**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-K**

| x          | ** ** | **ANNUAL  REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| ** ** | ** ** | **For the fiscal year ended  December  31, 2006**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | ** ** |
| **o**      | ** ** | **TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| ** ** | ** ** | **For the transition period from                                                       to                                                     ** |
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| ** ** | ** ** | **Commission file number  333-124924**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

 

**155 East Tropicana, LLC155 East Tropicana Finance Corp.**

(Exact name ofregistrant as specified in its charter)

| **Nevada  Nevada**                                                        |   | **20-1363044  20-2546581**            |
|---------------------------------------------------------------------------|--------|---------------------------------------|
| (State or other  jurisdiction of incorporation or organization)           |   | (I.R.S. Employer  Identification No.) |
|                                                                      |
| **115  East Tropicana Avenue, Las Vegas, NV 89109**                       |
| (Address and  telephone number of principal executive offices) (Zip Code) |

 

| Registrant’s telephone number, including area  code: **(702) 597-6076** |
|------------------------------------------------------------------------------|
|                                                                         |
| Securities registered pursuant to Section 12(b) of  the Act:                 |

 
| Title of each class | ** ** | **Name of each exchange on which registered** |
|---------------------|------------|-----------------------------------------------|
| **None.**           |       |                                          |

 

| Securities registered pursuant to Section 12(g)  of the Act: |
|--------------------------------------------------------------|
|                                                         |
| **None.**                                                    |
| (Title of each  class)                                       |
|                                                         |
|                                                         |
| (Title of each  class)                                       |

 

Indicate by check mark if the registrant is a well-known seasonedissuer, as defined in Rule 405 of the Securities Act.
|        | Yes o  No x |
|--------|-------------|
|   |        |

Indicate by check mark if the registrant is not required to filereports pursuant to Section 13 or Section 15(d) of the Act.
|  | Yes o  No x |
|--|-------------|

 

Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required 
| to file such reports), and (2) has been subject  to such filing requirements for the past 90 days. |   | Yes x  No o |
|----------------------------------------------------------------------------------------------------|--------|-------------|

 

Indicate by check mark if disclosure or delinquent filers pursuant toItem 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 definitiveproxy or information 
| statements  incorporated by reference in Part III of this Form 10-K or any amendment to  this Form 10-K. | Yes o  No x |
|----------------------------------------------------------------------------------------------------------|-------------|

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer.  See definition of“accelerated filer and large accelerated filer” in Rule 12b-2 of the ExchangeAct. (Check one):

Large accelerated filer o                        Acceleratedfiler o                         Non-Acceleratedfiler x
| Indicate by check mark whether the registrant  is a shell company (as defined in Rule 12b-2 of the Act). | Yes o  No x |
|----------------------------------------------------------------------------------------------------------|-------------|

 

State the aggregate market value of the voting and non-voting commonequity held by non-affiliates computed by reference to the price at which thecommon equity was last sold, or the average bid and asked price of such commonequity, as of the 
| last business day of the registrant’s most  recently completed second fiscal quarter. | Not Applicable. |
|--------------------------------------------------------------------------------------------|-----------------|

 

**DOCUMENTS INCORPORATED BY REFERENCE**

Not applicable.

 

----

**TABLE OFCONTENTS**
|               | ** **                                                                                                              | ** **                                                                                                            |
|---------------|-------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------|
| **PART I**    | ** **                                                                                                              |                                                                                                                  |
| ITEM 1.       |                                                                                                                    | Business                                                                                                              |
| Item  1A.     |                                                                                                                    | Risk Factors                                                                                                          |
| Item 1B.      |                                                                                                                    | Unresolved Staff Comments                                                                                             |
| ITEM  2.      |                                                                                                                    | Properties                                                                                                            |
| ITEM  3.      |                                                                                                                    | Legal  Proceedings                                                                                                    |
| ITEM 4.       |                                                                                                                    | Submission of Matters to a Vote of Security Holders                                                                   |
| **PART II**   |                                                                                                                    |                                                                                                                  |
| ITEM 5.       |                                                                                                                    | Market for Registrant’s Common Equity and Related  Stockholder Matters and Issuer Purchases of Equity Securities |
| ITEM 6.       |                                                                                                                    | Selected Financial Data                                                                                               |
| ITEM 7.       |                                                                                                                    | Management’s Discussion and Analysis of Financial  Condition and Results of Operation                            |
| ITEM 7A.      |                                                                                                                    | Quantitative and Qualitative Disclosures About Market  Risk                                                           |
| ITEM 8.       |                                                                                                                    | Financial Statements and Supplementary Data                                                                           |
| ITEM 9.       |                                                                                                                    | Changes in and Disagreements with Accountants on  Accounting and Financial Disclosure                                 |
| Item 9A.      |                                                                                                                    | Controls and Procedures                                                                                               |
| ITEM  9B.     | ** **                                                                                                              | Other  Information                                                                                                    |
| **PART III**  | ** **                                                                                                              |                                                                                                                  |
| ITEM 10.      |                                                                                                                    | Directors, Executive Officers and Corporate Governance                                                                |
| ITEM 11.      |                                                                                                                    | Executive Compensation                                                                                                |
| ITEM 12.      |                                                                                                                    | Security Ownership of Certain Beneficial Owners and  Management                                                       |
| ITEM 13.      |                                                                                                                    | Certain Relationships and Related Transactions                                                                        |
| ITEM 14.      |                                                                                                                    | Principal Accounting Fees and Services                                                                                |
| **PART IV**   | ** **                                                                                                              | ** **                                                                                                            |
| ITEM 15.      |                                                                                                                    | Exhibits and Financial Statement Schedules                                                                            |
| SIGNATURES    |
|          |
| EXHIBIT INDEX |
| Exhibit 31.1  | Certification Pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002                                                |
| Exhibit 31.2  | Certification Pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002                                                |
| Exhibit 32.1  | Certification Pursuant to 18 U.S.C. Section 1350, as  Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| Exhibit 32.2  | Certification Pursuant to 18 U.S.C. Section 1350, as  Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|               |                                                                                                                         |                                                                                                                       |  |

 

i

----

# **PART I**

## **ITEM 1.****                             BUSINESS.**

Unlessthe context indicates otherwise, all references to the “Company”, “155”, “we”, “our”,“ours” and “us” refer to 155 East Tropicana, LLC.

**Forward-looking Statements**

Certaininformation included herein contains statements that may be consideredforward-looking, such as statements relating to projections of future resultsof operations or financial condition, expectations for our casino, andexpectations of the continued availability of capital resources. Anyforward-looking statement made by us necessarily is based upon a number ofestimates and assumptions that, while considered reasonable by us, isinherently subject to significant business, economic and competitiveuncertainties and contingencies, many of which are beyond our control, and aresubject to change.  Actual results of ouroperations may vary materially from any forward-looking statement made by us oron our behalf.  Forward-looking statementsshould not be regarded as representation by us or any other person that theforward-looking statements will be achieved. Readers are cautioned not to place undue reliance on any forward-lookingstatements, which speak only as of the date thereof. We undertake no obligationto publicly release any revisions to such forward-looking statements to reflectevents or circumstances after the date hereof. Some of the contingencies and uncertainties to which any forward-lookingstatement contained herein are subject to include, but are not limited to,those set forth below in the heading “ITEM 1A. Risk Factors.”

**Corporate Organization**

Wewere formed in June of 2004 to acquire the Hôtel San Rémo Casino and Resort (the“Hôtel San Rémo”), a casino hotel located in Las Vegas, Nevada from Eastern& Western Hotel Corporation (“Eastern & Western”).  The Hôtel San Rémo was renovated andre-branded and is now known as Hooters Casino Hotel.  Our common membership interests are heldtwo-thirds through Florida Hooters LLC and one-third through EW Common LLC.

FloridaHooters LLC is a joint venture between Hooters Gaming LLC and Lags Ventures,LLC.  Hooters Gaming LLC is owned by theholders of licenses to operate Hooters restaurants in the Tampa Bay, Chicagoand Manhattan areas as well as for wholesale foods, calendars and Nevadahotel/gaming, and includes most of the original founders of the Hootersbrand.  Lags Ventures, LLC is owned by aholder of the license rights to Hooters restaurants in south Florida and theState of Nevada.  Pursuant to theselicense rights, the owners of Florida Hooters LLC operate 38 Hootersrestaurants, publish Hooters calendars, and operate a Hooters foodbusiness.  The owner of Lags Ventures,LLC is also the founder of the Dan Marino concept restaurants and owns andoperates two Dan Marino concept restaurants.

EWCommon LLC was formed to hold Eastern & Western’s membership interest inus.  Eastern & Western owns 90% of EWCommon LLC while our President, Michael Hessling, owns the balance.  Eastern & Western is beneficially ownedby Sukeaki and Toyoroku Izumi.  Eastern& Western and its affiliates owned the Hôtel San Rémo from November 1988until our acquisition of the hotel casino in August of 2004.

Ouraffiliates have granted us assignments of certain licenses pertaining to theuse of the Hooters brand as well as the Dan Marino, “13” Martini Bar and Pete& Shorty’s concept restaurants, solely for the purposes of allowing us tooperate a Hooters Casino Hotel located at our property.  Pursuant to the Hooters license assignment,we are required to pay the owner of the Hooters trademark, HI Limited

2

----

Partnership, a royalty fee.  Formore information, see “Item 1. Business—Intellectual Property” and “Item 13.Certain Relationships and Related Transactions.”  Hooters of America, Inc. is the generalpartner of HI Limited Partnership and we refer to HI Limited Partnership andHooters of America, Inc. collectively as “Hooters of America.”  The original founders of the Hooters brandsold the trademark rights (excluding certain rights they retained forthemselves) to Hooters of America in 2001. As a result, Hooters of America is the trademark owner of the Hootersbrand and the operator and franchisor of Hooters restaurants.  We are not affiliated with Hooters of America.

Beforewe received our necessary gaming licenses and prior to November 1, 2005, theHôtel San Rémo was operated by Eastern & Western pursuant to two separateleases with us.  These leases wereterminated when we received our gaming license. The following chart illustrates our corporate structure:

 

----

(1)          155 East Tropicana Finance Corp., which has no assets or operations, wasformed for the sole purpose of facilitating the issuance of our 8 3⁄4 % SeniorSecured Notes due 2012 (“Notes”).

**PotentialChange of Control**

OnJanuary 12, 2007, we, along with EW Common LLC and Florida Hooters LLC, signeda letter of intent to be acquired by an investment group led by NTH AdvisoryGroup, LLC.  On March 14, 2007, we and EWCommon LLC and Florida Hooters LLC signed a revised letter of intent.  Under the terms of the revised letter, the NTHAdvisory Group LLC has offered to purchase all of our outstanding membershipinterests for a purchase price of $95 million in cash, the payment of certainaccrued royalties, and 5% of certain future ownership distributions. NTHAdvisory Group LLC will also be responsible for any repurchases and relatedcosts of our $130 million in principal amount of 83⁄4% Senior Secured Notes 

3

----

due 2012 as a result of the proposed change of control.  The revised letter provides for a closing byJune 30, 2007, but under certain conditions may be closed as late as April, 30,2008. The closing is subject to the completion of due diligence, financing, andlicensing, among other customary conditions. In the revised letter, the partiesagreed that the NTH Advisory Group LLC has an exclusive right to negotiate apurchase of our outstanding membership interests until April 28, 2007, which isalso the date by which NTH Advisory Group must pay the second of two depositinstallments.  Because no definitiveagreement has been signed, there can be no assurance that (i) a definitiveagreement will ever be entered into, or (ii) if a definitive agreement isentered into, that the terms and conditions of the definitive agreement will bethe same or similar to those in the revised letter, or (iii) that theconditions to closing a transaction will ever be satisfied, or (iv) that anytransaction with NTH Advisory Group LLC will be consummated.

**HootersCasino Hotel**

TheHooters Casino Hotel, formerly the Hôtel San Rémo in Las Vegas, Nevada, was recentlyrenovated and re-branded.  The renovationcommenced on March 29, 2005, and the Hooters Casino Hotel opened to the publicon February 3, 2006.  We purchased theformer Hôtel San Rémo in August of 2004. Our property is located one-half block east of the intersection ofTropicana Avenue and Las Vegas Boulevard, a major intersection on the Las Vegasstrip (“The Strip”) that is within walking distance to approximately 25,000hotel rooms.

Priorto the renovation, Hôtel San Rémo featured 711 hotel rooms, including 17suites, and an approximately 24,000 square-foot casino with 532 slot andvideo poker machines, 16 table games, and a sports book. The Hôtel San Rémoremained open during our renovation, although only on a limited basis from lateOctober 2005 until we opened the property as the Hooters Casino Hotel onFebruary 3, 2006.

TheHooters Casino Hotel features the famous Hooters décor, and the Hooters brandis a prominent component of the facility. Our renovations have refreshed andupgraded the property, and provide several new restaurant offerings.  The Hooters Casino Hotel features:

·             an approximately 29,000 square foot “Hooters” themedcasino floor with approximately 679 state-of-the-art slot and video pokermachines and 33 table games;

·             696 newly renovated hotel rooms, including 17suites;

·             a tropical pool area featuring beach sand, palmtrees, lagoon style waterfall, cabanas, and Nippers Pool Bar;

·             distinctive dining and entertainment options,including:

·             a world famous Hooters restaurant;

·             Dan Marino’s Fine Food and Spirits, a restaurantfeaturing American cuisine;

·             “13” Martini Bar, a retro martini lounge featuringlive music and nightly entertainment, which will be closed in March 2007 andwill reopen in April 2007 as a comedy club;

·             The Bait Shoppe, a retail store conveniently locatedat poolside selling Hooters and Pete & Shorty’s branded merchandise andfood to-go;

·             Porch Dogs, a Caribbean themed casual indoor-outdoorclub offering music and cocktails;

·             Pete & Shorty’s Tavern, a casual andcomfortable restaurant bar featuring a sports book and a poker room;

4

----

·             The Dam Restaurant, a 24-hour café offering bothbuffet style food and tableside food service; and

·             The Lobby Bar, a 24-hour bar located at the entranceto the casino, featuring service by the world famous Hooters girls.

·             Splurge, a retail store selling Hooters brandedmerchandise.

·             SASS, a day spa, salon and workout facility.

**The Renovation**

Therenovation of the Hooters Casino Hotel commenced on March 29, 2005, and the HootersCasino Hotel opened to the public on February 3, 2006.  Our strategy is to build on Hooters’reputation as a casual, relaxed, fun, and welcoming environment.  We believe that Hooters’ strong brand namerecognition and our favorable location will generate significant visitortraffic.  The key elements of ourrenovation of the property are:

*RedesignMain Entrance.*  We renovatedthe main entrance to adopt the Hooters décor of natural wood, tin, and orange.  The Hooters brand is a prominent component ofthe main entrance and we replaced the existing doors with new 12-foot highclear glass doors to make the casino area clearly visible from the outside andthe immediate entrance area.  We alsomade improvements to the traffic flow around the entrance areas that we expectwill improve pedestrian traffic into the casino.  In addition, we added significant new signageto the property, including a large marquee in front of the property.  We anticipate that these improvements willresult in more walk-in visitors to the casino and our other attractions andamenities.

*Renovateand Expand Casino.*  We expandedand renovated our casino from approximately 24,000 square feet to approximately29,000 square feet and designed the casino to be more inviting and to betteruse the available space, allowing us to add new gaming equipment.  We now feature 679 state-of-the-art slot andvideo poker machines, 33 table games, sports book, and a poker room.  To make the casino more inviting, we raisedthe elevation of the ceiling in some areas for a more open feeling, updated theceiling with décor of natural wood, tin, and orange, re-carpeted the gamingarea with new Hooters-themed carpet and installed wood floor in thesurrounding area.  In addition, adjacentto the entrance, we added a Hooters bar, serving beer and cocktails to casinoguests, and a retail store, selling Hooters branded merchandise.

*NewDining and Entertainment Options.*  We offer distinctive dining and entertainmentoptions, including the 200-seat Hooters Restaurant, the 287-seat Dan Marino’sFine Food and Spirits, a 150 person occupancy “13” Martini Bar, the 100-seatPete & Shorty’s Tavern, the 175-seat the Dam Restaurant, the 200-seat PorchDogs, and a 350 person occupancy Nippers Pool Bar.  To house our new Dan Marino’s restaurant, webuilt a new building adjacent to the main entrance.  The restaurant is visible from both outsideand inside the property.  In addition,Dan Marino’s restaurant features a bar that serves customers from both thecasino floor and the restaurant.

*Hotel.*  We significantly remodeled our hotel rooms.  The 696 newly renovated rooms feature aCaribbean/Florida theme and new furniture, carpets, painted textured walls,lighting, art-work and bedspreads.  Wealso renovated the bathrooms with new paint, fixtures, and upgraded amenities.  The common hotel areas were updated with newcarpet, paint, doors and signage.

5

----

*Renovateand Expand the Pool Area.*  Weexpanded and upgraded the existing pool area to include tropical heated poolswith beach sand, palm trees, three in-ground Jacuzzis, lagoon style waterfalls,3 poolside cabanas, and Nippers Pool Bar, a swim up bar.

Wespent approximately $53.0 million in cash expenditures for renovations andoperating equipment and $10.1 million in pre-opening expenditures in 2005 and2006.  During the renovation, wecontinued to keep the existing Hôtel San Rémo operations open, although only ona limited basis from late October 2005 until the grand opening of the HootersCasino Hotel on February 3, 2006.

**Competition**

Weface competition in the market in which we are located as well as in or nearany geographic area from which we attract or expect to attract a significantnumber of our customers.  As a result,our casino property faces direct competition from all other casinos and hotelsin Las Vegas and to a lesser extent, in the Mesquite, Laughlin, Reno and LakeTahoe areas of Nevada and in Atlantic City, New Jersey, and in the Californiagaming market, as well as from other forms of gaming.

*LasVegas, Nevada.*  The hotelcasino industry in Las Vegas is highly competitive.  The Hooters Casino Hotel competes, on thebasis of overall atmosphere, range of amenities, level of service, price,location, entertainment offered, theme and size.  The Hooters Casino Hotel competes withnumerous resorts and hotel casinos on The Strip and in downtown Las Vegas, aswell as a large number of hotels and motels in and near Las Vegas.  Many competing properties have themes andattractions which draw a significant number of visitors and compete with ourproperty for hotel and gaming customers.  Some of these facilities are operated bycompanies that have more than one operating facility, and many have greatername recognition and financial and marketing resources than us and market tothe same target demographic group as we do.  Furthermore, additional major hotel casinosand significant expansion of existing properties, containing a significantnumber of hotel rooms and attractions, are expected to open in Las Vegas withinthe coming years.  We seek todifferentiate the Hooters Casino Hotel from other major Las Vegas hotel casinoresorts by concentrating on the design, atmosphere, personal service andamenities that we provide and the added value of the Hooters brand.

*CaliforniaGaming Market.*  Voters inCalifornia approved an amendment to the California constitution in 2000 thatgave Native American tribes in California the right to offer a limited numberof slots machines and a range of house-banked card games.  A number of Native American tribes havealready signed, and others have begun signing, gaming compacts with the Stateof California.  As of March 2007, 66 compactshave been approved by the federal government and casino-style gaming islegal in California on those tribal lands.  According to the National Indian GamingCommission, as of January 2007, there are approximately 56 operating tribalcasinos in California.  In addition,several Native American tribes in California have reached agreements with theState of California that allow for an increased number of gaming machineswithin the facilities operated by such tribes in exchange for a revenue-basedpayment to the state.  The competitiveimpact on our gaming establishments from the continued growth of gaming inCalifornia cannot be definitively determined but, depending on the nature,extent and location of the growth, the impact could be material.

*OtherForms of Gaming.*  We alsocompete, to some extent, with other forms of gaming on both a local andnational level, including state-sponsored lotteries, Internet gaming,dockside casinos, riverboat casinos, on- and off-track wagering and cardparlors.  The recent and continuedexpansion of legalized casino gaming into new jurisdictions throughout theUnited States has increased competition faced by us and will continue to do soin the future.  Additionally, if gamingwere legalized or expanded in jurisdictions near any geographic area from whichwe attract or expect to attract a significant number of our customers, we couldface additional competition which could have a significant adverse impact onour 

6

----

business, financial condition and results of operations.  There can be no assurance that we will be ableto continue to compete successfully in our existing markets or that we will beable to compete successfully against any such future competition.

**Intellectual Property**

Wehave entered into an assignment agreement with Florida Hooters, LLC whichgrants us the right to use certain intellectual property in connection with theoperation of the Hooters Casino Hotel.  Theintellectual property covered by these agreements is described below.  Additionally, we have been granted aroyalty-free license to the Pete & Shorty’s mark.  For more detailed information, see “Item 13. CertainRelationships and Related Transactions.”

*HootersTrademark.*  The Hooterstrademark and logo insignia are the exclusive property of Hooters of America.  We have an exclusive license to use theHooters brand in connection with gaming, casino or combined hotel, gaming and casinooperations solely at the Hooters Casino Hotel property.  Florida Hooters, LLC originally obtained thelicense through an assignment from Hooters Gaming Corporation, an affiliatedentity under common ownership with Hooters Gaming LLC.  The underlying license agreement was executedbetween Hooters of America and Hooters Gaming Corporation, and granted toHooters Gaming Corporation an exclusive license to use the licensedintellectual property in connection with gaming, casino or combined hotel,gaming and casino operations within the State of Nevada. Hooters GamingCorporation retained any and all rights and obligations in the licensedintellectual property pursuant to the license agreement for all locationswithin Nevada other than the Hooters Casino Hotel.  Under an Affirmation and Acknowledgementagreement between Hooters Gaming Corporation and 155 East Tropicana, LLC,Hooters Gaming Corporation has agreed not to operate (or license or assign itsrights to operate) another Hooters Casino Hotel on The Strip, until such timeas none of the Notes is outstanding.  Additionally,under the agreement, Hooters Gaming Corporation agreed not to operate (orlicense or assign its rights to operate) another Hooters Casino Hotel in ClarkCounty, Nevada for a period of four years from the issuance of the Notes orsuch earlier time as none of the Notes is outstanding.

Combinedhotel, gaming and casino operations contemplated under the license agreementinclude, but are not limited to, the right to provide the following within thefacility: (i) room service; (ii) restaurant operations, subject tothe consent of Las Vegas Wings, Inc., as the franchisee of the rights tooperate Hooters restaurants in Nevada (which consent has been obtained);(iii) retail sales facilities in which third parties are permitted toconduct retail sales of all kinds; and (iv) entertainment facilities,subject to certain quality standards.  Inconnection with such operations, we have the right to (i) sell approvedmerchandise bearing some or all of the licensed intellectual property,(ii) use the licensed intellectual property and Hooters Girls to promote,market, and advertise such facilities worldwide, and (iii) include HootersGirls as part of any facility staff.

Weare required to pay Hooters of America an annual fee equal to $500.  In addition, we pay to Hooters of America aroyalty in an amount equal to two percent (2%) of all net revenues generated inconnection with licensed activities (which includes net revenues generated inconnection with hotel, casino, and restaurant operations).  We are also required by the license agreementto maintain certain quality standards for the use of the Hooters brand.

*HootersRestaurant Concept.*  Pursuant toa consent from Las Vegas Wings, Inc., we have the right to use the Hootersrestaurant concept at the hotel casino.  Theconsent permits worldwide promotion, marketing and advertising of the hotelcasino and its services.  In addition,under the consent, Las Vegas Wings, Inc. has agreed not to (and not to grant alicense to any other person to) open a Hooters restaurant on The Strip (asdefined in the agreement).

7

----

*DanMarino Concept Restaurants.*  We have an exclusive license to use certainintellectual property to operate and promote restaurants, taverns, lounges andbars using the marks “Dan Marino’s Fine Food & Spirits” and “‘13’ MartiniBar,” which is operated in conjunction with Dan Marino’s Fine Food &Spirits, at the hotel casino.  FloridaHooters, LLC was granted the license from Lags Ventures, Inc., anaffiliated entity under common ownership with Lags Ventures, LLC.  The initial term of the agreement is20 years but may be extended for an additional ten years.  See “Item 13. Certain Relationships andRelated Transactions.”

*Pete &Shorty’s.* Pete & Shorty’s, Inc. has granted us a nonexclusive,royalty-free license to use the Pete & Shorty’s mark in connectionwith a restaurant, bar and lounge at the Hooters Casino Hotel.  Pursuant to the license agreement, we can alsouse the mark in connection with affiliated merchandise, entertainment andcasino services.  However,Pete & Shorty’s, Inc. maintains the right to obtain federaland/or state registrations for any and all additional services, other thanrestaurant, bar and cocktail lounge services, which we provide at the HootersCasino Hotel.

**Employees**

Asof December 31, 2006, we had 1,037 employees, none of which were covered by acollective bargaining agreement or members of unions.  However, on March 9, 2007, all 22 employees inthe engineering department voted to be represented by the Operating EngineersLocal #501 and Teamsters #995 jointly in collective bargainingnegotiations.  Negotiations between theunions and management will commence shortly. We cannot ensure that more unions will not attempt to organize our remainingemployees.

**Regulation and Licensing**

Theownership and operation of casino gaming facilities in Nevada are subject tothe Nevada Gaming Control Act and the regulations promulgated thereunder (“NevadaAct”), and various local regulations.  Inaddition, our gaming operations are subject to the licensing and regulatorycontrol of the Nevada Gaming Commission (“Nevada Commission”), theNevada State Gaming Control Board (“Nevada Board”), or the Clark County Liquorand Gaming Licensing Board (“CCLGLB”) together with the Nevada Commission andthe Nevada Board, the Nevada Gaming Authorities.  We received our license from the Nevada GamingAuthorities as a limited-liability company licensee in October 2005 and areregistered with the Nevada Commission as a publicly traded corporation,referred to as a Registered Corporation.  In addition, Florida Hooters LLC and EW CommonLLC are registered with the Nevada Gaming Authorities as intermediary companiesand licensed as the members of 155 East Tropicana, LLC.  Hooters Gaming LLC, Lags Ventures, LLC, andEastern & Western are registered with the Nevada Gaming Authorities asholding companies and were found suitable as members of Florida Hooters LLC andEW Common LLC, respectively.  Also,Messrs. Lageschulte, DiGiannantonio, Ranieri, Droste, Johnson, Blakely, S.Izumi, T. Izumi and Hessling are individually licensed as our managers.  Neil Keifer and Deborah Pierce also holdindividual licenses as our officers.  Finally,because we pay a percentage of our net profits directly earned from our gamingactivities to Hooters Gaming Corporation, it is licensed by the Nevada GamingAuthorities as well.

Thelaws, regulations and supervisory procedures of the Nevada Gaming Authoritiesare based upon declarations of public policy which are concerned with, amongother things:

·             the prevention of unsavory or unsuitable personsfrom having a direct or indirect involvement with gaming at any time or in anycapacity;

·             the establishment and maintenance of responsibleaccounting practices and procedures;

8

----

·             the maintenance of effective controls over thefinancial practices of licensees, including the establishment of minimumprocedures for internal fiscal affairs and the safeguarding of assets andrevenues, providing reliable record keeping and requiring the filing ofperiodic reports with the Nevada Gaming Authorities;

·             the prevention of cheating and fraudulent practices;and

·             providing a source of state and local revenuesthrough taxation and licensing fees.

Changesin these laws, regulations and procedures could have an adverse effect on ourbusiness, financial condition and results of operations.

Corporationsand other entities that operate casinos in Nevada are required to be licensedby the Nevada Gaming Authorities.  Agaming license for such activities requires the periodic payment of fees andtaxes and is not transferable.  As aRegistered Corporation, we are required periodically to submit detailedfinancial and operating reports to the Nevada Commission and to furnish anyother information that the Nevada Commission may require.

TheNevada Gaming Authorities may investigate any individual who has a materialrelationship to or material involvement with us in order to determine whethersuch individual is suitable or should be licensed as a business associate of agaming licensee.  Our owners, officers,managers and certain key employees are required to be licensed by the NevadaGaming Authorities.  The Nevada GamingAuthorities may deny an application for licensing for any cause that they deemreasonable.  A finding of suitability iscomparable to licensing, and both require submission of detailed personal andfinancial information followed by a thorough investigation.  Changes in licensed positions must be reportedto the Nevada Gaming Authorities and, in addition to their authority to deny anapplication for a finding of suitability or licensure, the Nevada GamingAuthorities have jurisdiction to disapprove a change in a corporate position.

Ifthe Nevada Gaming Authorities were to find an owner, officer, manager or keyemployee unsuitable for licensing or unsuitable to continue having arelationship with us, we would have to sever all relationships with thatperson.  In addition, the NevadaCommission may require us to terminate the employment of any person who refusesto file appropriate applications.  Determinationsof suitability or of questions pertaining to licensing are not subject tojudicial review in Nevada.

Aslicensees, we are required to submit detailed financial and operating reportsto the Nevada Commission.  Substantiallyall material loans, leases, sales of securities and similar financingtransactions by us must be reported to the Nevada Commission.

Ifit were determined that we violated the Nevada gaming laws, our gaming licensesand registrations with the Nevada Commission could be limited, conditioned,suspended or revoked, subject to compliance with certain statutory andregulatory procedures.  In addition, weand the persons involved could be subject to substantial fines for eachseparate violation of the Nevada laws at the discretion of the NevadaCommission.  Further, the NevadaCommission could appoint a supervisor to operate our gaming properties and,under certain circumstances, earnings generated during the supervisor’sappointment (except for the reasonable rental value of our gaming properties)could be forfeited to the State of Nevada.  Limitation, conditioning or suspension of anygaming license or the appointment of a supervisor could (and revocation of anygaming license would) materially adversely affect our operations.

Sincewe do not intend to register or sell any of our equity securities, every holderof our equity securities is required to be licensed by the Nevada GamingAuthorities.  In addition, as 155 EastTropicana, LLC has been licensed by the Nevada Gaming Authorities and hasbecome a Registered 

9

----

Corporation, none of its membership interests can be issued, sold,assigned, transferred, pledged, or otherwise disposed of without the priorapproval of the Nevada Board and the Nevada Commission.  In addition, the pledge of our equityinterests as security for the Notes was approved by the Nevada Board and theNevada Commission at the time 155 East Tropicana, LLC was licensed by and registeredwith the Nevada Commission, which was necessary in order for such pledge toremain effective.

Ifcertain exemptions are granted under the Nevada Act to a RegisteredCorporation, then any person who acquires more than 5% of a RegisteredCorporation’s voting securities is required to report the acquisition to theNevada Commission.  The Nevada Actrequires that beneficial owners of more than 10% of a registered corporation’svoting securities apply to the Nevada Commission for a finding of suitability within30 days after the Chairman of the Nevada Board mails the written noticerequiring the filing for a finding of suitability.  Under certain circumstances, an “institutionalinvestor,” as defined in the regulations of the Nevada Commission, which acquiresmore than 10%, but not more than 15%, of our voting securities may apply to theNevada Commission for a waiver of such finding of suitability if thatinstitutional investor holds the voting securities for investment purposesonly.  An institutional investor will notbe deemed to hold voting securities for investment purposes unless the votingsecurities were acquired and are held in the ordinary course of business as aninstitutional investor and not for the purpose of causing, directly orindirectly, the election of a majority of the members of our board of managers,any change in our corporate charter, bylaws, management, policies oroperations, or any of our gaming affiliates, or any other action which theNevada Commission finds to be inconsistent with holding our voting securitiesfor investment purposes only.  Activitieswhich are not deemed to be inconsistent with holding voting securities forinvestment purposes only include:

·             voting on all matters votedon by stockholders;

·             making financial and otherinquiries of management of the type normally made by securities analysts forinformational purposes and not to cause a change in its management, policies oroperations; and

·             other activities as the Nevada Commission maydetermine to be consistent with such investment intent.

Ifthe beneficial holder of voting securities who must be found suitable is acorporation, partnership or trust, it must submit detailed business andfinancial information including a list of beneficial owners.  The applicant is required to pay all costs ofinvestigation.

Underthe Nevada Act, under certain circumstances, an institutional investor asdefined in the Nevada Act, which intends to acquire not more than 15% of anyclass of securities of a privately-held corporation, limited partnership or limited-liabilitycompany that is also a registered holder or intermediary company of the holderof a gaming license, may apply to the Nevada Commission for a waiver of theusual prior licensing or finding of suitability requirements if suchinstitutional investor holds such securities only for investment purposes.  An institutional investor shall not be deemedto hold securities only for investment purposes unless the securities wereacquired and are held in the ordinary course of business as an institutionalinvestor, do not give the institutional investor management authority, and donot, directly or indirectly, allow the institutional investor to vote for theelection or appointment of members of the board of directors, a general partneror manager, cause any change in the articles of organization, operatingagreement, other organic document, management, policies or operations, or causeany other action that the Nevada Commission finds to be inconsistent withholding securities only for investment purposes.  Activities that are not deemed to beinconsistent with holding securities only for investment purposes include:

10

----

·             nominating any candidate for election or appointmentto the entity board of directors or equivalent in connection with a debtrestructuring;

·             making financial and other inquiries of managementof the type normally made by securities analysts for informational purposes andnot to cause a change in the entity management, policies or operations; and

·             such other activities as the Nevada Commission maydetermine to be consistent with such investment intent.

Anyperson who fails or refuses to apply for a finding of suitability or a licensewithin 30 days after being ordered to do so by the Nevada Commission orthe Chairman of the Nevada Board, may be found unsuitable.  The same restrictions apply to a record ownerif the record owner, after request, fails to identify the beneficial owner.  Any stockholder found unsuitable and whoholds, directly or indirectly, any beneficial ownership of the common stock ofa registered corporation beyond the period of time as may be prescribed by theNevada Commission may be guilty of a criminal offense.  We may become subject to disciplinary actionif, after receipt of notice that a person is unsuitable to be a stockholder orto have any other relationship with us, we:

·             pay that person any dividend or interest upon votingsecurities;

·             allow that person to exercise, directly orindirectly, any voting right conferred through securities held by that person;

·             pay remuneration in any form to that person forservices rendered or otherwise; or

·             fail to pursue all lawful efforts to require theunsuitable person to relinquish his voting securities for cash at fair marketvalue.

Additionally,the CCLGLB has taken the position that it has the authority to approve allpersons owning or controlling the stock of any corporation controlling a gaminglicense.

Wemay be required to disclose to the Nevada Board and the Nevada Commission theidentities of all holders of the Notes.  TheNevada Commission may, in its discretion, require the holder of any debtsecurity of a Registered Corporation, including the Notes, to fileapplications, be investigated and be found suitable to own the debt security ofa Registered Corporation.  If the NevadaCommission determines that a person is unsuitable to own a debt security, thenpursuant to the Nevada Act, the Registered Corporation can be sanctioned,including the loss of its approvals, if without the prior approval of theNevada Commission, it:

·             pays to the unsuitable person any dividend,interest, or any distribution whatsoever;

·             recognizes any voting right by the unsuitable personin connection with debt securities;

·             pays the unsuitable person remuneration in any form;or

·             makes any payment to the unsuitable person by way ofprincipal, redemption, conversion, exchange, liquidation or similartransaction.

Weare required to maintain a current membership ledger in Nevada, which may beexamined by the Nevada Gaming Authorities at any time.  If any securities are held in trust by anagent or by a nominee, the record holder may be required to disclose theidentity of the beneficial holder to the Nevada Gaming Authorities.  A failure to make such disclosure may begrounds for finding the record holder unsuitable.  We are also required to render maximumassistance in determining the identity of the beneficial owner.  The Nevada Commission has the power to requireour securities to bear a legend 

11

----

indicating that the securities are subject to the Nevada Act.  However, to date, the Nevada Commission hasnot imposed such a requirement on us.

Wemay not make a public offering of securities without the prior approval of theNevada Commission if the securities or proceeds from the securities areintended to be used to construct, acquire or finance gaming facilities inNevada, or to retire or extend obligations incurred for the purposes ofconstructing, acquiring or financing gaming facilities.  Furthermore, any approval, if granted, doesnot constitute a finding, recommendation or approval by the Nevada Commissionor the Nevada Board as to the accuracy or adequacy of the prospectus or theinvestment merits of the securities offered.  Any representation to the contrary isunlawful.  Pursuant to the Nevada Act,any entity which is not an “affiliated company,” as such term is defined in theNevada Act, or which is not otherwise subject to the provisions of the NevadaAct, including us, which plans to make a public offering of securitiesintending to use such securities or the proceeds from the sale thereof for theconstruction or operation of gaming facilities in Nevada, or to retire orextend obligations incurred for such purposes, may apply to the NevadaCommission for prior approval of such public offering.  The Nevada Commission may find an applicantunsuitable based solely on the fact that it did not submit such an application,unless upon a written request for a ruling, the Chairman of the Nevada Boardhas ruled that it is not necessary to submit such an application.

Changesin control of a Registered Corporation through merger, consolidation, stock orasset acquisitions, management or consulting agreements, or any act or conductby a person whereby that person obtains control (including foreclosure onpledged shares), may not occur without the prior approval of the NevadaCommission.  Entities seeking to acquirecontrol or ownership of a Registered Corporation must satisfy the Nevada Boardand Nevada Commission in a variety of stringent standards prior to assumingcontrol of such Registered Corporation.  TheNevada Commission may also require the stockholders, officers, managers andother persons having a material relationship or involvement with the entityproposing to acquire control, to be investigated and licensed as part of theapproval process relating to the transaction.

TheNevada legislature has declared that some corporate acquisitions opposed bymanagement, repurchases of voting securities and corporate defense tactics affectingNevada gaming licensees, and Registered Corporations that are affiliated withthose operations, may be injurious to stable and productive corporate gaming.  The Nevada Commission has established aregulatory scheme to ameliorate the potentially adverse effects of thesebusiness practices upon Nevada’s gaming industry and to further Nevada’s policyto:

·             assure the financial stability of corporate gamingoperators and their affiliates;

·             preserve the beneficial aspects of conductingbusiness in the corporate form; and

·             promote a neutral environment for the orderlygovernance of corporate affairs.

Approvalsare, in certain circumstances, required from the Nevada Commission before wecan make exceptional repurchases of voting securities above the current marketprice thereof and before a corporate acquisition opposed by management can beconsummated.  The Nevada Act alsorequires prior approval of a plan of recapitalization proposed by the board ofdirectors in response to a tender offer made directly to the RegisteredCorporation’s owners for the purposes of acquiring control of the RegisteredCorporation.

Licensefees and taxes, computed in various ways depending on the type of gaming oractivity involved, are payable to the State of Nevada and to the counties andcities in which the Nevada licensee’s 

12

----

respective operations are conducted.  Depending upon the particular fee or taxinvolved, these fees and taxes are payable either monthly, quarterly orannually and are based upon either:

·             a percentage of the gross revenues received;

·             the number of gaming devices operated; or

·             the number of table games operated.

