commission file number: 333-218746

2381 St Rose Pkwy, Suite 200

Henderson, NV 89052

(Address of principal executive offices)

(702) 481-2343

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act

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 ☐     No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒     No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," or “emerging growth company” in Rule 12b-2 of the Exchange Act:

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

Number of outstanding shares of common stock as of June 19, 2020 was 3,518,965,736.

LAS VEGAS XPRESS, INC.

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION

LAS VEGAS XPRESS, INC.

BALANCE SHEETS (Unaudited)

LAS VEGAS XPRESS, INC.

STATEMENTS OF OPERATIONS

(Unaudited)

LAS VEGAS XPRESS, INC.

STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018

(Unaudited)

LAS VEGAS XPRESS, INC.

STATEMENTS OF CASH FLOWS

(Unaudited)

LAS VEGAS XPRESS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND 2018

(Unaudited)

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 $308,792 for the six months ended June 30, 2019. The Company also has an accumulated deficit of $23,128,739 and a negative working capital of $3,495,849 as of June 30, 2019, including outstanding convertible notes payable of $324,058, before debt discount of $18,082. Management believes that it will need additional equity or debt financing to be able to implement its business plan. Given the lack of revenue, capital deficiency and negative working capital, there is substantial doubt about the Company’s ability to continue as a going concern.

While we expect the impacts of COVID-19 to have an adverse effect on our business, financial condition and results of operations, we are unable to predict the extent or nature of these impacts at this time.

Management is attempting to raise additional equity and debt 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.

Basis of Financial Statement Presentation:

The accompanying unaudited interim financial statements of Las Vegas Xpress, Inc. (the "Company") are condensed and have been prepared in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. These statements reflect all normal and recurring adjustments which, in the opinion of management, are necessary to present fairly the financial position, results of operations and cash flows of the Company for the interim periods presented. However, the results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2019 or any other future period. These interim financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2018.

Risks and Uncertainties:

The Company operates in a rail industry that is subject to intense competition and potential government regulations. Significant changes in regulations and the inability of the Company to establish contracts with rail services providers could have a materially adverse impact on the Company’s operations.

Use of Estimates:

The preparation of financial statements in conformity with GAAP 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. Actual results could differ from those estimates.

Cash and Cash Equivalents:

The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents. As of June 30, 2019 and December 31, 2018, the Company had $405 and $3,088 in cash and cash equivalents, respectively.

Related Parties:

The Company follows ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transactions (see Note 2).

Income Taxes:

Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The deferred tax assets of the Company relate primarily to operating loss carryforwards for federal income tax purposes. A full valuation allowance for deferred tax assets has been provided because the Company believes it is not more likely than not that the deferred tax asset will be realized. Realization of deferred tax assets is dependent on the Company generating sufficient taxable income in future periods.

The Company periodically evaluates its tax positions to determine whether it is more likely than not that such positions would be sustained upon examination by a tax authority for all open tax years, as defined by the statute of limitations, based on their technical merits. As of June 30, 2019 and December 31, 2018, the Company has not established a liability for uncertain tax positions.

Basic and Diluted Loss per Share:

In accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 260, “Earnings per Share,” the basic income (loss) per common share is computed by dividing the net income (loss) available to common stockholders 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 six months ended June 30, 2019 and 2018 as the amounts are anti-dilutive due to net losses. As of June 30, 2019, the Company had 1,436 outstanding warrants and convertible debt of $324,058, which were all excluded from the computation as they were anti-dilutive and are convertible into 5,997,561,071 shares of common stock. As of December 31, 2018, the Company had 3,426 outstanding warrants and convertible debt of $464,112, before debt discount of $65,001, which were all excluded from the computation as they were anti-dilutive.

Revenue Recognition:

The Company recognizes revenue from the sale of services in accordance with ASC 606, “Revenue Recognition,” only when all of the following criteria have been met:

Fair Value of Financial Instruments:

The Company’s financial instruments consist primarily of cash, prepaid expense, accounts payable and accrued liabilities, accrued expenses, convertible notes and notes payable. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments.

The Company adopted ASC Topic 820, Fair Value Measurements (“ASC Topic 820”), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The standard provides a consistent definition of fair value which focuses on an exit price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard also prioritizes, within the measurement of fair value, the use of market-based information over entity specific information and establishes a three-level hierarchy for fair value measurements based on the nature of inputs used in the valuation of an asset or liability as of the measurement date.

