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UNITED STATES SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

For the quarterly period ended March 31, 2003

For the Transition period from _______________ to ________________

Commission File Number   333-42147

LAS VEGAS SANDS, INC.
(Exact name of registration as specified in its charter)

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.
[X] Yes [   ] No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). [   ]Yes [X] No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of May 15, 2003

LAS VEGAS SANDS, INC.

Part I

FINANCIAL INFORMATION

Item 1.   Financial Statements

Consolidated Balance Sheets
(Dollars in thousands)

The accompanying notes are an integral part of these consolidated financial statements.

LAS VEGAS SANDS, INC.

Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

LAS VEGAS SANDS, INC.

Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

LAS VEGAS SANDS, INC.

Notes to Financial Statements

Note 1   Organization and Business of Company

        The accompanying consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002. The year end balance sheet data was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles. In addition, certain amounts in the 2002 financial statements have been reclassified to conform with the 2003 presentation. In the opinion of management, all adjustments and normal recurring accruals considered necessary for a fair presentation of the results for the interim period have been included. The interim results reflected in the unaudited financial statements are not necessarily indicative of expected results for the full year.

        Las Vegas Sands, Inc. (“LVSI”) is a Nevada corporation. On April 28, 1989, LVSI commenced gaming operations in Las Vegas, Nevada, by acquiring the Sands Hotel and Casino (the “Sands”). On June 30, 1996, LVSI closed the Sands and subsequently demolished the facility in order to construct a planned two-phase hotel-casino resort. The first phase of the hotel-casino resort (the “Casino Resort”) includes 3,036 suites, casino space approximating 116,000 square feet, approximately 500,000 square feet of convention space, and approximately 475,000 gross leasable square feet of retail shops and restaurants.

        The consolidated financial statements include the accounts of LVSI and its subsidiaries (the “Subsidiaries”), including Venetian Casino Resort, LLC (“Venetian”), Mall Intermediate Holding Company, LLC (“Mall Intermediate”), Grand Canal Shops Mall Subsidiary, LLC (the “Mall Subsidiary”), Grand Canal Shops II, LLC (the “Mall II Subsidiary”), Grand Canal Shops Mall MM Subsidiary, Inc., Grand Canal Shops Mall Construction, LLC (“Mall Construction”), Lido Intermediate Holding Company, LLC (“Lido Intermediate”), Lido Casino Resort Holding Company, LLC, Lido Casino Resort, LLC (the “Phase II Subsidiary”), Lido Casino Resort MM, Inc., Venetian Casino Resort Athens, LLC (“Venetian Athens”), Venetian Venture Development, LLC (“Venetian Venture”), Venetian Venture Development Intermediate Limited, Venetian Macau Management Limited, Venetian Macau Holdings Limited (“Venetian Macau”), Venetian Marketing, Inc. (“Venetian Marketing”), Venetian Far East Limited and Venetian Operating Company, LLC (“Venetian Operating”) (collectively, and including all other direct and indirect subsidiaries of LVSI, the “Company”). Each of LVSI and the Subsidiaries is a separate legal entity and the assets of each such entity are intended to be available only to the creditors of such entity.

        Venetian was formed on March 20, 1997 to own and operate certain portions of the Casino Resort. LVSI is the managing member and owns 100% of the common voting equity in Venetian. The entire preferred interest in Venetian is owned by Interface Group Holding Company, Inc. (“Interface Holding”), which is wholly-owned by LVSI’s principal stockholder (the “Principal Stockholder”).

        Various Subsidiaries are guarantors or co-obligors of certain indebtedness related to the Casino Resort. See Note 4 – Long-Term Debt.

        The Mall II Subsidiary is an indirect, wholly-owned subsidiary of LVSI and owns and operates the retail mall in the Casino Resort (the “Mall”). The Mall II Subsidiary was formed on May 31, 2002 and became a successor to the Mall Subsidiary in connection with the refinancing of the Mall’s indebtedness. See Note 4–Long-Term Debt.

        The Casino Resort is physically connected to the approximately 1.15 million square foot Sands Expo and Convention Center (the “Expo Center”). Interface Group-Nevada, Inc. (“IGN”), the owner of the Expo Center, is beneficially owned by the Principal Stockholder. Venetian, the Mall II Subsidiary and IGN transact business with each other and are parties to certain agreements.

LAS VEGAS SANDS, INC.