Anyperson who is licensed, required to be licensed, registered, required to beregistered, or is under common control with such persons, or “licensees,” andwho is or who proposes to become involved in a gaming venture outside ofNevada, is required to deposit with the Nevada Board, and thereafter maintain,a revolving fund in the amount of $10,000 to pay the expenses of investigationby the Nevada Board of the licensees’ participation in foreign gaming.  The revolving fund is subject to increase ordecrease in the discretion of the Nevada Commission.  Thereafter, licensees are also required tocomply with certain reporting requirements imposed by the Nevada Act.  Licensees are also subject to disciplinaryaction by the Nevada Commission if they knowingly violate any laws of theforeign jurisdiction pertaining to a foreign gaming operation, fail to conductthe foreign gaming operation in accordance with the standards of honesty andintegrity required of Nevada gaming operations, engage in activities or enterinto associations that are harmful to the State of Nevada or its ability tocollect gaming taxes and fees, or employ, contract with or associate with aperson in the foreign operation who has been denied a license or a finding ofsuitability in Nevada on the ground of personal unsuitability.

**PotentialChanges in Tax and Regulatory Requirements**

Inthe past, federal and state legislators and officials have proposed changes intax law, or in the administration of the laws, affecting the gaming industry.  Regulatory commissions and state legislaturessometimes consider limitations on the expansion of gaming in jurisdictionswhere we operate and other changes in gaming laws and regulations.  Proposals at the national level have includeda federal gaming tax and limitations on the federal income tax deductibility ofthe cost of furnishing complimentary promotional items to customers, as well asvarious measures which would require withholding on amounts won by customers oron negotiated discounts provided to customers on amounts owed to gamingcompanies.  It is not possible todetermine with certainty the likelihood of possible changes in tax or otherlaws or in the administration of the laws.  The changes, if adopted, could have a materialadverse effect on our financial results.

**Compliancewith Other Laws and Regulations**

Inaddition to the regulations described above, our operations are also subject toextensive state and local laws, regulations and ordinances that apply tonon-gaming businesses generally, and, on a periodic basis, we must obtainvarious other licenses and permits, including those required to sell alcoholicbeverages.  We have not incurred, and donot expect to incur, material expenditures with respect to these laws andregulations.  There can be no assurances,however, that we will not incur material liability under these laws andregulations in the future. See also “Item 1A. Risk Factors—Risks Related to OurBusiness—Governmental Regulations” and “—Factors Beyond Our Control.”

## **ITEM 1A.****                    RISK FACTORS.**

Thefollowing risks, if any one or more occurs, could materially harm our business,financial condition or future results of operations.

13

----

**Risks Related to Our Business**

**LicenseAgreement—*We are required to pay numerous royalty and otherfees to the licensors, some of whom are our affiliates, for the right to use certainintellectual property.***

TheHooters trademark and logo insignia are the exclusive property of Hooters ofAmerica.   Pursuant to certain licenses and an assignmentof those license rights to us, we have a royalty-bearing license to usecertain intellectual property related to the Hooters brand solely for purposesof the operation of a Hooters Casino Hotel located at our property.  Our operation of the Hooters Casino Hotel isconditioned on payment of certain royalty fees to Hooters of America and someof our affiliates based on percentages of revenues and sales generated by ourgaming and restaurant activities, as described under “Item 1. Business—IntellectualProperty” and “Item 13. Certain Relationships and Related Transactions,” andsatisfaction of other conditions under the license.  Failure to satisfy the conditions could resultin termination of the license.  Furthermore,in a bankruptcy of a licensor, the bankruptcy court could conclude that thetrademark license agreements are executory contracts and, subject to certainlegal requirements, may approve rejection of the license agreements.  Although we would take the position that ourlicense agreement with Hooters of America is perpetual and not an executorycontract, there can be no assurance that a bankruptcy court would so concludein a bankruptcy of Hooters of America.  Rejectionwould give rise to a claim for damages for breach of the license and mightprevent us from continuing to use the trademark or on the same terms.  The loss of our license rights could preventus from operating as the Hooters Casino Hotel, which would have a materialadverse effect on our business, financial condition and results of operations.

**Useof Hooters Brand—*Use of the Hooters brand by entities otherthan us, including in Las Vegas and other areas of Nevada, could adverselyaffect our business, financial condition and results of operations.***

Webelieve we benefit from the name recognition and reputation generated by theHooters restaurants that are operated worldwide.  We have the right to use the Hooters brand andcertain related intellectual property solely for purposes of the Hooters CasinoHotel. Hooters Gaming Corporation, an affiliate under common ownership withHooters Gaming LLC, is the sole owner of the right to use the Hooters brand inconnection with the conduct of gaming and the operation of hotels elsewhere inthe state of Nevada. Hooters Gaming Corporation has agreed not to operate (orlicense or assign its rights to operate) another Hooters Casino Hotel on TheStrip until the Notes are no longer outstanding.  Additionally, Hooters Gaming Corporation hasagreed not to operate (or license or assign its rights to operate) anotherHooters Casino Hotel in Clark County, Nevada for a period of four years fromthe issuance of the Notes or such earlier time as none of the Notes isoutstanding.  However, Hooters GamingCorporation or its assignee can exploit the Hooters brand and logo inconnection with hotel casinos and casinos in other areas of Nevada andelsewhere, including marketing worldwide, and once the Notes are no longeroutstanding, on The Strip.  For example,other Hooters Casino Hotels could be opened in areas (other than The Strip) inLas Vegas and Nevada and throughout the world where gaming operations arepermitted.  In addition, Las Vegas Wings,Inc., an affiliate under common ownership with Lags Ventures, LLC, owns theexclusive right to use the Hooters brand, marks and trade dress on restaurantservices elsewhere in Las Vegas (although it has agreed not to open or licenseanother person to open a Hooters restaurant on The Strip) and the remainder ofthe State of Nevada and currently owns two restaurants in Nevada.  As a result, Las Vegas Wings, Inc. or itsassignees can exploit the Hooters brand and logo in connection with additionalrestaurants in Las Vegas or elsewhere in Nevada.  See “Item 13. Certain Relationships andRelated Transactions.”  We cannot assurethat the development of other hotel casinos, casinos or restaurants using theHooters brand in Nevada or elsewhere will not adversely affect our business,financial condition and results of operations.  Nor can we assure that our business, financial

14

----

condition and results of operations will not be adversely affected bythe management of the Hooters brand or any negative public image or otheradverse event that becomes associated with the Hooters brand.

**Licensing—*We are required to maintain, gaming, liquor and other licenses tooperate the Hooters Casino Hotel. The gaming industry is highly regulated.***

Ouroperation of the Hooters Casino Hotel is contingent upon the maintenance ofvarious regulatory licenses, permits, approvals, registrations, findings ofsuitability, orders and authorizations.  Thelaws, regulations, and ordinances requiring these licenses, permits and otherapprovals generally relate to the responsibility, financial suitability andcharacter of the owners and managers of our gaming operations, as well aspersons financially interested or involved in our gaming operations, almost allof whom had never been licensed previously.  The scope of the approvals required to operatea facility were extensive.  Failure tomaintain the necessary approvals could adversely affect our ability to operatethe Hooters Casino Hotel. See “Item 1. Business–Regulation and Licensing.”

**DependenceUpon Cash Flow of Property—*Our cash flow to meet ourpayment obligations under the Notes and our other indebtedness and to fund ouroperations is dependent solely on the hotel casino.***

Wenow rely exclusively on cash flow generated by the hotel casino as well asborrowings under our senior secured credit facility (“Credit Facility”) to meetour payment obligations under the Notes and our other indebtedness and to fundour operations.  If we have insufficientfunds available under our Credit Facility and the hotel casino is notgenerating sufficient cash flow to meet our payment obligations under the Notesfor future interest payments and our other indebtedness, we may be unable tomake the required interest payments to the Note holders, to meet our paymentobligations under our other indebtedness and to fund our operations.  See “Item 1A. Risk Factors—Risks Related tothe Notes and Other Company Debt—Ability to Service Debt.”

**Riskof a New Venture—*We have a limited operating history orhistory of earnings as the Hooters Casino Hotel.***

Wewere formed to acquire, operate, renovate and re-brand the Hôtel San Rémo.  While the Hôtel San Rémo has a history ofoperations and a history of earnings, our operating history is very limited.  Moreover, in the past, the Hooters brand hasnot been associated with hotels or casinos.  Consequently, we cannot be certain that the transformationof the Hôtel San Rémo into the Hooters Casino Hotel will ultimately attract thenumber and type of hotel and casino customers and other visitors we desire toachieve our objective of improving the profitability of the hotel casino.

Weare subject to significant business, economic, regulatory and competitiveuncertainties frequently encountered by new businesses in competitiveenvironments, many of which are beyond our control.  Because we have a limited operating history,it may be more difficult for us to prepare for and respond to these types ofrisks, and the other types of risks described herein, as compared with anestablished business.  Our businessprospects should be evaluated in light of the difficulties frequentlyencountered by companies in the early stages of gaming projects and the risksinherent in the establishment of a new business enterprise.  There can be no assurance that we will be ableto successfully operate the hotel casino or manage these risks successfully,that the hotel casino will be profitable or that we will generate sufficientcash flow to meet our payment obligations under the Notes and our otherindebtedness, which would in turn negatively affect our business, financialcondition and results of operations.

15

----

**Competition—*We are subject to intense local competition as well as competition inthe gaming industry that could hinder our ability to operate profitably.***

Competitionin Las Vegas has increased over the last several years as a result ofsignificant increases in hotel rooms, casino sizes and convention, trade showand meeting facilities.  Our success isdependent upon the success of the hotel casino and its continuing ability toattract visitors and operate profitably.  The hotel casino, located one-half block eastof The Strip, competes with high-quality Las Vegas resorts and other Las Vegashotel casinos, including those located on The Strip and in downtown Las Vegas,on the basis of overall atmosphere, range of amenities, level of service,price, location, entertainment offered, theme and size.  Currently, there are approximately 37 majorgaming properties located on or near The Strip, 13 additional major gamingproperties in the downtown area and additional gaming properties located inother areas of Las Vegas.  Some of these facilitiesare operated by companies that have more than one operating facility, and manyhave greater name recognition and financial and marketing resources than us andmarket to the same target demographic group as we do.  Furthermore, additional major hotel casinosand significant expansion of existing properties, containing a significantnumber of hotel rooms and attractions, are expected to open in Las Vegas withinthe coming years.  There can be noassurance that the Las Vegas market will continue to grow or that hotel casinoresorts will continue to be popular.  Adecline or leveling off of the growth or popularity of such facilities wouldadversely affect our business, financial condition and results of operations.  See “Item 1. Business—Competition.”

Therealso is substantial competition among gaming companies in the gaming industrygenerally, which includes land-based casinos, dockside casinos, riverboatcasinos, casinos located on Native American land, including in California, andother forms of legalized gambling.  Ifother casinos operate more successfully, if existing properties are enhanced orexpanded, or if additional hotels and casinos are established in and around thelocations where we conduct business, we may lose market share.  We also compete, to some extent, with otherforms of gaming on both a local and national level, including state-sponsoredlotteries, Internet gaming, on- and off-track wagering and card parlors.  In particular, the legalization of gaming orthe expansion of legalized gaming in or near any geographic area from which weattract or expect to attract a significant number of our customers could have asignificant adverse effect on our business, financial condition and results ofoperations.

Increasedcompetition may also require us to make substantial capital expenditures tomaintain and enhance the competitive position of our hotel casino.  Because we are highly leveraged, aftersatisfying our obligations under our outstanding indebtedness, there can be noassurance that we will have sufficient financing to make such expenditures.  If we are unable to make such expenditures,our competitive position and our results of operations could be materiallyadversely affected.

**GovernmentalRegulations—*We face extensive regulation from gaming and othergovernment authorities.***

Asowners and operators of gaming facilities, we are subject to extensive Nevadastate and local regulation.  Nevada stateand local government authorities require us and our subsidiaries to maintaingaming licenses and require our officers and key employees to demonstratesuitability to hold gaming licenses.  TheNevada state and local government may limit, condition, suspend or revoke alicense for any cause deemed reasonable by the respective licensing agency.  They may also levy substantial fines againstus or the individuals involved in violating gaming laws or regulations.  The occurrence of any of these events couldhave a material adverse effect on our business, financial condition and resultsof operations.

16

----

Noassurances can be given that any new licenses, registrations, findings ofsuitability, permits and approvals, including for any proposed expansion of ourhotel casino, will be renewed when they expire.  Any failure to renew or maintain our licenses orreceive new licenses when necessary would have a material adverse effect on us.

Weare subject to a variety of other rules and regulations, including zoning,environmental, construction and land-use laws and regulations governing theserving of alcoholic beverages.  We alsopay substantial taxes and fees in connection with our operations as a gamingcompany, which taxes and fees are subject to increase or other change at anytime.  Any changes to these laws couldhave a material adverse effect on our business, financial condition and resultsof operations.

Thecompliance costs associated with these laws, regulations and licenses aresignificant.  A change in the laws,regulations and licenses applicable to our business or a violation of anycurrent or future laws or regulations or our gaming licenses could require usto make material expenditures or could otherwise materially adversely affectour business, financial condition or results of operations.  For more detailed information, see “Item 1.Business—Regulation and Licensing.”

**UnionEfforts to Organize Employees—*Our business, financialcondition, and results of operations may be harmed by union efforts to organizeour employees.***

Ouremployees were not covered by collective bargaining agreements as of December31, 2006.  However, all 22 employees in ourengineering department voted on March 9, 2007 to be represented by OperatingEngineers Local #501 and Teamsters #995 jointly in collective bargaining.  Negotiations between the unions andmanagement will commence shortly.

Unionizationof our employees could result in disruption in our business and could incursignificant costs, both of which could have a material adverse effect on ourresults of operation and financial condition.  We could experience significant increases inour labor costs which could also have a material adverse effect on ourbusiness, financial condition, and results of operations.  We may face an increased risk of unionactivity now that the Hooters Casino Hotel has opened due to a higher profileof the Hooters brand.

**PossibleConflicts of Interest—*The relationship of ourchief executive officer to Hooters Inc. and related entities createspotential for conflicts of interest.***

NeilKiefer, our chief executive officer is the President, Chief Executive Officerand director of Hooters Inc. and related entities, which are based inFlorida, and some of which may have interests adverse to us.  Due to Mr. Kiefer’s responsibilities toserve both companies, there is potential for conflicts of interest.  At any particular time, the needs ofHooters Inc. could cause Mr. Kiefer to devote attention toHooters Inc. at the expense of devoting attention to us.  In addition, matters may arise that placeMr. Kiefer in conflicting positions.  No assurance can be given that materialconflicts will not arise which could be detrimental to our business, financialcondition and results of operations.

**FactorsBeyond Our Control—*Our business, financialcondition and results of operations are dependent in part on a number offactors that are beyond our control.***

Theeconomic health of our business is generally affected by a number of factorsthat are beyond our control, including:

·             continued increases in healthcare costs;

·             general economic conditions and economic conditionsspecific to our primary markets;

17

----

·             inaccessibility to our property due to constructionon adjoining or nearby properties, streets or walkways;

·             levels of disposable income of casino customers;

·             increased transportation costs;

·             local conditions in key gaming markets, includingseasonal and weather-related factors;

·             increase in gaming taxes or fees;

·             decline in tourism and travel due to occurrences orthreats of terrorism or other destabilizing events;

·             substantial increase in the cost of electricity,natural gas and other forms of energy;

·             competitive conditions in the gaming industry,including the effect of such conditions on the pricing of our games andproducts;

·             the relative popularity of entertainmentalternatives to casino gaming that compete for the leisure dollar;

·             the adoption of anti-smoking regulations; and

·             an outbreak or suspicion of an outbreak of aninfectious communicable disease.

Anyof these factors could negatively impact our property or geographic location inparticular or the casino industry generally, and as a result, our business,financial condition and results of operations.

**EnvironmentalMatters—*We are subject to environmental laws and potentialexposure to environmental liabilities. This may cause us to incur costs oraffect our ability to develop, sell or rent our property or to borrow moneyusing such property as collateral.***

Weare subject to various federal, state and local environmental laws, ordinancesand regulations, including those governing discharges to air and water, thegeneration, handling, management and disposal of petroleum products, asbestoscontaining materials and other hazardous substances, and the health and safetyof our employees.  Permits may berequired for our operations and these permits are subject to renewal,modification and, in certain cases, revocation.  In addition, as a property owner and operator,we may be liable for the costs of investigating and remediating thesesubstances products on, under or in our property, without regard to whether weknew of, or caused, the presence of the contaminants, and regardless of whetherthe practices that resulted in the contamination were legal at the time theyoccurred.  The presence of, or failure toremediate properly, the substances may adversely affect our ability to sell or leaseour property or to borrow funds using it as collateral.  Additionally, we may be subject to claims bythird parties based on damages and costs resulting from environmentalcontamination emanating from our property.

Wehave not identified any such issues associated with our property that couldreasonably be expected to have an adverse effect on us or the results of ouroperations.  However, it is possible thathistorical or neighboring activities have affected our property and, as aresult, there can be no assurance that material obligations or liabilitiesunder environmental laws will not arise in the future which may have a materialadverse effect on us.  Moreover, it isalso possible that future developments could lead to material environmentalcompliance costs or other liabilities for us and that these costs could have amaterial adverse effect on our business and financial condition.

18

----

**UninsuredLosses—*We may incur losses that are not adequately coveredby insurance which may harm our financial condition and results of operations.***

Althoughwe maintain insurance that we believe is customary and appropriate for ourbusiness, we cannot assure you that insurance will be available or adequate tocover all loss and damage to which our business and our assets might besubjected.  In connection with insurancerenewals subsequent to the terrorist events of September 11, 2001, theinsurance coverage for certain types of damages or occurrences has beendiminished substantially and is unavailable at commercial rates.  The lack of adequate insurance for certaintypes or levels of risk could expose us to significant losses in the event thata catastrophe or lawsuit occurred for which we are underinsured.  Any losses we incur that are not adequatelycovered by insurance may decrease our future operating income, require us tofind a replacement for or repair destroyed property and reduce the fundsavailable for payment of our obligations on the Notes and our otherindebtedness.

**Risks Related to the Notes and Other Company Debt**

**SubstantialDebt—*Our substantial level of debt could adverselyaffect our financial condition and prevent us from fulfilling our obligationsunder the Notes and our other debt.***

We have substantial debt.  As of December 31, 2006, we have total debt of$134.9 million.  In addition to theNotes, we and our subsidiary are permitted under the indenture governing theNotes to incur additional debt, including up to $15.0 million principalamount of debt under our Credit Facility and debt used to purchase furniture,fixtures and equipment (including unlimited gaming furniture, fixtures andequipment financing).  Additionally, ifwe satisfy debt coverage tests in our debt agreements, we could incur furtherdebt.  If new debt were to be incurred inthe future, the related risks could intensify.

Oursubstantial debt could have important consequences and significant effects onour business. For example, it could:

·             make it more difficult for us to satisfy ourobligations under the Notes and our other debt;

·             result in an event of default if we fail to satisfyour obligations under the Notes or our other debt or fail to comply with thefinancial and other restrictive covenants contained in the indenture governingthe Notes or our Credit Facility, which event of default could result in all ofour debt becoming immediately due and payable and could permit our lenders toforeclose on our assets securing such debt;

·             require us to dedicate a substantial portion of ourcash flow from our business operations to pay our debt, thereby reducing theavailability of cash flow to fund working capital, capital expenditures,development projects, general operational requirements and other purposes;

·             limit our ability to obtain additional financing forworking capital, capital expenditures and other activities;

·             limit our flexibility in planning for, or reactingto, changes in our business and the industry in which we operate;

·             increase our vulnerability to general adverseeconomic and industry conditions or a downturn in our business; and

·             place us at a competitive disadvantage compared tocompetitors that are not as highly leveraged.

19

----

Anyof the above-listed factors could have a material adverse effect on ourbusiness, financial condition and results of operations and our ability to meetour payment obligations under the Notes and our other debt.

**Abilityto Service Debt—*To service our debt, we will require asignificant amount of cash. If we fail to generate sufficient cash flow fromfuture operations, we may have to refinance all or a portion of our debt orseek to obtain additional financing.***

Weexpect to obtain the funds to pay our expenses and to pay the amounts due underthe Notes, our Credit Facility and our other debt primarily from our operations. Our ability to meet our expenses andmake these payments thus depends on our future performance, which will beaffected by financial, business, economic and other factors, many of which wecannot control.  Our business may notgenerate sufficient cash flow from operations in the future and our currentlyanticipated growth in revenue and cash flow may not be realized, either or bothof which could result in our being unable to pay amounts due under our debt,including the Notes, or to fund other liquidity needs, such as future capitalexpenditures.  If we do not havesufficient cash flow from operations, we may be required to refinance all orpart of our then existing debt, sell assets, reduce or delay capitalexpenditures or borrow more money.  We cannotassure you that we will be able to accomplish any of these alternatives onterms acceptable to us, or at all.  Inaddition, the terms of existing or future debt agreements, including our CreditFacility and the indenture governing the Notes, may restrict us from adoptingany of these alternatives.  The failureto generate sufficient cash flow or to achieve any of these alternatives couldmaterially adversely affect our ability to pay our debt obligations.

**Limitationson Collateral—*The collateral securing the Notes does notinclude any of our gaming assets or certain other excluded assets.***

TheNotes and any guarantees thereof are secured by a security interest insubstantially all of our and any guarantors’ existing and future assets (otherthan certain excluded assets), a pledge of our equity interests and the equityinterests in any guarantors.  As of December31, 2006, there are no subsidiary guarantors.  The collateral does not include gaminglicenses or any gaming equipment or other assets securing furniture, fixturesand equipment financing, and there are no restrictions on the amount of gamingequipment financed in this manner.  Thecollateral also does not include contracts, agreements, licenses (includinggaming and liquor licenses) and other rights that by their express termsprohibit the assignment thereof or the grant of a security interest therein.  Some of these may be material to us and suchexclusion could have a material adverse effect on the value of the collateral.

**Valueof Collateral Securing the Notes—*The fair market value ofthe collateral securing the Notes may not be sufficient to pay the amounts owedunder the Notes.***

Theproceeds of any sale of collateral following an event of default with respectto the Notes may not be sufficient to satisfy, and may be substantially lessthan, amounts due on the Notes.  Noappraisal has been made of the collateral.  The total value of the collateral is likelyless than the amount due on the Notes.

Thevalue of the collateral in the event of liquidation will depend upon market andeconomic conditions, the availability of buyers and similar factors.  By its nature, some or all of the collateralmay not have a readily ascertainable market value or may not be saleable or, ifsaleable, there may be substantial delays in its liquidation.  To the extent that liens, security interestsand other rights granted to other parties (including the lenders under our CreditFacility) encumber assets owned by us, those parties have or may exerciserights and remedies with respect to the property subject to their liens thatcould adversely affect the value of that collateral and the ability of thetrustee under the indenture governing the 

20

----

Notes or the holders of the Notes to realize or foreclose on thatcollateral.  Consequently, we cannot giveassurance that liquidating the collateral securing the Notes would produceproceeds in an amount sufficient to pay any amounts due under the Notes afteralso satisfying the obligations to pay any creditors with prior claims on thecollateral.

Inaddition, under the intercreditor agreement between the trustee under theindenture governing the Notes and the lenders under our Credit Facility, theright of the lenders to exercise remedies with respect to the collateral coulddelay liquidation of the collateral.  Thegaming licensing process, along with bankruptcy laws and other laws relating toforeclosure and sale, as discussed below, also could substantially delay orprevent the ability of the trustee or any holder of the Notes to obtain thebenefit of any collateral securing the Notes.  Such delays could have a material adverseeffect on the value of the collateral.

Theindenture governing the Notes also permits us to designate one or more of ourrestricted subsidiaries as an unrestricted subsidiary.  If we designate a restricted subsidiary as anunrestricted subsidiary, all of the liens on any collateral owned by theunrestricted subsidiary or any of its subsidiaries and any guarantees of theNotes by the unrestricted subsidiary or any of its subsidiaries will bereleased under the indenture but not necessarily under our Credit Facility.  Designation of an unrestricted subsidiary willreduce the aggregate value of the collateral securing the Notes to the extentthat liens on the assets of the unrestricted subsidiary and its subsidiariesare released.  In addition, the creditorsof the unrestricted subsidiary and its subsidiaries will have a prior claim(ahead of the Notes) on the assets of such unrestricted subsidiary and itssubsidiaries.

Ifthe proceeds of any sale of collateral are not sufficient to repay all amountsdue on the Notes, the holders of the Notes (to the extent not repaid from theproceeds of the sale of the collateral), would have only an unsecured claimagainst our remaining assets.

**LienSubordination of Notes—*The lien on the collateral(other than the renovation disbursement and interest reserve accounts) securingthe Notes are contractually subordinated pursuant to the intercreditoragreement to the liens securing our Credit Facility.***

Thesecurity interests securing the Notes and any guarantees of the Notes arecontractually subordinated (other than the security interests in the renovationdisbursement account, which is senior, and interest reserve account, which doesnot secure our Credit Facility) to up to $15.0 million principal amount ofdebt (plus related interest, fees, indemnities, costs and expenses) that may beincurred under our Credit Facility, pursuant to an intercreditor agreementbetween the trustee under the indenture governing the Notes and the lendersunder our Credit Facility.  In addition,lenders of furniture, fixtures and equipment financing and other purchase moneydebt have a security interest in the assets securing that debt, although thoseassets, so long as they secure only such debt, will not secure the Notes.  The indenture permits unlimited gamingfurniture, fixtures and equipment financing and up to $2.5 million ofother secured purchase money financing.  Asa result, upon any distribution to our creditors, whether or not in bankruptcy,liquidation, reorganization or similar proceedings, or following accelerationof our debt or an event of default under such debt, the lenders under our CreditFacility and the lenders of furniture, fixtures and equipment financing andother purchase money debt will be entitled to be repaid in full from theproceeds of the assets (other than the renovation disbursement account)securing such debt before any payment is made to holders of Notes from suchproceeds.

Consequently,the liquidation of the collateral securing the Notes may not produce proceedsin an amount sufficient to pay the amounts due on the Notes after alsosatisfying the obligations to pay our Credit Facility lenders and purchasemoney lenders, even if the fair market value of the collateral securing theNotes would be sufficient, absent our Credit Facility and purchase money debt,to pay all amounts due on the Notes.  Ifthe proceeds of any sale of collateral are not sufficient to repay all amountsdue 

21

----

on the Notes, the holders of the Notes (to the extent not repaid fromthe proceeds of the sale of the collateral), would have only an unsecured claimagainst our remaining assets.

**Mechanics’Liens—*Parties who have provided services or supplies inconnection with the renovation of our hotel casino may have a lien on theproject senior to the security interests securing the Notes and any guarantees.***

Nevadalaw provides contractors, subcontractors and material suppliers with a lien onthe property improved by their services or supplies in order to secure theirright to be paid.  If these parties arenot paid in full, they may seek foreclosure on their liens.  In Nevada, the priority of all mechanics’liens related to a particular construction project relate back to the date onwhich work first commenced by any contractor.  Accordingly, contractors, subcontractors andsuppliers providing goods and services in connection with the renovation of thehotel casino who after recordation of the security interests securing the Notesotherwise comply with the applicable requirements of Nevada law may have a lienon our hotel casino senior in priority to the security interests, securing theNotes until they are paid in full.

Inthe event of a liquidation, proceeds from the sale of collateral will be usedto pay the holders of any mechanics’ liens then in existence before holders ofthe Notes.

**LimitedAbility of Holders of the Notes to Exercise Remedies—*The rightsof the trustee and holders of Notes to exercise remedies under the indenturegoverning the Notes are limited by an intercreditor agreement between thetrustee and the lenders under our Credit Facility.***

Anumber of the rights and remedies of the trustee and the holders of the Notesare significantly limited under the intercreditor agreement.  For instance, if the Notes become due andpayable prior to the stated maturity or are not paid in full at the statedmaturity at a time during which we have debt outstanding under our CreditFacility, the trustee will not have the right to foreclose upon the collateralthat also secures the obligations under our Credit Facility (other than therenovation disbursement account) unless and until the lenders under our CreditFacility fail to take steps to exercise remedies with respect to or inconnection with such collateral within 90 days following notice to such lendersof the occurrence of an event of default under the indenture governing theNotes.  In addition, the intercreditoragreement prevents the trustee and the holders of the Notes from pursuingremedies with respect to certain of the collateral in an insolvency proceeding.

Therights and remedies of the trustee also are subject to additional practicallimitations with respect to certain collateral so long as such collateral alsosecures our Credit Facility.  The trusteedoes not and will not have possession (if certificated) of our equity interestsin any guarantors or the equity interests of 155 East Tropicana, LLC and 155East Tropicana Finance Corp. (even though such equity interests will constitutecollateral), so long as such equity interests also secure our Credit Facility.  As a result, so long as such equity interestsalso secure our Credit Facility, the trustee (although it will have a perfectedsecurity interest in such equity interests) will not be able to take possessionof such equity interests upon the occurrence of an event of default under theindenture governing the Notes.  Inaddition, the trustee does not have a perfected security interest in certain otherportions of the collateral—including deposit accounts—that consist of assetsthat are not perfected by filing a Uniform Commercial Code financing statement,or that require that the issuers or any guarantor, as applicable, to cause thetrustee to obtain “control” (as defined in the Uniform Commercial Code) orpossession of such assets (and, after commercially reasonable efforts, theissuers or any such guarantor, as applicable, are unable to cause the trusteeto obtain such control or possession).

22

----

**LimitedAbility of Holders of Notes to Realize on Collateral—*Gaming laws,bankruptcy laws and other factors may delay or otherwise impede the trustee’sability to foreclose on the collateral securing the Notes.***

Inaddition to our intercreditor arrangements with lenders under our CreditFacility, the gaming laws of the State of Nevada and the licensing processes,along with other laws relating to foreclosure and sale, could substantiallydelay or prevent the ability of the trustee or any holder of the Notes to obtainthe benefit of any collateral securing the Notes.  For example, if the trustee sought to operate,or retain an operator for, any of our gaming properties, the trustee would berequired to obtain Nevada gaming licenses.  Potential purchasers of our gaming propertiesor the gaming equipment would also be required to obtain a Nevada gaminglicense.  This could limit the number ofpotential purchasers in a sale of our gaming properties or gaming equipment,which may delay the sale of and reduce the price paid for the collateral.

Inaddition, the trustee’s ability to repossess and dispose of collateral issubject to the procedural and other restrictions of state real estate,commercial and gaming law, as well as the prior approval of the lenders underour Credit Facility.  Among other things,if the trustee did conduct a foreclosure sale, and if the proceeds of the salewere insufficient, after expenses, to pay all amounts due on the Notes, thetrustee might, under certain circumstances, be permitted to assert a deficiencyclaim against us.  There can be noassurance that the trustee would be able to obtain a judgment for thedeficiency or that we would have sufficient other assets to pay a deficiencyjudgment.

Federalbankruptcy law also could impair the trustee’s ability to foreclose upon thecollateral.  If we or a guarantor becomea debtor in a case under the United States Bankruptcy Code, as amended, or the BankruptcyCode, the automatic stay, imposed by the Bankruptcy Code upon the commencementof a case, would prevent the trustee from foreclosing upon the collateral or(if the trustee has already taken control of the collateral) from disposing ofit, without prior bankruptcy court approval.

Thebankruptcy court might permit us to continue to use the collateral while thebankruptcy case was pending, even if the Notes were then in default.  Under the Bankruptcy Code, holders of Notesand the trustee would be entitled to “adequate protection” of the interest ofholders of Notes in the collateral, if necessary to protect against anydiminution in value during the case.  Becausethe Bankruptcy Code does not define “adequate protection,” and because thebankruptcy court has broad discretion, however, there can be no assurance thatthe court would require us to provide holders of Notes with any form of “adequateprotection,” or that any protection so ordered would, in fact, be adequate.

Ina bankruptcy case, the court would allow a claim for all amounts due under theNotes, including all accrued and unpaid interest through the date ofbankruptcy.  Under the Bankruptcy Code,interest stops accruing on the date of bankruptcy except under certainspecified circumstances, and there can be no assurance that the court wouldallow a claim for post-bankruptcy interest.  If the court held that the value of thecollateral securing the Notes was less than the amount due, the trustee wouldbe permitted to assert a secured claim in an amount equal to the collateral’svalue and an unsecured claim for the deficiency.

For these and other reasons, if we or our subsidiaries become debtorsin cases under the Bankruptcy Code, there can be no assurance:

·             whether any payments under the Notes would be made;

·             whether or when the trustee could foreclose upon orsell the collateral;

23

----

·             whether the term or other conditions of the Notes orany rights of the holders could be altered in a bankruptcy case without thetrustee’s or the investors’ consent;

·             whether the trustee or investors would be able toenforce the investors’ rights against the guarantors under their guarantees; or

·             whether or to what extent holders of the Notes wouldbe compensated for any delay in payment or decline in the collateral’s value.

Finally,the trustee’s ability to foreclose on the collateral on behalf of the holdersof Notes may be subject to the consent of third parties, prior liens (asdiscussed above) and practical problems associated with the realization of thetrustee’s security interest in the collateral.

**RestrictiveCovenants—*The indenture governing the Notes and our CreditFacility contain covenants that significantly restrict our operations.***

Theindenture governing the Notes and the agreement governing our Credit Facilitycontain, and any other future debt agreements may contain, numerous covenantsimposing financial and operating restrictions on our business.  These restrictions may affect our ability tooperate our business, may limit our ability to take advantage of potentialbusiness opportunities as they arise and may adversely affect the conduct ofour current business.  These covenantsplace restrictions on our ability and the ability of our restrictedsubsidiaries to, among other things:

·             pay dividends, redeem stock or make otherdistributions or restricted payments;

·             incur debt or issue preferred equity interests;

·             make certain investments;

·             create liens;

·             agree to payment restrictions affecting theguarantors;

·             consolidate or merge;

·             sell or otherwise transfer or dispose of assets,including equity interests of our restricted subsidiaries;

·             enter into transactions with our affiliates;

·             designate our subsidiaries as unrestrictedsubsidiaries; and

·             use the proceeds of permitted sales of our assets.

Ourfailure to comply with our debt-related obligations could result in an event ofdefault under the Notes and our other debt.

**Abilityto Repurchase Notes—*Our ability to repurchasethe Notes upon a change of control or an asset sale may be limited.***

Uponthe occurrence of specific “change of control” events and “asset sale” events,in each case as defined in the indenture governing the Notes, we will berequired to offer to repurchase all outstanding Notes at 101% of the principalamount (in the case of a change of control) and 100% of the principal amount(in the case of an asset sale), in each case, plus accrued and unpaid interestto the date of repurchase.  The lendersunder our Credit Facility will have a similar right to be repaid upon a changeof control.  Any of our future debtagreements may contain similar provisions with respect to a change of 

24

----

control or asset sale.  However,we may not have sufficient funds at the time of the change of control or assetsale to make the required repurchase of Notes or repayment of our other debt.  The terms of our Credit Facility also willlimit our ability to purchase Notes until all debt under our Credit Facility ispaid in full.  Any of our future debtagreements may contain similar restrictions.  If we fail to repurchase any Notes submittedin a change of control or asset sale offer, it would constitute an event ofdefault under the indenture which would, in turn, constitute an event ofdefault under our Credit Facility and could constitute an event of defaultunder our other debt, even if the change of control itself would not cause adefault.

Importantcorporate events, such as takeovers, recapitalizations or similar transactions,may not constitute a change of control under the indenture governing the Notesand thus not permit the holders of the Notes to require us to repurchase orredeem the Notes.

**RequiredRegulatory Redemption—*Noteholders may berequired to be licensed by a gaming authority and, if not so licensed, theirNotes will be subject to redemption.***

Weare required to notify the Nevada Board as to the identity of, and may berequired to submit background information regarding, each record or beneficialowner of the Notes.  For purposes ofthese rules, “beneficial interest” includes all direct and indirect forms ofownership or control, voting power or investment power held through anycontract, lien, lease, partnership, stockholding, syndication, joint venture,understanding, relation ship, present or reversionary right, title or interest,or otherwise.  The Nevada Board maydetermine that holders of the Notes have a “beneficial interest” in theissuers.

Ifthe Nevada Gaming Authorities require any person, including a record orbeneficial owner of the Notes, to be licensed, qualified or found suitable,that person must apply for a license, qualification or finding of suitabilitywithin the time period specified by the gaming authority.  The person would be required to pay all costsof obtaining a license, qualification or finding of suitability.  If a holder of the Notes is unable orunwilling to obtain such license, qualification or finding of suitability, suchagencies and authorities may not grant us or, if already granted, may suspendor revoke our licenses unless we terminate our relationship with the holder.  Under these circumstances, we would berequired to repurchase such Notes.  Therecan be no assurance that we will have sufficient funds or otherwise will beable to repurchase any or all of the Notes.  See “Item 1. Business—Regulation andLicensing.”

**FraudulentTransfer—*Under certain circumstances, a court could cancelthe obligations under the Notes or any guarantees and the liens that secure theNotes and guarantees.***

Unlessdesignated as an unrestricted subsidiary, each and any domestic subsidiary weform or acquire will be required to guarantee the Notes and grant a securityinterest in certain of its assets (junior to the security interest granted tothe lenders under our Credit Facility) to secure its guarantee.  Under federal bankruptcy law and comparableprovisions of state and federal nonbankruptcy fraudulent transfer laws, undercertain circumstances a court could avoid (i.e., cancel) a guarantee and thesecurity interest in the guarantor’s assets, and order the return of anypayments made thereunder to the guarantor or to a fund for the benefit of itsother creditors.

Acourt might take these actions if it found that when the guarantor entered intoits guarantee (or, in some jurisdictions, when payments became due on itsguarantee), (i) it received less than reasonably equivalent value or fairconsideration for its guarantee, and (ii) any of the following conditionswas then satisfied:

·             the guarantor was insolvent or rendered insolvent byreason of incurring its obligations under its guarantee or granting a securityinterest in its assets;

25

----

·             the guarantor was engaged in a business ortransaction for which its remaining assets constituted unreasonably smallcapital; or

·             the guarantor intended to incur, or believed (orreasonably should have believed) that it would incur, debts beyond its abilityto pay as those debts matured.

