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**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-K**

** **

**x****     ****ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIESEXCHANGE ACT OF 1934**

 

**For the fiscal year ended December 31, 2009**

 

**o****        ****TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934**

 

**For the transition period from                        to        **

 

**Commission file number 333-124924**

 

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

(Exact name of registrantas 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 EastTropicana Avenue, Las Vegas, NV 89109**

(Address andtelephone number of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code: **(702) 597-6076**

 

Securities registeredpursuant to Section 12(b) of the Act:

 

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

 

Securities registeredpursuant to Section 12(g) of the Act:

 

**None.**

(Title of eachclass)

 

 

(Title of eachclass)

 

Indicate by check mark ifthe registrant is a well-known seasoned issuer, as defined in Rule 405 ofthe Securities Act.  Yes o  No x

 

Indicate by check mark ifthe registrant is not required to file reports pursuant to Section 13 or Section 15(d) ofthe Act.  Yes o  No x

 

Indicate by checkmark whether the registrant (1) has filed all reports required to be filedby Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.  Yes x  No o

 

Indicate by checkmark whether the registrant has submitted electronically and posted on itscorporate Website, if any, every Interactive Data File required to be submittedand posted pursuant to Rule 405 of Regulations S-T (§232.405 of thischapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files).  Yes o  No o

 

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K(§229.405 of this chapter) is not contained herein, and will not be contained,to the best of registrant’s knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-K orany amendment to this Form 10-K.  Yes x  No o

 

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

 

| Large  accelerated filer o |   | Accelerated  filer o         |
|----------------------------|--------|------------------------------|
|                       |   |                         |
| Non-Accelerated  filer x   |   | Smaller  reporting company o |

 

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2of the Act).  Yes o No x

 

State theaggregate market value of the voting and non-voting common equity held bynon-affiliates computed by reference to the price at which the common equitywas last sold, or the average bid and asked price of such common equity, as ofthe last business day of the registrant’s most recently completed second fiscalquarter.  Not Applicable.

 

**DOCUMENTSINCORPORATED BY REFERENCE**

 

Not applicable.

 

 

 

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**TABLE OF CONTENTS**

 
| ** **        | ** **                                                                                                                         | **Page** |
|-------------------|------------------------------------------------------------------------------------------------------------------------------------|----------|
|              |                                                                                                                               |     |
| **PART I**   |                                                                                                                               |     |
| ITEM 1.           | Business                                                                                                                           | 2        |
| ITEM 1A.          | Risk Factors                                                                                                                       | 12       |
| ITEM 1B.          | Unresolved  Staff Comments                                                                                                         | 27       |
| ITEM 2.           | Properties                                                                                                                         | 27       |
| ITEM 3.           | Legal Proceedings                                                                                                                  | 27       |
| ITEM 4.           | Submission  of Matters to a Vote of Security Holders                                                                               | 27       |
| **PART II**  |                                                                                                                               |     |
| ITEM 5.           | Market for Registrant’s Common Equity,  Related Stockholder Matters and Issuer Purchases of Equity Securities                 | 27       |
| ITEM 6.           | Selected  Financial Data                                                                                                           | 28       |
| ITEM 7.           | Management’s Discussion and Analysis of  Financial Condition and Results of Operation                                         | 30       |
| ITEM 7A.          | Quantitative  and Qualitative Disclosures About Market Risk                                                                        | 45       |
| ITEM 8.           | Financial  Statements and Supplementary Data                                                                                       | 47       |
| ITEM 9.           | Changes in  and Disagreements with Accountants on Accounting and Financial Disclosure                                              | 70       |
| ITEM 9A(T)        | Controls and  Procedures                                                                                                           | 70       |
| ITEM 9B.          | Other Information                                                                                                                  | 71       |
| **PART III** |                                                                                                                               |     |
| ITEM 10.          | Directors,  Executive Officers and Corporate Governance                                                                            | 72       |
| ITEM 11.          | Executive Compensation                                                                                                             | 75       |
| ITEM 12.          | Security  Ownership of Certain Beneficial Owners and Management and Related Stockholder  Matters                                   | 78       |
| ITEM 13.          | Certain  Relationships and Related Transactions and Director Independence                                                          | 80       |
| ITEM 14.          | Principal  Accounting Fees and Services                                                                                            | 82       |
| **PART IV**  |                                                                                                                               |     |
| ITEM 15.          | Exhibits, Financial  Statement Schedules                                                                                           | 82       |
| SIGNATURES        |                                                                                                                               | 84       |
|              |                                                                                                                               |     |
| EXHIBIT INDEX     | 88                                                                                                                                 |
| Exhibit 12   | Computation  of Ratio Earnings to Fixed Charges                                                                                    |     |
| 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 |     |