The three-level hierarchy for fair value measurements is defined as follows:

Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets; liabilities in active markets;

Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability other than quoted prices, either directly or indirectly, including inputs in markets that are not considered to be active; or directly or indirectly including inputs in markets that are not considered to be active;

Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement

The following table summarizes fair value measurements by level at June 30, 2019 and December 31, 2018, measured at fair value on a recurring basis:

Share Based Payments:

The Company issues stock, options, and warrants as share-based compensation to employees and non-employees.

The Company accounts for its share-based compensation to employees and non-employees in accordance FASB ASC 718. Stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the requisite service period.

During the six months ended June 30, 2019 and 2018, the Company incurred $77,500 and $2,281,247 in stock- based compensation to employees.

The Company values stock compensation based on the market price on the grant date. The Company values warrants using the Black-Scholes option pricing model. Assumptions used in the Black-Scholes model to value options and warrants issued during the six months ended June 30, 2019 were as follows:

During the six months ended June 30, 2019, the Company did not issue any shares of common stock for outside services. During the six months ended June 30, 2018, the Company issued 25,000 shares of common stock for outside services valued at $200,000.

During the six months ended June 30, 2019 and 2018, the Company issued 2,001,133,771 shares of common stock for conversions of promissory notes and interest of $172,643. During the six months ended June 30, 2018, the Company issued 15,109 shares of common stock for conversions of promissory notes and interest of $51,300.

The Company acquires on-going funding on an as-needed basis from related parties that include the Company’s officers, directors, majority shareholders, and these parties’ affiliates, pursuant to promissory notes with various origination dates in 2015 and 2017.  A summary of outstanding notes payable is as follows:

For the six months ended June 30, 2019, proceeds from related parties totaled $73,475, and interest of $9,158 was accrued. For the six months ended June 30, 2018, proceeds from related parties were $5,344 and repayments were $9,933, while interest of $11,090was accrued.

The following summarizes the book value of the convertible notes payable outstanding as of June 30, 2019 and December 31, 2018:

During the six months ended June 30, 2019, the Company converted $140,054 convertible note principal and $32,589 in interest ($172,643 total debt) into 2,001,133,771 shares of common stock (Note 5), and recorded debt discount amortization of $46,919.

During the six months ended June 30, 2018, the Company received proceeds of $154,100 from convertible notes, and made repayments of $46,550, and recorded debt discount amortization of $120,811.  The Company also converted $140,055 in convertible note principal and $20,249 in interest ($51,300 total debt) into 15,109 shares of common stock (Note 5).

The Company analyzed the conversion option for derivative accounting consideration under ASC 815, “Derivatives and Hedging,” and determined that the convertible notes should be classified as a liability since the conversion option becomes effective at issuance resulting in there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options.

The Company determined our derivative liabilities to be a Level 3 fair value measurement and used the Black-Scholes pricing model to calculate the fair value as of June 30, 2019 and December 31, 2018. The Black-Scholes model requires six basic data inputs: the exercise or strike price, time to expiration, the risk-free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each convertible note and warrant is estimated using the Black-Scholes valuation model. The following weighted-average assumptions were used in June 30, 2019 and December 31, 2018:

The Company valued the conversion feature using the Black-Scholes valuation model. The fair value of the derivative liability for all the notes that were convertible as of June 30, 2019 and December 31, 2018 amounted to $143,678 and $336,825, respectively.

Common and Preferred Stock

The Company is authorized to issue 10,000,000,000 shares of common stock and 1,000,000 shares of preferred A (each share convertible on one for one base for common stock, no voting rights), 10,000 shares of preferred A-2 convertible into four times the sum of all shares of common stock issued and outstanding with the same voting rights), 1,000,000 shares of preferred B (each share converted into 10 shares of common stock and has 10 votes for any election) and 1,000 shares of preferred C class (each share is not convertible and has voting rights equal to four time the sum of total common stock shares issued and outstanding plus the total number of series B, A and A-2 that are issued and outstanding.) The increase in authorized shares of common stock from 500,000,000 to 1,000,000,000 was approved by the shareholders and Board of Directors on September 27, 2017. The increase from 1,000,000,000 to 3,000,000,000 shares was effective December 12, 2017, the increase from 3,000,000,000 to 5,000,000,000 shares was effective March 21, 2018 and the increase from 5,000,000,000 to 10,000,000,000 was effective May 17, 2018.

As of September 17, 2018, a reverse stock split in the ratio 5,000 for 1 share and the name change from X Rail Entertainment, Inc. to Las Vegas Xpress, Inc. was effective. The stock split has been retroactively reflected for all periods presented.

During the six months ended June 30, 2019, the Company issued an aggregate of 775,000,000 shares of common stock for compensation of $77,500 valued at the stock price on grant date. During the six months ended June 30, 2018, the Company issued an aggregate of 133,166 shares of common stock for compensation of $2,281,247.