Inapplying these factors, a court would likely find that a subsidiary guarantordid not receive fair consideration or reasonably equivalent value for itsguarantee, except to the extent that it benefited directly or indirectly fromthe Notes’ issuance.  The determinationof whether a subsidiary was or was rendered “insolvent” would vary depending onthe law of the jurisdiction being applied.  Generally, an entity would be consideredinsolvent if the sum of its debts (including contingent or unliquidated debts)is greater than all of its property at a fair valuation or if the present fairsalable value of its assets is less than the amount that will be required topay its probable liability on its existing debts (including contingent orunliquidated debts) as they become absolute and matured.

Acourt might also avoid a guarantor’s guarantee and the security interest in itsassets, if the court concluded that the guarantor entered into the guaranteewith actual intent to hinder, delay, or defraud creditors.  If a court avoided a guarantor’s guarantee,you would no longer have a claim against that subsidiary, and the claims ofcreditors of the subsidiary generally would be entitled to payment in fullbefore the subsidiary paid any dividends or made any distributions to us forthe purpose of our satisfying any claims under the Notes.

Similarly,under federal bankruptcy law and comparable provisions of state and federalnonbankruptcy fraudulent transfer laws, under certain circumstances a courtcould avoid (i.e., cancel) the Notes and the security interest in an issuer’sassets, and order the return of any payments made thereunder to the issuer orto a fund for the benefit of its other creditors.

Acourt might take these actions if it found that when an issuer issued the Notes,(i) it received less than reasonably equivalent value or fairconsideration, and (ii) any of the following conditions was thensatisfied:

·             the issuer was insolvent or rendered insolvent byreason of incurring obligations under the Notes or granting a security interestin its assets;

·             the issuer was engaged in a business or transactionfor which its remaining assets constituted unreasonably small capital; or

·             the issuer intended to incur, or believed (orreasonably should have believed) that it would incur, debts beyond its abilityto pay as those debts matured.

Weused a substantial portion of the proceeds from the Notes to repay amounts dueunder existing indebtedness.  To theextent that we used the proceeds of that indebtedness to make payments toEastern & Western (the parent of one of our members), in connection withour acquisition of our hotel casino, a court might find that we did not receivereasonably equivalent value or fair consideration for incurring our new debtobligations, under the Notes, to repay our existing indebtedness.  Alternatively, a court might find thatrepayment of the existing indebtedness, which is guaranteed by certain of ouraffiliates, was for the benefit of these affiliates.

Regardlessof the factors identified above, a court might also avoid the obligations ofthe issuers under the Notes and the security interest in their assets and orderthe return of any payments made under the Notes either to the issuers or to afund for the benefit of the issuers’ other creditors if the court found 

26

----

that the issuers incurred the obligations under the Notes with actualintent to hinder, delay, or defraud creditors of the issuers.

**Redemption**—***We may choose to redeem the Notes at anytime on orafter April 1, 2009.***

The Notes are redeemable at our option on or after April 1, 2009.  This means that we have the right, without aholder’s consent, to redeem or “call” all or a portion of the Notes at any timeor on or after April 1, 2009.  This doesnot mean that holders have a similar right to require us to repay theNotes.  We may choose to redeem theNotes, for example, when prevailing interest rates are lower than the rate thenborne by the Notes.  In that case holderswould not be able to reinvest the redemption proceeds in a comparable securityat an effective interest rate as high as the interest rate on the Notes beingredeemed.

Anysuch redemption right also may adversely impact a holder’s ability to sell theNotes, and/or the price at which holders could sell the Notes, as the redemptiondate approaches.  Holders are advised toconsult with a competent professional on related consequences of purchasingredeemable notes before purchasing them.

## **Item 1B.****                          UNRESOLVEDSTAFF COMMENTS.**

Notapplicable.

## **ITEM 2.****                             PROPERTIES.**

Ourprincipal properties currently consist of the following:

*HootersCasino Hotel.*  We own theapproximately seven-acre site on which the Hooters Casino Hotel is located inLas Vegas, Nevada.  The Hooters CasinoHotel consists of an approximately 29,000 square-foot casino with 696 guestrooms located in the hotel casino building and within two towers.  In addition, a six-level, 556-space parkinggarage is located adjacent to the hotel casino, and 202 additional surfacespaces parking spaces are located on the site.

*ExecutiveOffices and Conference Facility.*  We own an approximately two-acre siteconsisting of a one-level, 17,472 square-foot executive office building andconference facility and a 183-space parking lot.

## **ITEM 3.****                             LEGALPROCEEDINGS.**

Fromtime to time, we are a party to various claims arising in the normal course ofbusiness.  Management believes, however,that there are no proceedings pending or threatened against us which, ifdetermined adversely, would have a material adverse effect on our financialcondition, results of operations or liquidity.

## **ITEM 4.****                             SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS.**

Not applicable.

27

----

# **PART II**

## **ITEM 5.****                             MARKETFOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUERPURCHASES OF EQUITY SECURITIES.**

Notapplicable.

28

----

## **ITEM 6.****                             SELECTEDFINANCIAL DATA.**

The historical selected financial data of 155 EastTropicana, LLC and of the Hôtel San Rémo Casino and Resort set forth belowshould be read in conjunction with “Item 7. Management’s Discussion andAnalysis of Financial Condition and Results of Operations” and “Item 8. FinancialStatements and Supplementary Data.”  Thestatement of operations data for the periods ended December 31, 2006, 2005 and2004, and the balance sheet data at December 31, 2006 and 2005 of 155 EastTropicana, LLC are derived from, and are qualified by reference to, the auditedfinancial statements included in “Item 8. Financial Statements andSupplementary Data.”

**155 EAST TROPICANA, LLC**
| ** **                       | ** ** | **As of or for the periods ended** | ** ** |
|----------------------------------|------------|------------------------------------------------------------------|------------|
| ** **                       | ** ** | **December 31,**                                            | ** ** |
| ** **                       | ** ** | **2006**                                                         | ** ** | **2005 (1) (2)** | ** ** | **2004 (3)** | ** ** |
| ** **                       | ** ** | **(dollars in thousands)**                             | ** ** |
| **Results of Operations:**       |       |                                                             |       |   |   |   |   |
| Net revenues (4)                 |       | $                                                                | 66,711     |   | $ | 7,967 |   | $ | 2,150 |   |
| Operating  expenses (5)          |       | 59,112                                                           |       | 4,280 |   | — |   |
| Depreciation                     |       | 5,842                                                            |       | 1,956 |   | 777 |   |
| Pre-opening  expense             |       | 5,293                                                            |       | 4,825 |   | 103 |   |
| Related party  royalties expense |       | 1,459                                                            |       | — |   | — |   |
| Loss on disposal  of assets      |       | 1,199                                                            |       | — |   | — |   |
| Total operating  (loss) income   |       | (6,194                                                           | )          | (3,094 | ) | 1,270 |   |
| Interest  expense, net (6)       |       | (12,247                                                          | )          | (8,526 | ) | (2,184 | ) |
| Loss on  extinguishment of debt  |       | —                                                           |       | (2,247 | ) | — |   |
| Net loss                         |       | $                                                                | (18,441    | ) | $ | (13,867 | ) | $ | (914 | ) |
| **Balance Sheet:**               |       |                                                             |       |   |   |   |   |
| Cash and cash  equivalents       |       | $                                                                | 6,164      |   | $ | 14,191 |   | $ | 1,221 |   |
| Total assets                     |       | 145,593                                                          |       | 163,159 |   | 75,580 |   |
| Total long-term  debt (7)        |       | 134,940                                                          |       | 130,000 |   | 48,500 |   |
| Total  liabilities               |       | 144,482                                                          |       | 143,607 |   | 50,260 |   |
| Members’ equity             |       | 1,111                                                            |       | 19,553 |   | 25,320 |   |

 

----

(1)          Weobtained our gaming and liquor licenses, thereby completing the final stage ofthe acquisition of substantially all the assets and certain liabilities of the hotelcasino, in October 2005.  The results ofoperation reflect the casino and hotel operations from November 1, 2005 throughDecember 1, 2005.

(2)          Wewere considered a development stage company until November 1, 2005.

(3)          Wewere formed on June 17, 2004 for the purpose of consummating the acquisition ofsubstantially all the assets and certain liabilities of the Hôtel San RémoCasino and Resort.

(4)          Netrevenues for 2005 include related party lease income of $5.4 million receivedfrom Eastern & Western for the lease of the hotel casino from January 1,2005 through October 31, 2005.

(5)          Excludesdepreciation expense, pre-opening expense, related party royalties expense, andloss on disposal of assets.

(6)          Interest expense, net of interest income.

(7)    Includescurrent portion of long-term debt.

29

----

The following historicalinformation of the Hôtel San Rémo Casino and Resort is derived from its auditedfinancial statements for 2002 through 2005. Hôtel San Rémo Casino and Resort’s audited financial statements andrelated notes thereto as of October 31, 2005 and for the ten months then ended,and as of December 31, 2004 and for the year then ended appear elsewhere in thisAnnual Report on Form 10-K. 
| ** **                                | ** ** | **HÔTEL SAN RÉMO CASINO AND RESORT** | ** ** |
|-------------------------------------------|------------|-------------------------------------------------------------------------|------------|
| ** **                                | ** ** | **Ten Months Ended  October 31,**                        | ** ** | **Years Ended  December 31,** | ** ** |
| ** **                                | ** ** | **2005 **(1)                                                       | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
| ** **                                | ** ** | **(dollars in thousands)**                                    | ** ** |
| **Results  of Operations:**               | ** ** | ** **                                                              | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Revenues:**                             | ** ** | ** **                                                              | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Casino                                    |       | $                                                                       | 8,947      |   | $ | 12,725 |   | $ | 11,691 |   | $ | 11,831 |   |
| Food and beverage                         |       | 5,557                                                                   |       | 7,969 |   | 7,782 |   | 7,187 |   |
| Hotel and other                           |       | 12,217                                                                  |       | 14,826 |   | 12,531 |   | 11,567 |   |
| Gross revenues                            |       | 26,721                                                                  |       | 35,520 |   | 32,004 |   | 30,585 |   |
| Promotional allowances                    |       | (1,770                                                                  | )          | (2,414 | ) | (2,179 | ) | (2,384 | ) |
| Net revenues                              |       | $                                                                       | 24,951     |   | $ | 33,106 |   | $ | 29,825 |   | $ | 28,201 |   |
|                                      |       |                                                                    |       |   |   |   |   |   |   |
| **Operating  expenses:**                  | ** ** | ** **                                                              | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Casino                                    |       | $                                                                       | 5,275      |   | $ | 6,796 |   | $ | 6,828 |   | $ | 6,537 |   |
| Food and beverage                         |       | 4,977                                                                   |       | 6,360 |   | 6,099 |   | 5,612 |   |
| Hotel and other                           |       | 3,628                                                                   |       | 4,377 |   | 4,293 |   | 4,081 |   |
| General and administrative                |       | 6,678                                                                   |       | 7,860 |   | 6,604 |   | 6,350 |   |
| Depreciation                              |       | 335                                                                     |       | 1,419 |   | 2,134 |   | 2,257 |   |
| Related party lease expense (2)           |       | 5,439                                                                   |       | 2,150 |   | — |   | — |   |
| Restructuring costs                       |       | —                                                                  |       | 514 |   | — |   | — |   |
| Total operating  expense                  |       | $                                                                       | 26,332     |   | $ | 29,476 |   | $ | 25,958 |   | $ | 24,837 |   |
|                                      |       |                                                                    |       |   |   |   |   |   |   |
| Operating (loss)  income                  |       | $                                                                       | (1,381     | ) | $ | 3,630 |   | $ | 3,867 |   | $ | 3,364 |   |
|                                      |       |                                                                    |       |   |   |   |   |   |   |
| **Other  income (expenses):**             | ** ** | ** **                                                              | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Interest income from affiliate            |       | $                                                                       | 346        |   | $ | 444 |   | $ | 579 |   | $ | 317 |   |
| Interest expense                          |       | (7                                                                      | )          | (1,944 | ) | (1,185 | ) | (1,308 | ) |
| Loss on sale of assets                    |       | —                                                                  |       | (2 | ) | — |   | — |   |
| Foreign currency translation              |       | —                                                                  |       | 660 |   | (2,264 | ) | (2,074 | ) |
| Other                                     |       | —                                                                  |       | — |   | — |   | (19 | ) |
| Total other  income (expenses)            |       | 339                                                                     |       | (842 | ) | (2,870 | ) | (3,084 | ) |
| (Loss) income  before income taxes        |       | (1,043                                                                  | )          | 2,788 |   | 997 |   | 279 |   |
| Benefit  (provision) for income taxes (3) |       | 397                                                                     |       | (867 | ) | (303 | ) | (66 | ) |
| Net (loss)  income (3)                    |       | $                                                                       | (646       | ) | $ | 1,921 |   | $ | 694 |   | $ | 213 |   |
|                                      |       |                                                                    |       |   |   |   |   |   |   |
| **Balance  sheet**                        | ** ** | ** **                                                              | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Cash and cash  equivalents                |       | $                                                                       | 2,903      |   | $ | 4,471 |   | $ | 2,703 |   | $ | 3,516 |   |
| Total assets                              |       | 8,215                                                                   |       | 12,297 |   | 33,312 |   | 36,631 |   |
| Total debt                                |       | —                                                                  |       | 236 |   | 45,226 |   | 43,422 |   |
| Total  liabilities (3)                    |       | 4,355                                                                   |       | 4,824 |   | 49,103 |   | 48,545 |   |
| Division equity  (deficit) (3)            |       | 3,860                                                                   |       | 7,473 |   | (15,791 | ) | (11,914 | ) |

 

----

(1)          Thecompletion of the final stage of the acquisition of the Hôtel San Rémo Casinoand Resort occurred in October 2005, upon receipt of our gaming and liquorlicenses.  The results of operation 

30

----

reflect the casino and hotel operations from January 1, 2005 throughOctober 31, 2005 when the Hôtel San Rémo Casino and Resort ceased operations.

(2)          Inconnection with the August 3, 2004 contribution of the Hôtel San Rémo Casinoand Resort real property and non-gaming assets to us, Eastern & Westernentered into lease arrangements to lease back the hotel casino until wereceived all of the necessary government and regulatory approvals to operatethe hotel casino.  In October 2005, wereceived the necessary gaming and liquor licenses; therefore, the leasearrangements were terminated on October 31, 2005.

(3)          Theprovision for income taxes, net income, and related adjustments to totaldivision equity (deficit) for 2001 are unaudited.

The following selected quarterly financial data of 155East Tropicana, LLC and Hôtel San Rémo Casino and Resort for the years endedDecember 31, 2006 and 2005 is derived from the quarterly condensed consolidatedfinancial statements of 155 East Tropicana, LLC and the quarterly condensedcombined financial statements of Hôtel San Rémo Casino and Resort.  The financial data for the fourth quarter of2006 and 2005 are derived from the annual consolidated financial statements of155 East Tropicana, LLC and the annual combined financial statements of HôtelSan Rémo Casino and Resort included in “Item 8. Financial Statements andSupplementary Data.”  The financial datafor the fourth quarter of 2005 is presented as if there was no change inownership or operation of the hotel casino. 
| ** **               | ** ** | **155 EAST TROPICANA, LLC**           | ** ** | ** **              | ** ** |
|--------------------------|------------|------------------------------------------------------|------------|-------------------------|------------|
| ** **               | ** ** | **For the fiscal quarter ended** | ** ** | ** **              | ** ** |
| ** **               | ** ** | **March 31,  2006**                             | ** ** | **June 30,  2006** | ** ** | **September 30,  2006** | ** ** | **December 31,  2006** | ** ** | **Total** | ** ** |
| ** **               | ** ** | **(dollars in thousands)**                 | ** ** | ** **              | ** ** |
| Net revenues (1)         |       | $                                                    | 14,906     |                    | $          | 18,025 |   | $ | 17,006 |   | $ | 16,775 |   | $ | 66,712 |   |
| Operating (loss)  income |       | (4,856                                               | )          | (1,633                  | )          | (529 | ) | 824 |   | (6,194 | ) |
| Net loss                 |       | (7,596                                               | )          | (4,735                  | )          | (3,737 | ) | (2,373 | ) | (18,441 | ) |
|                          |            |                                                      |            |                         |            |  |  |  |  |  |  |  |  |  |  |  |

 
| ** **               | ** ** | **COMBINED**                                         | ** ** | ** **              | ** ** |
|--------------------------|------------|------------------------------------------------------|------------|-------------------------|------------|
| ** **               | ** ** | **For the fiscal quarter ended** | ** ** | ** **              | ** ** |
| ** **               | ** ** | **March 31,  2005**                             | ** ** | **June 30,  2005** | ** ** | **September 30,  2005** | ** ** | **December 31,  2005** | ** ** | **Total** | ** ** |
| ** **               | ** ** | **(dollars in thousands)**                 | ** ** | ** **              | ** ** |
| Net revenues             |       | $                                                    | 8,951      |                    | $          | 7,936 |   | $ | 6,160 |   | $ | 4,431 |   | $ | 27,478 |   |
| Operating income  (loss) |       | 1,847                                                |       | 945                     |       | (1,275 | ) | (5,992 | ) | (4,475 | ) |
| Net loss                 |       | (1,642                                               | )          | (1,481                  | )          | (3,622 | ) | (8,164 | ) | (14,909 | ) |
|                          |            |                                                      |            |                         |            |  |  |  |  |  |  |  |  |  |  |  |

 

----

(1)          Net revenues issued in previous quarters havebeen reduced for the reclassification (from casino expense) of slotparticipation fees.

## **ITEM 7.****                             MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.**

The following discussion should be read inconjunction with, and is qualified in its entirety by, the financial statementsand related notes thereto and other financial information included in “Item 8. FinancialStatements and Supplementary Data.” Certain statements in this Management’s Discussion and Analysis ofFinancial Condition and Results of Operations are forward-looking.

31

----

***Overview for 155 East Tropicana, LLC***

155 East Tropicana, LLC (“we”, “us”, “our”, or “155”)was formed on June 17, 2004 to acquire the Hôtel San Rémo Casino and Resort (“HôtelSan Rémo”), from Eastern & Western Hotel Corporation, or Eastern &Western.  Our common membership interestsare held two-thirds through Florida Hooters LLC and one-third through EW CommonLLC.

Florida Hooters LLC is a joint venture betweenHooters Gaming LLC and Lags Ventures, LLC. The owners of Hooters Gaming LLC, which include most of the originalfounders of the Hooters brand, hold licenses to sell wholesale foods andcalendars and to operate hotel casinos in Nevada and Hooters restaurants inTampa Bay, Florida, Chicago, Illinois and downtown Manhattan in New York.  Lags Ventures, LLC is owned by a holder ofthe license rights to Hooters restaurants in South Florida and the State ofNevada.  Pursuant to these licenserights, the owners of Florida Hooters LLC operate 38 Hooters restaurants,publish Hooters calendars, and operate a Hooters foods business.  The owner of Lags Ventures, LLC is also thefounder of the Dan Marino concept restaurants and owns and operates 2 DanMarino concept restaurants.

Eastern & Western owns 90% of EW Common LLC,while our President, Michael Hessling, owns the balance.  Eastern & Western owned the Hôtel SanRémo from November 1988 until our acquisition of the Hôtel San Rémo in 2004.

Our affiliates have granted us assignments of certain licenseagreements pertaining to the use of the Hooters brand as well as the DanMarino, 13 Martini Bar and Pete & Shorty’s concept restaurants, which willallow us to operate the Hooters Casino Hotel. The original founders of the Hooters brand sold the trademark rights(excluding certain rights they retained for themselves) to Hooters of Americain 2001.  As a result, Hooters of Americais the trademark owner of the Hooters brand and the operator and franchisor of Hootersrestaurants.  Pursuant to the Hooterslicense assignment, we are required to pay Hooters of America a royalty fee,which totaled approximately $1.3 million from February 3, 2006 (grand opening)through December 31, 2006.  Aside fromthe abovementioned royalty fee, we are not otherwise affiliated with Hooters ofAmerica.

In August 2004, we agreed to the acquisition of thereal property and other assets of the Hôtel San Rémo for approximately $74.6million including transaction costs and expenses, and as adjusted for finalpurchase price adjustments.  Initially,we acquired $67.5 million of the real property and non-gaming assets and agreedthat additional cash payments associated with the transfer of working capitaland the remaining $5.0 million in gaming assets would be transferred to us uponobtaining the gaming and liquor licenses necessary to take over operations ofthe hotel casino.  In connection with theacquisition, we refinanced $43.7 million of Eastern & Western’s existingindebtedness, incurred additional expenses and obligations of $5.9 million, andissued to Eastern & Western $25.0 million of preferred membership interestrepresenting one-third of our common membership interests.  EW Common LLC was formed to hold Eastern& Western’s membership interests in us. Concurrently, we issued to Florida Hooters LLC two-thirds of ourcommon membership interests in exchange for $5.1 million cash and theassignment of certain rights with respect to trademarks and licenses valued at$4.2 million, based on a valuation from a third-party appraiser.

On March 29, 2005, we issued $130.0 millionaggregate principal amount of 83⁄4% Senior Secured Notes due 2012, or the oldnotes, in a private placement.  The oldnotes were subsequently exchanged with new notes, or the Notes, registered underthe Securities Act of 1933 on Form S-4. Interest payments on the Notes are due semi-annually, on each April 1and October 1.  We used the proceeds fromthe old notes offering to refinance existing indebtedness, and have used, andare using, the 

32

----

remaining proceeds (together with cash from operations and proceedsfrom equipment financing) to renovate the hotel casino and to provide workingcapital.

In connection with the offering of the old notes, weformed a wholly owned subsidiary, 155 East Tropicana Finance Corp., solely forthe purpose of facilitating the old notes offering as a co-issuer of theold notes.

We also entered into a $15.0 million CreditFacility concurrently with the offering of the old notes.  As discussed in more detail under Liquidityand Capital Resources (155 East Tropicana, LLC), the Credit Facility wasamended on January 1, 2006, June 6, 2006, and December 15, 2006.  At December 31, 2006, $912,610 wasoutstanding on the Credit Facility.

Prior to November 1, 2005, we conducted no businessor operations other than in connection with the acquisition and subsequentleasing of the Hôtel San Rémo.  ThroughOctober 31, 2005, Eastern & Western held the gaming license in Nevada andowned all gaming assets used by the Hôtel San Rémo.  Under a casino lease and hotel lease, Eastern& Western operated the Hôtel San Rémo. After obtaining the necessary gaming and liquor licenses to operate thehotel casino in October 2005, we assumed operations of the hotel casino onNovember 1, 2005 and the leases with Eastern & Western were terminated.

Casino revenue is derived primarily from patronswagering on slot machines, table games and other gaming activities.  Table games include blackjack, craps,roulette, and specialty games.  Casinorevenue is defined as the win from gaming activities, computed as thedifference between gaming wins and losses, not the total amount wagered.  “Table game drop” and “slot handle” arecasino industry specific terms used to identify the amount wagered by patronsfor a casino table game or slot machine, respectively.  “Table game hold” and “slot hold” representthe percentage of the total amount wagered by the patron that the casino haswon.  Hold is derived by dividing theamount won by the casino (“table game win” and “slot win”) by the amountwagered by the patron.  Casino revenue isrecognized at the end of each gaming day.

Room revenue is derived from rooms and suites rentedto guests.  “Average daily rate” is anindustry specific term used to define the average amount of revenue per rentedroom per day.  “Occupancy percentage”defines the total percentage of rooms occupied, and is computed by dividing thenumber of rooms occupied by the total number of rooms available.  Room revenue is recognized at the time theroom is provided to the guest.

Food and beverage revenues are derived from food andbeverage sales in the food outlets of the hotel casino, including restaurants,room service and banquets.  Food andbeverage revenue is recognized at the time food and/or beverage is provided to theguest.  “Covers” are the number ofpatrons served in a food outlet.  “Averagecheck” is the average amount of food and beverage revenue charged to patrons ontheir restaurant checks.

Casino revenues vary from time to time due togeneral economic conditions, table game hold, slot hold, and occupancypercentages at the Hooters Casino Hotel and other hotels in Las Vegas.  Casino revenues also vary depending upon theamount of gaming activity as well as variations in the odds for different gamesof chance.  Casino revenues, roomrevenues, food and beverage revenues, and other revenues vary due to generaleconomic conditions and competition. During 2005, Las Vegas has continued to experience an upward trend intotal visitation, as well as gaming win, hotel occupancy and hotel dailyaverage room rates.

33

----

The following table summarizes the combined resultsof operations of 155 East Tropicana, LLC and the results of operations of the HôtelSan Rémo as if there had been no change in ownership during 2005 (in thousands):
| ** **                                                                | ** ** | **155**                                      | ** ** | **COMBINED**                                 | ** ** | ** **                           | ** ** | **HÔTEL SAN RÉMO**       | ** ** | ** **                           | ** ** |
|---------------------------------------------------------------------------|------------|----------------------------------------------|------------|----------------------------------------------|------------|--------------------------------------|------------|----------------------------------------------|------------|--------------------------------------|------------|
| ** **                                                                | ** ** | **Year Ended  December 31,  2006** | ** ** | **Year Ended  December 31,  2005** | ** ** | **%  Change  2006 - 2005** | ** ** | **Year Ended  December 31,  2004** | ** ** | **%  Change  2005 - 2004** | ** ** |
| ** **                                                                | ** ** | **(dollars in thousands)**         | ** ** |
| ** **                                                                | ** ** | ** **                                   | ** ** |
| Casino revenues                                                           |       | $                                            | 25,830     |                                         | $          | 9,940                                |       | 159.9                                        | %          | $                                    | 12,145     |   | (18.2 | )% |
| Casino expenses                                                           |       | 13,104                                       |       | 6,328                                        |       | 107.1                                | %          | 6,216                                        |       | 1.8                                  | %          |
| Profit margin                                                             |       | 49.3                                         | %          | 36.3                                         | %          |                                 |       | 48.8                                         | %          |                                 |       |
|                                                                      |       |                                         |       |                                         |       |                                 |       |                                         |       |                                 |       |
| Food and  beverage revenues                                               |       | $                                            | 23,621     |                                         | $          | 6,218                                |       | 279.9                                        | %          | $                                    | 7,969      |   | (22.0 | )% |
| Food and  beverage expenses                                               |       | 18,974                                       |       | 6,118                                        |       | 210.2                                | %          | 6,360                                        |       | (3.8                                 | )%         |
| Profit margin                                                             |       | 19.7                                         | %          | 1.6                                          | %          |                                 |       | 20.2                                         | %          |                                 |       |
|                                                                      |       |                                         |       |                                         |       |                                 |       |                                         |       |                                 |       |
| Hotel and other  revenues                                                 |       | $                                            | 22,696     |                                         | $          | 13,392                               |       | 69.5                                         | %          | $                                    | 14,826     |   | (9.7 | )% |
| Hotel and other  expenses                                                 |       | 8,786                                        |       | 4,270                                        |       | 105.8                                | %          | 4,377                                        |       | (2.4                                 | )%         |
| Profit margin                                                             |       | 61.3                                         | %          | 68.1                                         | %          |                                 |       | 70.5                                         | %          |                                 |       |
|                                                                      |       |                                         |       |                                         |       |                                 |       |                                         |       |                                 |       |
| Promotional  allowances                                                   |       | $                                            | 5,436      |                                         | $          | 2,072                                |       | 162.4                                        | %          | $                                    | 2,414      |   | (14.2 | )% |
| Percent of gross  revenues                                                |       | 7.5                                          | %          | 7.0                                          | %          |                                 |       | 6.9                                          | %          |                                 |       |
|                                                                      |       |                                         |       |                                         |       |                                 |       |                                         |       |                                 |       |
| General and  administrative expenses                                      |       | $                                            | 18,248     |                                         | $          | 8,123                                |       | 124.7                                        | %          | $                                    | 7,859      |   | 3.4 | % |
| Percent of net  revenues                                                  |       | 27.4                                         | %          | 29.6                                         | %          |                                 |       | 24.2                                         | %          |                                 |       |
|                                                                      |       |                                         |       |                                         |       |                                 |       |                                         |       |                                 |       |
| Depreciation  expense                                                     |       | $                                            | 5,842      |                                         | $          | 2,291                                |       | 155.0                                        | %          | $                                    | 2,196      |   | 4.3 | % |
|                                                                      |       |                                         |       |                                         |       |                                 |       |                                         |       |                                 |       |
| Pre-opening  expenses                                                     |       | $                                            | 5,293      |                                         | $          | 4,824                                |       | 9.7                                          | %          | $                                    | 103        |   | 4565.5 | % |
|                                                                      |       |                                         |       |                                         |       |                                 |       |                                         |       |                                 |       |
| Related party  royalties expense                                          |       | $                                            | 1,459      |                                         | $          | —                               |       | 100.0                                        | %          | $                                    | —     |   | 0.0 | % |
|                                                                      |       |                                         |       |                                         |       |                                 |       |                                         |       |                                 |       |
| Restructuring  costs                                                      |       | $                                            | —     |                                         | $          | —                               |       | 0.0                                          | %          | $                                    | 514        |   | (100.0 | )% |
|                                                                      |       |                                         |       |                                         |       |                                 |       |                                         |       |                                 |       |
| Loss on disposal  of assets                                               |       | $                                            | 1,199      |                                         | $          | —                               |       | 100.0                                        | %          | $                                    | —     |   | 0.0 | % |
|                                                                      |       |                                         |       |                                         |       |                                 |       |                                         |       |                                 |       |
| Loss on  extinguishment of debt                                           |       | $                                            | —     |                                         | $          | 2,247                                |       | (100.0                                       | )%         | $                                    | —     |   | 100.0 | % |
|                                                                      |       |                                         |       |                                         |       |                                 |       |                                         |       |                                 |       |
| Foreign currency  translation gain (loss)                                 |       | $                                            | —     |                                         | $          | —                               |       | 0.0                                          | %          | $                                    | 660        |   | (100.0 | )% |
|                                                                      |       |                                         |       |                                         |       |                                 |       |                                         |       |                                 |       |
| Interest income                                                           |       | $                                            | 499        |                                         | $          | 1,976                                |       | (74.8                                        | )%         | $                                    | 444        |   | 345.3 | % |
|                                                                      |       |                                         |       |                                         |       |                                 |       |                                         |       |                                 |       |
| Interest expense                                                          |       | $                                            | 12,746     |                                         | $          | 10,163                               |       | 25.4                                         | %          | $                                    | 4,128      |   | 146.2 | % |
|                                                                      |       |                                         |       |                                         |       |                                 |       |                                         |       |                                 |       |
| Related party  lease income (155 East Tropicana, LLC)                     |       | $                                            | —     |                                         | $          | 5,439                                |       | (100.0                                       | )%         | $                                    | 2,150      |   | 152.9 | % |
| Related party  lease expense (Hôtel San Rémo Casino and Resort) |       | $                                            | —     |                                         | $          | 5,439                                |       | (100.0                                       | )%         | $                                    | 2,150      |   | 152.9 | % |

 

***Comparison of Year Ended December 31, 2006 (155East Tropicana, LLC) with the Year Ended December 31, 2005 (Combined)***

The results of operations for the year endedDecember 31, 2006 includes the months of January 2006 when the property wasessentially closed for remodeling and the first eleven months of operations ofthe Hooters Casino Hotel from February 3, 2006 through December 31, 2006.  Net operating revenues for the year endedDecember 31, 2006 were $66.7 million, an increase of $39.2 million or 147.3%,from $27.5 million of combined net operating revenues for 155 and Hôtel SanRémo during the same period in the previous year.  Included in the net revenues for the yearended December 31, 2006 were $66.4 million generated by the Hooters CasinoHotel operations beginning on February 3, 2006. The significant 

34

----

increase in net operating revenues was due to increased activity in allareas of the casino and hotel operations following the opening of the newlyrenovated Hooters Casino Hotel.

Expenses before interest, depreciation, related-partyroyalties, pre-opening expenses, and loss on disposal totaled $59.1 million forthe year ended December 31, 2006.  Thislevel of spending against net revenues of $66.7 million did not result inadequate cash flow from operations to cover debt service and capital expenditures.  We targeted certain operating expenses andreduced these expenses starting in June 2006.  Expenses before interest, depreciation andrelated party royalties were cut from $17.4 million in the second quarter of2006 to $15.4 million in the third quarter. The decline in third quarter expenses resulted largely from cutting marketingcosts by $1.0 million, payroll costs by $0.2 million and other operationalexpenses by $0.9 million.  Expensesbefore interest, depreciation and related party royalties were then cut from $15.4million in the third quarter of 2006 to $14.4 million in the fourth quarter of2006, a decline of $1.0 million.  Thedecline in fourth quarter expenses resulted largely from cutting marketingcosts by $0.6 million, food and beverage costs by $0.3 million, and othergeneral and administrative expenses by $0.2 million.

In looking forward to our 2007 fiscal period, we willbe making several changes during the year aimed at increasing visitor volume tothe property, including: (1) increasing our presence through television, radio,and interstate billboards to build awareness of Hooters Casino Hotel inSouthern California, (2) converting “13” Martini Bar to the new Night OwlShowroom opening on April 20, 2007, which will feature veteran comedy stand-upartist Bobby Slayton, “The Pitbull of Comedy,” (3) featuring value-priced foodofferings in our restaurants, and (4) introducing new marketing promotions andother gaming-oriented events.  Ourmanagement has also identified slot revenue as a revenue source that needs tobe enhanced.  We are modifying the slotfloor and enhancing the slot club by featuring cash back during the firstquarter of 2007.  The new slot club willbe promoted with programs such as HOOT Million Dollar Swipe and othergiveaways.

*Casino.*  Casinorevenues increased by $15.9 million to $25.8 million for the year endedDecember 31, 2006, compared to $9.9 million for the year ended December 31, 2005.  Casino revenue of $25.7 million was generatedafter the grand opening on February 3, 2006.

Table games revenue was $11.0 million in 2006, an increaseof $7.8 million, or 241.0%, from the prior year’s table games win of $3.2million.  With the exception of $0.1million, all table games revenue was generated after the grand opening.  Table games drop increased to $64.4 million,or by 280.3%, for the year ended December 31, 2006 compared to the same periodin 2005, but the table games hold percentage decreased from 19.1% in 2005 to17.1% in 2006.  The table games generatedan average win per table of $1,013 per day after February 3, 2006 as comparedto $568 for the same period in 2005. According to the Gaming Revenue Reports published by the Nevada State GamingControl Board, the average win per table per day for Las Vegas Strip casinoswith annual gaming revenue of $36.0 to $70.0 million was $1,069 for the yearended December 31, 2006.

Slot revenue of $14.3 million for the year endedDecember 31, 2006 was an increase of 115.9% compared to $6.6 million in2005.  With the exception of $0.1million, the entire slot revenue was generated after the grand opening.  The average win per machine per day was $73from February 3, 2006 to December 31, 2006 compared to $40 for the same periodin 2005.  According to the Gaming RevenueReports published by the Nevada State Gaming Control Board, the average win permachine per day for Las Vegas Strip casinos with annual gaming revenue of $36.0to $70.0 million was $111 for the year ended December 31, 2006.  Management began implementing strategies in2006 to increase slot play.  In thesummer of 2006, we began to add new slot machines to the floor and reconfigurethe floor to make it more inviting.  Wecontinued by targeting our marketing efforts at increasing slot play throughmore aggressive slot club awards, modifications to the pay tables on the slotmachines to award more and larger 

35

----

payouts, direct mailing campaigns, and other promotions and programsaimed at increasing the flow of customers to the casino floor.  These programs began in the fourth quarter of2006 and will continue to be implemented in early 2007.

Casino expenses increased by 107.1% to $13.1 millionfor the year ended December 31, 2006 compared to $6.3 million for the yearended December 31, 2005 due to increases in payroll and other operationalexpenses.  However, the profit margin forcasino operations increased from 36.3% during the year ended December 31, 2005 to49.3% during the year ended December 31, 2006 due to payroll and otheroperational expenses being proportionally lower during 2006 in comparison torevenue.  The percentage of expenses incomparison to revenue for the years ended December 31, 2006 and 2005 were 27.7%and 34.9%, respectively, for payroll expenses and 22.5% and 26.1%,respectively, for other operational expenses.

*Food and beverage.*  Foodand beverage revenue was $23.6 million for the year ended December 31, 2006 ascompared to $6.2 million for 2005, an increase of 279.9%.  The increase in food revenues was a result ofincreased customer volume after the grand opening.  Beverage revenue (which includes complimentarybeverages) increased by $7.9 million, or 381.6%, from $2.1 million during theyear ended December 31, 2005.

Food and beverage expenses increased from $6.1million during the year ended December 31, 2005 to $19.0 million during theyear ended December 31, 2006, an increase of $12.9 million.  The increase was due to increases in payroll,cost of sales, and other operational expenses associated with the increase inbusiness volume and the increase in number of food and beverage outlets fromfive to ten after the grand opening.  Theprofit margin for food and beverage operations increased from 1.6% during theyear ended December 31, 2005 to 19.7% during the year ended December 31, 2006operational efficiencies in payroll and cost of sales.

*Hotel and other.*  Hoteland other revenue (which includes hotel room revenue, retail, spa and othermiscellaneous revenue) increased by $9.3 million, or 69.5%, to $22.7 millionfor the year ended December 31, 2006 from $13.4 million for the year endedDecember 31, 2005.

Room revenue increased to $16.3 million for the yearended December 31, 2006 compared to $12.4 million in 2005.  For the months of February through December2006, room revenue was $15.9 million with an occupancy rate of 79.7% andaverage daily room rate of $90.  Thiscompares to room revenue of $11.2 million for the same eleven months in 2005,with an occupancy rate of 84.0% and an average daily rate of $66.  Subsequent to the remodeling of the rooms,which were completed in February 2006, we have been able to increase room ratesdue to the improved product; however, occupancy rates were not as strong due tothe slow start-up in marketing our rooms in the first two quarters of 2006.  The occupancy rates have steadily climbedthough each quarter beginning with 66.3% in the period from February 3 to March31,2006, then to 73.9% in the second quarter, 80.7% in the third quarter and83.4% in the fourth quarter of 2006.

Retail revenue was $5.5 million or 24.2% of hoteland other revenue in the year ended December 31, 2006 and has increased from $0.9million during the year ended December 31, 2005 due to the strength of Hootersbrand merchandise.

Hotel and other expenses increased by 105.8% from$4.3 million during the year ended December 31, 2005 to $8.8 million during theyear ended December 31, 2006 due to significant increases in payroll and otherexpenses in hotel and retail operations.  The profit margin for room was 61.3% duringthe year ended December 31, 2006 compared to 68.8% for the same period in 2005due to increases in payroll expense and upgraded room amenities.  Retail sales generated a profit margin of 35.3%in 2006.