 

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# **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.

 

**Liquidity and Financial Position**

 

Fordiscussion of our liquidity and financial position, please see “Management’sDiscussion and Analysis of Financial Condition and Results ofOperations-Executive Overview-Liquidity and Financial Position” and Note 2 tothe accompanying consolidated financial statements.

 

**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-lookingstatements should not be regarded as representation by us or any other personthat the forward-looking statements will be achieved.  Readers are cautioned not to place unduereliance on any forward-looking statements, which speak only as of the datethereof. We undertake no obligation to publicly release any revisions to suchforward-looking statements to reflect events or circumstances after the datehereof.  Some of the contingencies anduncertainties to which any forward-looking statement contained herein aresubject to include, but are not limited to, those set forth below in theheading “ITEM 1A. Risk Factors.”

 

**CorporateOrganization**

** **

We were formed in June 2004to acquire the Hôtel San Rémo Casino and Resort (the “Hôtel San Rémo”), acasino hotel located in Las Vegas, Nevada, from Eastern & WesternHotel 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.

 

Florida Hooters LLC is ajoint venture between Hooters Gaming LLC and Lags Ventures, LLC.  Hooters Gaming LLC is owned by the holders oflicenses to operate Hooters restaurants in the Tampa Bay, Chicago and Manhattanareas as well as for wholesale foods, calendars and Nevada hotel/gaming andincludes most of the original founders of the Hooters brand.  Lags Ventures, LLC is owned by a holder ofthe license rights to Hooters restaurants in south Florida.  Pursuant to these license rights, the ownersof Florida Hooters LLC operate 41 Hooters restaurants, publish Hooterscalendars, and operate a Hooters food business. The owner of Lags Ventures, LLC is also the founder of the Dan Marinoconcept restaurants and owns and operates 1 Dan Marino concept restaurant.

 

EW Common LLC was formed tohold Eastern & Western’s membership interest in us.  Eastern & Western owns 90% of EWCommon LLC while our President owns the balance.  Eastern & Western is beneficiallyowned by Sukeaki and Toyoroku Izumi. Eastern & Western and its affiliates owned the Hôtel San Rémofrom November 1988 until our acquisition of the hotel casino in August 2004.

 

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Our affiliates have grantedus assignments of certain licenses pertaining to the use of the Hooters brandas well as the Pete & Shorty’s concept restaurant, solely for thepurposes of allowing us to operate a Hooters Casino Hotel located at ourproperty.  Pursuant to the Hooterslicense assignment, we are required to pay the owner of the Hooters trademark,HI Limited Partnership, a royalty fee. For more information, see “Item 1. Business—Intellectual Property” and “Item13. 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 thetrademark owner of the Hooters brand and the operator and franchisor of Hootersrestaurants.  We are not affiliated withHooters of America.

 

Before we received ournecessary gaming licenses and prior to November 1, 2005, the Hôtel SanRémo was operated by Eastern & Western pursuant to two separate leaseswith us.  These leases were terminatedwhen we received our gaming license.  Thefollowing chart illustrates our corporate structure:

 

 

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(1)         155 East Tropicana FinanceCorp., which has no assets or operations, was formed for the sole purpose offacilitating the issuance of our 8 3⁄4 % Senior Secured Notes originally due2012.  The Notes are currently in defaultand the Note Holders have the ability to accelerate repayment of the Notes.