Notes to Financial Statements (Continued)

Note 2    Stockholders’ Equity and Per Share Data

        The Company established a nonqualified stock option plan, which provides for the granting of stock options pursuant to the applicable provisions of the Internal Revenue Code and regulations. The stock option plan provides that the Principal Stockholder may assume the obligations of the Company under the plan and provides for the granting of up to 75,000 shares of common stock to officers and other key employees of the Company.

        During the first quarter of 2002, the Company entered into a stockholders’ agreement (the “Stockholders’ Agreement”) with the employees to whom options were granted (the “Additional Stockholders”) and the Principal Stockholder. The Stockholders’ Agreement restricts the ability of the Additional Stockholders and any of their permitted transferees who have agreed to be bound by the terms and conditions of the agreement to sell, assign, pledge, encumber or otherwise dispose of any shares of common stock of LVSI, except in accordance with the provisions of the Stockholders’ Agreement. If at any time before LVSI completes an initial public offering, the Principal Stockholder wishes to sell 20% or more of his ownership interest in LVSI to any third party transferee, each Additional Stockholder shall have the right to participate in such sale on the same terms as those offered to the Principal Stockholder. The Additional Stockholders also have certain piggyback registration rights. Finally, if at any time prior to the completion by LVSI of an initial public offering LVSI wishes to issue any new securities, the Additional Stockholders will have the right to purchase that number of shares of LVSI common stock, at the proposed purchase price of the new securities, such that the Additional Stockholders’ percentage ownership of LVSI would remain the same following such issuance.

        Basic and diluted income per share are calculated based upon the weighted average number of shares outstanding. In the first quarter of 2002, the Company completed a stock split whereby the number of shares of common stock outstanding was increased from 925,000 to 1,000,000. At the time of the stock split, the Principal Stockholder maintained 100% ownership of the Company’s common stock. All references to share and per share data herein have been adjusted retroactively to give effect to the increase in shares of common stock outstanding to 1,000,000.

        The Company has elected to follow Accounting Principles Board Opinion No. 25 entitled “Accounting For Stock Issued to Employees” and accounts for its stock-based compensation to employees using the intrinsic value method. Under this method, compensation expense is the difference between the market value of the Company’s stock and the stock option’s exercise price at the measurement date. Under APB 25, if the exercise price of the stock options is equal to or less than the market price of the underlying stock on the date of grant, no compensation expense is recognized.

LAS VEGAS SANDS, INC.

Notes to Financial Statements (Continued)

Note 2   Stockholders’ Equity and Per Share Data (Continued)

        Had the Company accounted for the plan under the fair value method allowed by Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”), the Company’s net income and earnings per share would have been reduced to the following pro forma amounts:

        The fair value of each option grant was estimated on the date of grant using an appraisal of the value of LVSI and its common stock. The estimated fair value of options granted in 2002 as of December 31, 2002 was $1 per share. The fair value of each option grant was estimated on the date of grant using the minimum value method with the following weighted-average assumptions: risk-free interest rate of 3.84%; no expected dividend yields; and expected lives of 2 years.

Note 3   Property and Equipment

        Property and equipment consists of the following (in thousands):

        During the three month period ended March 31, 2003 and March 31, 2002, the Company capitalized interest expense of $2.0 million and $0.3 million, respectively.

        As of March 31, 2003, construction in progress represented construction costs and project design for an approximately 1,000-room hotel tower on top of the Casino Resort’s existing parking garage, an approximately 1,000-parking space expansion to the parking garage and approximately 150,000 square feet of additional convention center space on the Phase II Land (collectively, the “Phase IA Addition”), design and shared facilities costs for the planned second phase of the Casino Resort, to be owned by the Phase II Subsidiary (the “Phase II Resort”), design, pre-development and construction costs for a casino in Macau, and on-going capital improvement projects at the Casino Resort.

LAS VEGAS SANDS, INC.

Notes to Financial Statements (Continued)

Note 4   Long-Term Debt

        Long-term debt consists of the following (in thousands):

        On June 4, 2002, the Company completed a series of refinancing transactions (collectively, the “Refinancing Transactions”) including: (1) the issuance of $850.0 million in aggregate principal amount of 11% mortgage notes due 2010 (the “Mortgage Notes”) in a private placement; (2) entering into a new senior secured credit facility (the “Senior Secured Credit Facility”) with a syndicate of lenders in an aggregate amount of $375.0 million; and (3) entering into a secured mall facility (the “Secured Mall Facility”) in an aggregate amount of $105.0 million, which was subsequently increased to $120.0 million on June 28, 2002. The Company used the proceeds of the Refinancing Transactions to repay, redeem or repurchase all of its previously outstanding indebtedness to finance the construction and development of the Phase IA Addition and to pay all fees and expenses associated with the Refinancing Transactions. In addition, the completion guarantee provided by the Principal Stockholder relating to the construction of the Casino Resort was terminated upon the consummation of the Refinancing Transactions and the remaining cash collateral was returned to the Principal Stockholder.