36

----

*General and administrative.* General and administrative expense includes costs associated withcorporate marketing, information technology, finance, accounting, and propertyoperations.  General and administrativeexpense increased $10.1 million to $18.2 million for the year ended December31, 2006 compared to $8.1 million for the year ended December 31, 2005.  This increase was principally due toincreases in advertising and marketing expenses for the rebranding of the hotelcasino and payroll expenses for increased staffing under the Hooters CasinoHotel operations for the year ended December 31, 2006.

*Depreciation and amortization expense.*  Depreciationand amortization expense of $5.8 million for the year ended December 31, 2006increased by $3.5 million, or 155.0%, from $2.3 million for the year endedDecember 31, 2005.  The increase indepreciation and amortization expense was due to additional depreciation offixed asset additions placed in service beginning February 3, 2006.

*Pre-opening expenses.* Pre-opening expenses are costs associated with the start-up activitiesfor the new Hooters Casino Hotel and consist of salaries and wages, legal,professional, general, and other general administrative expenses.  Pre-opening expenses increased by $0.5million to $5.3 million for the year ended December 31, 2006 compared to $4.8million during the year ended December 31, 2005, largely due to increasedtraining expenses during the month of January 2006 and the costs of the grandopening celebration for the Hooters Casino Hotel in February 2006.

*Related party royalties expenses.* Beginning on February 3, 2006, related party royalty fees were incurredpursuant to agreements with Hooters Gaming Corporation, Lags Ventures, Inc.,and Las Vegas Wings, Inc.  These relatedparty royalties expenses totaled $1.5 million during the year ended December31, 2006.  The payment of the relatedparty royalties is restricted under the Notes indenture.  The fees can only be paid after the close ofthe fiscal year and only if our debt coverage ration is 1.5 to 1 for thatfiscal year.  The payments of the royaltyfees are further limited to the sum of 2% of revenue and 3% of EBITDA asdefined in the indenture.

*Loss on disposal of assets.*  Theloss on disposal of assets in 2006 of $1.2 million is the result of retiring andreplacing certain old slot machines and other equipment and carpeting on thecasino floor in connection with the Hooters Casino Hotel remodel.

*Interest income.* Interest income was $0.5 million for the year ended December 31, 2006,compared to $2.0 million for the year ended December 31, 2005.  The decrease resulted from greater interestincome earned during 2005 on the investment of the $130.0 million in Notesproceeds.

*Interest expense.* Interest expense was $12.7 million for the year ended December 31, 2006,compared to $10.2 million for the year ended December 31, 2005, an increase of$2.5 million.  The increase in interestexpense is largely attributable to twelve full months of interest expense totaling$11.4 million on the $130.0 million in Notes during the year ended December 31,2006 compared to nine full months of interest expense totaling $8.5 millionduring the year ended December 31, 2005.

*Loss on extinguishment of debt.*  Theloss on extinguishment of debt in 2005 was related to the payoff of our bankloan with the proceeds of the old notes.

*Related party lease income.* During the period from August 3, 2004 through October 31, 2005, weleased the hotel casino to Eastern & Western under two separate leaseagreements.  Pursuant to the casino leaseagreement, the casino, showroom, liquor servicing areas and other casinorelated areas were leased for $125,000 per month.  Pursuant to the hotel lease agreement for thehotel, restaurants, and other areas of the hotel casino property, rental incomewas $250,000 per month, plus a percentage rent equal to 100% of all revenuesreceived by Eastern & Western from the operation of the hotel andrestaurants, less 

37

----

operating expenses and working capital reserves, as defined in thehotel lease agreement.  For the yearended December 31, 2005, a total of $5.4 million was received in rental incomeunder the casino and hotel leases.

*Related party lease expense. *During the period from August 3, 2004 through October 31, 2005, Eastern& Western leased the hotel casino from us (see Related Party Lease Incomein the paragraph above).  Rental expenseof $5.4 million was incurred under the casino and hotel leases for the year endedDecember 31, 2005.

*Provision for income taxes.* Income of the Hôtel San Rémo is included in the tax return of S.I.Enterprises, Inc.  The provision forincome taxes was a benefit of $0.4 million for the year ended December 31,2005, predicated on loss before taxes of $1.0 million.

155 East Tropicana, LLC is a limited-liabilitycompany and is treated as a partnership for federal income tax purposes.  Accordingly, a provision for federal incometaxes is not recorded on 155 East Tropicana, LLC’s consolidated financialstatements.  Taxable income or loss willbe included in the income tax returns of the members.

***Comparison of Year Ended December 31, 2005(Combined) with the Year Ended December 31, 2004 (Combined)***

The decline in revenues was the result of a generaldecline in business due to construction disruption.  During the year ended December 31, 2005,substantial blocks of rooms were periodically out of service for remodeling;the Paparazzi restaurant was closed in June 2005; the Luigi’s and Saizenrestaurants were permanently closed in September 2005; the coffee shop wasclosed from September to the end of November; and from 230 to 330 slot machineson the casino floor were deactivated during the months from June throughDecember 2005.  The main entrance to thecasino was obstructed from early November through the end of December whichinterfered with traffic flow.

*Casino.* Casino revenues decreased by $2.2 million to $9.9 million for the yearended December 31, 2005, compared to $12.1 million for the year ended December31, 2004, primarily attributable to construction disruption as discussedabove.  Table games revenue was $3.2million in 2005, a decrease of $0.4 million, or 11.3%, from the prior year’stable games win of $3.6 million.  Thedecrease in table game drop was $2.8 million, or 14.0%, for the year endedDecember 31, 2005 compared to the year ended December 31, 2004, and waspartially offset by an increase in the table game hold percentage from 18.5% in2004 to 19.1% in 2005.  Slot revenue of $6.6million for the year ended December 31, 2005 was a decrease of 21.1% comparedto $8.4 million in 2004.  During thethird and fourth quarters of 2005, approximately one-half of the casino slotfloor was closed because of the remodeling.

Casino expenses in 2005 remained comparable to 2004,with a slight increase of $0.1 million due primarily to payroll expenses.  Casino profit margin decreased given thedecrease in revenues and increase in expenses.

The casino revenue and expense for the years endedDecember 31, 2005 and 2004 have been modified to conform to the current year’spresentation.  Participation fees paid toslot machine manufacturers have been reclassified from casino expense to areduction in casino revenue.

*Food and beverage.*  Foodand beverage revenue was $6.2 million for the year ended December 31, 2005 ascompared to $8.0 million for 2004, a decrease of 22.0%.  The decline was a result of a food revenuedecline of $1.8 million.  Covers in allrestaurants declined by 201,800, or 34.4%. Covers for the Coffee Shop declined by 181,000, or 35.5%, during theyear ended December 31, 2005 largely as a result 

38

----

of the closure of the restaurant for two months.  The decrease in food revenue is also attributableto the permanent closings of the Paparazzi, Luigi’s, and Saizen restaurantsduring the year ended December 31, 2005. Beverage revenue (which includes complimentary beverages) increasedslightly by $30,000, or 1.4%, largely due to the number of complimentarybeverages served on the casino floor.

Food and beverage expenses decreased by 3.8% due toa decrease in cost of sales as a result of the multiple restaurantclosures.  Food and beverage profitmargin decreased significantly from 20.2% in 2004 to 1.6% in 2005 due to asignificant decrease in food and beverage revenues in 2005 while the expensesremained comparable from 2004 to 2005.

*Hotel and other.*  Hoteland other revenue decreased by $1.4 million, or 9.7%, from $14.8 million forthe year ended December 31, 2004 to $13.4 million for the year ended December31, 2005.  The occupancy rate, based onavailable rooms, remained relatively flat to 83.4% for the year ended December31, 2005 from 83.5% for the year ended December 31, 2004.  The number of rooms available for saledeclined by 29,000, or 11.5%, due to rooms that were taken out of service forremodeling.  The decline in hotel andother revenue was somewhat offset by an increase of 2.6% in average daily roomrate to $65.66 for the year ended December 31, 2005 from $63.99 for the yearended December 31, 2004.  There was alsoa general increase in average daily room rates in the Las Vegas market in2005.  According to the Las VegasConvention and Visitors Authority, the Las Vegas average daily room ratesincrease by $13.34, or 14.9%, for the year ended December 31, 2005.

Hotel and other expenses decreased by 2.4% due tocost savings associated with a decline in rooms to clean and supply.

*General and administrative.* General and administrative expense includes costs associated withcorporate marketing, information technology, finance, accounting, and propertyoperations.  General and administrativeexpense increased $0.3 million to $8.1 million for the year ended December 31,2005 compared to $7.8 million for the year ended December 31, 2004.  This increase was principally due toincreases in payroll expenses in finance, accounting, and executive management.

*Depreciation expense.* Depreciation expense of $2.3 million for the year ended December 31,2005 increased by $0.1 million, 4.3%, from $2.2 million for the year endedDecember 31, 2004.  The increase indepreciation expense was due to additional depreciation of fixed assetadditions.

*Restructuring costs.*  The$0.5 million in restructuring costs incurred during the year endedDecember 31, 2004 represents various professional fees incurred inconnection with Hôtel San Rémo’s assessment of its financial alternatives andfuture business strategies.  These feeswere incurred as a result of Hôtel San Rémo’s events of default under itsformer debt agreements.  There were norestructuring costs incurred during the year ended December 31, 2005.

*Pre-opening expenses.* Pre-opening expenses are costs associated with the start-up activitiesfor the new Hooters Casino Hotel and consist of salaries and wages, legal,professional, general, and other general administrative expenses.  Pre-opening expenses increased by $4.7million to $4.8 million for the year ended December 31, 2005 compared to $0.1million during the year ended December 31, 2004 due to increased start-upactivities.

*Interest income.* Interest income was $2.0 million for the year ended December 31, 2005,compared to $0.4 million for the year ended December 31, 2004.  The increase resulted from interest incomereceived by 155 East Tropicana, LLC on the investment of old notes proceeds forthe year ended December 31, 2005.

39

----

*Interest expense.* Interest expense was $10.2 million for the year ended December 31, 2005,compared to $4.1 million for the year ended December 31, 2004, an increase of$6.1 million.  The increase in interestexpense is largely attributable to $9.1 million in interest expense on the$130.0 million in Notes.

*Foreign currency translation.*  Theforeign currency translation income of the Hôtel San Rémo resulted from thefluctuations in Japanese Yen denominated borrowings.  These borrowings totaled approximately$23.4 million at December 31, 2003 and were paid in full onAugust 3, 2004.  For the year endedDecember 31, 2004, currency fluctuations resulted in a gain of$0.7 million.  There was no foreigndebt outstanding during the year ended December 31, 2005.

*Loss on extinguishment of debt.*  Theloss on extinguishment of debt in 2005 was related to the payoff of our bankloan with the proceeds of the old notes.

*Related party lease income.* During the period from August 3, 2004 through October 31, 2005, 155 EastTropicana, LLC leased the hotel casino to Eastern & Western under twoseparate lease agreements.  Pursuant tothe casino lease agreement, the casino, showroom, liquor servicing areas andother casino related areas were leased for $125,000 per month.  Rental income of $1.2 million was receivedunder the casino lease for the year ended December 31, 2005 compared to $0.6million for the period from inception (June 17, 2004) through December 31,2004.  Pursuant to the hotel leaseagreement for the hotel, restaurants, and other areas of the hotel casinoproperty, rental income was $250,000 per month, plus a percentage rent equal to100% of all revenues received by Eastern & Western from the operation ofthe hotel and restaurants, less operating expenses and working capitalreserves, as defined in the hotel lease agreement.  Rental income of $4.2 million was receivedunder the hotel lease for the year ended December 31, 2005 compared to $1.5million for the period from inception (June 17, 2004) through December 31,2004.

*Related party lease expense. *During the period from August 3, 2004 through October 31, 2005, Eastern& Western leased the hotel casino from 155 East Tropicana, LLC (see RelatedParty Lease Income in the paragraph above). Rental expense of $5.4 million and $2.1 million was incurred under thecasino and hotel leases for the years ended December 31, 2005 and 2004,respectively.

*Provision for income taxes.* Income of the Hôtel San Rémo is included in the tax return of S.I.Enterprises, Inc.  The provision forincome taxes was $0.9 million for the year ended December 31, 2004,predicated on income before taxes of $2.8 million, compared to a benefit of$0.4 million for the year ended December 31, 2005, predicated on lossbefore taxes of $1.0 million.

155 East Tropicana, LLC is a limited-liabilitycompany and is treated as a partnership for federal income tax purposes.  Accordingly, a provision for federal incometaxes is not recorded on 155 East Tropicana, LLC’s consolidated financialstatements.  Taxable income or loss willbe included in the income tax returns of the members.

***Liquidity and Capital Resources (155 East Tropicana, LLC)***

Forthe year ended December 31, 2006, we used $10.5 million of cash in operatingactivities, largely due to our net loss of $18.4 million, which was offset by $9.9million of non-cash depreciation and amortization charges, non-cash loss ondisposal of assets, and payment-restricted related party royalty fees.

Forthe year ended December 31, 2006, $4.1 million of cash was provided byinvesting activities, largely due to the release of restricted cash to payinterest, offset by capital expenditures and the payment 

40

----

of constructionpayables.  At December 31, 2006, we nolonger have funds held as restricted cash.

For the year ended December 31, 2006, we used $1.6million of cash in financing activities, largely as a result of principalpayments on equipment debt, offset by $0.9 million in proceeds from issuance oflong-term debt.

The Notes’ indenture contains certain provisionswhich restrict or limit our ability to, among other things, incur more debt,pay dividends, redeem stock or make other distributions, enter intotransactions with affiliates or transfer or sell assets.

We entered into our $15.0 million Credit Facility concurrently with theoffering of the old notes.  The CreditFacility is a four-year revolving Credit Facility of $15.0 million, maturing onMarch 30, 2009, and currently has outstanding draws of $0.9 million at December31, 2006.   All outstanding principal andinterest under the Credit Facility is due and payable on March 30, 2009.

Prior to the December 2006 amendment, the CreditFacility required that we meet certain financial covenants on a quarterlybasis.  Among other covenants, we wererequired to maintain a rolling twelve month adjusted EBITDA that increased periodicallyand a senior debt to EBITDA ratio which was also adjusted periodically.  On December 20, 2006, the financial covenantswere eliminated.

We entered into equipment financing of $6.2 millionduring the year ended December 31, 2006, of which $4.0 million was outstandingat December 31, 2006.

In addition to the capital expenditures associatedwith the remodeling and paid for from the restricted renovation funds, we spent$1.6 million in capital expenditures through December 31, 2006.  Capital expenditures of approximately $1.8million are anticipated in 2007.

We believe that we have the flexibility to coveroperational contingencies, working capital needs, capital expenditures, anddebt service obligations during 2007 through the use of cash (which totaled $6.2million at December 31, 2006, including $3.8 million required in dailyoperations), our cash flow from operations, and our ability to draw against our$15.0 million Credit Facility, along with other available equipment financing.

**Contractual Obligations**

The following table summarizes the contractualcommitments of 155 East Tropicana, LLC as of December 31, 2006:
|                                    | ** ** | **Payments Due By Year** | ** ** |
|------------------------------------|------------|-----------------------------------------|------------|
| ** **                         | ** ** | **Total**                               | ** ** | **Less than  1 year** | ** ** | **1-3 years** | ** ** | **4-5 years** | ** ** | **Thereafter** | ** ** |
| ** **                         | ** ** | **(dollars in thousands)**    | ** ** |
| Long-term  debt(1)                 |       | $                                       | 130,913    |   | $ | — |   | $ | 913 |   | $ | — |   | $ | 130,000 |   |
| Equipment purchase  agreements (2) |       | 4,027                                   |       | 1,859 |   | 2,123 |   | 45 |   | — |   |
| Operating  contracts (3)           |       | 4,092                                   |       | 1,923 |   | 1,556 |   | 613 |   | — |   |
| Total                              |       | $                                       | 139,032    |   | $ | 3,782 |   | $ | 4,592 |   | $ | 658 |   | $ | 130,000 |   |

 

41

----

----

(2)          The long-term debt represents the $0.9 million in outstanding drawsagainst the Credit Facility as of December 31, 2006 due on March 30, 2009 andthe $130.0 million Notes issued on March 29, 2005 and due on 2012.

(3)          We entered into various equipment purchase agreements in connectionwith the renovation and rebranding of the Hooters Casino Hotel.

(4)          Operating contracts represent various contracts for services inconnection with the operations of the Hooters Casino Hotel.

***Liquidity and Capital Resources (Hôtel San Rémo)***

Effective November 1, 2005, 155 East Tropicana, LLC assumed fulloperations of the Hôtel San Rémo, and effective that date, the Hôtel San Rémo wasno longer an operating entity.  Thefollowing summarizes the cash flows of the Hôtel San Rémo for the ten months endedOctober 31, 2005.

For the ten months ended October 31, 2005, the Hôtel San Rémo generatedcash flows from operating activities of $0.5 million.

For the ten months ended October 31, 2005, net cashprovided by investing activities totaled approximately $18,000, as cashoutflows for capital expenditures were offset by decreases (uses) of otherlong-term assets.

For the ten months ended October 31, 2005, net cashused in financing activities totaled $2.1 million, largely a result of theadvances to our affiliates and 155 East Tropicana, LLC of $1.9 million andpayments on long-term debt of $0.2 million.

As a result of the above factors, the Hôtel San Rémoceased operations as a hotel and casino business, as all remaining assets weretransferred to either 155 or the former owner of the hotel.

***Critical Accounting Policies and Estimates***

Management has identified the following criticalaccounting policies that affect the more significant judgments and estimatesused in the preparation of 155 East Tropicana, LLC’s consolidated financialstatements and Hôtel San Rémo’s combined financial statements.  The preparation of the financial statementsin conformity with accounting principles generally accepted in the UnitedStates requires management to make estimates and judgments that affect thereported amounts of assets and liabilities, revenue and expenses, and relateddisclosures of contingent assets and liabilities.  On an on-going basis, management evaluatesthose estimates, including those related to asset impairment, accruals for slotmarketing points, compensation and related benefits, revenue recognition,allowance for doubtful accounts, contingencies, and litigation.  These accounting policies are stated in thenotes to the financial statements and in relevant sections of the managementdiscussion and analysis.  These estimatesare based on the information currently available to management and on variousother assumptions that management believes to be reasonable under thecircumstances.  Actual results could varyfrom those estimates and estimates and assumptions may be changed in the future.  Changes in these estimates and assumptionsmay have a material effect on the results of operations and financial conditionof 155 East Tropicana, LLC and the results of operations and financialcondition of the Hôtel San Rémo.

42

----

We believe that the following critical accountingpolicies affect significant judgments and estimates used in the preparation ofthe consolidated financial statements:

*Cash and Cash Equivalents*.  Weconsider all highly liquid investments purchased with original maturities ofthree months or less to be cash equivalents. The carrying amount of cash and equivalents approximates its fair value.

*Restricted Cash.*  Wehad $29.3 million held in restricted accounts as of December 31, 2005.  These funds were used for the constructionand renovation of the Hooters Casino Hotel and to fulfill debt servicerequirements during the year ended December 31, 2006.

*Accounts Receivable.* Accounts receivable are due within one yearand are recorded net of amounts estimated to be uncollectible.  We reserve an estimated amount forreceivables to reduce the receivables to their net realizable value whichapproximate fair value.  Historicalcollection rates and customer relationships of the previously operated HôtelSan Rémo were considered in determining the reserve for 155 East Tropicana, LLC.

*Inventories.* Inventories are stated at the lower of cost (using the first-in,first-out method) or market values.

*Property and Equipment.* Property and equipment are stated at cost.  Costs of improvements are capitalized. Costof normal repairs and maintenance are charged to expense as incurred.  Upon the sale or retirement of property andequipment, the cost and related accumulated depreciation are removed from therespective accounts, and the resulting gain or loss, if any, is included in theaccompanying consolidated statements of operations.

Depreciation is provided on a straight-line basisover the estimated useful life of the assets. The service lives of assets are generally 30 to 40 years forbuildings and 3 to 10 years for furniture and equipment.

The carrying values of our assets are reviewed whenevents or changes in circumstances indicate that the carrying amount of theasset may not be recoverable in accordance with Financial Accounting Standards Board,or the FASB Statement No. 144, Accounting for the Impairment or Disposalof Long-lived Assets, or SFAS No. 144. Under SFAS No. 144, an asset impairment is determined to exist whenevents or changes in circumstances indicate that the carrying amount of anasset may not be recoverable and if estimated future cash flows, undiscountedand without interest charges, are less than the carrying amount.  If it is determined that an impairment hasoccurred, then an impairment loss is recognized in the consolidated statementof operations and the related assets are adjusted to their estimated fair valueless sales costs.

*Deferred Financing Costs.* Deferred financing costs consist of loan origination and commitment feesand are amortized to interest expense over the term of the related financing ona straight line basis which approximates the effective interest rate method.

*Intangible Assets.* Intangible assets represent (1) the value of intellectual propertyrelated to the Hooters brand contributed to us pursuant to an assignmentagreement with Florida Hooters LLC, (2) the value of the slot club customerlist acquired from Eastern & Western, and (3) the excess of the purchaseprice over the fair market value of the Hôtel San Rémo assets acquired, or Goodwill.

In June 2001, the FASB issued Statement ofFinancial Accounting Standards No. 142, *Goodwill andOther Intangible Assets*, or SFAS No. 142. We evaluate theamortization periods and possible 

43

----

impairment of its intangible assets in accordance with SFASNo. 142.  The intellectual propertyrelated to the Hooters brand contributed to us and the Goodwill are intangibleassets not subject to amortization.  Theslot customer list is being amortized using the straight line method over fiveyears.

*Jackpots and Prizes.* We have progressive slot machines.  As coins are played, the amount available towin increases and will be paid out when the jackpot is awarded.  In accordance with industry practice, werecord the liability and expense related to such progressives as incurred.

*Casino Revenues and PromotionalAllowances.*  In accordance with industry practice, we recognizeas casino revenue the net win from gaming activities, which is the differencebetween gaming wins and losses.  Theretail value of rooms, food, and beverage furnished to customers without chargeis included in gross revenues and then deducted as promotional allowances.

*Participation Fees. *Participation fees paid to slot machine manufacturers are classified asa reduction of revenue instead of a casino expense.

*Player Club Points.*  Our slotclub allows customers to earn certain complimentary products and services,based on the volume of the customer’s gaming activity.   155East Tropicana, LLC and Hôtel San Rémo have recorded a liability for theestimated cost of the complimentary products and services earned by customers.

155 East Tropicana, LLC’s slot club program allowscustomers to redeem points earned from their gaming activity for complimentaryfood, beverage, rooms, entertainment, and merchandise.  At the time redeemed, the retail value ofcomplimentaries under the program is recorded as revenue with a correspondingoffsetting amount included in promotional allowances.  The cost associated with complimentary food,beverage, rooms, entertainment, and merchandise redeemed under the program isrecorded in casino costs and expenses.

In February 2001, the Emerging Issues Task Force, orthe EITF of the Financial Accounting Standards Board reached a consensus inEITF Issue No. 00-22, “Accounting for ‘Points’ and Certain Other Time-Based orVolume-Based Sales Incentive Offers, and Offers for Free Products to beDelivered in the Future.”  EITF Issue No.00-22 requires that the redemption of points for cash be recognized as areduction of revenue.  In accordance withEITF Issue No. 00-22, 155 East Tropicana, LLC has recorded the cost of pointsearned and redeemed for complimentary services/cash rebates as promotionalallowances.

*Advertising.* Prepaid advertising costs are expensed the first time the advertisingtakes place.  Advertising costs areincluded in general and administrative expenses.

*Capitalized Interest.*  Theinterest cost associated with a major construction project is capitalized andincluded in the cost of the project. When no debt is incurred specifically for a project, interest iscapitalized on amounts expended on the project using the weighted-average costof our outstanding borrowings.

*Income Taxes.*  155East Tropicana, LLC is a limited-liability company and is taxed as apartnership for federal income tax purposes.  Accordingly, no provision for federal incometaxes has been recorded in the accompanying consolidated financial statementssince the taxable income or loss is included in the income tax return of themembers.

Hôtel San Rémo accounted for income taxes under SFASNo. 109, *Accounting for Income Taxes*, or SFAS No.109, whereby deferred tax assets and liabilities are recognized for the futuretax 

44

----

consequences attributable to differences between the financialstatements carrying amounts of existing assets and liabilities and theirrespective tax bases.  Deferred taxassets and liabilities were measured using enacted tax rates expected to applyto taxable income in the years in which those temporary differences areexpected to be recovered or settled. Under SFAS No. 109, the effect on deferred tax assets and liabilities ofa change in tax rates is recognized in income in the period that included theenactment date.

*Pre-opening Expenses.*  Pre-openingcosts are expensed as incurred, consistent with Statement of Position 98-5,Reporting on the Costs of Start-up Activities.

*Use of Estimates.*  Thepreparation of financial statements in conformity with generally acceptedaccounting principles in the United States requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date ofthe financial statements, and the reported amounts revenues and expenses duringthe reporting periods. Actual results could differ from those estimates.

## **ITEM 7A.       QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.**

The following discusses our exposure to market riskrelated to changes in interest rates, equity prices and foreign currencyexchange rates.  We do not believe that theirrespective exposure to market risk is material.

Market risk is risk of loss arising from changes inmarket rates and prices, such as interest rates, foreign currency exchangerates and commodity prices.  At December31, 2006, we had $130,000,000 aggregate principal amount of the Notes, slotequipment purchase agreements of $6.0 million carrying an imputed interest rateof 3.327%, and hotel equipment purchase agreements of $0.2 million carrying animputed interest rate of 10.75%.   TheNotes carry a fixed interest rate of 83⁄4 %, provided no events of default haveoccurred.  Since the Notes and equipmentpurchase agreements have fixed interest rates, there is no market riskassociated with these loans.  We havemarket risk associated with funds that may be borrowed on the$15.0 million Credit Facility, due to an interest rate that floats withthe LIBOR or prime rate.  The term of theCredit Facilitywillmature on March 30, 2009.  At December31, 2006, $0.9 million was outstanding under the variable rate Credit Facility,carrying interest at 8.985%.

**We do not have any significant foreigncurrency exchange rate risk or commodity price risk and do not currently tradeany market sensitive instruments.**

45

----

## **ITEM 8.****                             FINANCIALSTATEMENTS AND SUPPLEMENTARY DATA.**

**INDEXTO FINANCIAL STATEMENTS**

The following consolidated financial statements of 155 East Tropicana,LLC and the combined financial statements of Hôtel San Rémo Casino and Resort are presented herein on the pagesindicated:

**155EAST TROPICANA, LLC**

**AUDITED CONSOLIDATED FINANCIALSTATEMENTS:**
| Report of Independent  Registered Public Accounting Firm |
|----------------------------------------------------------|
| Consolidated Balance Sheets                              |
| Consolidated Statements of Operations                    |
| Consolidated Statements of Members’ Equity          |
| Consolidated Statements of Cash Flows                    |
| Notes to Consolidated Financial Statements               |

 

**HÔTEL SAN RÉMO CASINO AND RESORT**

**AUDITED COMBINED FINANCIAL STATEMENTS:**
| Report of Independent  Registered Public Accounting Firm |
|----------------------------------------------------------|
| Combined  Balance Sheet                                  |
| Combined Statements of Operations                        |
| Combined Statements of Division Equity (Deficit)         |
| Combined Statements of Cash Flows                        |
| Notes to Combined Financial Statements                   |

46

----

### **REPORT OF INDEPENDENTREGISTERED PUBLIC ACCOUNTING FIRM**

**To theMembers of 155 East Tropicana, LLC:**

We have audited the accompanying consolidated balance sheets of 155East Tropicana, LLC and subsidiary as of December 31, 2006 and 2005, and therelated consolidated statements of operations, members’ equity (deficit), andcash flows for the years ended December 31, 2006 and 2005 and for the periodfrom inception (June 17, 2004) through December 31, 2004.  Thesefinancial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinionon these financial statements based on our audits.

We conducted our audits in accordance with the standards of the PublicCompany Accounting Oversight Board (United States). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free of material misstatement. We were not engagedto perform an audit of the Company’s internal control over financial reporting.Our audits included consideration of internal control over financial reportingas a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the Company’s internal controlover financial reporting.  Accordingly,we express no such opinion. An audit also includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements, assessingthe accounting principles used and significant estimates made by management,and evaluating the overall financial statement presentation. We believe thatour audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to abovepresent fairly, in all material respects, the consolidated financial positionof 155 East Tropicana, LLC and subsidiary at December 31, 2006 and 2005, andthe consolidated results of their operations and their cash flows for the yearended December 31, 2006 and 2005 and for the period from inception (June 17,2004) through December 31, 2004, in conformity with U.S. generally acceptedaccounting principles.
|                   | /s/ Ernst & Young LLP |
|-------------------|---------------------------|
|              |
|              |
| Las Vegas, Nevada |
| March 26, 2007    |

47

----

### **155EAST TROPICANA, LLC(A NEVADA LIMITED-LIABILITY COMPANY)**

### **CONSOLIDATEDBALANCE SHEETS**

| ** **                                                                                                              | ** ** | **December 31,** | ** **  | **December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------|------------|-----------------------|-------------|-----------------------|------------|
| ** **                                                                                                              | ** ** | **2006**              | ** **  | **2005**              | ** ** |
| **Assets**                                                                                                              | ** ** | ** **            | ** **  | ** **            | ** ** |
| Current assets:                                                                                                         |       |                  |        |                  |       |
| Cash and cash  equivalents                                                                                              |       | $                     | 6,164,192   |                  | $          | 14,191,385 |   |
| Accounts  receivable, net of allowance for doubtful   accounts of $99,921 and $110,017 in 2006 and   2005, respectively |       | 1,609,756             |        | 647,776               |       |
| Due from Hôtel  San Rémo                                                                                      |       | —                |        | 30,508                |       |
| Inventories                                                                                                             |       | 846,651               |        | 146,339               |       |
| Prepaid expenses                                                                                                        |       | 1,569,980             |        | 775,836               |       |
| Total current  assets                                                                                                   |       | 10,190,579            |        | 15,791,844            |       |
| Property and equipment,  net                                                                                            |       | 122,135,784           |        | 103,264,703           |       |
| Other long-term assets:                                                                                                 |       |                  |        |                  |       |
| Restricted cash                                                                                                         |       | —                |        | 29,345,513            |       |
| Deferred  financing costs                                                                                               |       | 6,366,625             |        | 7,286,738             |       |
| Intangible  assets                                                                                                      |       | 6,557,119             |        | 6,609,028             |       |
| Other assets                                                                                                            |       | 343,273               |        | 861,565               |       |
| Total other  long-term assets                                                                                           |       | 13,267,017            |        | 44,102,844            |       |
| Total assets                                                                                                            |       | $                     | 145,593,380 |                  | $          | 163,159,391 |   |
|                                                                                                                    |       |                  |        |                  |       |
| **Liabilities and Members’ Equity**                                                                                | ** ** | ** **            | ** **  | ** **            | ** ** |
| Current liabilities:                                                                                                    |       |                  |        |                  |       |
| Accounts payable                                                                                                        |       | $                     | 2,969,064   |                  | $          | 3,323,099 |   |
| Construction  payable                                                                                                   |       | —                |        | 6,034,450             |       |
| Accrued interest  payable                                                                                               |       | 2,843,750             |        | 2,864,396             |       |
| Accrued  liabilities                                                                                                    |       | 2,266,740             |        | 1,384,649             |       |
| Current portion  of long-term debt                                                                                      |       | 1,859,319             |        | —                |       |
| Total current  liabilities                                                                                              |       | 9,938,873             |        | 13,606,594            |       |
| Related party  royalties payable                                                                                        |       | 1,461,881             |        | —                |       |
| Long-term debt                                                                                                          |       | 133,081,099           |        | 130,000,000           |       |
| Total  liabilities                                                                                                      |       | 144,481,853           |        | 143,606,594           |       |
|                                                                                                                    |       |                  |        |                  |       |
| Commitments and  contingencies                                                                                          |       |                  |        |                  |       |
|                                                                                                                    |       |                  |        |                  |       |
| Members’ equity:                                                                                                   |       |                  |        |                  |       |
| Membership  interests                                                                                                   |       | 34,333,375            |        | 34,333,375            |       |
| Accumulated  deficit                                                                                                    |       | (33,221,848           | )           | (14,780,578           | )          |
|                                                                                                                    |       | 1,111,527             |        | 19,552,797            |       |
| Total  liabilities and members’ equity                                                                             |       | $                     | 145,593,380 |                  | $          | 163,159,391 |   |

 

*Theaccompanying notes are an integral part of these consolidated financial**statements.*

48

----

**155 East Tropicana, LLC(A Nevada Limited-Liability Company)**

### **CONSOLIDATEDSTATEMENTS OF OPERATIONS**

| ** **                                                                                                                                                                                                                  | ** ** | **Year Ended   December 31,** | ** **  | **Year Ended   December 31,** | ** ** | **For the Period   from Inception   (June 17, 2004)   through  December 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------|-------------|----------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------|------------|
| ** **                                                                                                                                                                                                                  | ** ** | **2006**                                     | ** **  | **2005**                                     | ** ** | **2004**                                                                                                                   | ** ** |
|                                                                                                                                                                                                                        |       |                                         |        |                                         |       |                                                                                                                       |       |
| Operating revenues:                                                                                                                                                                                                         |       |                                         |        |                                         |       |                                                                                                                       |       |
| Casino                                                                                                                                                                                                                      |       | $                                            | 25,830,265  |                                         | $          | 993,175                                                                                                                    |       | $ | — |   |
| Food and  beverage                                                                                                                                                                                                          |       | 23,620,776                                   |        | 662,044                                      |       | —                                                                                                                     |       |
| Hotel and other                                                                                                                                                                                                             |       | 22,696,316                                   |        | 1,174,324                                    |       | —                                                                                                                     |       |
| Related party  lease income                                                                                                                                                                                                 |       | —                                       |        | 5,439,324                                    |       | 2,150,382                                                                                                                  |       |
|                                                                                                                                                                                                                        |       | 72,147,357                                   |        | 8,268,867                                    |       | 2,150,382                                                                                                                  |       |
| Less promotional  allowances                                                                                                                                                                                                |       | (5,436,431                                   | )           | (301,841                                     | )          | —                                                                                                                     |       |
| Net operating revenues                                                                                                                                                                                                      |       | 66,710,926                                   |        | 7,967,026                                    |       | 2,150,382                                                                                                                  |       |
|                                                                                                                                                                                                                        |       |                                         |        |                                         |       |                                                                                                                       |       |
| Operating expenses:                                                                                                                                                                                                         |       |                                         |        |                                         |       |                                                                                                                       |       |
| Casino                                                                                                                                                                                                                      |       | 13,103,972                                   |        | 1,053,755                                    |       | —                                                                                                                     |       |
| Food and  beverage                                                                                                                                                                                                          |       | 18,973,914                                   |        | 1,140,854                                    |       | —                                                                                                                     |       |
| Hotel and other                                                                                                                                                                                                             |       | 8,785,883                                    |        | 641,254                                      |       | —                                                                                                                     |       |
| General and  administrative                                                                                                                                                                                                 |       | 18,248,203                                   |        | 1,444,397                                    |       | —                                                                                                                     |       |
| Depreciation and  amortization                                                                                                                                                                                              |       | 5,841,526                                    |        | 1,956,172                                    |       | 777,133                                                                                                                    |       |
| Pre-opening  expenses                                                                                                                                                                                                       |       | 5,292,834                                    |        | 4,824,498                                    |       | 103,409                                                                                                                    |       |
| Related party  royalties expense                                                                                                                                                                                            |       | 1,459,162                                    |        | —                                       |       | —                                                                                                                     |       |
| Loss on disposal  of assets                                                                                                                                                                                                 |       | 1,199,470                                    |        | —                                       |       | —                                                                                                                     |       |
| Total operating  expenses                                                                                                                                                                                                   |       | 72,904,964                                   |        | 11,060,930                                   |       | 880,542                                                                                                                    |       |
| Operating (loss) income                                                                                                                                                                                                     |       | (6,194,038                                   | )           | (3,093,904                                   | )          | 1,269,840                                                                                                                  |       |
|                                                                                                                                                                                                                        |       |                                         |        |                                         |       |                                                                                                                       |       |
| Other income (expense):                                                                                                                                                                                                     |       |                                         |        |                                         |       |                                                                                                                       |       |
| Interest  expense, net of capitalized interest of $202,873, $692,059 and $22,036 for  the years ended December 31, 2006 and 2005 and for the period from inception  (June 17, 2004) through December 31, 2004, respectively |       | (12,745,839                                  | )           | (10,155,864                                  | )          | (2,183,714                                                                                                                 | )          |
| Interest income                                                                                                                                                                                                             |       | 498,607                                      |        | 1,629,590                                    |       | —                                                                                                                     |       |
| Loss on  extinguishment of debt                                                                                                                                                                                             |       | —                                       |        | (2,246,526                                   | )          | —                                                                                                                     |       |
| Other income (expense),  net                                                                                                                                                                                                |       | (12,247,232                                  | )           | (10,772,800                                  | )          | (2,183,714                                                                                                                 | )          |
| Net loss                                                                                                                                                                                                                    |       | $                                            | (18,441,270 | )                                            | $          | (13,866,704                                                                                                                | )          | $ | (913,874 | ) |

 

*Theaccompanying notes are an integral part of these consolidated financial**statements.*

49

----

**155 East Tropicana, LLC(A Nevada Limited-Liability Company)**

### **CONSOLIDATED STATEMENTS OF MEMBERS’ EQUITY**

| ** **                                          | ** ** | **Florida Hooters  LLC** | ** **  | **EW Common  LLC** | ** ** | **Total**   | ** ** |
|-----------------------------------------------------|------------|-------------------------------|-------------|-------------------------|------------|-------------|------------|
| ** **                                          | ** ** | ** **                    | ** **  | ** **              | ** ** | ** **  | ** ** |
| Balance at Inception  (June 17, 2004)               |       | $                             | —      |                    | $          | —      |       | $ | — |   |
|                                                |       |                          |        |                    |       |        |       |
| Florida Hooters LLC:                                |       |                          |        |                    |       |        |       |
| Cash  contribution                                  |       | 5,133,375                     |        | —                  |       | 5,133,375   |       |
| Assignment of  agreements for intellectual property |       | 1,100,000                     |        | —                  |       | 1,100,000   |       |
|                                                |       |                          |        |                    |       |        |       |
| EW Common LLC:                                      |       |                          |        |                    |       |        |       |
| Deemed capital  contribution                        |       | —                        |        | 20,000,000              |       | 20,000,000  |       |
|                                                |       |                          |        |                    |       |        |       |
| Net loss during the  year ended December 31, 2004   |       | (609,249                      | )           | (304,625                | )          | (913,874    | )          |
|                                                |       |                          |        |                    |       |        |       |
| Balance at December 31,  2004                       |       | 5,624,126                     |        | 19,695,375              |       | 25,319,501  |       |
|                                                |       |                          |        |                    |       |        |       |
| Florida Hooters LLC:                                |       |                          |        |                    |       |        |       |
| Assignment of  agreements for intellectual property |       | 3,100,000                     |        | —                  |       | 3,100,000   |       |
|                                                |       |                          |        |                    |       |        |       |
| EW Common LLC:                                      |       |                          |        |                    |       |        |       |
| Deemed capital  contribution                        |       | —                        |        | 5,000,000               |       | 5,000,000   |       |
|                                                |       |                          |        |                    |       |        |       |
| Net loss during the  year ended December 31, 2005   |       | (9,244,469                    | )           | (4,622,235              | )          | (13,866,704 | )          |
|                                                |       |                          |        |                    |       |        |       |
| Balance at December 31,  2005                       |       | (520,343                      | )           | 20,073,140              |       | 19,552,797  |       |
|                                                |       |                          |        |                    |       |        |       |
| Net loss during the  year ended December 31, 2006   |       | (12,294,180                   | )           | (6,147,090              | )          | (18,441,270 | )          |
|                                                |       |                          |        |                    |       |        |       |
| Balance at December 31,  2006                       |       | $                             | (12,814,523 | )                       | $          | 13,926,050  |       | $ | 1,111,527 |   |