 

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**Hooters CasinoHotel**

** **

We purchased the formerHôtel San Rémo in August 2004 and commenced renovations in   March 2005.  On February 3, 2006, we opened theHooters Casino Hotel to the public.  Ourproperty is located one-half block east of the intersection of Tropicana Avenueand Las Vegas Boulevard, a major intersection on the Las Vegas strip (“TheStrip”) that is within walking distance to approximately 30,000 hotel rooms.

 

The Hooters Casino Hotelfeatures the famous Hooters décor, and the Hooters brand is a prominentcomponent of the facility. Our strategy was to build on Hooters’ reputation asa casual, relaxed, fun and welcoming environment.  The Hooters Casino Hotel features:

 

·             an approximately 29,000 square foot “Hooters” themedcasino floor with approximately 615 state-of-the-art slot and video pokermachines and 24 table games;

 

·             696 hotel rooms, including 17 suites;

 

·             a tropical pool area featuring beach sand, palmtrees, lagoon style waterfall, and Pool Bar containing 350 seats;

 

·             distinctive dining and entertainment options,including:

 

·             a world famous Hootersrestaurant containing 200 seats;

 

·             Mad Onion Restaurant,(formerly Dan Marino’s) featuring American cuisine and offering 24 hour diningcontaining 287 seats;

 

·             Night Owl Showroom featuringnightly entertainment;

 

·             Porch Dogs, a Caribbeanthemed casual indoor-outdoor club offering Hooter’s food and bar containing 200seats;

 

·             Pete & Shorty’sTavern, a casual and comfortable  barfeaturing a sports book and a poker room containing 100 seats;

 

·             The Lobby Bar, a 24-hour barlocated at the entrance to the casino, featuring service by the world famousHooters girls;

 

·             Dixie’s Dam Country Bar

 

·             Splurge and Bait Shoppe retail stores sellingHooters branded merchandise, and our newest addition Punishment retail storefeaturing  mixed martial arts, or MMArelated clothing.

 

**Competition**

** **

We face competition in themarket in which we are located as well as in or near any geographic area fromwhich we attract or expect to attract a significant number of ourcustomers.  As a result, our casinoproperty faces direct competition from all other casinos and hotels in LasVegas, NV 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.

 

*Las Vegas, Nevada.*  The hotel casino industry in Las Vegas ishighly competitive.  In response torecent economic downturn, many competing properties have significantly reducedtheir room rates, which has increased competition for the middle market, budgetoriented tourist.  The Hooters CasinoHotel competes on the basis of overall atmosphere, range of amenities, level ofservice, price, location, 

 

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entertainment offered, themeand size.  The Hooters Casino Hotelcompetes with numerous resorts and hotel casinos on The Strip and in downtownLas Vegas, as well as a large number of hotels and motels in and near LasVegas.  Many competing properties havethemes and attractions which draw a significant number of visitors and competewith our property 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. The City Center with 6,800 hotelrooms and condominiums (opening over time), a new casino, shopping mall andnumerous restaurants and other facilities recently opened in December 2009and January 2010 within a mile of us on the Las Vegas Strip.  Additional major hotel casinos andsignificant expansion of existing properties, containing a significant numberof hotel rooms and attractions, have also recently opened in Las Vegas.  Other projects that are currently on holdcould also potentially open in the near future. We seek to differentiate the Hooters Casino Hotel from other major LasVegas hotel casino resorts by concentrating on the design, atmosphere, personalservice and amenities that we provide and the added value of the Hooters brand.

 

*California Gaming Market.*  Voters in California approved an amendment tothe California constitution in 2000 that gave Native American tribes inCalifornia the right to offer a limited number of slot machines and a range ofhouse-banked card games.  A number ofNative American tribes have already signed, and others have begun signing,gaming compacts with the State of California. According to the National Indian Gaming Commission, as of February 2009,there are approximately 62 operating tribal casinos in California.  In addition, several Native American tribesin California have reached agreements with the State of California that allowfor an increased number of gaming machines within the facilities operated bysuch tribes in exchange for a revenue-based payment to the state.  The competitive impact on our gamingestablishments from the continued growth of gaming in California cannot be definitivelydetermined but, depending on the nature, extent and location of the growth, theimpact could be material.