Mortgages Notes

        The Mortgage Notes bear interest at 11%, payable each June 15th and December 15th. The Mortgage Notes are secured by second priority liens on certain assets of the Company (the personal property and the real estate improvements that comprise the hotel, the casino, and the convention space, with certain exceptions). The Mortgage Notes are redeemable at the option of LVSI and Venetian at prices ranging from 100% to 105.5% commencing on or after June 15, 2006, as set forth in the Mortgage Notes and the indenture pursuant to which the Mortgage Notes were issued (the “Indenture”). Prior to June 15, 2006, LVSI and Venetian may redeem the Mortgage Notes at their principal amount plus an applicable make-whole premium. Upon a change of control (as defined in the Indenture), each Mortgage Note holder may require LVSI and Venetian to repurchase such Mortgage Notes at 101% of the principal amount thereof plus accrued interest and other amounts which are then due, if any. On or prior to June 15, 2005, the Company may redeem up to 35% of the Mortgage Notes with the net cash proceeds of one or more offerings of equity securities at a redemption price of 111% of the principal amount of the Mortgage Notes, plus accrued and unpaid interest. Upon an event of loss or certain asset sales, the Company may also be required to offer to purchase all or a portion of the Mortgage Notes with the proceeds of such event of loss or sale. The Mortgage Notes are not subject to a sinking fund requirement.

LAS VEGAS SANDS, INC.

Notes to Financial Statements (Continued)

Note 4   Long-Term Debt (Continued)

        On December 27, 2002, the Company completed an exchange offer to exchange the Mortgage Notes for mortgage notes with substantially the same terms.

Senior Secured Credit Facility

        The Senior Secured Credit Facility provides for a $250.0 million single draw senior secured term loan facility (the “Term B Facility”), a $50.0 million senior secured delayed draw facility (the “Term A Facility”) and a $75.0 million senior secured revolving facility (the “Revolving Facility”). Term B Facility proceeds of $185.0 million were deposited into restricted accounts, invested in cash or permitted investments and pledged to a disbursement agent for the Senior Secured Credit Facility lenders. The $185.0 million will be used as required for Phase IA Addition project costs under disbursement terms specified in the Senior Secured Credit Facility. The disbursement account is subject to a security interest in favor of the lenders under the Senior Secured Credit Facility.

        The Term B Facility matures on June 4, 2008 and is subject to quarterly amortization payments in the amount of $625,000 from September 30, 2002 until September 30, 2007, followed by four equal quarterly amortization payments of $59.4 million until the maturity date. The Term A Facility is available from the closing date of the Senior Secured Credit Facility through the first anniversary of the closing date, subject to certain conditions. The Term A Facility matures on June 4, 2007 and is subject to quarterly amortization payments commencing on December 31, 2003 in the amount of $1,666,667 for three quarters, $2,500,000 for the succeeding four quarters, $3,750,000 for the next four quarters and $5,000,000 for the final four quarters. The Revolving Facility matures on June 4, 2007 and has no interim amortization. No amounts had been drawn under the Term A Facility or the Revolving Facility as of March 31, 2003. However, as described below, as loans are made under the Venetian Intermediate Credit Agreement (as defined below) and letters of credit are issued as a result, the amounts available for working capital loans under the Revolving Facility will decrease from the $75.0 million of current availability to $25.0 million.

        All amounts outstanding under the Senior Secured Credit Facility bear interest at the option of the Company at the prime rate plus 2% per annum, or at the reserve adjusted Eurodollar rate plus 3% per annum. After the Phase IA Addition is substantially complete, the applicable margin for amounts outstanding under the Term A Facility and the Revolving Facility will be determined by a grid based upon a leverage ratio. The leverage ratio will be calculated as the ratio of consolidated total debt as of the last day of each fiscal quarter to EBITDA (as defined in the Senior Secured Credit Facility) for the four-fiscal quarter period ending on such date. Commitment fees equal to 0.50% per annum of the daily average unused portion of the commitment under the Revolving Facility and 0.75% per annum of the daily average unused portion of the Term A Facility are payable quarterly in arrears. The average interest rate for the Senior Secured Credit Facility was 4.40% during the first quarter of 2003.