 

* The accompanying notes are an integral part ofthese consolidated financial**statements.*

50

----

**155 East Tropicana, LLC(A Nevada Limited-Liability Company)**

### **CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

| ** **                                                                       | ** ** | **Year Ended  December 31,  2006** | ** **  | **Year Ended  December 31,  2005** | ** ** | **For the Period from   Inception  (June 17, 2004)  through  December 31,  2004** | ** ** |
|----------------------------------------------------------------------------------|------------|----------------------------------------------|-------------|----------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------|------------|
|                                                                             |       |                                         |        |                                         |       |                                                                                                                 |       |
| **Cash Flow From Operating  Activities**                                         | ** ** | ** **                                   | ** **  | ** **                                   | ** ** | ** **                                                                                                           | ** ** |
| Net loss                                                                         |       | $                                            | (18,441,270 | )                                            | $          | (13,866,704                                                                                                          | )          | $ | (913,874 | ) |
| Adjustments to  reconcile net loss to net cash provided by operating activities: |       |                                         |        |                                         |       |                                                                                                                 |       |
| Depreciation and  amortization                                                   |       | 5,841,526                                    |        | 1,956,172                                    |       | 777,133                                                                                                              |       |
| Amortization of  debt issuance costs                                             |       | 1,299,484                                    |        | 1,164,026                                    |       | 375,875                                                                                                              |       |
| Amortization of  intangible asset                                                |       | 51,909                                       |        | 8,652                                        |       | —                                                                                                               |       |
| Loss on  extinguishment of debt                                                  |       | —                                       |        | 2,246,526                                    |       | —                                                                                                               |       |
| Loss on disposal  of assets                                                      |       | 1,199,470                                    |        | —                                       |       | —                                                                                                               |       |
| Changes in  assets and liabilities:                                              |       |                                         |        |                                         |       |                                                                                                                 |       |
| Accounts  receivable                                                             |       | (961,980                                     | )           | (639,476                                     | )          | (8,300                                                                                                               | )          |
| Inventories                                                                      |       | (700,312                                     | )           | (146,339                                     | )          | —                                                                                                               |       |
| Prepaid expenses                                                                 |       | (794,144                                     | )           | (719,065                                     | )          | (56,762                                                                                                              | )          |
| Accounts payable                                                                 |       | (354,035                                     | )           | 3,323,099                                    |       | —                                                                                                               |       |
| Accrued interest  payable                                                        |       | (20,646                                      | )           | 2,864,396                                    |       | —                                                                                                               |       |
| Accrued  liabilities                                                             |       | 882,091                                      |        | 1,384,649                                    |       | —                                                                                                               |       |
| Related party  royalties payable                                                 |       | 1,461,881                                    |        | —                                       |       | —                                                                                                               |       |
| Net cash (used in)  provided by operating activities                             |       | (10,536,026                                  | )           | (2,424,064                                   | )          | 174,072                                                                                                              |       |
|                                                                             |       |                                         |        |                                         |       |                                                                                                                 |       |
| **Cash Flow From Investing  Activities**                                         | ** ** | ** **                                   | ** **  | ** **                                   | ** ** | ** **                                                                                                           | ** ** |
| Acquisition of Hôtel  San Rémo                                         |       | —                                       |        | (2,158,131                                   | )          | (46,212,689                                                                                                          | )          |
| Capital expenditures                                                             |       | (19,693,731                                  | )           | (32,814,738                                  | )          | (975,849                                                                                                             | )          |
| Change in construction  payable                                                  |       | (6,034,450                                   | )           | 6,034,450                                    |       | —                                                                                                               |       |
| Change in restricted  cash                                                       |       | 29,345,513                                   |        | (25,345,513                                  | )          | (4,000,000                                                                                                           | )          |
| Decrease (increase) in  other assets                                             |       | 518,292                                      |        | (761,565                                     | )          | (100,000                                                                                                             | )          |
| Net cash provided by  (used in) investing activities                             |       | $                                            | 4,135,624   |                                         | $          | (55,045,497                                                                                                          | )          | $ | (51,288,538 | ) |

 

* The accompanying notes are an integral part ofthese consolidated financial**statements.*

51

----

**155 East Tropicana, LLC(A Nevada Limited-Liability Company)**

### **CONSOLIDATED STATEMENTS OF CASH FLOWS(CONTINUED)**

| ** **                                                                                           | ** ** | **Year Ended  December 31,  2006** | ** ** | **Year Ended  December 31,  2005** | ** ** | **For the Period from  Inception  (June 17, 2004)  through  December 31,  2004** | ** ** |
|------------------------------------------------------------------------------------------------------|------------|----------------------------------------------|------------|----------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------|------------|
|                                                                                                 |       |                                         |       |                                         |       |                                                                                                           |       |
| **Cash Flow From Financing  Activities**                                                             | ** ** | ** **                                   | ** ** | ** **                                   | ** ** | ** **                                                                                                     | ** ** |
| Cash contributions from  Florida Hooters LLC                                                         |       | $                                            | —     |                                         | $          | —                                                                                                         |       | $ | 5,133,375 |   |
| Payment of debt  financing costs                                                                     |       | (379,370                                     | )          | (7,907,213                                   | )          | (1,804,200                                                                                                     | )          |
| Extinguishment of debt                                                                               |       | —                                       |       | (48,500,000                                  | )          | —                                                                                                         |       |
| Loan penalties from  extinguishment of debt                                                          |       | —                                       |       | (1,361,750                                   | )          | —                                                                                                         |       |
| Proceeds from issuance  of long-term debt                                                            |       | 912,610                                      |       | 130,000,000                                  |       | 48,500,000                                                                                                     |       |
| Due to/from Hôtel San  Rémo                                                                |       | 30,508                                       |       | (1,790,942                                   | )          | 506,142                                                                                                        |       |
| Principal payments on  equipment purchase agreements                                                 |       | (2,190,539                                   | )          | —                                       |       | —                                                                                                         |       |
| Net cash (used in)  provided by financing activities                                                 |       | (1,626,791                                   | )          | 70,440,095                                   |       | 52,335,317                                                                                                     |       |
|                                                                                                 |       |                                         |       |                                         |       |                                                                                                           |       |
| (Decrease) increase in  cash and cash equivalents                                                    |       | (8,027,193                                   | )          | 12,970,534                                   |       | 1,220,851                                                                                                      |       |
| Cash and cash  equivalents, beginning of period                                                      |       | 14,191,385                                   |       | 1,220,851                                    |       | —                                                                                                         |       |
| Cash and cash  equivalents, end of period                                                            |       | $                                            | 6,164,192  |                                         | $          | 14,191,385                                                                                                     |       | $ | 1,220,851 |   |
|                                                                                                 |       |                                         |       |                                         |       |                                                                                                           |       |
| **Supplemental disclosure of cash  flow information**                                                | ** ** | ** **                                   | ** ** | ** **                                   | ** ** | ** **                                                                                                     | ** ** |
| Cash paid for interest,  net of capitalized interest                                                 |       | $                                            | 12,766,485 |                                         | $          | 6,817,694                                                                                                      |       | $ | 1,807,839 |   |
|                                                                                                 |       |                                         |       |                                         |       |                                                                                                           |       |
| Assets acquired through  equipment purchase agreements                                               |       | $                                            | 6,218,347  |                                         | $          | —                                                                                                         |       | $ | — |   |
|                                                                                                 |       |                                         |       |                                         |       |                                                                                                           |       |
| Noncash investing and  financing activities:                                                         |       |                                         |       |                                         |       |                                                                                                           |       |
| Contribution by  Florida Hooters LLC of intangible assets pursuant to assignment agreements          |       | $                                            | —     |                                         | $          | 3,100,000                                                                                                      |       | $ | 1,100,000 |   |
|                                                                                                 |       |                                         |       |                                         |       |                                                                                                           |       |
| Due to Hôtel San  Rémo - amount due to existing owner                                      |       | $                                            | —     |                                         | $          | —                                                                                                         |       | $ | 1,254,292 |   |
|                                                                                                 |       |                                         |       |                                         |       |                                                                                                           |       |
| Deemed capital contribution  - issuance of membership interest with priority return to EW Common LLC |       | $                                            | —     |                                         | $          | 5,000,000                                                                                                      |       | $ | 20,000,000 |   |

 

* The accompanying notes are an integral part ofthese consolidated financial**statements.*

52

----

**155 East Tropicana, LLC(A Nevada Limited-Liability Company)**

### **NOTESTO CONSOLIDATED FINANCIAL STATEMENTS**

**December 31, 2006**

**1.  Organizationaland Basis of Presentation**

155East Tropicana, LLC, a Nevada limited-liability company (the “Company”)was incorporated on June 17, 2004 to acquire the real and personalproperty of the Hôtel San Rémo Casino and Resort (the “Hôtel San Rémo”) in LasVegas, Nevada with the intention of renovating the existing casino and hotel facilitywith a “Hooters” entertainment concept and theme.  The renovations were completed and the HôtelSan Rémo property was reopened as the new Hooters Casino Hotel on February 3,2006.  The Company’s business isconcentrated at the one casino and hotel property in Las Vegas, Nevada.  The renovations were financed by the Companyand its wholly owned subsidiary, 155 East Tropicana Finance Corp. through a$130 million Senior Secured Notes offering on March 29, 2005.  The Company’s membership interests are heldtwo-thirds through Florida Hooters LLC and one-third through EW CommonLLC.  The initial capitalization of theCompany was provided by Florida Hooters LLC in the form of a $5.1 millioncash contribution and the assignment of rights with respect to the Hooterstrademark and logo and other intellectual property and by EW Common LLC in theform of a $25.0 million deemed capital contribution.  The deemed capital contribution from EWCommon LLC carries with it a priority return of four percent on thecontribution annually as described in Note 11. The payment of this priority return is subject to meeting certainfinancial covenants associated with the Company’s debt.

FloridaHooters LLC is a joint venture between Hooters Gaming LLC and Lags Ventures,LLC.  Hooters Gaming LLC is owned by theholders of licenses to operate Hooters restaurants in the Tampa Bay, Florida,Chicago, Illinois and downtown Manhattan in New York as well as for the sale ofwholesale foods and calendars and Nevada hotel/gaming and includes most of theoriginal founders of the Hooters brand. Pursuant to these license rights, the owners of Florida Hooters LLCoperate 38 Hooters restaurants, publish Hooters calendars and operate a Hootersfood business.  Lags Ventures, LLC isowned by a holder of the license rights to Hooters restaurants in South Floridaand the State of Nevada.  The owner ofLags Ventures, LLC is also the founder of the Dan Marino concept restaurantsand owns and operates two Dan Marino concept restaurants.

EWCommon LLC is owned 90% by Eastern & Western Hotel Corporation (“Eastern &Western”) and 10% by Michael J. Hessling, president of the Company.  Eastern & Western and its affiliatesowned the real property and non-gaming assets of Hôtel San Rémo fromNovember 1988 until the Company’s acquisition of the Hôtel San Rémo inAugust 2004.

FloridaHooters LLC and EW Common LLC entered into a joint venture agreement for thepurpose of forming the Company and documenting the terms of their investmentsand business venture.  Under the terms ofthe joint venture agreement, the venture progressed in three stages.  The first stage involved the formation of theCompany and the conveyance of all the real and non-gaming personal

53

----

**155 East Tropicana, LLC(A Nevada Limited-Liability Company)**

### **NOTESTO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**1.  Organizationaland Basis of Presentation (continued)**

propertyowned by and associated with the Hôtel San Rémo, the leaseback under operatinglease arrangements of these assets to Eastern & Western pursuant tothe casino and hotel lease agreements described in Note 9, and the contributionthrough assignment agreements of certain intellectual property rights to theCompany by the respective members of Florida Hooters LLC.  The second stage related to the raising offinancing to fund the redesign and renovation of the Hôtel San Rémo into theHooters Casino Hotel, the refinancing of the Company’s current debt structureand other working capital requirements, which was completed on March 29,2005.  The final stage involved thesecuring of all licenses necessary to conduct gaming at the hotel casino andthe subsequent termination of the hotel and casino leases.  In October 2005, the Company secured thenecessary gaming and liquor licenses and on November 1, 2005, assumed theoperations of the existing Hôtel San Rémo. The hotel and casino leases with Eastern & Western were terminatedon October 31, 2005.

Pursuantto the joint venture agreement, Florida Hooters LLC and EW Common LLC enteredinto an operating agreement.  Under theterms of the operating agreement, Florida Hooters LLC has the right to appointsix managers and EW Common LLC has the right to appoint three managers to amanagement board.  Certain transactions,including key operational matters, the sale of all or substantially all of theCompany’s assets, a merger or consolidation and various governance mattersrequire the unanimous approval of the management board.

Priorto November 1, 2005, the Company had conducted no business other than inconnection with the acquisition and subsequent leasing of the Hôtel San Rémo,and was considered a development stage company. The Hôtel San Rémo is a division of S.I. Enterprises, Inc., a Nevadacorporation.  Through October 31, 2005,Eastern & Western held the gaming license in Nevada and owned allgaming assets used by Hôtel San Rémo. Commencing November 1, 2005, all operations, assets and liabilities ofthe former Hôtel San Rémo hotel and casino are included in the Company’sfinancial statements, and effective that date the Company was no longer in thedevelopment stages.

OnFebruary 3, 2006, the new Hooters Casino Hotel was opened for business. The Hooters Casino Hotel features a casino floor with 679 slot and video pokermachines, 33 table games, 696 newly renovated hotel rooms including 17 suites,a tropical pool area, retail outlets, a day spa, and dining and entertainmentoptions which include a Hooters restaurant, Dan Marino’s Fine Food, a coffeeshop restaurant, a sports bar, and several bars. The renovations included aredesign of the main entrance, a renovation and expansion of the casino andrestaurant areas, a remodel of the hotel rooms and a renovation and expansionof the pool area.

Significantintercompany transactions between the Company and its wholly owned subsidiaryhave been eliminated in consolidation. 

 

54

----

**155 East Tropicana, LLC(A Nevada Limited-Liability Company)**

### **NOTESTO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**2.  Acquisition**

InAugust 2004, the Company agreed to the acquisition of the real property andother assets of the Hôtel San Rémo for approximately $72.5 million includingtransaction costs and expenses, and subject to working capital adjustments atthe date of licensing (October 31, 2005). Initially, the Company acquired $67.5 million of the real property andnon-gaming assets and agreed that the remaining $5.0 million in gaming assets wouldbe transferred to the Company upon obtaining the gaming and liquor licensesnecessary to assume operations of the hotel and casino.  The acquisition was funded by the Companythrough a term loan totaling $48.5 million which was used to extinguishthe Hôtel San Rémo’s existing indebtedness of $43.7 million, a commitmentto pay the existing owner of Hôtel San Rémo $1.3 million, and the issuanceto EW Common LLC of a 33 1¤3% membership interest withpriority return valued at $25.0 million.

Theacquisition of the Hôtel San Rémo has been accounted for as a purchase. Thefollowing table sets forth the determination of the total purchase price (inthousands):
| Membership interest with  priority return                                            |   | $      | 25,000 |   |
|--------------------------------------------------------------------------------------|--------|--------|--------|--------|
| Cash paid to former  owner of Hôtel San Rémo                               |   | 1,254  |   |
| Pay-off of Hôtel  San Rémo debt                                            |   | 43,746 |   |
| Transaction costs and  expenses                                                      |   | 2,467  |   |
| Final purchase price  adjustments paid (inclusive of $1,127,628 described in Note 9) |   | 2,158  |   |
|                                                                                 |   | $      | 74,625 |   |

The allocation of the purchase price to theunderlying Hôtel San Rémo assets acquired was as follows (in thousands):
| Land                                                                |   | $      | 38,932 |   |
|---------------------------------------------------------------------|--------|--------|--------|--------|
| Buildings and  improvements                                         |   | 31,242 |   |
| Furniture, fixtures and  equipment                                  |   | 2,033  |   |
| Slot customer list                                                  |   | 260    |   |
| Excess of purchase  price over fair market value of assets acquired |   | 2,158  |   |
|                                                                |   | $      | 74,625 |   |

In 2005, the Company utilized a third-partyappraiser to finalize the purchase price of the assets acquired.  Also during 2005, the Company and Hôtel SanRémo agreed on the final purchase price adjustments.

55

----

**155 East Tropicana, LLC(A Nevada Limited-Liability Company)**

### **NOTES TOCONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**3.  Summary of Significant Accounting Principles**

*Cash and Cash Equivalents.*  The Company considers all highly liquidinvestments purchased with original maturities of three months or less to becash equivalents.  The carrying amount ofcash and equivalents approximates its fair value.

*Restricted Cash.*  TheCompany had $29.3 million held in restricted accounts as of December 31, 2005.  These funds were used for the constructionand renovation of the Hooters Casino Hotel and to fulfill debt servicerequirements during the year ended December 31, 2006.

*Accounts Receivable.* Accounts receivable are duewithin one year and are recorded net of amounts estimated to beuncollectible.  The Company reserves anestimated amount for receivables to reduce the receivables to their net realizablevalue which approximate fair value. Historical collection rates and customer relationships of the previouslyoperated Hôtel San Rémo were considered in determining the reserve.  Bad debt expense was $233,027, $10,000 and $0for the years ended December 31, 2006 and 2005 and the period from inception(June 17, 2004) through December 31, 2004, respectively.

*Inventories.*  Inventoriesare stated at the lower of cost (using the first-in, first-out method) ormarket value.

*Property and Equipment.*  Property and equipment are stated atcost.  Costs of improvements arecapitalized. Cost of normal repairs and maintenance are charged to expense asincurred.  Upon the sale or retirement ofproperty and equipment, the cost and related accumulated depreciation areremoved from the respective accounts, and the resulting gain or loss, if any,is included in the accompanying consolidated statements of operations.

Depreciationis provided on a straight-line basis over the estimated useful life of theassets.  The service lives of assets aregenerally 30 to 40 years for buildings and 3 to 10 years forfurniture and equipment.

Thecarrying values of the Company’s assets are reviewed when events or changes incircumstances indicate that the carrying amount of the asset may not berecoverable in accordance with *Financial AccountingStandards Board (FASB) Statement No. 144, Accounting for the Impairment orDisposal of Long-lived Assets*. Under SFAS No. 144, an asset impairment is determined to exist whenevents or changes in circumstances indicate that the carrying amount of anasset may not be recoverable and if estimated future cash flows, undiscountedand without interest charges, are less than the carrying amount.  If it is determined that an impairment hasoccurred, then an impairment loss is recognized in the consolidated statementof operations and the related assets are adjusted to their estimated fair valueless sales costs.

56

----

**155 East Tropicana, LLC(A Nevada Limited-Liability Company)**

### **NOTES TOCONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**3.  Summary of Significant Accounting Principles (continued)**

*Deferred Financing Costs.*  Deferred financing costs consist of loanorigination and commitment fees and are amortized to interest expense over theterm of the related financing on a straight line basis which approximates theeffective interest rate method.

*Intangible Assets.*  Intangible assets represent (1) the value ofintellectual property related to the Hooters brand contributed to the Companypursuant to an assignment agreement with Florida Hooters LLC, (2) the value ofthe slot club customer list acquired for Eastern & Western, and (3) theexcess of the purchase price over the fair market value of the assets acquired(“Goodwill”).

TheCompany evaluates the amortization periods and possible impairment of itsintangible assets in accordance with Statement of Financial AccountingStandards No. 142, *Goodwill and OtherIntangible Assets*.  Theintellectual property related to the Hooters brand contributed to the Company andthe Goodwill are intangible assets not subject to amortization.  The slot customer list is being amortizedusing the straight line method over five years.

*Jackpots and Prizes.* The Company has progressiveslot machines.  As coins are played, theamount available to win increases and will be paid out when the jackpot isawarded.  In accordance with industrypractice, the Company records the liability and expense related to suchprogressives as incurred.

*Participation Fees. *Participationfees paid to slot machine manufacturers are classified as a reduction ofrevenue.  During the years ended December31, 2006 and 2005, the Company paid participation fees totaling $1,245,181 and$34,040, respectively.

*Casino Revenues and Promotional Allowances*.  In accordance with industry practice, theCompany recognizes as casino revenue the net win from gaming activities, whichis the difference between gaming wins and losses.  The retail value of rooms, food, and beveragefurnished to customers without charge is included in gross revenues and thendeducted as promotional allowances.

Theestimated departmental cost of providing such promotional allowances isincluded in casino costs and expenses and consists of the following for theyears ended December 31, 2006 and 2005 (dollars in thousands):
|                   | ** ** | **2006** | ** ** | **2005** | ** ** |
|-------------------|------------|----------|------------|----------|------------|
| Food and beverage |       | $        | 1,141      |     | $          | 93 |   |
| Hotel and other   |       | 316      |       | 30       |       |
|              |       | $        | 1,457      |     | $          | 123 |   |

 

57

----

**155 East Tropicana, LLC(A Nevada Limited-Liability Company)**

### **NOTES TOCONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**3.  Summary ofSignificant Accounting Principles (continued)**

*Player Club Points.*  The Company’s slot club allows customers toearn certain complimentary products and/or cash, based on the volume of thecustomer’s gaming activity.  The Companyhas recorded a liability for the estimated cost of the products and/or cashearned by customers.

TheCompany’s slot club program allows customers to redeem points earned from theirgaming activity for complimentary food, beverage, rooms, entertainment, andmerchandise.  At the time redeemed, theretail value of complimentaries under the program is recorded as revenue with acorresponding offsetting amount included in promotional allowances.  The cost associated with complimentary food,beverage, rooms, entertainment, and merchandise redeemed under the program isrecorded in casino operating expenses.

InFebruary 2001, the Emerging Issues Task Force (“EITF”) of the FinancialAccounting Standards Board reached a consensus in EITF Issue No. 00-22, “Accountingfor ‘Points’ and Certain Other Time-Based or Volume-Based Sales IncentiveOffers, and Offers for Free Products to be Delivered in the Future.”  EITF Issue No. 00-22 requires that theredemption of points for cash be recognized as a reduction of revenue.  In accordance with EITF Issue No. 00-22, theCompany has recorded the retail value of points earned and redeemed forcomplimentary services/cash rebates as promotional allowances.  Such amounts totaled $114,150 and $13,895 forthe years ended December 31, 2006 and 2005, respectively.

*Advertising.*  Prepaidadvertising costs are expensed the first time the advertising takes place.  Prepaid advertising included in prepaidexpenses was $99,296 and $273,796 at December 31, 2006 and 2005, respectively.  Advertising costs included in general andadministrative expenses were $6,029,798 and $157,778 for the years endedDecember 31, 2006 and 2005, respectively.

*Capitalized Interest.*  The interest cost associated with a majorconstruction project is capitalized and included in the cost of theproject.  When no debt is incurredspecifically for a project, interest is capitalized on amounts expended on theproject using the weighted-average cost of the Company’s outstandingborrowings.  Capitalized interest was$202,873, $692,059 and $22,036 for the years ended December 31, 2006 and 2005and for the period from inception (June 17, 2004) through December 31, 2004,respectively.

*Income Taxes.*  TheCompany is a limited-liability company and is taxed as a partnership forfederal income tax purposes. Accordingly, no provision for federal income taxeshas been recorded in the accompanying consolidated financial statements sincethe taxable income or loss is included in the income tax return of the members.

58

----

**155 East Tropicana, LLC(A Nevada Limited-Liability Company)**

### **NOTES TOCONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**3.  Summary ofSignificant Accounting Principles (continued)**

*Pre-opening Expenses.*  Pre-opening costs are expensed asincurred, consistent with Statement of Position 98-5, *Reporting on the Costs of Start-up Activities*.

*Use of Estimates.*  Thepreparation of financial statements in conformity with generally acceptedaccounting principles in the United States requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financialstatements, and the reported amounts revenues and expenses during the reportingperiods. Actual results could differ from those estimates.

*Reclassifications*. Certain reclassifications, having no effect on net loss, have been madeto the previously issued consolidated financial statements to conform to thecurrent period’s presentation of the Company’s financial statements.

*RecentlyIssued Accounting Pronouncements.*

InSeptember 2006, the Financial Accounting and Standards Board (“FASB”) issued Statementof Financial Accounting Standards No. 157 (“SFAS 157”), *Fair Value Measurements*, which definesfair value, establishes a framework for measuring fair value in GAAP, andexpands disclosures about fair value measurements.  SFAS 157 does not require any new fair valuemeasurements, but provides guidance on how to measure fair value by providing afair value hierarch used to classify the source of the information.  This statement is effective for the Company’sfiscal year 2007.  The Company isevaluating whether adoption of this statement will result in a change to itsfair value measurements.

InFebruary 2006, the FASB issued Statement of Financial Accounting StandardsNo. 155 (“SFAS 155”), *Accounting forHybrid Financial Instruments,*which becomes effective for theCompany for fiscal year 2007.  ThisStatement amends FASB Statements of Financial Accounting Standards No. 133 (“SFAS133”), *Accounting for Derivative Instrumentsand Hedging Activiti*es, and No. 140 (“SFAS 140”), *Accounting for Transfers and Servicing of FinancialAssets and Extinguishment of Liabilities*.  SFAS 155 resolves issues addressed in SFAS 133Implementation Issue No. D1, “Application of Statement 133 to BeneficialInterests in Securitized Financial Assets.”  The Company does not expectthe adoption of the statement to have a material impact on its consolidatedresults of operations, financial position or cash flows.

59

----

**155 East Tropicana, LLC**

**(A NevadaLimited-Liability Company)**

### **Notes to Consolidated Financial Statements(continued)**

**3.  Summary of Significant AccountingPrinciples (continued)**

*Recently Issued AccountingPronouncements (continued).*

InMay 2005, the FASB issued Statement of Financial Accounting StandardsNo. 154 (“SFAS 154”), *AccountingChanges and Error Corrections, Requiring Retrospective Application toPrior-Period Financial Statements of Changes in Accounting Principle*,unless it is impracticable to determine either the period-specific effects orthe cumulative effect of the change. SFAS 154 also redefines “restatement” as the revising of previouslyissued financial statements to reflect the corrections of errors.  This statement is effective for the Companyfor its fiscal year 2006.  Although theCompany has no current application for this statement, the adoption of thisstatement may affect its future consolidated results of operations, financialposition or cash flows.

In September 2006,the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108(“SAB 108”), *Considering the Effects of Prior YearMisstatements when Quantifying Misstatements in Current Year FinancialStatements*.  SAB 108 requiresanalysis of misstatements using both an income statement (rollover approach)and a balance sheet (iron curtain approach) in assessing materiality andprovides for a one-time cumulative effect transition adjustment.  SAB 108 is effective for the Company’s fiscalyear 2007 annual financial statements. The Company does not expect the adoption of the statement to have amaterial impact on its consolidated results of operations, financial positionor cash flows.

InDecember 2004, the FASB issued Statement of Financial Accounting StandardsNo. 153 (“SFAS 153”), *Exchanges of NonmonetaryAssets - an amendment of APB Opinion No. 29*.  SFAS 153 amends APB Opinion No. 29 toeliminate the exception for nonmonetary exchanges of similar productive assetsand replaces it with a general exception for exchanges of nonmonetary assetsthat do not have commercial substance. SFAS 153 will apply to nonmonetary exchanges occurring in fiscal yearsbeginning after June 15, 2005.  Theadoption of SFAS 153 did not have a material impact on the financial statementsof the Company.

In November 2004, theFASB issued Statement of Financial Accounting Standards No. 151 (“SFAS No.151”), *Inventory Costs*.  The statement is effective for inventorycosts incurred during fiscal years beginning after June 15, 2005.  The adoption of SFAS 151 did not have amaterial impact on the financial statements of the Company.

60

----

**155 East Tropicana, LLC**

**(A NevadaLimited-Liability Company)**

### **Notes to Consolidated Financial Statements(continued)**

**4.  Propertyand Equipment**

Property and equipment consists of the following atDecember 31, 2006 and 2005 (dollars in thousands):
|                                    | ** ** | **2006** | ** ** | **2005** | ** ** |
|------------------------------------|------------|----------|------------|----------|------------|
| Land                               |       | $        | 38,932     |     | $          | 38,932 |   |
| Buildings and  improvements        |       | 72,907   |       | 33,886   |       |
| Furniture,  fixtures and equipment |       | 17,749   |       | 3,438    |       |
| Construction in  progress          |       | 138      |       | 29,742   |       |
| Subtotal                           |       | 129,726  |       | 105,998  |       |
| Less:  accumulated depreciation    |       | (7,590   | )          | (2,733   | )          |
| Property and equipment,  net       |       | $        | 122,136    |     | $          | 103,265 |   |

**5.  IntangibleAssets**

Intangible assets consist ofthe following at December 31, 2006 and 2005 (dollars in thousands):
|                                                      | ** ** | **2006** | ** ** | **2005** | ** ** |
|------------------------------------------------------|------------|----------|------------|----------|------------|
| Intellectual  property                               |       | $        | 4,200      |     | $          | 4,200 |   |
| Slot customer  list                                  |       | 260      |       | 260      |       |
| Goodwill                                             |       | 2,158    |       | 2,158    |       |
| Subtotal                                             |       | 6,618    |       | 6,618    |       |
| Less:  accumulated amortization (slot customer list) |       | (61      | )          | (9       | )          |
| Intangible assets, net                               |       | $        | 6,557      |     | $          | 6,609 |   |

 

*Intellectual property*.  The Company has entered into an assignmentagreement with Florida Hooters LLC which grants the Company the right to usecertain intellectual property in connection with the operations of the HootersCasino Hotel.  The intellectual propertyconsists of (i) an exclusive license for the Hooters trademark and logoinsignia in connection with gaming, casino or combined hotel, gaming and casinooperations, (ii) a non-exclusive license to use the Hooters restaurantconcept, (iii) an exclusive license to operate and promote restaurants,taverns, lounges and “Dan Marino’s Fine Food & Spirits” and “‘13’ MartiniBar” and (iv) a non-exclusive, royalty-free license to use thePete & Shorty’s mark at a restaurant, bar and lounge, in each case solelyfor purposes of a Hooters Casino Hotel located at the Hôtel San Rémoproperty.  These intangible assets wereinitially valued at $1.1 million by management when contributed, pendingcompletion of a third party valuation.  Theintangible assets were subsequently valued at $4.2 million by an independentthird party appraiser and are reflected as such in on the accompanyingconsolidated balance sheet at December 31, 2006 and 2005.  Management believes the intellectual propertyacquired through the assignment agreements to be indefinite-lived intangibles.

61

----

**155 EastTropicana, LLC(A Nevada Limited-Liability Company)**

### **Notes to Consolidated FinancialStatements (continued)**

** **

**5.  Intangible Assets (continued)**

The Hooterstrademark and logo insignia are the exclusive property of HI LimitedPartnership.  Florida Hooters LLCoriginally obtained the license for the trademark and logo insignia through anassignment from Hooters Gaming Corporation, an affiliated entity under commonownership with Hooters Gaming LLC. Hooters Gaming Corporation is owned directly or indirectly by certainmembers of the Company or members of the Company’s management board.  The underlying license agreement was executedbetween HI Limited Partnership and Hooters Gaming Corporation and grantedto Hooters Gaming Corporation an exclusive license to use the licensedintellectual property in connection with gaming, casino or combined hotel,gaming and casino operations within the State of Nevada.  Hooters Gaming Corporation retained any andall rights and obligations in the licensed intellectual property pursuant tothe license agreement for all locations within the State of Nevada other thanthe Hooters Casino Hotel.  The Companybegan the use of the licensed intellectual property in connection with licensedgaming activities when the hotel casino was reopened as the new Hooters CasinoHotel on February 3, 2006.

The Hootersrestaurant concept is the exclusive property of Hooters of America, Inc.,an unrelated party.  Las VegasWings, Inc., an affiliated entity under common ownerships with LagsVentures, LLC, owns the exclusive right to use the Hooters restaurant conceptin the State of Nevada.  Florida HootersLLC originally obtained the right for use at the Hooters Casino Hotel throughan assignment from Hooters Gaming Corporation, who in turn, was granted theright from Las Vegas Wings, Inc.  

Pursuant to theterms of the assignment agreement with Florida Hooters LLC related to theHooters trademark, logo, and restaurant concept and Lags Ventures, LLC relatedto the Dan Marino’s concept restaurants, the Company must pay fees androyalties to Hooters Gaming Corporation, HI Limited Partnership, Las VegasWings, Inc. and Lags Ventures, Inc. Payments to Hooters Gaming Corporation are accrued at three percent ofall net profits directly earned from the gaming activities at the HootersCasino Hotel.  HI Limited Partnershipwill be paid an annual fee equal to $500. 

In addition, the Companyis required to pay HI Limited Partnership a royalty in an amount equal to twopercent of all net revenues generated in connection with licensed activitieswhich includes net revenues generated in connection with the Hooters restaurantoperation.  Las Vegas Wings, Inc is paida consent fee equal to four percent of gross sales from any Hooters brandedrestaurant and three percent of the gross cash sales of any merchandise with aHooters logo, on or near the Hooters Casino Hotel.  Lags Ventures, Inc. is paid a fee by theCompany equal to six percent of net revenues generated by the Dan Marino’s FineFood and Spirits and the “13” Martini Bar to be located in the Hooters CasinoHotel.  Payment of these fees isrestricted under the indenture governing the Notes.  Use of the Pete & Shorty’s mark partlyowned by certain members of the Company’s management board is royalty-free.

62

----

**155 EastTropicana, LLC(A Nevada Limited-Liability Company)**

### **Notesto Consolidated Financial Statements (continued)**

**5.  Intangible Assets (continued)**

Hooters Gaming Corporation,HI Limited Partnership, and Las Vegas Wings, Inc. agreed to subordinatepayment of their respective fees in favor of certain payments required underthe Company’s operating agreement. Payment is further subject to meeting certain financial ratiosassociated with the Company’s Notes.

*Slot customer list.* As part of the acquisition of the real property and other assets of theHôtel San Rémo (Note 2), the Company acquired the slot customer list valued bya third-party appraiser at $260,000.  Itis being amortized over five years using the straight line method.  

*Goodwill.* As part of the allocation of the purchase price of the Hôtel San Rémo(Note 2), the Company recorded goodwill from the acquisition of Hôtel San Rémo,representing the excess of the purchase price over the fair market value ofassets acquired.

**6.  Long-term Debt**

**Notes Offering**

On March 29, 2005, the Company issued $130.0 millionaggregate principal amount of 83⁄4% Senior Secured Notes due 2012, in a privateplacement (the “old notes”).  On August5, 2005, the Company successfully exchanged all of the old notes for new notes(“Notes”).  The Notes have substantiallyidentical terms as the old notes, except that the Notes have been registeredunder the Securities Act of 1933. Interest payments on the Notes are due semi annually, on April 1 andOctober 1.  The Notes are secured by allof the Company’s and, to the extent in existence, subsidiary guarantors’  1) existing and future assets  (otherthan certain excluded existing and future assets), 2) the Company’s equityinterest in any guarantors and 3) existing renovation disbursement and interestreserve accounts as described below.

The Notes are redeemable at the option of the Companyon or after April 1, 2009. The indenture governing the Notes required theCompany to establish a renovation disbursement account in the amount of $50.8million and interest reserve account in the amount of $11.2 million. Theindenture also contains certain provisions which restrict or limit theCompany’s ability to, among other things, incur more debt, pay dividends,redeem stock or make other distributions, enter into transactions withaffiliates or transfer or sell assets. The Company used the proceeds from theNotes to retire existing indebtedness and (together with cash from operationsand proceeds from equipment financing), renovate and construct the HootersCasino Hotel and provide for general working capital needs.  Related to this retirement of the thenexisting indebtedness, the Company recognized a loss on extinguishment of debtin the amount of $2,246,526 during the year ended December 31, 2005.

63

----

**155 EastTropicana, LLC(A Nevada Limited-Liability Company)**

### **Notesto Consolidated Financial Statements (continued)**

**6.  Long-term Debt (continued)**

**Senior SecuredCredit Facility**

The Companyentered into a $15.0 million senior secured credit facility (the “CreditFacility”) concurrently with the offering of the old notes.  The Credit Facility is a four-year revolvingCredit Facility of $15.0 million, maturing on March 30, 2009.  Originally, the Credit Facility called forrestrictions on the availability of the full $15.0 million amount of the CreditFacility, based on a multiple of the trailing twelve-month EBITDA (“BorrowingBase”).  EBITDA was defined for anyfiscal period as the Company’s consolidated net income (or loss), minusextraordinary gains and interest income, plus interest expense, income taxesand depreciation and amortization for such period, and subject to otheradjustments as defined in the Credit Facility agreement.  On December 20, 2006, the Credit Facility wasamended to eliminate financial covenant requirements.  The Company drew $0.9 million against theCredit Facility during the year ended December 31, 2006 (all of which wasoutstanding at December 31, 2006).

At the Company’soption, the interest rate will be either the agent for the lender’s prime rateplus 2.00% per annum or LIBOR plus 3.50% per annum.  As of December 31, 2006, the Credit Facilitycarried an interest rate of 8.985% per annum. All the obligations under the Credit Facility are secured by firstpriority liens on and security interest in all of the Company’s and anyguarantor’s existing and future properties and assets.  The lien on the collateral that secures theNotes are contractually subordinated to the liens securing the principal amountof borrowings under the Credit Facility of up to $15.0 million (plus relatedinterest, fees, indemnities, costs and expenses).  The Credit Facility required the Company topay unused commitment fees of 0.50% per annum on any unused portion of theCredit Facility, and, if terminated prior to the third anniversary date, aprepayment premium of 1.00% of the maximum credit amount for each year orpartial year remaining from the termination date to the third anniversary date.