 

*Other Forms of Gaming.*  We also compete, to some extent, with otherforms of gaming on both a local and national level, including state-sponsoredlotteries, Internet gaming, dockside casinos, riverboat casinos, on- andoff-track wagering and card parlors.  Therecent and continued expansion of legalized casino gaming into newjurisdictions throughout the United States has increased competition faced byus and will continue to do so in the future. Additionally, if gaming were legalized or expanded in jurisdictions nearany geographic area from which we attract or expect to attract a significantnumber of our customers, we could face additional competition which could havea significant adverse impact on our business, financial condition and resultsof operations.  There can be no assurancethat we will be able to continue to compete successfully in our existingmarkets or that we will be able to compete successfully against any such futurecompetition.

 

**IntellectualProperty**

** **

We have entered into anassignment agreement with Florida Hooters, LLC which grants us the right to usecertain intellectual property in connection with the operation of the HootersCasino Hotel.  The intellectual propertycovered by these agreements is described below. Additionally, we have been granted a royalty-free license to the Pete &Shorty’s mark.  For more detailedinformation, see “Item 13. Certain Relationships and Related Transactions.”

 

*Hooters Trademark.*  The Hooters trademark and logo insignia arethe exclusive property of Hooters of America. We have an exclusive license to use the Hooters brand in connection withgaming, casino or combined hotel, gaming and casino operations solely at theHooters Casino Hotel property.  FloridaHooters, LLC originally obtained the license through an assignment from HootersGaming Corporation, an affiliated entity under common ownership with HootersGaming LLC.  The underlying 

 

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license agreement wasexecuted between Hooters of America 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 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 notto operate (or license or assign its rights to operate) another Hooters CasinoHotel in Clark County, Nevada for a period of four years from the issuance ofthe Notes or such earlier time as none of the Notes is outstanding.

 

Combined hotel, gaming andcasino operations contemplated under the license agreement include, but are notlimited to, the right to provide the following within the facility: (i) roomservice; (ii) restaurant operations; (iii) retail sales facilities inwhich third parties are permitted to conduct retail sales of all kinds; and (iv) entertainmentfacilities, subject to certain quality standards.  In connection with such operations, we havethe right to (i) sell approved merchandise bearing some or all of the licensedintellectual property, (ii) use the licensed intellectual property andHooters Girls to promote, market, and advertise such facilities worldwide, and (iii) includeHooters Girls as part of any facility staff.

 

We are required to payHooters of America an annual fee equal to $500. In addition, we pay to Hooters of America a royalty in an amount equalto two percent (2%) of all net revenues generated in connection with licensedactivities (which includes net revenues generated in connection with hotel, casino,and restaurant operations).  We are alsorequired by the license agreement to maintain certain quality standards for theuse of the Hooters brand.

 

*Hooters Restaurant Concept.*  Pursuant to a consent received in 2004 fromLas Vegas Wings, Inc., we have the right to use the Hooters restaurantconcept at the hotel casino.  The consentpermits worldwide promotion, marketing and advertising of the hotel casino andits services.

 

*Dan Marino Concept Restaurants.*  We had an exclusive license to use certain intellectualproperty to operate and promote restaurants, taverns, lounges and bars usingthe marks “Dan Marino’s Fine Food & Spirits” and ‘“13” Martini Bars’.  In November 2009 the license wasterminated and we rebranded the restaurant as “Mad Onion”.  The ‘“13” Martini Bar”, which was closed in2007, was reopened in 2007 as “Night Owl Showroom”. See “Item 13. CertainRelationships and Related Transactions.”

 

*Pete & Shorty’s.*  Pete & Shorty’s, Inc. hasgranted us a nonexclusive, royalty-free license to use the Pete &Shorty’s mark in connection with a restaurant, bar and lounge at the HootersCasino Hotel.  Pursuant to the licenseagreement, we can also use the mark in connection with affiliated merchandise,entertainment and casino services. However, Pete & Shorty’s, Inc. maintains the right toobtain federal and/or state registrations for any and all additional services,other than restaurant, bar and cocktail lounge services, which we provide atthe Hooters Casino Hotel.