        The Senior Secured Credit Facility is secured by a first priority lien on certain assets of the Company (the personal property and the real estate improvements that comprise the hotel, the casino, and the convention space, with certain exceptions). The Senior Secured Credit Facility contains affirmative, negative and financial covenants including limitations on indebtedness, liens, investments, guarantees, restricted junior payments, mergers and acquisitions, sales of assets, leases, transactions with affiliates and scope-changes and modifications to material contracts. Additionally, the Company is required to comply with certain financial ratios and other financial covenants including total debt to EBITDA ratios, EBITDA to interest coverage ratios, minimum net worth covenants and maximum capital expenditure limitations. At March 31, 2003, the Company was in compliance with all required covenants and ratios under the Senior Secured Credit Facility.

LAS VEGAS SANDS, INC.

Notes to Financial Statements (Continued)

Note 4   Long-Term Debt (Continued)

Secured Mall Facility

        In June 2002, the Company also entered into an agreement (the “Secured Mall Facility”) with certain lenders to provide for a $105.0 million loan (subsequently increased to $120.0 million on June 28, 2002) to the Mall II Subsidiary. The initial $105.0 million of proceeds (net of financing costs) from the Secured Mall Facility, along with the proceeds of a $37.9 million capital contribution in Mall II Subsidiary by Venetian, were used to repay the Mall Take-out Financing and costs previously owed by the Mall Subsidiary. Upon the consummation of the Refinancing Transactions, the assets of the Mall were transferred to the Mall II Subsidiary, the borrower under the Secured Mall Facility. The additional $15.0 million of proceeds (net of financing costs) were distributed to Venetian and used for general corporate purposes. The indebtedness under the Secured Mall Facility is secured by a first priority lien on the assets that comprise the Mall (the “Mall Assets”). The average interest rate for the Secured Mall Facility was 3.23% during the first quarter of 2003.

        The amounts outstanding under the Secured Mall Facility bear interest at the adjusted one month Eurodollar rate plus 1.875% per annum. Interest is paid monthly and there is no scheduled principal amortization. The Secured Mall Facility is due in full on June 10, 2005 and provides for two one-year extensions at the option of the Company, subject to certain criteria. The Secured Mall Facility contains affirmative, negative and financial covenants including net operating income performance standards. Failure to meet these financial covenants in certain circumstances allows the lenders’ agent to control collection of rents, to approve operating budgets and provides for a cash sweep of excess cash flow to reduce amounts outstanding under the Secured Mall Facility.

        The Company is required to maintain an interest rate cap agreement to limit the impact of increases in interest rates on its floating rate debt derived from the Secured Mall Facility. To meet the requirements of the Secured Mall Facility, the Company entered into a cap agreement during June 2002 (the “Mall Cap Agreement”) that resulted in a premium payment to counterparties based upon notional principal amounts for a term equal to the term of the Secured Mall Facility. The provisions of the Mall Cap Agreement entitle the Company to receive from the counterparties the amounts, if any, by which the selected market interest rates exceed the strike rates stated in such agreement. There was no net effect on interest expense as a result of the Mall Cap Agreement for the three months ended March 31, 2003. If the Company had terminated the Mall Cap Agreement as of March 31, 2003, the Company would have received $0.1 million based on quoted market values from the various institutions holding the swaps. The notional amount of the Mall Cap Agreement (which expires on June 28, 2005) at March 31, 2003 was $120.0 million.

        Pursuant to the terms of the Secured Mall Facility, the Mall II Subsidiary is also required to maintain certain funds in escrow for debt service and property taxes. At March 31, 2003, $2.7 million was held by the lenders’ agent in escrow for these purposes. The amounts in escrow are classified as restricted cash in the accompanying financial statements.

LAS VEGAS SANDS, INC.

Notes to Financial Statements (Continued)

Note 4   Long-Term Debt (Continued)

        The Company entered into interest rate cap and floor agreements related to its previously outstanding bank credit facility (the “Bank Cap Agreement”) during 1998. The notional amount of the Bank Cap Agreement at March 31, 2003 was $37.6 million. The Bank Cap Agreement expires in June 2003, unless terminated earlier by the Company. The Bank Cap Agreement does not quality as a hedge for accounting purposes and the net effect of changes in its fair value resulted in an increase of interest expense of $0.6 million for the quarter ended March 31, 2003. If the Company had terminated the Bank Cap Agreement as of March 31, 2003, the Company would have had to pay a net amount of $0.3 million based on quoted market values from the various institutions holding the swaps. In accordance with Financial Accounting Standards Board Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, the Company has recorded the fair value of its obligations under the Bank Cap Agreement in the accompanying financial statements and will continue to do so while the agreements are in effect.