**IntercreditorAgreement**

Concurrently withthe closing of the old notes offering and the Credit Facility, the Companyentered into an intercreditor agreement, which defines the rights of thelenders under the Credit Facility in relation to the rights of the trustee andthe holders of the Notes with respect to****the collateralsecuring the Notes. The intercreditor agreement, among other things, providesthat the liens securing the Notes and any guarantees thereof are contractuallysubordinated (other than the security interests in the renovation disbursementaccount, which will be senior, and interest reserve account, which will notsecure the Credit Facility) to the liens securing the principal amount ofindebtedness of up to $15.0 million (plus related interest, fees, indemnities,costs and expenses) under the Credit Facility. The trustee’s ability toexercise rights and remedies in respect of the collateral are also subject tothe terms of the intercreditor agreement.

64

----

**155 East Tropicana, LLC(A Nevada Limited-Liability Company)**

** **

### **Notesto Consolidated Financial Statements (continued)**

**6.  Long-termDebt (continued)**

**EquipmentPurchase Agreements**

During the year ended December 31, 2006, the Companyentered into loan agreements to purchase approximately $6.2 million in slotsand hotel equipment.  The loans, whichare collateralized by the equipment purchased, have terms ranging from 12 monthsto 5 years.  Interest rates imputed onslot equipment purchases of $6.0 million and hotel equipment purchase of $0.2million were 3.3% and 10.8%, respectively. At December 31, 2006, $4.0 million was outstanding under theseagreements.

**7.  MembershipInterests**

The initial capitalcontributions and membership interests in the Company for Florida Hooters LLCand EW Common LLC were established in exchange for the following:

Florida Hooters LLC contributed $5.0 million incash and the intellectual property described in Note 5 for a 66 2¤3% membership interest in the Company. Further, allpre-development costs incurred by Florida Hooters LLC are credited to theFlorida Hooters LLC capital account.

EW Common LLC received a 33 1¤3% membership interest with priority return for a$20.0 million deemed initial capital contribution as part of the Company’sacquisition of the real property and non-gaming assets of the Hôtel SanRémo.  In October 2005, the Companysecured their gaming and liquor licenses and on November 1, 2005, assumed theoperations of the hotel casino.  Uponobtaining the necessary licenses to operate the hotel casino, the Companyacquired the gaming assets from Eastern & Western consisting primarily ofslot machines and customer lists and credited the capital account of EW CommonLLC for an additional $5.0 million. A 4% priority rate of return on themembership interest held by EW Common LLC commenced accruing upon completion ofthe renovation and re-opening of the Hooters Casino Hotel.

**8.  Profit-Sharing Plan**

The Company has a deferred compensation planestablished pursuant to Section 401(k) of the Internal Revenue Code for allregular full-time employees not covered by a collective bargaining agreementwho have completed at least three months of continuous service.  The Company’s****contributionsto the plan are at the discretion of the Company’s management board. TheCompany’s plan allows for a Company match of 25% of each dollar contributed bythe employee, not to exceed 1% of a participant’s annual compensation.  A contribution of approximately $66,000 wasmade by the Company in 2006.  There wereno such contributions made during 2005. Amounts expensed under the plan for administrative expenses for theyears ended December 31, 2006 and 2005 and for the period from inception (June17, 2004) through December 31, 2004 totaled $5,046, $2,556 and $0,respectively.

65

----

**155 East Tropicana, LLC(A Nevada Limited-Liability Company)**

** **

### **Notes to Consolidated FinancialStatements (continued)**

** **

**9.  Lease Agreements**

The Company, as lessor, entered into a casino leaseand hotel lease with Eastern & Western covering the real property andnon-gaming assets of the Hôtel San Rémo acquired by the Company.  The leases were subsequently terminated onOctober 31, 2005 and the operations of the hotel and casino were assumed by theCompany on November 1, 2005.

Prior to its terminationon October 31, 2005, the casino lease covered those portions of the Hôtel SanRémo containing the showroom, gaming and liquor servicing areas, the casinofloor where gaming activities occur, surveillance areas, count rooms, thecashier’s cage and other areas ancillary to the casino footprint.

Minimum monthly base-rentpayments of $125,000 were due from August 3, 2004 until the termination of thelease on October 31, 2005.

Under the provisions ofthe casino lease, Eastern & Western was allowed to deposit $30,000into a “Capital Reserve Account” each month for capital improvements to thecasino such as the purchase of gaming devices. The casino lease also provided for Eastern & Western to fund$120,000 each month to a “Change in Control Reserve” and $55,000 to establishan “Expense Reserve” to be used for the payment of legal, accounting, andprofessional fees and other general business expenses including licensingrenewal costs.  To the extent that thesereserves were not used, they were paid to Eastern & Western at thetermination of the lease.  On December12, 2005, a payment of $1,127,628 was made to Eastern & Western by theCompany for the balance of the reserves at October 31, 2005, which was treatedby the Company as a purchase price adjustment. Rental income earned under the casino lease totaled $1,250,000 and$612,903 for the year ended December 31, 2005 and the period from inception(June 17, 2004) through December 31, 2004, respectively.  There were no rent receivables under thecasino lease at December 31, 2005 or 2004.

**HotelLease**

The hotel lease betweenEastern & Western and the Company covered those portions of the HôtelSan Rémo containing all non-casino areas, including the hotel.  The hotel lease was terminated on October 31,2005.   Minimum lease payments due underthe hotel lease consisted of a minimum rent and a percentage rent.  The minimum rent was $250,000 per month.   The percentage rent was equal to 100% of allrevenues received from the operations of the hotel, less actual operationalexpenses (including minimum rent).  Theminimum rent was paid on a monthly basis on the first of each month and thepercentage rent was paid in arrears on the first of each month.  Percentage rental income earned for theperiod from inception (June 17, 2004) through December 31, 2004 and the yearended December 31, 2005 was $311,672 and $1,689,324, respectively.  The total rental income earned under thehotel lease

66

----

**155 East Tropicana, LLC(A Nevada Limited-Liability Company)**

** **

### **Notes to Consolidated FinancialStatements (continued)**

** **

**9.  Lease Agreements (continued)**

**HotelLease (continued)**

was $1,537,479 and$4,189,324 for the period from inception (June 17, 2004) through December 31,2004 and the year ended December 31, 2005, respectively.   There were no rent receivables under thehotel lease at December 31, 2005 or 2004.

**10.  RelatedParty Transactions**

**Royalties Expense**

Pursuant to agreementsrelated to the use of certain trademarks (see Note 5), the Company must payfees and royalties to related parties.  A fee equal to 3% of all netprofits earned from gaming activities is payable to Hooters Gaming Corporation,a fee equal to 6% of net revenues generated by the Dan Marino’s Restaurant and13 Martini Bar is payable to Lags Ventures, Inc. and a consent fee of 4% ofcash sales from Hooters branded restaurant, and 3% of the gross sales with anymerchandise with a Hooters logo, is payable to Las Vegas Wings, Inc.  Thetotal fees accrued at December 31, 2006 for Hooters Gaming Corporation, LagsVenture, Inc. and Las Vegas Wings, Inc. were $0.8 million, $0.2 million, and$0.5 million, respectively.  As theHooters Casino Hotel opening did not occur until February 2006, no fees wereaccrued by the Company for these royalties during the year ended December 31,2005.  The payment of these royalty feesis considered under the indenture governing the Notes.

**HawkeyeConstruction and Millwork, Inc.**

Hawkeye Construction andMillwork, Inc. is co-owned by David Lageschulte, a member of the Company’smanagement board and an indirect beneficial owner of 33.27% of the Company’smembership interests.  Hawkeye Constructionand Millwork, Inc. managed the construction and renovation of the HootersCasino Hotel and received as compensation for such services 2% of theconstruction and furniture, fixtures and equipment costs, not to exceed a totalof $600,000.  The Company’s payments toHawkeye Construction and Millwork, Inc. in relation to the construction andrenovation management agreement totaled $0.1 million and $0.5 million for theyears ended December 31, 2006 and 2005, respectively.  No amounts were paid to Hawkeye Constructionand Millwork, Inc. during the period from inception (June 17, 2004) throughDecember 31, 2004.

67

----

**155 East Tropicana, LLC(A Nevada Limited-Liability Company)**

** **

### **Notes to Consolidated FinancialStatements (continued)**

** **

**10.  RelatedParty Transactions (continued)******

**ProvidentAdvertising & Marketing, Inc.**

The majorityshareholder of Provident Advertising & Marketing, Inc.(“Provident”) is Edward C. Droste, a member of the Company’s management boardand an indirect beneficial owner of 3.96% of the Company’s membershipinterests.  Provident was engaged by theCompany to provide services related to the planning and development of aninitial advertising and marketing plan and for the continued development and implementationof a strategic marketing plan for the Hooters Casino Hotel.  They continue to be involved as the Company’sadvertising firm.  In addition, theCompany purchases Hooters logo items from Provident for uniforms and for resalein the Company’s gift shops.  The feespaid to Provident during the years ended December 31, 2006 and 2005 and theperiod from inception (June 17, 2004) through December 31, 2004 totaled $3.0million, $0.3 million, and $19,500, respectively.

The Notes issued by theCompany require the Company to engage an independent valuation firm todetermine that the related party transactions are valued at arm’s-length pricesif the total expenditures to Provident aggregate $2.5 million.  A nationally-recognized valuation firm issueda favorable opinion that the related party transactions with Provident had beenconducted in a manner consistent with the arm’s-length standard.

**11.  Commitmentsand Contingencies**

***Litigation***

Fromtime to time, the Company is a party to various claims arising in the normalcourse of business. Management believes, however, that there are no proceedingspending or threatened against the Company which, if determined adversely, wouldhave a material adverse effect on the Company’s financial condition, results ofoperations or liquidity.

***Contractual Commitments***

On February 25,2005, the Company entered into a $36.5 million guaranteed maximum pricecontract with The PENTA Building Group, Inc. for the renovation,construction and upgrade of the Hôtel San Rémo. Upon receiving the necessary building permits, the renovation andconstruction of the Hôtel San Rémo commenced in April 2005.  The Company has paid approximately $36.3million to The PENTA Building Group, Inc. and the contract is complete.  The final payment was made prior to December31, 2006.

The Company has enteredinto operational contracts totaling $4.1 million at December 31, 2006.

68

----

**155 East Tropicana, LLC(A Nevada Limited-Liability Company)**

** **

### **Notes to Consolidated Financial Statements(continued)**

** **

**11.  Commitmentsand Contingencies (continued)**

**Hootersof America Royalty Payments**

**Beginningon February 3, 2006, the Company was required to pay the owner of the Hooterstrademark, Hooters of America, a royalty fee equal to 2% of all net revenues ofthe hotel and casino (excluding the Dan Marino’s Restaurant and 13 Martini Bar)and 1% of revenues from the Pete and Shorty’s Tavern less miscellaneousexpenses.  The total fees paid to Hootersof America were approximately $1.3 million for the year ended December 31, 2006.  These fees are included in general andadministrative expenses on the accompanying condensed consolidated statementsof operations.**

**PreferredReturn**

**TheCompany’s membership interests include an EW Common LLC preferred account whichaccumulates a preferred return rate of 4% per annum on the $25.0 millionaccount balance.  Such preferred returnbegan accumulating on March 1, 2006, and accumulates whether or not there areprofits or funds available for the payment of the preferred return.  Under the Notes indenture, the preferredreturn to EW Common LLC is payable only if the Company’s coverage ratio ofEBITDA to fixed charges (as defined in the indenture and after giving effect tothe payment of the preferred return) is 1.5 to 1 for the fiscal year asmeasured after the close of the fiscal year. As of December 31, 2006, $0.8 million relating to the preferred accounthas accumulated, but has not been paid. As the Company’s coverage ratio of EBITDA to fixed charges did not meetthis defined ratio, no liability has been recorded in the accompanyingconsolidated financial statements at December 31, 2006.**

**12.  SubsequentEvents (unaudited)**

On January 12, 2007, the Company, EW Common LLC, andFlorida Hooters LLC, signed a letter of intent to be acquired by an investmentgroup led by NTH Advisory Group, LLC.  OnMarch 14, 2007, the Company, EW Common LLC, and Florida Hooters LLC signed arevised letter of intent.  Under theterms of the revised letter, the NTH Advisory Group, LLC has offered topurchase all outstanding membership interests for a purchase price of $95.0million in cash, the payment of certain accrued royalties, and 5% of certainfuture ownership distributions.  NTHAdvisory Group, LLC will also be responsible for any repurchases and relatedcosts of the Notes as a result of the proposed change of control.  The revised letter provides for a closing byJune 30, 2007, but under certain conditions may be closed as late as April, 30,2008.  The closing is subject to thecompletion of due diligence, financing, and licensing, among other customaryconditions.  The parties agreed that theNTH Advisory Group, LLC has an exclusive right to negotiate a purchase ofoutstanding membership interests until April 28, 2007, which is also the dateby which NTH Advisory Group, LLC must pay the second of two depositinstallments.  Because no definitiveagreement has been signed, there can be no assurance that (i) a definitiveagreement will ever be entered into, or (ii) if a definitive agreement isentered into, that the terms and conditions of the definitive agreement will bethe same or similar to those in the revised letter, or (iii) that theconditions to closing a transaction will ever be satisfied, or (iv) that anytransaction with NTH Advisory Group, LLC will be consummated.

69

----

### **Report of Independent Registered Public Accounting Firm**

**To S.I. Enterprises, Inc:**

** **

We have audited theaccompanying combined balance sheet of Hôtel San Rémo Casino and Resort, a division of S.I.Enterprises, Inc., a Nevada corporation (the “Division”) as of October31, 2005 and the related combined statements of operations, division equity(deficit), and cash flows for the ten months ended October 31, 2005 and for theyear ended December 31, 2004.  Thesefinancial statements are the responsibility of the Division's management.  Our responsibility is to express an opinionon these financial statements based on our audits.

 

We conducted our auditsin accordance with the standards of the Public Company Accounting OversightBoard (United States). Those standards require that we plan and perform theaudit to obtain reasonable assurance about whether the financial statements arefree of material misstatement. We were not engaged to perform an audit of theDivision's internal control over financial reporting. Our audits includedconsideration of internal control over financial reporting as a basis fordesigning audit procedures that are appropriate in the circumstances, but notfor the purpose of expressing an opinion on the effectiveness of the Division'sinternal control over financial reporting. Accordingly, we express no suchopinion. An audit also includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements, assessing theaccounting principles used and significant estimates made by management, andevaluating the overall financial statement presentation. We believe that ouraudits provide a reasonable basis for our opinion.

 

In our opinion, thecombined financial statements referred to above present fairly, in all materialrespects, the combined financial position of HôtelSan RémoCasino and Resort at October 31, 2005, and the results of its combinedoperations and its combined cash flows for the ten months ended October 31,2005 and for the year ended December 31, 2004, in conformity with U.S.generally accepted accounting principles.

 
|                    |   | /s/ Ernst & Young LLP |
|--------------------|--------|---------------------------|
|               |   |                      |
|               |   |                      |
| Las Vegas,  Nevada |   |                      |
| February 9, 2006   |   |                      |

 

70

----

**Hôtel San Rémo Casino and Resort**

**(Divisionof S.I. Enterprises, Inc.)**

### **COMBINEDBALANCE SHEET**

| ** **                                                                                                                                             | ** ** | **October 31,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                                                                                             | ** ** | **2005**             | ** ** |
| **Assets**                                                                                                                                             | ** ** | ** **           | ** ** |
| Current assets:                                                                                                                                        |       |                 |       |
| Cash and cash  equivalents                                                                                                                             |       | $                    | 2,903,020  |   |
| Accounts  receivable, net of allowance for doubtful accounts of $137,507 in 2005 and  including related party interest receivables of $395,324 in 2005 |       | 1,392,338            |       |
| Due from 155  East Tropicana, LLC                                                                                                                      |       | 644,934              |       |
| Due from Nevada  Gaming Control Board                                                                                                                  |       | 116,893              |       |
| Inventories                                                                                                                                            |       | 200,208              |       |
| Prepaid expenses                                                                                                                                       |       | 175,750              |       |
| Deferred tax assets                                                                                                                                    |       | 776,614              |       |
| Total current assets                                                                                                                                   |       | 6,209,757            |       |
| Property and equipment:                                                                                                                                |       |                 |       |
| Furniture,  fixtures and equipment                                                                                                                     |       | 7,177,825            |       |
| Less accumulated  depreciation                                                                                                                         |       | (6,040,293           | )          |
| Net property and  equipment                                                                                                                            |       | 1,137,532            |       |
| Deferred tax assets                                                                                                                                    |       | 825,550              |       |
| Other assets                                                                                                                                           |       | 42,088               |       |
| Total assets                                                                                                                                           |       | $                    | 8,214,927  |   |
|                                                                                                                                                   |       |                 |       |
| **Liabilities and Division Equity**                                                                                                                    | ** ** | ** **           | ** ** |
| Current liabilities:                                                                                                                                   |       |                 |       |
| Accounts payable                                                                                                                                       |       | $                    | 1,720,996  |   |
| Accrued expenses                                                                                                                                       |       | 1,416,765            |       |
| Income taxes  payable to S.I. Enterprises, Inc.                                                                                                        |       | 1,216,743            |       |
| Total current  liabilities                                                                                                                             |       | 4,354,504            |       |
|                                                                                                                                                   |       |                 |       |
| Commitments and  contingencies                                                                                                                         |       |                 |       |
|                                                                                                                                                   |       |                 |       |
| Division equity                                                                                                                                        |       | 3,860,423            |       |
| Total liabilities and  division equity                                                                                                                 |       | $                    | 8,214,927  |   |

 

*Theaccompanying notes are an integral part of these combined financial**statements.*

71

----

**Hôtel San Rémo Casino and Resort**

**(Divisionof S.I. Enterprises, Inc.)**

### **Combined Statementsof Operations**

| ** **                            | ** ** | **Ten Months Ended** | ** ** | **Year Ended**         | ** ** |
|---------------------------------------|------------|--------------------------------|------------|-----------------------------|------------|
| ** **                            | ** ** | **October 31,  2005**     | ** ** | **December 31,  2004** | ** ** |
|                                  |       |                           |       |                        |       |
| Operating  revenues:                  |       |                           |       |                        |       |
| Casino                                |       | $                              | 8,947,267  |                        | $          | 12,144,817 |   |
| Food and beverage                     |       | 5,556,404                      |       | 7,968,741                   |       |
| Hotel and other                       |       | 12,217,344                     |       | 14,826,303                  |       |
|                                  |       | 26,721,015                     |       | 34,939,861                  |       |
| Less promotional  allowances          |       | (1,769,932                     | )          | (2,413,791                  | )          |
| Net operating  revenues               |       | 24,951,083                     |       | 32,526,070                  |       |
| Operating  expenses:                  |       |                           |       |                        |       |
| Casino                                |       | 5,274,642                      |       | 6,216,178                   |       |
| Food and beverage                     |       | 4,976,696                      |       | 6,360,381                   |       |
| Hotel and other                       |       | 3,628,525                      |       | 4,376,884                   |       |
| General and administrative            |       | 6,678,543                      |       | 7,858,528                   |       |
| Depreciation expense                  |       | 334,790                        |       | 1,419,038                   |       |
| Related party lease expense           |       | 5,439,324                      |       | 2,150,382                   |       |
| Restructuring costs                   |       | —                         |       | 514,449                     |       |
| Total operating  expenses             |       | 26,332,520                     |       | 28,895,840                  |       |
| Operating (loss)  income              |       | (1,381,437                     | )          | 3,630,230                   |       |
| Other income  (expense):              |       |                           |       |                        |       |
| Related party interest income         |       | 346,262                        |       | 443,692                     |       |
| Interest expense                      |       | (7,398                         | )          | (1,944,451                  | )          |
| Foreign currency translation          |       | —                         |       | 660,184                     |       |
| Loss on sale of asset                 |       | —                         |       | (1,842                      | )          |
| Other income  (expense), net          |       | 338,864                        |       | (842,417                    | )          |
| (Loss) income  before income taxes    |       | (1,042,573                     | )          | 2,787,813                   |       |
| (Benefit)  provision for income taxes |       | (396,633                       | )          | 867,303                     |       |
| Net (loss)  income                    |       | $                              | (645,940   | )                           | $          | 1,920,510 |   |

 

*The accompanying notes are anintegral part of these combined financial statements.*

72

----

**Hôtel San Rémo Casino and Resort**

**(Divisionof S.I. Enterprises, Inc.)**

### **Combined Statements of Division Equity (Deficit)**

| ** **                                                        | ** ** | **Ten Months Ended** | ** ** | **Year Ended**         | ** ** |
|-------------------------------------------------------------------|------------|--------------------------------|------------|-----------------------------|------------|
| ** **                                                        | ** ** | **October 31,  2005**     | ** ** | **December 31,  2004** | ** ** |
|                                                              |       |                           |       |                        |       |
| Balance,  beginning of period                                     |       | $                              | 7,472,515  |                        | $          | (15,791,014 | ) |
| Advances (to) from affiliates, net                                |       | (2,966,152                     | )          | 3,553,315                   |       |
| Transfer of real property and non-gaming assets to  EW Common LLC |       | —                         |       | (25,956,004                 | )          |
| Transfer of long-term debt to EW Common LLC                       |       | —                         |       | 43,745,708                  |       |
| Net (loss) income                                                 |       | (645,940                       | )          | 1,920,510                   |       |
| Balance, end of  period                                           |       | $                              | 3,860,423  |                        | $          | 7,472,515 |   |

 

*The accompanying notes are an integral part of these combined financialstatements.*

73

----

**Hôtel San Rémo Casino and Resort**

**(Divisionof S.I. Enterprises, Inc.)**

### **Combined Statements of Cash Flows**

| ** **                                                                                | ** ** | **Ten Months Ended** | ** ** | **Year Ended**   | ** ** |
|-------------------------------------------------------------------------------------------|------------|--------------------------------|------------|-----------------------|------------|
| ** **                                                                                | ** ** | **October 31,**           | ** ** | **December 31,** | ** ** |
| ** **                                                                                | ** ** | **2005**                       | ** ** | **2004**              | ** ** |
|                                                                                      |       |                           |       |                  |       |
| **Cash  Flow From Operating Activities**                                                  |       |                           |       |                  |       |
| Net (loss)  income                                                                        |       | $                              | (645,940   | )                     | $          | 1,920,510 |   |
| Adjustments to reconcile net (loss) income to net  cash provided by operating activities: |       |                           |       |                  |       |
| Depreciation                                                                              |       | 334,790                        |       | 1,419,038             |       |
| Deferred income taxes                                                                     |       | 812,954                        |       | (1,607,722            | )          |
| Foreign currency translation                                                              |       | —                         |       | (660,184              | )          |
| Change in  operating assets and liabilities:                                              |       |                           |       |                  |       |
| Accounts receivable                                                                       |       | (221,490                       | )          | (221,547              | )          |
| Provision for doubtful accounts                                                           |       | (9,338                         | )          | (15,413               | )          |
| Due from Nevada Gaming Control Board                                                      |       | (116,893                       | )          | —                |       |
| Inventories                                                                               |       | 74,749                         |       | (17,682               | )          |
| Prepaid expenses                                                                          |       | 505,948                        |       | (100,044              | )          |
| Accounts payable                                                                          |       | 110,836                        |       | 387,458               |       |
| Accrued expenses                                                                          |       | (410,616                       | )          | 765,543               |       |
| Income taxes payable to S.I. Enterprises, Inc.                                            |       | 65,980                         |       | (408,830              | )          |
| Net cash  provided by operating activities                                                |       | 500,980                        |       | 1,461,127             |       |
|                                                                                      |       |                           |       |                  |       |
| **Cash  Flow From Investing Activities**                                                  |       |                           |       |                  |       |
| Capital  expenditures                                                                     |       | (21,781                        | )          | (928,010              | )          |
| Net change in  other assets                                                               |       | 39,459                         |       | 5,541                 |       |
| Net cash  provided by (used in) investing activities                                      |       | 17,678                         |       | (922,469              | )          |
|                                                                                      |       |                           |       |                  |       |
| **Cash  Flow From Financing Activities**                                                  |       |                           |       |                  |       |
| Net change in  due from 155 East Tropicana, LLC                                           |       | 1,115,500                      |       | (1,760,434            | )          |
| Principal payments  on long-term debt                                                     |       | (235,905                       | )          | (779,479              | )          |
| Advances (to)  from affiliates, net                                                       |       | (2,966,152                     | )          | 3,768,945             |       |
| Net cash  provided by (used in) financing activities                                      |       | (2,086,557                     | )          | 1,229,032             |       |
|                                                                                      |       |                           |       |                  |       |
| (Decrease)  increase in cash and cash equivalents                                         |       | (1,567,899                     | )          | 1,767,690             |       |
| Cash and cash  equivalents, beginning of period                                           |       | 4,470,919                      |       | 2,703,229             |       |
| Cash and cash  equivalents, end of period                                                 |       | $                              | 2,903,020  |                  | $          | 4,470,919 |   |

 

*Theaccompanying notes are an integral part of these combined financialstatements.*

74

----

**Hôtel San Rémo Casino and Resort**

**(Divisionof S.I. Enterprises, Inc.)**

### **CombinedStatements of Cash Flows (continued)**

| ** **                                                        | ** ** | **Ten Months Ended** | ** ** | **Year Ended**   | ** ** |
|-------------------------------------------------------------------|------------|--------------------------------|------------|-----------------------|------------|
| ** **                                                        | ** ** | **October 31,**           | ** ** | **December 31,** | ** ** |
| ** **                                                        | ** ** | **2005**                       | ** ** | **2004**              | ** ** |
|                                                              |       |                           |       |                  |       |
| **Supplemental  disclosure of cash flow information:**            | ** ** | ** **                     | ** ** | ** **            | ** ** |
| Cash paid during  period for interest                             |       | $                              | 7,398      |                  | $          | 1,474,301 |   |
|                                                              |       |                           |       |                  |       |
| **Non-cash  investing and financing activities:**                 | ** ** | ** **                     | ** ** | ** **            | ** ** |
| Assets acquired  under capital leases                             |       | $                              | —     |                  | $          | 191,709 |   |
|                                                              |       |                           |       |                  |       |
| Transfer of real  property and non-gaming assets to EW Common LLC |       | $                              | —     |                  | $          | (25,956,004 | ) |
|                                                              |       |                           |       |                  |       |
| Transfer of  long-term debt to EW Common LLC                      |       | $                              | —     |                  | $          | 43,745,708 |   |

 

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

75

----

**Hôtel San Rémo Casino and Resort**

**(Division of S.I. Enterprises, Inc.)**

### **Notes to Combined Financial Statements**

**October31, 2005**

**1.  Organization and Basis ofPresentation**

The accompanying combined financial statements present the operationsof Hôtel San Rémo Casino and Resort (“Hôtel San Rémo”), a division of S.I.Enterprises, Inc. (the “Parent Company”), a Nevada Corporation, which islocated in Las Vegas, Nevada.  Hôtel SanRémo commenced gaming operations on February 16, 1990.  The accompanying combined financialstatements represent the assets, liabilities and operations of the hotel andgaming facilities and include certain accounts of Eastern & WesternHotel Corporation (“Eastern & Western”) and I&P Corporation,Colorado (“I&P”), both Nevada corporations. Theaccompanying financial statements have been prepared as of the last day ofoperations, October 31, 2005, of Hôtel San Rémo by Eastern & Western as 155East Tropicana, LLC assumed the operations of the hotel and casino as ofNovember 1, 2005 upon which it secured its gaming and liquor licenses.Through October 31, 2005, Eastern & Western held the gaming license inNevada and owned all gaming assets used by Hôtel San Rémo.  I&P owned the real property andnon-gaming assets of Hôtel San Rémo until August 3, 2004, at which timethey were acquired by 155 East Tropicana, LLC (see Note 2) and then leased backto Hôtel San Rémo pursuant to the casino lease and hotel lease arrangements(see Note 7).  Members of the Izumifamily are 100% owners of the Parent Company, which owns 100% of Eastern &Western and owns 100% of I&P.  Theprincipal business of Eastern & Western prior to the merger of I&P intoEastern & Western, was the owner and operator of the hotel.

On July 28, 2004, I&P was merged with and intoEastern & Western, with Eastern & Western assuming all assetsand liabilities of I&P including the real property and non-gaming assets ofHôtel San Rémo.

Certain reclassifications, having no effect on net loss, have been madeto the previously issued combined financial statements to conform to thecurrent period’s presentation of the Hôtel San Rémo’s financial statements.  All significant intercompany accounts andtransactions have been eliminated in the combined financial statements.

**2.  Acquisition by 155 EastTropicana, LLC**

In August 2004, 155 East Tropicana, LLC (“155”) agreed to theacquisition of the real property and other assets of Hôtel San Rémo forapproximately $72.5 million including transaction costs and expenses.  155 is a joint venture between FloridaHooters LLC and EW Common LLC.  EW CommonLLC was formed to hold Eastern & Western’s membership interest in155.  EW Common LLC is owned 90% byEastern & Western and 10% by Michael J. Hessling, the executive vicepresident and chief operating officer of Hôtel San Rémo.  Initially, 155 acquired $67.5 million of thereal property and non-gaming assets and agreed that the remaining $5.0 millionin gaming assets would be transferred to 155 upon obtaining the gaming andliquor licenses necessary to take over operations of the hotel and casino.

76

----

**Hôtel San Rémo Casino and Resort**

**(Division of S.I. Enterprises, Inc.)**

### **Notes to Combined Financial Statements (continued)**

**2.  Acquisition by 155 EastTropicana, LLC (continued)**

InOctober 2005, 155 secured the necessary gaming and liquor licenses and onNovember 1, 2005, assumed the operations of the hotel and casino.  On November 1, 2005, the remaining Hôtel SanRémo gaming assets were also transferred to 155 in exchange for an additional$5.0 million interest in 155 with a priority return.  The casino and hotel leases were terminatedon October 31, 2005.   Immediately priorto the acquisition in 2004, the real property and non-gaming assets ofHôtel San Rémo with a net book value of $25,956,004 and long-term debt of$43,745,708 were transferred to EW Common LLC.  Because EW Common LLC and Hôtel San Rémoare entities under common control, these transfers were reflected as divisionequity transactions.

The acquisition was funded by 155 through a term loan totaling$48.5 million which was used to extinguish the Hôtel San Rémo’s existingindebtedness of $43.7 million, a commitment to pay the former owner ofHôtel San Rémo $1.3 million and the issuance to EW Common LLC of a 331¤3% membership interest with priority return valued at$20.0 million.

On March 29, 2005, 155 successfully completed the issuance of $130million in principal amount 83⁄4%, Senior Secured Notes due 2012 (the “old notes”).  On August 5, 2005, 155 successfully exchangedall of the old notes for new notes (the “Notes”).  Proceeds from the Notes offering were usedprincipally to renovate the Hôtel San Rémo into the Hooters Casino Hotel.

**3.  Summary of SignificantAccounting Policies**

*Use of Estimates. *The preparation of financial statements inconformity with accounting principles generally accepted in the United Statesrequires management to make estimates and assumptions that affect the reportedamount of assets and liabilities and disclosure of contingent assets andliabilities at the date of the combined financial statements and the reportedamounts of revenues and expenses during the reporting period.  Actual results could differ from thoseestimates.

*Restructuring Costs.*  Professional fees includingthose related to legal, accounting and consulting services incurred by HôtelSan Rémo in evaluating various financial strategies to restructure its existingindebtedness (see Note 5) have been classified as restructuring costs in theaccompanying combined statements of operations.

*Cash and Cash Equivalents.*  Cash and cash equivalentsinclude all cash balances and highly liquid investments with purchasedmaturities of three months or less at the date of purchase.

77

----

**Hôtel San Rémo Casino and Resort**

**(Division of S.I. Enterprises, Inc.)**

### **Notes to Combined FinancialStatements (continued)**

**3.  Summary of SignificantAccounting Policies (continued)**

*Allowances for Doubtful Accounts.*  TheHôtel San Rémo reserves an estimated amount for receivables that may not becollected.  Historical collections ratesand customer relationships are considered in determining specificreserves.  Bad debt expense was $45,000and $48,000 for the ten months ended October 31, 2005 and for the year endedDecember 31, 2004, respectively.

*Inventories.* Inventories are stated at the lower of cost (using a first-in, first-outmethod) or market value.

*Property and Equipment.* Property and equipment are recorded at cost.  Depreciation is calculated using thestraight-line method over the following estimated useful lives:
| Buildings and improvements          |   | 15 to 31.5 years |
|-------------------------------------|--------|------------------|
| Furniture,  fixtures, and equipment |   | 3 to 7 years     |

 

Normal repairs and maintenance are charged to expense whenincurred.  Expenditures that extend theuseful lives of assets are capitalized.

*Long-Lived Assets.*  In accordance with theprovisions of Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accountingfor the Impairment or Disposal of Long-Lived Assets,” Hôtel San Rémo evaluatesthe potential impairment of long-lived assets when events or changes incircumstances indicate that the carrying amount of a long-lived asset may notbe recoverable.  If it is determined thatthe carrying value of long-lived assets may not be recoverable based upon therelevant facts and circumstances, Hôtel San Rémo estimates the futureundiscounted cash flows expected to result from the use of the asset and itseventual disposition.  If the sum of theexpected undiscounted future cash flows is less than the carrying value of theasset, Hôtel San Rémo will recognize an impairment loss for the differencebetween the carrying value of the asset and its fair value.

*Income Taxes.*   Hôtel San Rémo****accountsfor income taxes under SFAS No. 109, “Accounting for Income Taxes” (“SFAS No.109”), whereby deferred tax assets and liabilities are recognized for thefuture tax consequences attributable to differences between the financialstatements carrying amounts of existing assets and liabilities and theirrespective tax bases.  Deferred taxassets and liabilities are measured using enacted tax rates expected to applyto taxable income in the years in which those temporary differences areexpected to be recovered or settled. Under SFAS No. 109, the effect on deferred tax assets and liabilities ofa change in tax rates is recognized in income in the period that included theenactment date.

78

----

**Hôtel San Rémo Casino and Resort**

**(Division of S.I. Enterprises, Inc.)**

### **Notes to Combined Financial Statements (continued)**

**3.  Summary of SignificantAccounting Policies (continued)**

*Jackpots and Prizes.*  Hôtel San Rémo has progressiveslot machines.  As coins are played, theamount available to win increases and will be paid out when the jackpot isawarded.  In accordance with industrypractice, Hôtel San Rémo records the liability and expense related to suchprogressives as incurred.

*Casino Revenues and Promotional Allowances.*  Inaccordance with industry practice, Hôtel San Rémo recognizes as casino revenuethe net win from gaming activities, which is the difference between gaming winsand losses.  The retail value of rooms,food and beverage furnished to customers without charge is included in grossrevenues and then deducted as promotional allowances.

The estimated departmental costs of providing such promotionalallowances are included in casino operating expenses and consist of thefollowing:
|                    | ** ** | **Ten months ended** | ** ** | **Year ended**         | ** ** |
|--------------------|------------|--------------------------------|------------|-----------------------------|------------|
| ** **         | ** ** | **October 31,  2005**     | ** ** | **December 31,  2004** | ** ** |
| Food and  beverage |       | $                              | 558,702    |                        | $          | 531,609 |   |
| Hotel and other    |       | 75,641                         |       | 110,090                     |       |
|               |       | $                              | 634,343    |                        | $          | 641,699 |   |

 

*PlayerClub Points.*  Hôtel SanRémo’s Money Club slot club program allows customers to earn certaincomplimentary products and/or cash, based on the volume of the customers’gaming activity.  Hôtel San Rémo hasrecorded a liability for the estimated cost of the products and/or cash earnedby customers.  Hôtel San Rémo’s slot clubprogram allows customers to redeem points earned from their gaming activity forcomplimentary food, beverage, rooms, entertainment and merchandise.  At the time redeemed, the retail values ofcomplimentaries under the program are recorded as revenue with a correspondingoffsetting amount included in promotional allowances.  The costs associated with complimentary food,beverage, rooms, entertainment and merchandise redeemed under the program isrecorded in casino operating expenses.  

In February 2001, theEmerging Issues Task Force (“EITF”) of the Financial Accounting Standards Board(“FASB”) reached a consensus in EITF Issue No. 00-22, “Accounting for ‘Points’and Certain Other Time-Based or Volume-Based Sales Incentive Offers, and Offersfor Free Products to Be Delivered in the Future.”  EITF Issue No. 00-22 requires that theredemption of points for cash be recognized as a reduction of revenue.  In accordance with EITF Issue No. 00-22,Hôtel San Rémo has recorded the cost of points earned and redeemed forcomplimentary services/cash rebates as promotional allowances.  Such amounts totaled $89,222 and $146,468 forthe ten months ended October 31, 2005 and for the year ended December 31, 2004,respectively.

79

----

**Hôtel San Rémo Casino and Resort**

**(Division of S.I. Enterprises, Inc.)**

### **Notes to Combined Financial Statements (continued)**

**3.  Summary of SignificantAccounting Policies (continued)**

*Advertising.*  Prepaid advertising costs are expensed thefirst time the advertising takes place. Prepaid advertising included in prepaid expenses was $20,270 at October31, 2005.  Advertising costs included ingeneral and administrative expenses were $473,834 and $625,079 for the tenmonths ended October 31, 2005 and for the year ended December 31, 2004,respectively.

*Foreign Currency Translation.*  Until its extinguishment in August2004, Hôtel San Rémo had long-term debt that was denominated in JapaneseYen.  In accordance with SFAS No. 52, “ForeignCurrency Translation,” Hôtel San Rémo has recognized as income or expenses inthe accompanying combined statements of operations the translation gains orlosses that arose from changes in the exchange rates between the Japanese Yenand Hôtel San Rémo’s functional currency, the U.S. Dollar.

*Fair Value of Financial Instruments.*  Thecarrying value of Hôtel San Rémo’s cash and cash equivalents, receivables,accounts payable, accrued expenses and debt approximates fair value primarilybecause of the short maturities of these instruments.

*Reclassifications. *Certain amounts in the prior years’ financialstatements have been reclassified to conform to the current year’spresentation.

**4.  Due from Affiliates**

At October 31, 2005 and December 31, 2004, Hôtel San Rémo had unsecureddemand notes receivable from various related parties in the aggregate amount of$11,449,000 and $10,804,000, respectively. These notes bear interest at variable rates, ranging from 3.4% to 5.0%at October 31, 2005.  Hôtel San Rémo hasrecorded interest income related to these notes of $346,262 and $443,692 forthe ten months ended October 31, 2005 and for the year ended December 31, 2004,respectively.  The notes receivable atOctober 31, 2005 and December 31, 2004 are included in Hôtel San Rémo’sdivision equity.