During the six months ended June 30, 2019, the Company issued an aggregate of 2,001,133,771 shares of common stock for note or interest conversion of $172,643. During the six months ended June 30, 2018 the Company issued 15,109 shares of common stock for note or interest conversion of $51,300.

There were no warrants exercised during the six months ended June 30, 2019 and 2018.

During the six months ended June 30, 2019 and 2018, the Company issued 0 and 25,000 shares of common stock for services valued at the market price of $0 and $200,000 on the grant date.

Warrants

The Company accounted for the issuance of Warrants in conjunction from the issuance of convertible notes as an equity instrument and recognized the warrants under the Black-Scholes valuation model based on the Company’s market share price on the grant date.

The below table summarizes warrant activity during the six months ended June 30, 2019:

The fair value of each warrant on the date of grant is estimated using the Black-Scholes option valuation model. The following weighted-average assumptions were used for warrants granted during the six months ended June 30, 2019 and 2018:

The following table summarizes information relating to outstanding and exercisable warrants as of June 30, 2019:

As of June 30, 2019, the aggregate intrinsic value of warrants outstanding was $0.14 based on the closing market price of $0.0001 on June 30, 2019.

On August 22, 2019, the Company issued 500,000 shares of common stock for cash.

The Company has examined events occurring subsequent to June 30, 2019 through the date these financial statements were issued and determined there are no additional events to disclose.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

This Quarterly 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 Xpress, Inc.’s 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, managements' ability to raise capital in the future, the retention of key employees and changes in the regulation of our industry, as well as the risk factors identified in the Company’s filings.

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 following discussion should be read in conjunction with our condensed financial statements and notes thereto included elsewhere herein.

Business Overview

Las Vegas Xpress, Inc. is in the specialty passenger train business and has three operating divisions: the X Train, currently in the planning stages, is an excursion railroad between metropolitan areas and resort/casino destinations: X Wine Railroads is planned to be a rail excursion from metropolitan areas to wine regions: and Club X Train, currently in the planning stages, is a riders membership club for X Train customers.

X Train

The X Train will be an excursion passenger rail service operated by United Rail, between Los Angeles and Las Vegas.

United Rail is a related party company that will provide the locomotives, crew and railcars for the project. Las Vegas Xpress, Inc. will provide a complete bundled package of services including ticket, rooms and transfers to & from the station and weekend events such as access to nightclubs, golf outings and restaurants.

X Wine Railroad

The Company’s X Wine Railroad service from LA Union Station to Santa Barbara California is planned to run on a scheduled basis, once a month on Saturdays, with individual riders (retail) as well as charters for corporate outings and special events (corporate). The X Wine Railroad will provide a unique wine tasting experience to riders who take the train aboard special period classic railcars and an excursion to the Los Olivos wine area of Southern California. Over 250 private wineries reside in the area and the X Wine Railroad will provide private access to these vineyards on an exclusive basis. Ticket prices are $369 per person, all inclusive. Since February 2017 this train has run once and the Company anticipates to continue to run this train intermittently, depending on demand. X Wine provides an all-inclusive day trip including a gourmet breakfast, wine tasting in the wineries, wine and cheese lunch at the wineries, and a gourmet dinner on the train's return trip. The Company temporarily suspended the service until 2021 due to change in Amtrak policies.

Club X Train

Club X Train, which is still in the planning stage, will be a one stop shop for all Las Vegas rooms, activities, tours, show tickets and packages. Las Vegas shows, hotel rooms, tours, nightclubs and attractions will all available for members of ClubXTrain.com. This will be the only site riders need to plan their Vegas vacation getaway.

We anticipate that when a customer purchases a train ticket on either the X Train (once it commences operations) or any of the X Wine Railroad excursions, such tickets will include enrollment in our Club X membership club. Members will receive points from each excursion they ride and will be provided discounts on products and services we provide. The more they ride, the more points they will receive. Club X train will be the customer's ticket within Vegas for access to nightclubs, hosted bottle service, pool parties, gentlemen's clubs and the Club X Train Crawl: a high end to visiting three nightclubs in one night. Customers will outline their desired plan for the evening and Club X Train will take care of arranging all the details. We expect to commence offering Club X Train service when the X Train commences running, currently anticipated to be January 2022.

Critical Accounting Policies

The preparation of our condensed 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 impairment of long-lived 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.

Results of Operations for the Three Months Ended June 30, 2019 as Compared to the Three Months Ended June 30, 2018

The following is a comparison of the results of operations for the three months ended June 30, 2019 and 2018.

Revenue

During the three months ended June 30, 2019 and 2018, the Company didn’t generate any revenue, since it temporarily discontinued its operation of the X Wine Railroad. The Company plans to reestablish the service in 2021.