Venetian Intermediate Credit Facility

        As further described in Note 6, the Company is currently constructing a casino in Macau (the “Macau Casino”) with an anticipated completion date of February 2004. On March 27, 2003, Venetian Venture Development Intermediate Limited (“Venetian Intermediate”), a subsidiary of the Company, entered into a credit agreement (“Venetian Intermediate Credit Agreement”) with a lender to provide $50.0 million of financing for the Macau Casino. Venetian Intermediate, a wholly-owned indirect subsidiary of Venetian, owns 100% of Venetian Macau. The obligations under the loans to be made under Venetian Intermediate Credit Agreement will be guaranteed by the Company and Venetian and supported by letters of credit to be issued under the Senior Secured Credit Facility in favor of the Venetian Intermediate Credit Agreement lenders. As these loans are made, the letters of credit will reduce the amounts available for working capital loans under the Revolving Facility on a dollar for dollar basis from the $75.0 million of current availability to $25.0 million. The amounts outstanding under the Venetian Intermediate Credit Facility bear interest at the base rate or the adjusted Eurodollar rate plus 0.5% per annum. Interest is payable on base rate loans on a monthly basis and is payable on Eurodollar loans at the end of the applicable interest period, and there is no scheduled principal amortization. The credit facility is due in full March 27, 2006. As of May 15, 2003, the credit facility remains undrawn.

Note 5   Redeemable Preferred Interest in Venetian Casino Resort, LLC

        During 1997, Interface Holding contributed $77.1 million in cash to Venetian in exchange for a Series A preferred interest (the “Series A Preferred Interest”) in Venetian. By its terms, the Series A Preferred Interest was convertible at any time into a Series B preferred interest in Venetian (the “Series B Preferred Interest”). In August 1998, the Series A Preferred Interest was converted into the Series B Preferred Interest. The rights of the Series B Preferred Interest include the accrual of a preferred return of 12% from the date of contribution in respect of the Series A Preferred Interest. Until the indebtedness under the Senior Secured Credit Facility is repaid and cash payments are permitted under the restricted payment covenants of the Indenture, the preferred return on the Series B Preferred Interest will accrue but will not be paid in cash. Commencing June 30, 2011, distributions must be made to the extent of the positive capital account of the holder. During the second and third quarters of 1999, Interface Holding contributed $37.3 million and $7.1 million, respectively, in cash in exchange for an additional Series B Preferred Interest. During the three month periods ended March 31, 2003 and March 31, 2002, $6.4 million and $5.7 million, respectively, were accrued on the Series B Preferred Interest related to the contributions made. Since 1997, no distributions of preferred interest or preferred return have been paid on the Series B Preferred Interest.

LAS VEGAS SANDS, INC.

Notes to Financial Statements (Continued)

Note 6   Commitments and Contingencies

         Construction Litigation

        The construction of the principal components of the Casino Resort was undertaken by Lehrer McGovern Bovis, Inc. (the “Construction Manager”) pursuant to a construction management agreement and certain amendments thereto (as so amended, the “Construction Management Contract”). The Construction Management Contract established a final guaranteed maximum price (the “Final GMP”) of $645.0 million, so that, subject to certain exceptions (including an exception for cost overruns due to “scope changes”), the Construction Manager was responsible for any costs of the work covered by the Construction Management Contract in excess of $645.0 million. The Construction Management Contract also established a required “substantial completion” date (the date on which the construction of the Casino Resort was sufficiently complete, including the receipt of necessary permits, licenses and approvals, so that all components of the Casino Resort could be open to the general public) of April 21, 1999 (subject to extensions on account of “scope changes” and force majeure events), with a per-day liquidated damages penalty for failure to meet such deadline.

        The Company paid the Construction Manager a construction management fee of 1½% of the Final GMP, payable in monthly installments.

        The obligations of the Construction Manager under the Construction Management Contract were guaranteed by Bovis, Inc. (“Bovis”), the Construction Manager’s direct parent at the time the Construction Management Contract was entered into (such guaranty, the “Bovis Guaranty”). Bovis’ obligations under the Bovis Guaranty were guaranteed by The Peninsula and Oriental Steam Navigation Company (“P&O”), a British public company and the Construction Manager’s ultimate parent at the time the Construction Management Contract was entered into (such guaranty, the “P&O Guaranty”).