Included in accounts receivable at October 31, 2005 are related partyinterest receivables and other receivables of $395,324.

In addition, at October 31, 2005, Hôtel San Rémo had a receivable inthe amount of $644,934 from 155.

80

----

**Hôtel San Rémo Casino and Resort**

**(Division of S.I. Enterprises, Inc.)**

### **Notes to Combined FinancialStatements (continued)**

**5.  Profit-Sharing Plan**

Hôtel San Rémo has a deferred compensation plan established pursuant toSection 401(k) of the Internal Revenue Code for all regular full-time employeesnot covered by a collective bargaining agreement who have completed at leastthree months of continuous service. Hôtel San Rémo’s contributions to the plan are at the discretion of theParent Company’s board of directors and cannot exceed $1,500 or 6% of theparticipant’s compensation.  There wereno contributions made during 2005, 2004 and 2003.  Amounts expensed under the plan foradministrative expenses for the ten months ended October 31, 2005 and for theyear ended December 31, 2004 totaled $329 and $1,700, respectively.

**6.  Lease Agreements**

In connection with the acquisition of Hôtel San Rémo’s real propertyand non-gaming assets by 155, Eastern & Western, as lessee, and 155 enteredinto lease agreements to lease back the casino and hotel property previouslyowned by Hôtel San Rémo.  Upon thereceipt of gaming and liquor licensing by 155, these leases were terminated onOctober 31, 2005 and the operations of the hotel and casino were assumed by155.   The terms of these leaseagreements are described below.

*Casino Lease.*  The casino lease between Eastern &Western and 155 covered those portions of the Hôtel San Rémo containing theshowroom, gaming and liquor servicing areas, the casino floor where gamingactivities occur, surveillance areas, count rooms, cashier cages and otherareas ancillary to the casino footprint.

Monthly base rent payments of $125,000 were due from August 3, 2004until termination at October 31, 2005. Upon certain defined events and to theextent that Hôtel San Rémo had available cash flow from casino operations,Eastern & Western was to set aside reserves of $120,000 and $55,000 eachmonth to cover change in control payments and licensing expenses,respectively.  To the extent that thesereserves were not used, they were paid to Eastern & Western at thetermination of the lease.  On December21, 2005, a payment of $1,127,628 was made to Eastern & Western by 155 forthe balance of the reserves existing at October 31, 2005.

*Hotel Lease. *The hotel lease between Eastern & Western and 155 covered thoseportions of the Hôtel San Rémo containing all non-casino areas including thehotel.

81

----

**Hôtel SanRémo Casino and Resort****(Divisionof S.I. Enterprises, Inc.)**

### **Notes to Combined Financial Statements (continued)**

**6.  Lease Agreements (continued)**

Minimum lease payments due under the hotel lease consist of a minimumrent and a percentage rent. The minimum rent was $250,000 per month. Thepercentage rent was equal to 100% of all revenues received from the operationof the hotel, less actual operational expenses (including minimum rent) andworking capital reserves which were determined and agreed upon monthly by 155and Eastern & Western.  No capitalreserves were agreed to for the period from August 3, 2004 through October 31,2005. While the minimum rent was paid on a monthly basis, the percentage rentwas paid in arrears to 155 on the first day of each calendar quarter.  Rent for any partial month was prorated basedon a thirty-day month.  Percentage rentalexpense incurred for the ten months ended October 31, 2005 and for the yearended December 31, 2004 totaled $1,689,324 and $311,672, respectively.

Total rental expense under the casino and hotel leases was $5,439,324and $2,150,382 during the ten months ended October 31, 2005 and the year endedDecember 31, 2004, respectively.

**7.  Income Taxes**

Hôtel San Rémo is a division included in the consolidated federalincome tax return of the Parent Company. Accordingly, the current federal tax liability or benefit resulting fromthe taxable income or loss generated by Hôtel San Rémo is recognized by theParent Company in its consolidated federal income tax return.

The components of the HôtelSan Rémo’s income tax provision (benefit) from continuing operations for theten months ended October 31, 2005 and for the year ended December 31, 2004 areas follows (amounts in thousands):
|                                 | ** ** | **Ten months ended** | ** ** | **Year ended**   | ** ** |
|---------------------------------|------------|--------------------------------|------------|-----------------------|------------|
| ** **                      | ** ** | **October 31,**           | ** ** | **December 31,** | ** ** |
| ** **                      | ** ** | **2005**                       | ** ** | **2004**              | ** ** |
| ** **                      | ** ** | **(in thousands)**        | ** ** |
| Current tax expense  (benefit)  |       | $                              | 66         |                  | $          | (409 | ) |
| Deferred tax expense  (benefit) |       | (463                           | )          | 1,276                 |       |
| Total                           |       | $                              | (397       | )                     | $          | 867 |   |

 

82

----

 

**Hôtel San Rémo Casino and Resort**

**(Division of S.I. Enterprises, Inc.)**

### **Notes to Combined Financial Statements (continued)**

**7.  Income Taxes (continued)**

A reconciliation of Hôtel San Rémo’s income taxprovision (benefit) as compared to the tax provision calculated by applying thefederal statutory rate (35%) to (loss) income before income taxes for the tenmonths ended October 31, 2005 and for the year ended December 31, 2004, is asfollows (amounts in thousands):
|                                                              | ** ** | **Ten months ended** | ** ** | **Year ended**   | ** ** |
|--------------------------------------------------------------|------------|--------------------------------|------------|-----------------------|------------|
| ** **                                                   | ** ** | **October 31,**           | ** ** | **December 31,** | ** ** |
| ** **                                                   | ** ** | **2005**                       | ** ** | **2004**              | ** ** |
| ** **                                                   | ** ** | **(in thousands)**        | ** ** |
| Computed income  tax expense at statutory rate               |       | $                              | (365       | )                     | $          | 976 |   |
| General business  credits net of disallowed employment taxes |       | (32                            | )          | (110                  | )          |
| Other                                                        |       | —                         |       | 1                     |       |
| Total                                                        |       | $                              | (397       | )                     | $          | 867 |   |

 

Theincome tax effects of temporary differences between financial and income taxreporting that give rise to deferred tax assets and liabilities at October 31,2005 are as follows:
|                                       | ** ** | **October 31,**    | ** ** |
|---------------------------------------|------------|-------------------------|------------|
| ** **                            | ** ** | **2005**                | ** ** |
| ** **                            | ** ** | **(in thousands)** | ** ** |
| **Deferred tax assets**               |       |                    |       |
| Accrued expenses                      |       | $                       | 524        |   |
| Bad debt reserve                      |       | 48                      |       |
| Fixed assets, primarily  depreciation |       | —                  |       |
| Intangibles                           |       | 346                     |       |
| Capitalized interest                  |       | 13                      |       |
| AMT and general  business credits     |       | 694                     |       |
| Total deferred tax  assets            |       | 1,625                   |       |
|                                  |       |                    |       |
| **Deferred tax liabilities**          |       |                    |       |
| Fixed assets, primarily  depreciation |       | (23                     | )          |
| Total deferred tax  liabilities       |       | (23                     | )          |
|                                  |       |                    |       |
| Net deferred tax asset                |       | $                       | 1,602      |   |

 

At October 31, 2005, Hôtel San Rémo has $476,831 ofalternative minimum tax (“AMT”) credits and $217,109 of general businesscredits available to offset future federal tax. The AMT credit does not have an expiration date.  The general business credits will start toexpire in 2024.

83

----

**Hôtel San Rémo Casino and Resort**

**(Division of S.I. Enterprises, Inc.)**

### **Notes to Combined Financial Statements (continued)**

**7.  Income Taxes (continued)**

The current payable for income taxes at October 31, 2005 is recorded inincome taxes payable to the Parent Company in the accompanying combined balancesheets.

On February 28, 2005, the Parent Company convertedfrom a Nevada corporation to a Nevada limited-liability company.  Effective on the date of conversion, theParent Company elected to retain its “C” corporation status for federal incometax purposes.

**8.  Commitments and Contingencies**

*Non-Compete.*  Under theterms of the casino lease and the hotel lease, Eastern & Western has agreedthat Hôtel San Rémo will not operate a similar casino or hotel business at anyother location in Clark County, Nevada, including any location within a hoteland/or casino property.

*Litigation.*  Hôtel SanRémo is party to various litigation arising in the normal course ofbusiness.  Management is of the opinionthat the ultimate resolution of these matters will not have a material adverseeffect on the financial position, cash flows, or the results of operations ofHôtel San Rémo.

**9.  Subsequent Events**

On December 12, 2005, Hôtel San Rémo received a payment of $2,158,131(inclusive of the payment of $1,127,628 discussed in Note 6) from 155 inadditional consideration associated with the sale of the Hôtel San Rémo pursuantto an Amended and Restated Joint Venture Agreement and the Amended and RestatedCasino Lease Agreement with 155.

84

----

 
| **ITEM 9.** | **Changes in and  Disagreements with Accountants on Accounting and Financial Disclosure.** |
|-------------|--------------------------------------------------------------------------------------------|

 

Not applicable.
| **Item 9A.** | **Controls and  Procedures.** |
|--------------|-------------------------------|

 

**Evaluation ofDisclosure Controls**

Weevaluated the effectiveness of our disclosure controls and procedures as of theend of the 2006 fiscal year.  Thisevaluation was done with the participation of our management, including ourChief Executive Officer, President, Chief Operating Officer, and ChiefFinancial Officer.

Disclosurecontrols and procedures are controls and other procedures that are designed toensure that information required to be disclosed by us in the reports that wefile or submit under the Securities Exchange Act of 1934 are recorded,processed, summarized and reported within the time periods specified in the Securitiesand Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controlsand procedures designed to ensure that information required to be disclosed byus in the reports that we file under the Securities Exchange Act of 1934 isaccumulated and communicated to our manager, as appropriate to allow timelydecisions regarding required disclosure.

**Limitations on theEffectiveness of Controls**

Ourmanagement does not expect that our disclosure controls and procedures or ourinternal controls over financial reporting will prevent all error and allfraud.  A control system, no matter howwell conceived and operated, can provide only reasonable, but not absolute,assurance that the objectives of a control system are met.  Further, any control system reflectslimitations on resources, and the benefits of a control system must beconsidered relative to its costs. Because of the inherent limitations in all control systems, noevaluation of controls can provide absolute assurance that all control issuesand instances of fraud, if any, within us have been detected.  These inherent limitations include therealities that judgments in decision-making can be faulty and that breakdownscan occur because of simple error or mistake. Additionally, controls can becircumvented by the individual acts of some persons, by collusion of two ormore people, or by management override of a control.  The design of a control system is also basedupon certain assumptions about the likelihood of future events, there can be noassurance that any design will succeed in achieving its stated goals under allpotential future conditions; over time, controls may become inadequate becauseof changes in conditions, or the degree of compliance with the policies orprocedures may deteriorate. Because of the inherent limitations in acost-effective control system, misstatements due to error or fraud may occurand may not be detected.

**Conclusions**

Basedon this evaluation, the our Chief Executive Officer and Chief Financial Officerhave evaluated our disclosure controls and procedures (as defined in theSecurities Exchange Act of 1934 Rules 13a-15(e) and 15d- 15(e)) as ofDecember 31, 2006, and have concluded that these are effective to timelyalert them to material information relating to us required to be included inthe reports that we file or submit under the Securities Exchange Act of 1934.

85

----

**Changes inInternal Controls**

There were no changes in ourinternal controls over financial reporting that occurred during our last fiscalquarter, *i.e.*, the quarter endedDecember 31, 2006, that have materially affected, or are reasonably likely tomaterially affect, our internal controls over financial reporting.

**ITEM 9B.**               Other Information.

Not applicable.

86

----

**PART III**

**ITEM 10.**                 Directors, Executive Officers and CorporateGovernance.

Thefollowing information summarizes the business experience during at least thepast five years of each of our named executive officers and the members of ourmanagement board.
| Name                       | ** ** | **Age** | ** ** | **Position(s)**                |
|----------------------------|------------|---------|------------|--------------------------------|
| Neil G. Kiefer             |       | 55      |       | Chief Executive Officer        |
| Michael J.  Hessling       |       | 54      |       | President and Management Board |
| Gary A. Gregg              |       | 56      |       | Chief Operating Officer        |
| Deborah J.  Pierce         |       | 58      |       | Chief Financial Officer        |
| John T. Blakely            |       | 62      |       | Management Board               |
| Gilbert  DiGiannantonio(1) |       | 58      |       | Management Board               |
| Edward C. Droste           |       | 55      |       | Management Board               |
| Sukeaki Izumi(2)           |       | 69      |       | Management Board               |
| Toyoroku Izumi(2)          |       | 44      |       | Management Board               |
| Dennis D.  Johnson         |       | 56      |       | Management Board               |
| David L.  Lageschulte      |       | 55      |       | Management Board               |
| William R.  Ranieri(1)     |       | 86      |       | Management Board               |

 

----

(1)             Mr. DiGiannantoniois the son-in-law of Mr. Ranieri.

(2)             Mr. SukeakiIzumi is the father of Mr. Toyoroku Izumi.

**Business Experience**

*Neil G.Kiefer.*  Mr. Kiefer was appointedour Chief Executive Officer in August 2004. Mr. Keifer has been involvedin the Hooters organization since its inception in 1983, when he incorporatedthe original Hooters entity, Hooters Inc. From 1983 to 1992,Mr. Kiefer served as general outside counsel to Hooters Inc. and itsrelated Hooters entities. From May 1992 to June 1994, Mr. Kieferserved as President and Chief Executive Officer of Hooters ManagementCorporation, the managing entity for Hooters Inc. and its affiliatedcompanies. Since June 1994, Mr. Kiefer has served as President andChief Executive Officer of Hooters Inc. and all other Hooters corporationsaffiliated with Hooters Inc. Mr. Kiefer was elected to theHooters Inc. board of directors in 1994 and continues to serve on theboard.

*MichaelJ. Hessling.* Mr. Hessling was appointed to our management board on July 30, 2004and was appointed our President in June 2006. Mr. Hessling has beeninvolved in the gaming industry since 1979 when he joined Caesars Palace asManager of Financial Planning. Before his departure in 1983, Mr. Hesslingwas promoted to Assistant Vice President of Planning and Administration and,after assisting in the opening of Caesars Tahoe, served as management liaisonbetween the Tahoe and Las Vegas operations. During 1983, Mr. Hesslingserved as Vice President of Casino Operations for CSP, a management companythat operated the Dunes Hotel & Casino. From 1983 to 1988,Mr. Hessling served as general manager of several small casinos in LasVegas. Since 1989, Mr. Hessling has been a part owner of and has served asTreasurer and a director for Beatty Future Inc., which owns a casino motelin rural Nevada. From 1989 until June 2004, Mr. Hessling served asExecutive Vice President, General Manager and Chief Operating Officer of theHôtel San Rémo.

87

----

*Gary A.Gregg.*  Mr. Gregg was appointed ourChief Operating Officer on October 30, 2006. From 1988 to 1993, Mr. Gregg served as President for the Flamingo HiltonLaughlin and was responsible for the property’s operations andprofitability.  From 1993 to 1997, Mr.Gregg served as President and Senior Vice President for the Las Vegas Hiltonand Hilton Hotels Corporation, where he was responsible for the company’soverall operations and profitability. From 1998 to 2001, Mr. Gregg served as General Manager for the RegencyCasino by Hyatt located in Thessaloniki, Greece, where, in addition to hisoperational responsibilities, he was also responsible for overall regulatoryissues including administration of all policies and procedures.  From 2001 to 2003, Mr. Gregg served asGeneral Manager for the Hollywood Casino located in Shreveport, Louisiana wherehe was also responsible for the operational and regulatory aspects of thecompany’s business.  From July 2004 untilOctober 2006, Mr. Gregg served as President for Daily Edge, LLC where hemanaged sales representatives, trade shows, and associated sales and marketingservices.

*DeborahJ. Pierce.* Ms. Pierce was appointed our Chief Financial Officer inFebruary 2005. From June 1995 to May 1998, Ms. Pierceserved as Vice President of Finance for Tropicana Resort & Casino and wasresponsible for various financial and operational aspects of the organization’sbusiness. From June 1998 to November 1998, Ms. Pierce served asChief Financial Officer, Secretary and Treasurer of Palace REIT, a real estateinvestment trust formed in 1998 to acquire office and industrial properties inselected markets in the United States. From November 1998 toJune 2003, Ms. Pierce served as Vice President of Finance forAmeristar Casinos, Inc. From July 2003 to August 2004, Ms. Pierceserved as Vice President of Finance for Silverton Casino, LLC where she wasresponsible for various financial, regulatory and operational aspects of thecompany’s business. From November 2004 to February 2005, Ms. Pierce servedas Chief Financial Officer of Fantasy Springs Resort & Casino.

*John T.Blakely.* Mr. Blakely was appointed to our management board inJuly 2004. Mr. Blakely has been practicing law in Florida since 1970.In 1973, Mr. Blakely practiced in the Tampa and Clearwater offices of Johnson,Blakely, Pope, Bokor, Ruppel and Burns and was a partner when he left in 2003.Since 2003, Mr. Blakely has been a partner with the Naples office ofRoetzel & Andress, a national law firm based in Akron, Ohio.Mr. Blakely has served as Director (1999 to 2002) and President (2001 to2002) of the Port Royal Club in Naples, Florida.

*GilbertDiGiannantonio.* Mr. DiGiannantonio was appointed to our management board inJuly 2004. Mr. DiGiannantonio is one of the original founders of theHooters restaurant, concept and brand. He has served as the Vice President ofOperations and Vice President of Hooters Inc. since 1983.Mr. DiGiannantonio is also the co-owner of one Hooters restaurant in LasVegas, Nevada. In addition, he is an owner of the Pete & Shorty’s ofClearwater restaurant.

*EdwardC. Droste.* Mr. Droste was appointed to our management board in July 2004.Mr. Droste is one of the original founders of the Hooters restaurant,concept and brand. Mr. Droste co-founded several restaurant concepts,including Pete & Shorty’s Tavern and Adobe Gila’s and was involved inthe conceptual development of Dan Marino’s Town Tavern and Stumps Supper Club.Currently, Mr. Droste serves as Chief Executive Officer of ProvidentManagement Corporation, a resort management company, which he founded (since 1989),and as a director for Hooters Management Corporation (since 1992). In 1986,Mr. Droste founded Provident Advertising & Marketing, Inc.,which is responsible for coordinating the promotional activities for theHooters restaurants and the national distribution of the Hooters calendar. In1995, Mr. Droste founded Provident Entertainment, Inc., anentertainment company that produces a two-hour radio talk show and is in talksto produce a motion picture. Mr. Droste also serves on the board ofdirectors for the Outback Bowl (since 2004), the H. Lee Moffitt CancerCenter & Research Institute Foundation, Inc. (since 2003), andthe Clearwater Regional Chamber of Commerce (since 1993).  In January 2007, Mr. Droste began serving atwo-year term as the Executive Vice Chairman for the H. Lee Moffitt CancerCenter and Research Institute Foundation, Inc.

88

----

*SukeakiIzumi.*  Mr. Izumi was appointed toour management board in July 2004. Mr. Izumi was the founder ofEastern & Western, which was formed in 1988 to acquire, remodel,expand and operate the Hôtel San Rémo property. Since 1988, Mr. Izumi hasserved as the President and Director of Eastern & Western.Mr. Izumi also serves as President and Director of S.I.Enterprises, LLC (formerly known as S.I. Enterprises, Inc.), theentity which wholly owns Eastern & Western (since 1990), BeattyFuture, Inc. (since 1989), an entity in which Mr. Izumi has anownership interest, and I & F Corporation, Japan (since 1973).Mr. Izumi served as President, Chairman and Director of Hakusui Tech,Co., Ltd. from 1992 to 2002. Hakusui Tech. Co., Ltd. filed anapplication for the commencement of civil rehabilitation proceedings with aJapanese court in June 2002. As a result of such filing, the company underwentcourt-supervised reorganization. On January 31, 2006, the Japanese court has released Hakusui Tech. Co.,Ltd. from its supervision, and Hakusui Tech. Co., Ltd. is no longer involved incivil rehabilitation proceedings. Currently, Hakusui Tech. Co., Ltd. is a good standing corporation.

*ToyorokuIzumi.*  Mr. Izumi was appointed toour management board in July 2004. Mr. Izumi has been a director,Secretary and Treasurer of Eastern & Western since 1990. From 1996 to2002, Mr. Izumi served as Vice President of Beatty Future, Inc., anentity in which he has an ownership interest. Mr. Izumi also serves asdirector, Treasurer and Assistant Secretary of S.I. Enterprises, LLC(formerly known as S.I. Enterprises, Inc.), the entity that wholly ownsEastern & Western (since 1995), and as a director of I&FCorporation, Japan (since 1997). Mr. Izumi has been serving as thePresident of Hakusui Tech, Co., Ltd. since 2000. Hakusui Tech.Co., Ltd. filed an application for the commencement of civilrehabilitation proceedings with a Japanese court on June 21, 2002. As aresult of such filing, the company underwent court-supervisedreorganization.  On January 31, 2006, theJapanese court has released Hakusui Tech. Co., Ltd. from its supervision, andHakusui Tech. Co., Ltd. is no longer involved in civil rehabilitationproceedings.  Currently, Hakusui Tech.Co., Ltd. is a good standing corporation.

*DennisD. Johnson.* Mr. Johnson was appointed to our management board inAugust 2004. Mr. Johnson is one of the original founders of theHooters restaurant, concept and brand. In 1994, Mr. Johnson joined thecorporate office of Hooters Inc. and was responsible for maintaining theintegrity of the Hooters trademark through quality control, store inspectionsand site selections until 2002. From 1994 to 2004, Mr. Johnson served asthe Vice President of Hooters Management Corporation. Since 2000,Mr. Johnson has served as the Vice President of Merchandise Sales. Since1992, Mr. Johnson has been a member of the Hooters Management Corporationboard of directors.

*DavidL. Lageschulte.* Mr. Lageschulte was appointed to our management board inJuly 2004. Mr. Lageschulte is the controlling shareholder of theoriginal licensee of the Hooters restaurant concept and brand. Mr. Lageschultecontrols and is the Chief Executive Officer of 19 Hooters restaurants whichoperate throughout Southeast and Southwest Florida, and in the State of Nevada.Mr. Lageschulte is the Chief Executive Officer of LTP ManagementGroup, Inc., a restaurant managing entity for 32 restaurants, which heestablished in 1987. Mr. Lageschulte co-founded several restaurant andentertainment concepts including Dan Marino’s Fine Food & Spirits,Adobe Gila’s, Ugly Tuna Saloona, Stumps Supper Club and Splitsville.Mr. Lageschulte also owns several corporations, in Florida and otherstates, which are involved in an array of operations including health andfitness centers, heavy equipment sales and leasing, well drilling and realestate investments.

*WilliamR. Ranieri.* Mr. Ranieri was appointed to our management board in July 2004.Mr. Ranieri is one of the original founders of the Hooters restaurant,concept and brand and, since 1983, has served as a director for HootersManagement Corporation, Hooters Inc. and its related entities.

89

----

**Committeesof our Management Board**

Ourmanagement board currently does not have any committees. More specifically, ourmanagement board does not have a compensation committee or an audit committee.The guidelines and pay levels for the compensation of executive officers aregenerally established by the management board. All the functions of an auditcommittee are performed by the entire management board.

**Codeof Ethics**

Due to our limited size, we have not yet adopted a code of ethics thatapplies to our principal executive officer, principal financial officer,principal accounting officer or controller, or persons performing similarfunctions.

**ITEM 11.**                 Executive Compensation.

**CompensationDiscussion and Analysis**

Wedo not have a compensation committee or formalized program for determiningexecutive compensation.  All decisionsregarding executive compensation are made at the discretion of our managementboard.  Our Chief Operating Officer hasthe discretion to award reasonable annual pay increases.  The management board has not used an outsideconsultant in connection with making compensation decisions.

Ourmanagement board strives to award executive compensation at a level that willattract, motivate, and retain talented and dedicated executive officers.  For the fiscal year ended December 31, 2006,the components of compensation for named executive officers were base salary,bonus, and company contributions to our 401(k) plan.

Insetting base salaries, the management board considers executive experience,current position’s responsibility, and certain relevant market data.  Bonuses are awarded based upon theprofitability of the Company and each named executive officer’s individualcontribution to our profitability, as determined by the management board.  In making such a determination for each namedexecutive officer, the management board considers the Company’s overallprofitability and achievement of the Company’s financial goals and each namedexecutive officer’s job performance and achievement.

Executiveofficers are eligible to participate in our 401(k) plan as are all regularfull-time employees not covered by a collective bargaining agreement who havecompleted at least three months of continuous service.  The Company’s contributions to the 401(k)plan are at the discretion of the management board.  The Company’s plan allows for a company matchof 25% of each dollar contributed by the employee, not to exceed 1% of aparticipant’s annual compensation.

90

----

**Summary Compensation Table**

Thefollowing table sets forth the cash compensation we paid to the five mosthighly compensated employees during the year ended December 31, 2006 forservices to the Chief Executive Officer, Chief Financial Officer, and certainother most highly compensated executive officers during the year ended December31, 2006:
| Name and Principal Position   | ** ** | **Year** | ** ** | **Salary** | ** ** | **Bonus **(1) | ** ** | **All Other  Compensation **(2) | ** ** | **Total** | ** ** |
|----------------------------------------------|------------|----------|------------|------------|------------|--------------------|------------|-------------------------------------------|------------|-----------|------------|
| Neil G. Kiefer   Chief Executive Officer     |       | 2006     |       | $          | 101,964    |               | $          | —                                    |       | $         | 1,552      |   | $ | 103,516 |   |
| Deborah J.  Pierce   Chief Financial Officer |       | 2006     |       | $          | 154,230    |               | $          | —                                    |       | $         | 2,095      |   | $ | 156,325 |   |
| Michael J.  Hessling   President             |       | 2006     |       | $          | 276,340    |               | $          | —                                    |       | $         | 1,188      |   | $ | 277,528 |   |
| Kim L. Tyler   Sr. VP of Food & Beverage |       | 2006     |       | $          | 154,406    |               | $     | 50,000                                    | (3)        | $         | 2,590      |   | $ | 206,996 |   |
| Richard M. Newman   VP of Casino Operations  |       | 2006     |       | $          | 127,692    |               | $     | 50,000                                    | (3)        | $         | 1,815      |   | $ | 179,507 |   |

 

----

(1)            Mr.Kiefer and Mr. Hessling did not receive bonuses because they participate in thevalue of the Company as equity owners. Ms. Pierce received a bonus of $50,000prior to the end of the 2005 fiscal year for her performance in 2005.

(2)            Allother compensation includes $538 in premiums paid for life insurance policiesinsuring the lives of the executive officers and the Company’s contributions tothe employees’ 401(k) plan.

(3)            Bonuspaid in 2006 for 2005 performance.

**EmploymentContracts**

Effective October 31,2006, we signed an employment agreement with Michael J. Hessling to serve asPresident.  The terms of the agreementstates that Mr. Hessling will serve as our President for a period of one year fromthe effective date of the agreement. Under the signed employment agreement, Mr. Hessling will be paid anannual base salary of $275,000 and will be entitled to participate in a bonusprogram, if a bonus program is established for our senior management team. If wechoose to terminate Mr. Hessling’s employment prior to October 31,2007, Mr. Hessling will be entitled to receive separation pay equal to allsalary due for the balance of the term of the agreement.

Effective October 30,2006, we signed an employment agreement with Gary A. Gregg to serve as ChiefOperating Officer.  The terms of theagreement states that Mr. Gregg will serve as our Chief Operating Officer for aperiod of three years from the effective date of the agreement.  Under the signed employment agreement, Mr.Gregg will be paid an annual base salary of $250,000 and will be eligible toreceive an annual performance bonus based on targeted EBITDA (as defined in theemployment agreement) levels.  If wechoose to terminate Mr. Gregg’s employment without cause, Mr. Greggwill be entitled to receive separation pay equal to six months of base salaryat the then current rate. On March 23, 2007, we signed a change of controlagreement with Mr. Gregg, which will expire on April 30, 2008.  The agreement defines a change of control asthe successful sale of a majority of our membership interests as contemplatedin the revised letter of intent that was signed by us on March 14, 2007.  Under the change of control agreement, ifemployed by us at the time of a change in control, Mr. Gregg is entitled toreceive a change of control bonus equal to his then current salary plus theprorated amount of any annual bonus he would have been entitled to at the endof the calendar year under his employment agreement.  If Mr. Gregg is terminated without causewithin twelve months after the change of control, he will be entitled to anadditional amount of up to twelve months salary.  The change of control agreement lists thecircumstances under which we can terminate the agreement.

91

----

Effective February 1,2005, we signed an employment agreement with Deborah J. Pierce to serve as ourChief Financial Officer.  Under thesigned employment agreement, Ms. Pierce will be paid an annual base salary of $150,000,and will be entitled to participate in a bonus program for up to $50,000, if abonus program is established.  If wechoose to terminate Ms. Pierce’s employment without cause, Ms. Pierce will beentitled to receive separation pay equal her monthly gross salary for sixmonths after the termination.  On March23, 2007, we signed a change of control agreement with Ms. Pierce, which willexpire on April 30, 2008.  The agreementdefines a change of control as the successful sale of a majority of ourmembership interests as contemplated in the revised letter of intent that wassigned by us on March 14, 2007.  Underthe change of control agreement, if employed by us at the time of a change incontrol, Ms. Pierce is entitled to receive a change of control bonus equal toone half of her then current salary.  IfMs. Pierce is terminated without cause within six months after the change ofcontrol, she will be entitled to an additional amount of up to six monthssalary on the condition that she continues to assist us in finalizing ourrecords for a reasonable period.  Thechange of control agreement lists the circumstances under which we canterminate the agreement.

Effective October 27, 2004, we signed an employmentagreement with Kim L. Tyler to serve as our Senior Vice-President of Food andBeverage.  Under the signed employmentagreement, Mr. Tyler will be paid an annual base salary of $150,000, and willbe entitled to participate in a bonus program for up to $50,000, if a bonusprogram is established.  If we choose toterminate Mr. Tyler’s employment without cause, Mr. Tyler will be entitled toreceive separation pay equal his monthly gross salary for six months after thetermination.  On March 23, 2007, wesigned a change of control agreement with Mr. Tyler, which will expire on April30, 2008.  The agreement defines a changeof control as the successful sale of a majority of our membership interests ascontemplated in the revised letter of intent that was signed by us on March 14,2007.  Under the change of controlagreement, if employed by us at the time of a change in control, Mr. Tyler isentitled to receive a change of control bonus equal to one half of his thencurrent salary.  If Mr. Tyler isterminated without cause within six months after the change of control, he willbe entitled to an additional amount of up to six months salary.  The change of control agreement lists thecircumstances under which we can terminate the agreement.

On March 23, 2007, wesigned a change of control agreement with Richard Newman, our Vice President ofCasino Operations, which will expire on April 30, 2008.  The agreement defines a change of control asthe successful sale of a majority of our membership interests as contemplatedin the revised letter of intent that was signed by us on March 14, 2007.  Under the change of control agreement, ifemployed by us at the time of a change in control, Mr. Newman is entitled toreceive a change of control bonus equal to one half of his then currentsalary.  If Mr. Newman is terminatedwithout cause within six months after the change of control, he will beentitled to an additional amount of up to six months salary.  The change of control agreement lists thecircumstances under which we can terminate the agreement.

**Compensationof Management Board**

Themembers of our management board currently do not receive any separatecompensation for serving on our management board. All members of our managementboard are reimbursed for air, meal, and other travel expenses incurred inconnection with attendance at board meetings.

**Options,Long Term Incentive and Other Benefit Plans**

Wedo not maintain a stock option plan or any similar employee benefit plan.  Accordingly, during the last fiscal year, wehave not issued any options or stock to any of its executive officers ordirectors.  In addition, there have notbeen any exercises or re-pricings of stock options or stock appreciation rightsheld by any of our executive officers or directors.

92

----

**Management Board Interlocks and Insider Participation**

Gary A. Gregg, our Chief Operating Officer,participates in discussions regarding compensation for executive officers andother employees.

**THE FOLLOWING REPORT OF THEMANAGEMENT BOARD SHALL NOT BE DEEMED TO BE SOLICITING MATERIAL OR TO BE FILEDWITH THE SEC UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF1934 OR INCORPORATED BY REFERENCE IN ANY DOCUMENT SO FILED.**

**Management Board Compensation Report**

Our management board has reviewed and discussed theabove Compensation Discussion and Analysis with our management and determinedthat the Compensation Discussion and Analysis be included in this annualreport.
| March 30, 2007 | MANAGEMENT BOARD   Michael J. Hessling 

Toyoroku Izumi

Sukeaki Izumi

William R. Ranieri

David L. Lageschulte

Edward C. Droste

Gilbert DiGiannantonio

John T. Blakely

Dennis D. Johnson |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

**ITEM12.**                 Security Ownership of Certain Beneficial Owners andManagement.

The following table shows information regarding thebeneficial ownership of our membership interests as of December 31, 2006,and sets forth the number of and percentage owned by:

·                  each person known to own beneficially morethan 5% of any units of our membership interests;

·                  each of the members of our management boardand named executive officers; and

·                  all of our management board and executiveofficers as a group.

A person is a “beneficialowner” of a security if that person has or shares “voting power,” whichincludes the power to vote or to direct the voting of the security, or “investmentpower,” which includes the power to dispose of or to direct the disposition ofthe security.

93

----

 
| **Name of Beneficial Owner**                                                 | ** ** | **Number of Units  Beneficially Owned** | ** ** | **Percent of  Units  Owned Beneficially** | ** ** |
|---------------------------------------------------------------------------------------------|------------|--------------------------------------------------------|------------|-----------------------------------------------------|------------|
| *Florida  Hooters LLC*(1)   107 Hampton Road #200   Clearwater, FL 33759                    |       | 66.67                                                  |       | 66.67                                               | %          |
| Hooters Gaming  LLC   107 Hampton Road #200   Clearwater, FL 33759                          |       | 33.40                                                  |       | 33.40                                               | %          |
| Gilbert  DiGiannantonio(2)   107 Hampton Road #200   Clearwater, FL 33759                   |       | 16.52                                                  |       | 16.52                                               | %          |
| William  Ranieri(3)   107 Hampton Road #200   Clearwater, FL 33759                          |       | 6.61                                                   |       | 6.61                                                | %          |
| Edward Droste(4)    107 Hampton Road #200   Clearwater, FL 33759                            |       | 3.97                                                   |       | 3.97                                                | %          |
| Dennis  Johnson(5)   107 Hampton Road #200   Clearwater, FL 33759                           |       | 0.66                                                   |       | 0.66                                                | %          |
| Neil Kiefer(6)   107 Hampton Road #200   Clearwater, FL 33759                               |       | 1.67                                                   |       | 1.67                                                | %          |
| Lags Ventures,  LLC   4411 Cleveland Avenue   Ft. Myers, FL 33901                           |       | 33.27                                                  |       | 33.27                                               | %          |
| David  Lageschulte(7)   4411 Cleveland Ave.   Ft. Myers, FL 33902                           |       | 33.27                                                  |       | 33.27                                               | %          |
| *EW  Common LLC*(8)   115 East Tropicana Ave.   Las Vegas, NV 89109                         |       | 33.33                                                  |       | 33.33                                               | %          |
| Eastern &  Western Hotel Corporation(9)   115 East Tropicana Ave.   Las Vegas, NV 89019 |       | 30.00                                                  |       | 30.00                                               | %          |
| S.I.  Enterprises, Inc.(10)   115 East Tropicana Ave.   Las Vegas, NV 89019            |       | 30.00                                                  |       | 30.00                                               | %          |
| Sukeaki  Izumi(10)(11)   115 East Tropicana Ave.   Las Vegas, NV 89109                      |       | 2.10                                                   |       | 2.10                                                | %          |
| Toyoroku  Izumi(10)(12)   115 East Tropicana Ave   Las Vegas, NV 89109                      |       | 27.90                                                  |       | 27.90                                               | %          |
| Michael J.  Hessling(13)   115 East Tropicana Ave.   Las Vegas, NV 89109                    |       | 3.33                                                   |       | 3.33                                                | %          |
| *All Management Board and Executive Officers as a  group*(11 persons)                       |       | 96.04                                                  |       | 96.04                                               | %          |

 

94

----

 

----

| (1)  | The membership interests of Florida Hooters LLC are  owned 50.1% by Hooters Gaming LLC and 49.9% by Lags Ventures, LLC.                                                                                                                                                                                                                                                                                                                                                     |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)  | By virtue of his 49.474% ownership interest in Hooters  Gaming LLC, Mr. DiGiannantonio is deemed to beneficially own 16.52% of  our membership interests.                                                                                                                                                                                                                                                                                                              |
| (3)  | By virtue of his 19.789% ownership interest in  Hooters Gaming LLC, Mr. Ranieri is deemed to beneficially own 6.61% of  our membership interests.                                                                                                                                                                                                                                                                                                                      |
| (4)  | By virtue of his 11.885% ownership interest in  Hooters Gaming LLC, Mr. Droste is deemed to beneficially own 3.97% of  our membership interests.                                                                                                                                                                                                                                                                                                                       |
| (5)  | By virtue of his 1.979% ownership interest in  Hooters Gaming LLC, Mr. Johnson is deemed to beneficially own 0.66% of  our membership interests.                                                                                                                                                                                                                                                                                                                       |
| (6)  | By virtue of his 5.000% ownership interest in  Hooters Gaming LLC, Mr. Kiefer is deemed to beneficially own 1.67% of  our membership interests.                                                                                                                                                                                                                                                                                                                        |
| (7)  | By virtue of his sole ownership and control of Lags  Ventures, LLC, Mr. Lageschulte is deemed to beneficially own all of our  membership interests beneficially owned by Lags Venture, LLC.                                                                                                                                                                                                                                                                       |
| (8)  | The membership interests of EW Common LLC are owned  90% by Eastern & Western and 10% by Michael Hessling.                                                                                                                                                                                                                                                                                                                                                         |
| (9)  | Eastern & Western is wholly owned by S.I.  Enterprises, Inc.                                                                                                                                                                                                                                                                                                                                                                                                  |
| (10) | S.I. Enterprises, Inc. was converted into a  limited-liability company on February 28, 2005 and is now known as  S.I. Enterprises, LLC. The interests in S.I. Enterprises, Inc.  are owned 93% by Toyoroku Izumi and 7% by Sukeaki Izumi. By virtue of its  sole ownership of Eastern & Western, S.I. Enterprises, Inc. is  deemed to beneficially own all of our membership interests beneficially owned  by Eastern & Western. |
| (11) | By virtue of his 7% ownership of S.I.  Enterprises, Inc., Mr. S. Izumi is deemed to beneficially own 2.10%  of our membership interests.                                                                                                                                                                                                                                                                                                                          |
| (12) | By virtue of his 93% ownership of S.I.  Enterprises, Inc., Mr. T. Izumi is deemed to beneficially own  27.90% of our membership interests.                                                                                                                                                                                                                                                                                                                        |
| (13) | By virtue of his 10% ownership of EW  Common LLC, Mr. Hessling is deemed to beneficially own 3.33% of our  membership interests.                                                                                                                                                                                                                                                                                                                                  |

 

**ITEM 13.**                 Certain Relationships and Related Transactions.

We believe that all of the transactions mentionedbelow are on terms at least as favorable to us as would have been obtained froman unrelated third party.