Operating Expenses

Compensation expense decreased by $196,247, or 72.0%, during the three months ended June 30, 2019 as compared to the three months ended June 30, 2018. The decrease in compensation expense was primarily due to lower payroll in 2019 and issuances of stock to management in 2018. Selling, general and administrative expenses decreased by $73,744, or 89.3%, during the three months ended June 30, 2019 as compared to the same period in 2018 primarily due to decrease in travel and office expenses. Professional fees decreased by $256,116, or 81.2%, during 2019 as compared to 2018 due primarily to decreases in consulting services.

Other (Expense) Income

Interest expense decreased by $584,727, or 95.4%, during the quarter ended June 30, 2019 as compared to the same period in 2018 due to lower convertible promissory notes in 2019. During the three months ended June 30, 2019, change in fair value of derivative liability decreased by $577,636 or 91.6%.

Results of Operations for the Six Months Ended June 30, 2019 as Compared to the Six Months Ended June 30, 2018

The following is a comparison of the results of operations for the six months ended June 30, 2019 and 2018.

Revenue

During the six months ended June 30, 2019, the Company didn’t generate any revenue, since it temporarily discontinued its operation of the wine train. During the six months ended June 30, 2018, the Company generated some revenue from operating the wine train in Santa Barbara, CA. Revenue was generated from selling train tickets, food and beverage and wine tours. The Company plans to reestablish the service in 2021.

Operating Expenses

Compensation expense decreased by $2,388,747, or 91.2%, during the six months ended June 30, 2019 as compared to the six months ended June 30, 2018. The decrease in compensation expense was primarily due to issuances of stock to management in 2018. Selling, general and administrative expenses decreased by $92,316, or 73.6%, during the six months ended June 30, 2019 as compared to the same period in 2018 primarily due to decrease in travel and office expenses. Professional fees decreased by $329,396, or 76.3%, during 2019 as compared to 2018 due primarily to decreases in consulting services.

Other (Expense) Income

Interest expense decreased by $598,922, or 82.2%, during the six months ended June 30, 2019 as compared to the same period in 2018 due to lower debt. During the six months ended June 30, 2019, change in fair value of derivative liability decreased by $1,004,655 or 88.0%.

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 limited operating revenues and is currently dependent on debt financing and sale of equity to fund operations.

As shown in the accompanying financial statements, the Company has a net loss of $308,792 for the six months ended June 30, 2019, and a net loss of $2,769,928 for the six months ended June 30, 2018. The Company also has an accumulated deficit of $23,128,739 and a negative working capital of $3,495,849 as of June 30, 2019, which includes outstanding convertible notes payable $324,058. Management believes that it will need additional equity or debt financing to be able to implement its business plan. Given the lack of significant revenue, capital deficiency and negative working capital, there is substantial doubt about the Company’s ability to continue as a going concern.

We believe that the successful growth and operation of our business is dependent upon our ability to do the following:

Management is attempting to raise additional equity and debt to acquire several operating passenger rail operations which will 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.

Cash Flows

Net cash used in operating activities for the six months ended June 30, 2019 and 2018 were $77,704 and $159,074, respectively. Cash used in operating activities for the six months ended June 30, 2019 and 2018 were primarily due to net loss of $308,792 and $2,769,928, respectively. During the six months ended June 30, 2019, the net loss included significant non-cash expenses of $46,919 in debt discount amortization, $77,500 in stock issued for compensation, and $136,985 in gain on change in derivative liability related to convertible notes payable, as well as $243,654 in changes in operating assets and liabilities. During the six months ended June 30, 2018, the net loss included significant non-cash expenses of $2,281,247 in stock issued for compensation, $120,811 in debt discount amortization, $200,000 in stock issued for services, $60,801 in derivative expense and $1,141,640 gain on change in derivative liability related to convertible notes payable, and $400,000 in warrant expense, as well as $530,561 in changes in operating assets and liabilities.

There were no investing activities during the six months ended June 30, 2019 and 2018.

Net cash provided by financing activities for the six months ended June 30, 2019 amounted to $75,021, which consisted of $1,546 in proceeds from notes payable and $73,475 in proceeds from related party notes payable. Net cash provided by financing activities for the six months ended June 30, 2018 was $102,961, which consisted of $154,100 in proceeds from convertible notes payable and $46,550 in repayments on convertible notes payable, as well as $5,344 from proceeds from related party notes payable and $9,933 in repayments on related party notes.

Description of Indebtedness

For a complete description of our outstanding debt as of June 30, 2019 and December 31, 2018, see Notes 2 and 3 to the financial statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

As a "smaller reporting company" as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.