        The Construction Manager obtained, on behalf of the Company (and at the Company’s expense), a liquidated damages insurance policy (the “LD Policy”). The LD Policy covers (with certain exceptions) liquidated damages for delays of not less than one month and not more than four months in achieving substantial completion beyond the date substantial completion was required to be achieved under the Construction Management Contract.

        On July 30, 1999, Venetian filed a complaint against the Construction Manager and Bovis in United States District Court for the District of Nevada. The action alleges breach of contract by the Construction Manager of its obligations under the Construction Management Contract and a breach of contract by Bovis of its obligations under the Bovis Guaranty, including failure to fully pay trade contractors and vendors and failure to meet the April 21, 1999 guaranteed completion date. The Company amended this complaint on November 23, 1999 to add P&O as an additional defendant. The suit is intended to ask the courts, among other remedies, to require the Construction Manager and its guarantors to pay its contractors, to compensate Venetian for the Construction Manager’s failure to perform its duties under the Construction Management Contract and to pay the Company the agreed upon liquidated damages penalty for failure to meet the guaranteed substantial completion date. Venetian seeks total damages in excess of $100.0 million. The Construction Manager subsequently filed motions to dismiss the Company’s complaint on various grounds, which the Company opposed. The Construction Manager’s motions were either denied by the court or voluntarily withdrawn.

LAS VEGAS SANDS, INC.

Notes to Financial Statements (Continued)

Note 6   Commitments and Contingencies (Continued)

        In response to Venetian’s breach of contract claims against the Construction Manager, Bovis and P&O, the Construction Manager filed a complaint on August 3, 1999 against Venetian in the District Court of Clark County, Nevada. The action alleges a breach of contract and quantum meruit claims under the Construction Management Contract and also alleges that Venetian defrauded the Construction Manager in connection with the construction of the Casino Resort. The Construction Manager seeks damages, attorney’s fees and costs and punitive damages. In the lawsuit, the Construction Manager claims that it is owed approximately $90.0 million from Venetian and its affiliates. This complaint was subsequently amended by the Construction Manager, which also filed an additional complaint against the Company relating to work done and funds advanced with respect to the contemplated development of the Phase II Resort. Based upon its review of the complaints, the Company believes that the Construction Manager has not provided Venetian with reasonable documentation to support such claims, the Construction Manager has materially breached its agreements with the Company and the Construction Manager’s claims are without merit. The Company intends to vigorously defend itself and pursue its claims against the Construction Manager in any litigation.

        In connection with these disputes, as of December 31, 1999 the Construction Manager and its subcontractors filed mechanics liens against the Casino Resort for $145.6 million and $182.2 million, respectively. The Company believes that a major reason these lien amounts exceed the Construction Manager’s claims of $90.0 million is based upon a duplication of liens through the inclusion of lower-tier claims by subcontractors in the liens of higher-tier contractors, including the lien of the Construction Manager. As of December 31, 1999, the Company had purchased surety bonds for virtually all of the claims underlying these liens (other than approximately $15.0 million of claims with respect to which the Construction Manager purchased bonds). As a result, there can be no foreclosure of the Casino Resort in connection with the claims of the Construction Manager and its subcontractors. However, the Company will be required to pay or immediately reimburse the bonding company if and to the extent that the underlying claims are judicially determined to be valid. If such claims are not settled, it is likely to take a significant amount of time for their validity to be judicially determined.

        The Company believes that these claims are, in general, unsubstantiated, without merit, overstated, and/or duplicative. The Construction Manager itself has publicly acknowledged that at least some of the claims of its subcontractors are without merit. In addition, the Company believes that pursuant to the Construction Management Contract and the Final GMP, the Construction Manager is responsible for payment of any subcontractors’ claims to the extent they are determined to be valid. The Company may also have a variety of other defenses to the liens that have been filed, including, for example, the fact that the Construction Manager and its subcontractors previously waived or released their rights to file liens against the Casino Resort. The Company intends to vigorously defend itself in any lien proceedings.