The Company’s Compliance Policies consider relatedparty transactions as “potential conflicts of interest”.  Before engaging in “potential conflicts ofinterest,” proposed activities are reviewed by company management and reportedto the Compliance Committee, which comprises of two management board membersand three company officers.  Themanagement board also reviews all related party transactions on a case by casebasis and approves any such transaction in accordance with Nevada corporatelaw.  In addition, the Notes issued by us prohibit us from entering intocertain transactions with certain related parties unless it is determined thatthe terms of the transaction are fair and reasonable to us, and no lessfavorable than could have been obtained in an arm’s length transaction with anunrelated party.  The Notes require additional approvals before we mayenter into certain related transactions in which the consideration to eitherparty in the transaction would exceed specified thresholds.

95

----

**FloridaHooters LLC and Related Entities**

We have entered into an assignment agreement withFlorida Hooters LLC whereby we have been assigned (i) a license to usecertain intellectual property related to the Hooters brand in connection withgaming, casino or combined hotel gaming and casino operations at the HootersCasino Hotel property; (ii) a non-exclusive license to use the Hootersrestaurant concept at the Hooters Casino Hotel property; and (iii) anexclusive license to use certain intellectual property to operate and promoterestaurants, taverns, lounges and bars using the marks “Dan Marino’s FineFood & Spirits” and “‘13’ Martini Bar,” which is operated inconjunction with Dan Marino’s Fine Food & Spirits, at the HootersCasino Hotel property.  Pursuant to theassignment agreement, we must pay certain fees to related entities.

Hooters Gaming Corporation is a related entity whichis owned by certain members of our management board (Gilbert DiGiannantonio(52.078%), William Ranieri (20.831%), Edward Droste (12.510%), and DennisJohnson (2.083%)) as well as some of our other indirect minority interestowners. Las Vegas Wings, Inc. is a related entity that is owned by DavidLageschulte (50.69%), Gilbert DiGiannantonio (14.18%) and William Ranieri(5.13%), all of whom are members of our management board and indirectmembership interest owners. Lags Ventures, Inc. is a related entity whichis wholly owned by David Lageschulte, a member of our management board and anindirect beneficial owner (through Lags Ventures, LLC) of 33.27% of ourmembership interests.

Pursuant to the terms of our assignment agreementwith Florida Hooters LLC, we accrued the following fees beginning on February3, 2006, the opening of the Hooters Casino Hotel:

·                  *Hooters Gaming Corporation.*  Wepay Hooters Gaming Corporation a fee equal to three percent of all net gamingrevenues generated from our gaming activities (as defined by Nevada law). Thefee accrues on a monthly basis.

·                  *Las Vegas Wings, Inc.*  Wepay Las Vegas Wings, Inc. a consent fee equal to four percent of gross cashsales from any Hooters branded restaurant and three percent of the gross cashsales of any merchandise with a Hooters logo at any location on or about theHooters Casino Hotel.  This consent feeaccrues monthly.

·                  *Lags Ventures, Inc.*  The “DanMarino’s Fine Food & Spirits” and “‘13’ Martini Bar” marks used inconnection with restaurant services at the Hooters Casino Hotel property,require us to pay Lags Ventures, Inc. a royalty equal to six percent ofgross cash sales generated from such establishments. This mark fee iscalculated on a monthly basis, subject to any subordination or deferral agreedto by Lags Ventures, Inc., and is payable no later than 30 days afterthe termination of the preceding full calendar month. In addition to the markfee, we pay Lags Ventures, Inc. all training fees, set-up fees and otherstart-up items customarily incurred by Lags Ventures, Inc. in similar licensingsituations. These additional fees and amounts are not and will not besubordinated or deferred to any other amount.

Hooters Gaming Corporation, Las VegasWings, Inc. and Lags Ventures, Inc. have agreed to subordinate payment oftheir respective fees in favor of the obligations of 155 East Tropicana, LLCand its subsidiaries under the Notes and any guarantees of the Notes, certainpayments to be made pursuant to our operating agreement, and any fees due toany of them will accrue and remain unpaid until there is sufficient net cashflow from operations to make all of the foregoing payments. In addition, theforegoing fees are subject to applicable limitations in the indenture governingthe Notes, such as the limitation on restricted payments to the extent theyconstitute restricted payments.

96

----

**OtherTransactions**

*Provident Advertising &Marketing, Inc.*  Provident Advertising &Marketing, Inc.’s majority shareholder is Edward C. Droste, a member ofour management board and an indirect beneficial owner of 3.96% of ourmembership interests.  Beginning 2004,Provident Advertising & Marketing, Inc. provided us with servicesrelating to the planning and development of an advertising and marketingplan.  The aggregate marketing fee andmerchandise fee paid to Provident Advertising & Marketing, Inc. forthe years ended December 31, 2006 and 2005 was approximately $0.6 millionand $0.2 million, respectively.  For theyears ended December 31, 2006 and 2005, we paid $3,033,070 and $89,511,respectively, to Provident Merchandise Sourcing, and $6,420 and $179,respectively, to Provident Creative for uniforms and for merchandise to sell inour gift shops.  Both ProvidentMerchandise Sourcing and Provident Creative are affiliated with ProvidentAdvertising & Marketing, Inc.  Wewill continue to engage Provident Advertising & Marketing, Inc.for the continued development and implementation of a strategic marketing planin connection with the Hooters Casino Hotel.

Our Notes indenture requires that we engage anindependent valuation firm to determine that the related party transactions arevalued at arm’s-length prices if the total expenditures to Provident aggregate$2.5 million.  A nationally-recognizedvaluation firm issued a favorable opinion that the related party transactionswith Provident had been conducted in a manner consistent with the arm’s lengthstandard.

*Eastern & Western HotelCorporation.*  After acquiring the property, but prior toobtaining our gaming licenses, we entered into a casino lease withEastern & Western as the operator of all areas of the Hôtel San Rémorelating to casino gaming. Pursuant to the terms of the lease,Eastern & Western leased from us those portions of the Hôtel San Rémocontaining the showroom, gaming and liquor servicing areas, including areascontaining and immediately adjacent to slot machines, video machines, allgaming devices, table games, the poker room, keno area, baccarat areas, andother areas which are subject to direct supervision by the Nevada GamingAuthorities, as well as all surveillance areas, counting rooms, cashier cagesand other areas ancillary to casino gaming. We also entered into a hotel leasewith Eastern & Western as the operator of all non-casino areas of theHôtel San Rémo. These leases were terminated on November 1, 2005, after wereceived our gaming licenses.  Eastern& Western paid us an aggregate amount of approximately $5.4 million underthe leases during the year ended December 31, 2005.

*Hawkeye Construction andMillwork, Inc.*  Hawkeye Construction and Millwork, Inc.is co-owned by David Lageschulte, a member of our management board and anindirect beneficial owner of 33.27% of our membership interests. InFebruary 2005, we entered into an agreement with Hawkeye Construction andMillwork, Inc. whereby Hawkeye Construction and Millwork, Inc. wouldmanage the construction and renovation project at the hotel casino property.Total compensation for services is two percent (2%) of the construction andfurniture, fixtures and equipment costs, but will not exceed $600,000. The feeis paid on a monthly basis.  The Company’spayments to Hawkeye Construction and Millwork, Inc. in relation to theconstruction and renovation management agreement totaled $0.1 million and $0.5million for the years ended December 31, 2006 and 2005, respectively.

*Pete & Shorty’s, Inc.* Pete & Shorty’s, Inc. is owned by our chief executiveofficer, Neil Kiefer (6.39%), certain members of our management board (GilbertDiGiannantonio (12.77%), William Ranieri (4.26%), Edward Droste (14.00%), andDennis Johnson (9.34%)), and an indirect minority interest owner. InMarch 2005, we entered into a license agreement with Pete &Shorty’s, Inc. whereby we were granted a nonexclusive, royalty-freelicense to use the Pete & Shorty’s mark in connection with arestaurant, bar and lounge at the Hooters Casino Hotel. Pursuant to the licenseagreement, we can also use the mark in connection with affiliated merchandise,entertainment and casino services.

97

----

**ITEM 14.**                 Principal Accounting Fees and Services.

The aggregate accounting fees billed and servicesprovided by Ernst & Young LLP, our principal accountants, to us and HôtelSan Rémo Casino and Resort for 2006 and 2005 are as follows:
|                                            | ** ** | **Year ended  December 31,  2006** | ** ** | **Year ended  December 31,  2005** | ** ** |
|--------------------------------------------|------------|----------------------------------------------|------------|----------------------------------------------|------------|
| **155 East Tropicana, LLC** |       |                                         |       |                                         |       |
| Audit fees (1)                             |       | $                                            | 187,631    |                                         | $          | 104,626 |   |
| Audit-related  fees (2)                    |       | —                                       |       | 8,100                                        |       |
| Tax fees                                   |       | —                                       |       | —                                       |       |
| All other fees  (3)                        |       | 5,025                                        |       | 410,202                                      |       |
| Total fees                                 |       | $                                            | 192,656    |                                         | $          | 522,928 |   |

 
|                                                | ** ** | ** ** | ** ** | **Ten months ended  October 31,  2005** | ** ** |
|------------------------------------------------|------------|------------|------------|-----------------------------------------|------------|
| **Hôtel San Rémo Casino and Resort** |       |       |       |                                    |       |
| Audit fees (1)                                 |       |       |       | $                                       | 97,068     |   |
| Audit-related  fees (2)                        |       |       |       | —                                  |       |
| Tax fees                                       |       |       |       | —                                  |       |
| All other fees                                 |       |       |       | —                                  |       |
| Total fees                                     |       |       |       | $                                       | 97,068     |   |

 

----

(1)          Represents the aggregate fees Ernst &Young LLP billed us and Hôtel San Rémo Casino and Resort for professional servicesfor the audits of our annual financial statements and review of financialstatements included in our reports on Form 10-Q or services that are normallyprovided by Ernst & Young LLP in connection with those filings.  The 2005 audit fees for Hôtel San Rémoincludes $36,000 related to Ernst & Young LLP performing an audit of the2002 combined financial statements that was invoiced in March 2005.

(2)          Represents the aggregate fees Ernst &Young LLP billed us and Hôtel San Rémo Casino and Resort for assurance andrelated services that are reasonably related to the performance of the auditsin 2006 and 2005.

(3)          Represents the aggregate fees Ernst &Young LLP billed for other than the items described in 1–3 above.  The fees of $5,025 paid in 2006 represent feesbilled to us for professional services rendered in connection with theagreed-upon-procedures related to the ownership transfer of the Hôtel San RémoCasino and Resort.  The fees of $410,202paid in 2005 represent fees billed to us for assistance related to the offeringof the old notes and the registration statement on Form S-4, declared effectiveby the Securities and Exchange Commission on June 24, 2005.

We do not have an audit committee. Fees paid to Ernst & Young LLP,our principal accountants, are pre-approved by the Chief Financial Officer andPresident.

98

----

**PART IV**

**ITEM 15.**                 Exhibits and Financial Statement Schedules.

(a)     List the following documents filed as part of thereport:

 
| (1)    | All financial statements.                                                                                                                                    |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                         |
|   | Included in “Item 8. Financial Statements and  Supplementary Data” above.                                                                          |
|   |                                                                                                                                                         |
| (2)    | Financial Statement Schedules.                                                                                                                               |
|   |                                                                                                                                                         |
|   | Not applicable.                                                                                                                                              |
|   |                                                                                                                                                         |
| (3)    | Exhibit Index.                                                                                                                                               |
|   |                                                                                                                                                         |
|   | See exhibits listed on the  Exhibit Index following the signature page of this Annual Report, where said  Exhibit Index is incorporated herein by reference. |

 

(b)    Exhibits.

Included as exhibits are theitems listed in the Exhibit Index.

(c)     Financial Statement Schedules

Not applicable.

99

----

**SIGNATURES**

Pursuant to the requirements of Section 13 or 15(d)of the Securities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned, thereunto dulyauthorized.
|                      | **155 East Tropicana, LLC** |
|----------------------|-----------------------------|
|                 | (Registrant)                |
|                 |                        |
|                 |                        |
|                 | By:                         | /s/ Neil G. Kiefer |   |
| Date: March 15, 2007 |                        | Neil G. Kiefer |
|                 | Its:                        | Chief Executive Officer |

 

Pursuant to therequirements of the Securities and Exchange Act of 1934, this report has beensigned below by the following persons on behalf of the registrant and in thecapacities and on the dates included.
| Signature             | ** ** | **Title** | ** **                         | **Date** |
|-----------------------|------------|-----------|------------------------------------|----------|
|                  |       |      |                               |     |
| /s/ Neil G. Kiefer    |       |      | Chief Executive Officer (Principal |     | March 15, 2007 |
| Neil G. Kiefer        |       |      | Executive Officer)                 |     |   |
|                  |       |      |                               |     |   |
|                  |       |      |                               |     |   |
| /s/ Deborah J. Pierce |       |      | Chief Financial Officer (Principal |     | March 30, 2007 |
| Deborah J. Pierce     |       |      | Financial and Accounting Officer)  |     |   |
|                  |       |      |                               |     |   |
|                  |       |      |                               |     |   |
| /s/ Michael Hessling  |       |      | President and Management Board     |     | March 12, 2007 |
| Michael Hessling      |       |      |                               |     |   |
|                  |       |      |                               |     |   |
|                  |       |      |                               |     |   |
| /s/ Toyoroku Izumi    |       |      | Management Board                   |     | March 12, 2007 |
| Toyoroku Izumi        |       |      |                               |     |   |

 

100

----

 
| Signature                   | ** ** | **Title** | ** **       | **Date** |
|-----------------------------|------------|-----------|------------------|----------|
|                        |       |      |             |     |
| /s/ Sukeaki Izumi           |       |      | Management Board |     | March 12, 2007 |
| Sukeaki Izumi               |       |      |             |     |   |
|                        |       |      |             |     |   |
|                        |       |      |             |     |   |
| /s/ William Ranieri         |       |      | Management Board |     | March 16, 2007 |
| William Ranieri             |       |      |             |     |   |
|                        |       |      |             |     |   |
|                        |       |      |             |     |   |
| /s/ David Lageschulte       |       |      | Management Board |     | March 22, 2007 |
| David Lageschulte           |       |      |             |     |   |
|                        |       |      |             |     |   |
|                        |       |      |             |     |   |
| /s/ Edward Droste           |       |      | Management Board |     | March 15, 2007 |
| Edward Droste               |       |      |             |     |   |
|                        |       |      |             |     |   |
|                        |       |      |             |     |   |
| /s/ Gilbert  DiGiannantonio |       |      | Management Board |     | March 15, 2007 |
| Gilbert DiGiannantonio      |       |      |             |     |   |
|                        |       |      |             |     |   |
|                        |       |      |             |     |   |
| /s/ John Blakely            |       |      | Management Board |     | March 15, 2007 |
| John Blakely                |       |      |             |     |   |
|                        |       |      |             |     |   |
|                        |       |      |             |     |   |
| /s/ Dennis Johnson          |       |      | Management Board |     | March 16, 2007 |
| Dennis Johnson              |       |      |             |     |   |

 

101

----

 

**SIGNATURES**

Pursuant to the requirementsof Section 13 or 15(d) of the Securities Exchange Act of 1934, the registranthas duly caused this report to be signed on its behalf by the undersigned,thereunto duly authorized.
|                      | **155 East Tropicana Finance Corp.** |
|----------------------|--------------------------------------|
|                 | (Registrant)                         |
|                 |                                 |
|                 |                                 |
|                 | By:                                  | /s/ Neil G. Kiefer |   |
| Date: March 15, 2007 |                                 | Neil G. Kiefer |
|                 | Its:                                 | Chief Executive Officer |

 

Pursuant to the requirements of the Securities andExchange Act of 1934, this report has been signed below by the followingpersons on behalf of the registrant and in the capacities and on the datesincluded.
| Signature             | ** ** | ** ** | **Title**                               | ** ** | **Date**       |
|-----------------------|------------|------------|-----------------------------------------|------------|----------------|
|                  |       |       |                                    |       |           |
| /s/ Neil G. Kiefer    |       |       | President (Principal Executive Officer) |       | March 15, 2007 |
| Neil G. Kiefer        |       |       |                                    |       |           |
|                  |       |       |                                    |       |           |
|                  |       |       |                                    |       |           |
| /s/ Deborah J. Pierce |       |       | Treasurer (Principal Financial and      |       | March 30, 2007 |
| Deborah J. Pierce     |       |       | Accounting Officer)                     |       |           |
|                  |       |       |                                    |       |           |
|                  |       |       |                                    |       |           |
| /s/ Michael Hessling  |       |       | Vice President, Secretary and Director  |       | March 12, 2007 |
| Michael Hessling      |       |       |                                    |       |           |
|                  |       |       |                                    |       |           |
|                  |       |       |                                    |       |           |
| /s/ Toyoroku Izumi    |       |       | Director                                |       | March 12, 2007 |
| Toyoroku Izumi        |       |       |                                    |       |           |

 

102

----

 
| Signature                   | ** ** | ** ** | **Title** | ** ** | **Date**       |
|-----------------------------|------------|------------|-----------|------------|----------------|
|                        |       |       |      |       |           |
| /s/ Sukeaki Izumi           |       |       | Director  |       | March 12, 2007 |
| Sukeaki Izumi               |       |       |      |       |           |
|                        |       |       |      |       |           |
|                        |       |       |      |       |           |
| /s/ William Ranieri         |       |       | Director  |       | March 16, 2007 |
| William Ranieri             |       |       |      |       |           |
|                        |       |       |      |       |           |
|                        |       |       |      |       |           |
| /s/ David Lageschulte       |       |       | Director  |       | March 22, 2007 |
| David Lageschulte           |       |       |      |       |           |
|                        |       |       |      |       |           |
|                        |       |       |      |       |           |
| /s/ Edward Droste           |       |       | Director  |       | March 15, 2007 |
| Edward Droste               |       |       |      |       |           |
|                        |       |       |      |       |           |
|                        |       |       |      |       |           |
| /s/ Gilbert  DiGiannantonio |       |       | Director  |       | March 15, 2007 |
| Gilbert DiGiannantonio      |       |       |      |       |           |
|                        |       |       |      |       |           |
|                        |       |       |      |       |           |
| /s/ John Blakely            |       |       | Director  |       | March 15, 2007 |
| John Blakely                |       |       |      |       |           |
|                        |       |       |      |       |           |
|                        |       |       |      |       |           |
| /s/ Dennis Johnson          |       |       | Director  |       | March 16, 2007 |
| Dennis Johnson              |       |       |      |       |           |

 

103

----

 

**EXHIBIT INDEX**
| Index No. | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                       |
|-----------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|      |       |                                                                                                                                                                                                                                                                                                                                                                                  |
| 3.1       |       | Articles of Organization of 155 East Tropicana LLC  dated June 17, 2004, incorporated by reference to registrant’s Registration  Statement on Form S-4, as filed with the Securities and Exchange Commission  on May 13, 2005.                                                                                                                                                   |
|      |       |                                                                                                                                                                                                                                                                                                                                                                                  |
| 3.2       |       | Amended and Restated Articles of Organization of 155  East Tropicana LLC dated June 28, 2004, incorporated by reference to  registrant’s Registration Statement on Form S-4, as filed with the Securities  and Exchange Commission on May 13, 2005.                                                                                                                              |
|      |       |                                                                                                                                                                                                                                                                                                                                                                                  |
| 3.3       |       | Articles of Incorporation of 155 East Tropicana  Finance Corp dated March 7, 2005, incorporated by reference to registrant’s  Registration Statement on Form S-4, as filed with the Securities and Exchange  Commission on May 13, 2005.                                                                                                                                         |
|      |       |                                                                                                                                                                                                                                                                                                                                                                                  |
| 3.4       |       | Articles of Organization of EW Common LLC dated July  23, 2004, incorporated by reference to registrant’s Registration Statement on  Form S-4, as filed with the Securities and Exchange Commission on May 13,  2005.                                                                                                                                                            |
|      |       |                                                                                                                                                                                                                                                                                                                                                                                  |
| 3.5       |       | Articles of Organization of Florida Hooters LLC  dated June 15, 2004, incorporated by reference to registrant’s Registration  Statement on Form S-4, as filed with the Securities and Exchange Commission  on May 13, 2005.                                                                                                                                                      |
|      |       |                                                                                                                                                                                                                                                                                                                                                                                  |
| 3.6       |       | Amended and Restated Articles of Organization of  Florida Hooters LLC dated November 5, 2004, incorporated by reference to  registrant’s Registration Statement on Form S-4, as filed with the Securities  and Exchange Commission on May 13, 2005.                                                                                                                              |
|      |       |                                                                                                                                                                                                                                                                                                                                                                                  |
| 3.7       |       | Amended and Restated Operating Agreement of 155 East  Tropicana, LLC dated March 9, 2005, incorporated by reference to registrant’s  Registration Statement on Form S-4, as filed with the Securities and Exchange  Commission on May 13, 2005.                                                                                                                                  |
|      |       |                                                                                                                                                                                                                                                                                                                                                                                  |
| 3.8       |       | Code of Bylaws of 155 East Tropicana Finance Corp.  dated March 8, 2005, incorporated by reference to registrant’s Registration  Statement on Form S-4, as filed with the Securities and Exchange Commission  on May 13, 2005.                                                                                                                                                   |
|      |       |                                                                                                                                                                                                                                                                                                                                                                                  |
| 3.9       |       | Operating Agreement of EW Common LLC dated July 30,  2004, incorporated by reference to registrant’s Registration Statement on  Form S-4, as filed with the Securities and Exchange Commission on May 13,  2005.                                                                                                                                                                 |
|      |       |                                                                                                                                                                                                                                                                                                                                                                                  |
| 3.10      |       | Operating Agreement of Florida Hooters LLC dated  July 30, 2004, incorporated by reference to registrant’s Registration  Statement on Form S-4, as filed with the Securities and Exchange Commission  on May 13, 2005.                                                                                                                                                           |
|      |       |                                                                                                                                                                                                                                                                                                                                                                                  |
| 4.1       |       | Indenture among 155 East Tropicana, LLC, 155 East  Tropicana Finance Corp and The Bank of New York Trust Company, N.A. dated  March 29, 2005, incorporated by reference to registrant’s Registration  Statement on Form S-4, as filed with the Securities and Exchange Commission  on May 13, 2005.                                                                              |
|      |       |                                                                                                                                                                                                                                                                                                                                                                                  |
| 4.2       |       | Registration Rights Agreement among 155 East  Tropicana, LLC, 155 East Tropicana Finance Corp, Florida Hooters LLC, EW  Common LLC, Jefferies & Company, Inc. and Wells Fargo Securities, LLC  dated March 29, 2005. , incorporated by reference to registrant’s Registration  Statement on Form S-4, as filed with the Securities and Exchange Commission  on May 13, 2005. |
|      |       |                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.1      |       | Purchase Agreement among 155 East Tropicana, LLC,  155 East Tropicana Finance Corp, Jefferies & Company, Inc. and Wells  Fargo Securities, LLC dated March 23, 2005. , incorporated by reference to  registrant’s Registration Statement on Form S-4, as filed with the Securities  and Exchange Commission on May 13, 2005.                                                 |

 

104

----

 
| Index No. | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|-----------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|      |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.2      |       | Senior Secured Notes Security Agreement among 155  East Tropicana, LLC, 155 East Tropicana Finance Corp and The Bank of New York  Trust Company, N.A. dated March 29, 2005, incorporated by reference to  registrant’s Registration Statement on Form S-4, as filed with the Securities  and Exchange Commission on May 13, 2005.                                                                                                                      |
|      |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.3      |       | Guarantee and Pledge Agreement between Eastern &  Western Hotel Corporation and The Bank of New York Trust Company, N.A. dated  March 29, 2005, incorporated by reference to registrant’s Registration  Statement on Form S-4, as filed with the Securities and Exchange Commission  on May 13, 2005.                                                                                                                                              |
|      |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.4      |       | Parent Pledge Agreement among Florida Hooters LLC,  EW Common LLC and The Bank of New York Trust Company, N.A. dated March 29,  2005, incorporated by reference to registrant’s Registration Statement on  Form S-4, as filed with the Securities and Exchange Commission on May 13,  2005, incorporated by reference to registrant’s Registration Statement on  Form S-4, as filed with the Securities and Exchange Commission on May 13,  2005. |
|      |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.5      |       | Trademark Security Agreement among 155 East  Tropicana LLC, 155 East Tropicana Finance Corp and The Bank of New York Trust  Company, N.A. dated March 29, 2005, incorporated by reference to registrant’s  Registration Statement on Form S-4, as filed with the Securities and Exchange  Commission on May 13, 2005.                                                                                                                                  |
|      |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.6      |       | Credit Agreement among 155 East Tropicana, LLC, 155  East Tropicana Finance Corp and Wells Fargo Foothill, Inc. dated March 29,  2005, incorporated by reference to registrant’s Registration Statement on  Form S-4, as filed with the Securities and Exchange Commission on May 13,  2005.                                                                                                                                                           |
|      |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.7      |       | Amendment Number One to Credit Agreement dated  January 30, 2006, incorporated by reference to registrant’s current report on  Form 8-K, as filed with the Securities and Exchange Commission on February 2,  2006.                                                                                                                                                                                                                                    |
|      |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.8      |       | Security Agreement among 155 East Tropicana, LLC,  155 East Tropicana Finance Corp and Wells Fargo Foothill, Inc. dated March  29, 2005, incorporated by reference to registrant’s Registration Statement on  Form S-4, as filed with the Securities and Exchange Commission on May 13,  2005.                                                                                                                                                         |
|      |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.9      |       | Securities Account Control Agreement between Wells  Fargo Foothill, Inc., Eastern & Western Hotel Corporation, Wells Fargo  Brokerage Services, LLC dated March 29, 2005, incorporated by reference to  registrant’s Registration Statement on Form S-4, as filed with the Securities  and Exchange Commission on May 13, 2005.                                                                                                                    |
|      |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.10     |       | Securities Account Control Agreement between Wells  Fargo Foothill, Inc., 155 East Tropicana, LLC and Wells Fargo Brokerage  Services, LLC dated March 29, 2005, incorporated by reference to registrant’s  Registration Statement on Form S-4, as filed with the Securities and Exchange  Commission on May 13, 2005.                                                                                                                                 |
|      |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.11     |       | Collateral Account Control Agreement among 155 East  Tropicana, LLC, The Bank of New York Trust Company, N.A. dated March 29, 2005  (Interest Reserve Account) , incorporated by reference to registrant’s  Registration Statement on Form S-4, as filed with the Securities and Exchange  Commission on May 13, 2005.                                                                                                                                 |
|      |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.12     |       | Cash Collateral and Disbursement Agreement among The  Bank of New York Trust Company, N.A., and 155 East Tropicana, LLC and 155  East Tropicana Finance Corp. dated March 29, 2005, incorporated by reference  to registrant’s Registration Statement on Form S-4, as filed with the  Securities and Exchange Commission on May 13, 2005.                                                                                                              |

 

105

----

 
| Index No. | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                  |
|-----------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|      |       |                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.13     |       | Guarantee and Pledge Agreement between Eastern &  Western Hotel Corporation and Wells Fargo Foothill, Inc. dated March 29,  2005, incorporated by reference to registrant’s Registration Statement on  Form S-4, as filed with the Securities and Exchange Commission on May 13,  2005.                                                                                                 |
|      |       |                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.14     |       | Parent Pledge Agreement among Florida Hooters, LLC,  EW Common LLC and Wells Fargo Foothill, Inc. dated March 29, 2005,  incorporated by reference to registrant’s Registration Statement on Form S-4,  as filed with the Securities and Exchange Commission on May 13, 2005.                                                                                                               |
|      |       |                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.15     |       | Intercompany Subordination Agreement among 155 East  Tropicana, LLC, 155 East Tropicana Finance Corp. and Wells Fargo Foothill,  Inc. dated March 29, 2005, incorporated by reference to registrant’s  Registration Statement on Form S-4, as filed with the Securities and Exchange  Commission on May 13, 2005.                                                                           |
|      |       |                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.16     |       | Intercreditor and Lien Subordination Agreement among  Wells Fargo Foothill, Inc., The Bank of New York Trust Company, N.A., 155  East Tropicana, LLC and 155 East Tropicana Finance Corp. dated March 29,  2005, incorporated by reference to registrant’s Registration Statement on  Form S-4, as filed with the Securities and Exchange Commission on May 13,  2005.                      |
|      |       |                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.17     |       | Deed of Trust, Fixture Filing with Assignment of  Rents and Leases, and Security Agreement by and from 155 East Tropicana, LLC,  to Lawyers Title of Nevada, Inc for the benefit of Wells Fargo Foothill, Inc.  dated March 29, 2005, incorporated by reference to registrant’s Registration  Statement on Form S-4, as filed with the Securities and Exchange Commission  on May 13, 2005. |
|      |       |                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.18     |       | Leasehold Deed of Trust, Fixture Filing with  Assignment of Rents and Leases, and Security Agreement to Lawyers Title of  Nevada, Inc. for the benefit of Wells Fargo Foothill, Inc. dated March 29,  2005, incorporated by reference to registrant’s Registration Statement on  Form S-4, as filed with the Securities and Exchange Commission on May 13,  2005.                           |
|      |       |                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.19     |       | Assignment of Entitlements, Contracts, Rents and  Revenues between 155 East Tropicana, LLC and Wells Fargo Foothill, Inc. dated  March 29, 2005, incorporated by reference to registrant’s Registration  Statement on Form S-4, as filed with the Securities and Exchange Commission  on May 13, 2005.                                                                                      |
|      |       |                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.20     |       | Assignment of Entitlements and Contracts between  Eastern & Western Hotel Corporation and Wells Fargo Foothill, Inc. dated  March 29, 2005, incorporated by reference to registrant’s Registration  Statement on Form S-4, as filed with the Securities and Exchange Commission  on May 13, 2005.                                                                                       |
|      |       |                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.21     |       | Subordination and Attornment Agreement and Estoppel  Certificate between Wells Fargo Foothill, Inc., Eastern & Western Hotel  Corporation and 155 East Tropicana, LLC dated March 29, 2005, incorporated by  reference to registrant’s Registration Statement on Form S-4, as filed with  the Securities and Exchange Commission on May 13, 2005.                                       |
|      |       |                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.22     |       | Consent to Collateral Assignment of Contract by  C&B Nevada, Inc. and Wells Fargo Foothills, Inc. dated March 29, 2005,  incorporated by reference to registrant’s Registration Statement on Form S-4,  as filed with the Securities and Exchange Commission on May 13, 2005.                                                                                                           |
|      |       |                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.23     |       | Consent to Collateral Assignment of Contract by The  PENTA Building Group, Inc. and Wells Fargo Foothills, Inc. dated March 29,  2005, incorporated by reference to registrant’s Registration Statement on  Form S-4, as filed with the Securities and Exchange Commission on May 13,  2005.                                                                                                |

 

106

----

 
| Index No. | ** ** | **Description**                                                                                                                                                                                                                                                                                                                      |
|-----------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|      |       |                                                                                                                                                                                                                                                                                                                                 |
| 10.24     |       | Control Agreement among Wells Fargo Foothill, Inc.  Florida Hooters LLC, EW Common LLC and 155 East Tropicana, LLC dated March  29, 2005, incorporated by reference to registrant’s Registration Statement on  Form S-4, as filed with the Securities and Exchange Commission on May 13,  2005.                                 |
|      |       |                                                                                                                                                                                                                                                                                                                                 |
| 10.25     |       | Amended and Restated Joint Venture Agreement between  EW Common LLC, Eastern & Western Hotel Corporation and Florida Hooters  dated March 9, 2005, incorporated by reference to registrant’s Registration  Statement on Form S-4, as filed with the Securities and Exchange Commission  on May 13, 2005.                    |
|      |       |                                                                                                                                                                                                                                                                                                                                 |
| 10.26     |       | Amended and Restated Assignment Agreement between  Hooters Gaming Corporation and Florida Hooters, LLC dated March 9, 2005,  incorporated by reference to registrant’s Registration Statement on Form S-4,  as filed with the Securities and Exchange Commission on May 13, 2005.                                               |
|      |       |                                                                                                                                                                                                                                                                                                                                 |
| 10.27     |       | Amended and Restated Assignment Agreement between  Florida Hooters, LLC and 155 East Tropicana, LLC dated March 9, 2005,  incorporated by reference to registrant’s Registration Statement on Form S-4,  as filed with the Securities and Exchange Commission on May 13, 2005.                                                  |
|      |       |                                                                                                                                                                                                                                                                                                                                 |
| 10.28     |       | Amended and Restated Mark License Agreement between  Lags Ventures, Inc. and Florida Hooters, LLC dated March 9, 2005,  incorporated by reference to registrant’s Registration Statement on Form S-4,  as filed with the Securities and Exchange Commission on May 13, 2005.                                                    |
|      |       |                                                                                                                                                                                                                                                                                                                                 |
| 10.29     |       | Affirmation and Acknowledgement between Hooters  Gaming Corporation and 155 East Tropicana, LLC dated March 9, 2005,  incorporated by reference to registrant’s Registration Statement on Form S-4,  as filed with the Securities and Exchange Commission on May 13, 2005.                                                      |
|      |       |                                                                                                                                                                                                                                                                                                                                 |
| 10.30     |       | Trademark License Agreement between PETE &  SHORTY’S, INC., Florida 33763 and 155 East Tropicana, LLC dated March 11,  2005, incorporated by reference to registrant’s Registration Statement on  Form S-4, as filed with the Securities and Exchange Commission on May 13,  2005.                                     |
|      |       |                                                                                                                                                                                                                                                                                                                                 |
| 10.31     |       | Amendment to License Agreement between HI Limited  Partnership and Hooters Gaming Corporation dated February 24, 2005,  incorporated by reference to registrant’s Registration Statement on Form S-4,  as filed with the Securities and Exchange Commission on May 13, 2005.                                                    |
|      |       |                                                                                                                                                                                                                                                                                                                                 |
| 10.32     |       | Collateral Account Control Agreement among 155 East  Tropicana, LLC and The Bank of New York Trust Company, N.A. dated March 29,  2005 (Renovation Disbursement Account), incorporated by reference to  registrant’s Registration Statement on Form S-4, as filed with the Securities  and Exchange Commission on May 13, 2005. |
|      |       |                                                                                                                                                                                                                                                                                                                                 |
| 10.33     |       | Amendment Number Two to Credit Agreement dated June  2, 2006, incorporated by reference to registrant’s current report on Form  8-K, as filed with the Securities and Exchange Commission on June 6, 2006.                                                                                                                      |
|      |       |                                                                                                                                                                                                                                                                                                                                 |
| 10.34     |       | Amendment Number Three to Credit Agreement dated  December 15, 2006, incorporated by reference to registrant’s current report  on Form 8-K, as filed with the Securities and Exchange Commission on December  21, 2006.                                                                                                         |
|      |       |                                                                                                                                                                                                                                                                                                                                 |
| 10.35     |       | Letter of Intent dated January 12, 2007,  incorporated by reference to registrant’s current report on Form 8-K, as  filed with the Securities and Exchange Commission on January 19, 2007.                                                                                                                                      |
|      |       |                                                                                                                                                                                                                                                                                                                                 |
| 10.36     |       | Change of Control Agreement between 155 East  Tropicana, LLC and Gary A. Gregg dated March 23, 2007.                                                                                                                                                                                                                                 |

 

107

----

 
| Index No. | ** ** | **Description**                                                                                                                                                                                                                              |
|-----------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|      |       |                                                                                                                                                                                                                                         |
| 10.37     |       | Change of Control Agreement between 155 East  Tropicana, LLC and Deborah J. Pierce dated March 23, 2007.                                                                                                                                     |
|      |       |                                                                                                                                                                                                                                         |
| 10.38     |       | Change of Control Agreement between 155 East  Tropicana, LLC and Kim Tyler dated March 23, 2007.                                                                                                                                             |
|      |       |                                                                                                                                                                                                                                         |
| 10.39     |       | Change of Control Agreement between 155 East  Tropicana, LLC and Rick Newman dated March 23, 2007.                                                                                                                                           |
|      |       |                                                                                                                                                                                                                                         |
| 10.40     |       | Employment Agreement between 155 East Tropicana, LLC  and Michael J. Hessling dated October 31, 2006, incorporated by reference to  registrant’s Form 10-Q, as filed with the Securities and Exchange Commission  on November 13, 2006. |
|      |       |                                                                                                                                                                                                                                         |
| 10.41     |       | Employment Agreement between 155 East Tropicana, LLC  and Gary A. Gregg dated October 30, 2006, incorporated by reference to  registrant’s Form 10-Q, as filed with the Securities and Exchange Commission  on November 13, 2006.       |
|      |       |                                                                                                                                                                                                                                         |
| 10.42     |       | Employment Agreement between 155 East Tropicana, LLC  and Deborah J. Pierce dated February 1, 2005.                                                                                                                                          |
|      |       |                                                                                                                                                                                                                                         |
| 10.43     |       | Employment Agreement between 155 East Tropicana, LLC  and Kim Tyler dated October 27, 2004.                                                                                                                                                  |
|      |       |                                                                                                                                                                                                                                         |
| 31.1      |       | Certification of Deborah J. Pierce under Section 302  of the Sarbanes-Oxley Act of 2002                                                                                                                                                      |
|      |       |                                                                                                                                                                                                                                         |
| 31.2      |       | Certification of Neil G. Kiefer under Section 302 of  the Sarbanes-Oxley Act of 2002                                                                                                                                                         |
|      |       |                                                                                                                                                                                                                                         |
| 32.1      |       | Certification of Deborah J. Pierce pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                |
|      |       |                                                                                                                                                                                                                                         |
| 32.2      |       | Certification of Neil G. Kiefer pursuant to Section  906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                   |

 

108

----