        On August 9, 1999, the Company notified the insurance companies providing coverage under the LD Policy that it has a claim under the LD Policy. The LD Policy provides insurance coverage for the failure of the Construction Manager to achieve substantial completion of the portions of the Casino Resort covered by the Construction Management Contract within 30 days of the April 21, 1999 deadline, with a maximum liability under the LD Policy of approximately $24.1 million and with coverage being provided, on a per-day basis, for days 31-120 of the delay in the achievement of substantial completion. The Company’s claim under the LD Policy is likely to be for the above-described maximum liability of $24.1 million. The Company expects the LD Policy insurers to assert many of the same claims and defenses that the Construction Manager has asserted or will assert in the above-described litigations. Liability under the LD Policy may ultimately be determined by binding arbitration.

        In June 2000, the Company purchased an insurance policy (the “Insurance Policy”) for loss coverage in connection with all litigation relating to the construction of the Casino Resort (the “Construction Litigation”). Under the Insurance Policy, the Company will self-insure the first $45.0 million and the insurer will insure up to the next $80.0 million of any possible covered losses. The Insurance Policy provides coverage for any amounts determined in the Construction Litigation to be owed to the Construction Manager or its subcontractors relating to claimed delays, inefficiencies, disruptions, lack of productivity/unauthorized overtime or schedule impact, allegedly caused by the Company during construction of the Casino Resort, as well as any defense costs.

LAS VEGAS SANDS, INC.

Notes to Financial Statements (Continued)

Note 6   Commitments and Contingencies (Continued)

        The Company and the Construction Manager commenced a trial in state court in Clark County, Nevada to litigate certain of their respective claims in August 2002. Many of the remaining claims between the parties that are the subject of the state court action and the federal court action will be proceeding concurrently in independent arbitration hearings. The Company anticipates that closing arguments in the state court trial will be completed by May 16, 2003, with a jury verdict in that proceeding expected to follow shortly thereafter. It is not yet possible to determine the ultimate outcome or a range of loss or award in the state court proceeding. If any litigation or other lien proceedings concerning the claims of the Construction Manager or its subcontractors were decided adversely to the Company, such litigation or other lien proceedings could have a material adverse effect on the financial position, results of operations or cash flows of the Company, to the extent such litigation or lien proceedings are not covered by the Insurance Policy.

         Macau Casino Projects

        On June 26, 2002, the Government of the Macau Special Administrative Region of the People’s Republic of China (“Macau”) granted a provisional concession to operate casinos in Macau to Galaxy Casino Company Limited, a joint venture comprised of a subsidiary of the Company (the “Macau Subsidiary”) and a group of Macau and Hong Kong-based investors. During December 2002, the joint venture participants entered into concession, sub-concession, and related agreements. The sub-concession agreement with the joint venture participants provides that Venetian Macau (a wholly owned subsidiary of the Company) will develop and operate casino projects separate from its other joint venture partners.  

        The Company intends to build two casino projects in Macau. One is the Macau Casino that Company commenced construction on during December 2002 and has an anticipated completion date of February 2004. In addition to the Macau Casino, the Company tentatively plans to build a 500-suite hotel, casino and convention center complex, with a Venetian-style theme similar to that of the Company’s Las Vegas property.

        Under the terms of Venetian Macau’s agreements with the government of Macau, Venetian Macau has certain financial obligations to the Government of Macau or is obligated to pay for certain costs of developing and constructing the Macau Casino and other projects in Macau. Venetian Macau is committed to invest 4.4 billion Macau patacas (approximately $529.1 million at exchange rates as of March 31, 2003) under its agreement with the government of Macau in various development projects until March 31, 2007. To support this obligation, Venetian Macau has caused a Macau bank to guarantee 300 million Macau patacas (approximately $36.1 million at exchange rates as of March 31, 2003) on its behalf and Lido Casino Resort Holding Company, LLC (an unrestricted subsidiary of the Company) has guaranteed 200 million Macau patacas (approximately $24.0 million at exchange rates as of March 31, 2003) of the legal and contractual liabilities of Venetian Macau to the Macau government until March 31, 2007.

        The Company expects to use cash received from the following sources to fund the various Macau projects:

LAS VEGAS SANDS, INC.

Notes to Financial Statements (Continued)

Note 6   Commitments and Contingencies (Continued)

        The Company is currently constructing the Macau Casino. The Company currently estimates the total cost to complete the Macau Casino to be $225.9 million and expects completion to occur by February 2004. The cost of the Macau Casino will fulfill part of the Venetian Macau obligation to the Macau government described above. The Senior Secured Credit Facility and the Indenture relating to the Mortgage Notes limits the Company’s ability to make investments in its Macau subsidiaries. As of March 31, 2003, the Company has invested $35.1 million in its Macau subsidiaries and expects to invest an additional $4.9 million. Of this invested amount, $16.4 million remains on deposit in Venetian Macau bank accounts as of March 31, 2003. On March 27, 2003, Venetian Intermediate entered into the Venetian Intermediate Credit Agreement with a lender to provide $50.0 million of financing for the Macau Casino. Venetian Intermediate, a wholly-owned indirect subsidiary of Venetian, owns 100% of Venetian Macau. To raise the remaining funds necessary to complete the Macau Casino, Venetian Macau is currently negotiating to obtain $120.0 million in additional debt financing (“Proposed Venetian Macau Financing Agreement”), a $20.0 million working capital revolver (“Proposed Macau Revolver”) and FF&E financing (“Proposed Macau FF&E Facility”). The Company has not yet determined a date when the above proposed financings will close. The proceeds from the Venetian Intermediate Credit Agreement, the Proposed Venetian Macau Credit Agreement, the Proposed Macau Revolver, the Proposed Macau FF&E Facility and the direct investments of $40.0 million from Venetian will be used to fund the $225.9 million total anticipated cost of the Macau Casino. The Company cannot provide any assurance that financing will be available to the Company to complete the Macau Casino and fulfill its other obligations under its agreements with the Government of Macau, and, if available, that the financing will be on terms favorable to the Company.

        Through March 31, 2003, the Company had incurred pre-opening and developmental expenses of $7.7 million and construction costs of $10.8 million, in connection with the Macau Casino project.

      Internet Gaming

        The Company has also entered into a joint venture agreement to assess the feasibility of and develop an Internet gaming site. After recovery of each partner’s initial capital contribution, the Company will receive 50% to 80% of the net profit of the joint venture, based upon an increasing scale of net profit (if any). The joint venture provides that the agreement will be automatically terminated should the Company fail to obtain or maintain any required regulatory approvals or existing gaming licenses from Alderney, the Nevada gaming authorities or any other applicable jurisdiction prior to launching its operations or determine that any such approvals or licenses could be jeopardized. On March 27, 2003, a subsidiary of the Company received an interactive gaming license and an electronic betting center license from the Alderney Gambling Control Commission, but has not yet established any operations.

Note 7   Summarized Financial Information

        LVSI and Venetian are co-obligors of the Mortgage Notes and the indebtedness under the Senior Secured Credit Facility and are jointly and severally liable for such indebtedness. Venetian, Mall Intermediate, Mall Construction, Lido Intermediate, Venetian Venture, Venetian Athens, Venetian Marketing and Venetian Operating (collectively, the “Subsidiary Guarantors”) are subsidiaries of LVSI, all of the capital stock of which is owned by LVSI and Venetian. The Subsidiary Guarantors have jointly and severally guaranteed (or are co-obligors of) such debt on a full and unconditional basis. The Mall is owned by the Mall II Subsidiary, a non-guarantor subsidiary which is the borrower under the Secured Mall Facility.

LAS VEGAS SANDS, INC.

Notes to Financial Statements (Continued)

Note 7   Summarized Financial Information

        Separate financial statements and other disclosures concerning each of Venetian and the Subsidiary Guarantors are not presented below because management believes that they are not material to investors. Summarized financial information of LVSI, Venetian, the Subsidiary Guarantors and the non-guarantor subsidiaries in a combined basis as of March 31, 2003 and December 31, 2002, and for the three month periods ended March 31, 2003 and March 31, 2002 is as follows (in thousands):

LAS VEGAS SANDS, INC.

Notes to Financial Statements (continued)

Note 7   Summarized Financial Information (continued)

CONDENSED BALANCE SHEETS
March 31, 2003

(1)     As more fully described in Note 4 – Long-Term Debt, LVSI and Venetian are co-obligors of certain of the Company’s indebtedness. Accordingly, such indebtedness has been presented as an obligation of both entities in the above balance sheets.

LAS VEGAS SANDS, INC.

Notes to Financial Statements (continued)

Note 7   Summarized Financial Information (continued)

CONDENSED BALANCE SHEETS
December 31, 2002

(1)     As more fully described in Note 4 Long-Term Debt, LVSI and Venetian are co-obligors of certain of the Company’s indebtedness. Accordingly, such indebtedness has been presented as an obligation of both entities in the above balance sheets.

LAS VEGAS SANDS, INC.

Notes to Financial Statements (continued)

Note 7   Summarized Financial Information (continued)

CONDENSED STATEMENT OF OPERATIONS
For the three months ended March 31, 2003