 

**Employees**

** **

As of December 31, 2009,we had 720 employees.  None of ouremployees are covered by collective bargaining agreements.

 

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**Regulationand Licensing**

** **

The ownership and operationof casino gaming facilities in Nevada are subject to the Nevada Gaming ControlAct and the regulations promulgated thereunder (“Nevada Act”), and variouslocal regulations.  In addition, ourgaming operations are subject to the licensing and regulatory control of the Nevada GamingCommission (“Nevada Commission”), the Nevada State Gaming Control Board (“NevadaBoard”), and the Clark County Liquor and Gaming Licensing Board (“CCLGLB”together with the Nevada Commission and the Nevada Board, the “Nevada GamingAuthorities”).  We receivedour license from the Nevada Gaming Authorities as a limited-liability companylicensee in October 2005 and are registered with the Nevada Commission asa publicly traded corporation, referred to as a “Registered Corporation”.  In addition, Florida Hooters LLC and EWCommon LLC are registered with the Nevada Gaming Authorities as intermediarycompanies and 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 andHessling are individually licensed as our managers.  Neil Kiefer, Deborah Pierce and Gary Greggalso hold individual licenses as our officers. Finally, because we pay a percentage of our net profits directly earned fromour gaming activities to Hooters Gaming Corporation, it is licensed by theNevada Gaming Authorities as well.

 

The laws, regulations andsupervisory procedures of the Nevada Gaming Authorities are based upondeclarations of public policy which are concerned with, among other 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;

 

·             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.

 

Changes in these laws,regulations and procedures could have an adverse effect on our business,financial condition and results of operations.

 

Corporations and otherentities that operate casinos in Nevada are required to be licensed by theNevada Gaming Authorities.  A gaminglicense for such activities requires the periodic payment of fees and taxes andis not transferable.  As a RegisteredCorporation, we are required to periodically submit detailed financial andoperating reports to the Nevada Commission and to furnish any other informationthat the Nevada Commission may require.

 

The Nevada GamingAuthorities may investigate any individual who has a material relationship toor material involvement with us in order to determine whether such individualis suitable or should be licensed as a business associate of a gaminglicensee.  Our owners, officers, managersand certain key employees are required to be licensed by the Nevada GamingAuthorities.  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 bereported to the 

 

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Nevada Gaming Authoritiesand, in addition to their authority to deny an application for a finding ofsuitability or licensure, the Nevada Gaming Authorities have jurisdiction todisapprove a change in a corporate position.

 

If the Nevada GamingAuthorities were to find an owner, officer, manager or key employee unsuitablefor licensing or unsuitable to continue having a relationship with us, we wouldhave to sever all relationships with that person.  In addition, the Nevada Commission mayrequire us to terminate the employment of any person who refuses to fileappropriate applications.  Determinationsof suitability or of questions pertaining to licensing are not subject tojudicial review in Nevada.

 

As licensees, we arerequired to submit detailed financial and operating reports to the NevadaCommission.  Substantially all materialloans, leases, sales of securities and similar financing transactions by usmust be reported to the Nevada Commission.

 

If it were determined thatwe violated the Nevada gaming laws, our gaming licenses and registrations withthe Nevada Commission could be limited, conditioned, suspended or revoked, subjectto compliance with certain statutory and regulatory procedures.  In addition, we and the persons involvedcould be subject to substantial fines for each separate violation of the Nevadalaws at the discretion of the Nevada Commission.  Further, the Nevada Commission could appointa supervisor to operate our gaming properties and, under certain circumstances,earnings generated during the supervisor’s appointment (except for thereasonable rental value of our gaming properties) could be forfeited to theState of Nevada.  Limitation,conditioning or suspension of any gaming license or the appointment of asupervisor could (and revocation of any gaming license would) materiallyadversely affect our operations.

 

Since we do not intend toregister or sell any of our equity securities, every holder of our equitysecurities is required to be licensed by the Nevada Gaming Authorities.  In addition, as 155 East Tropicana, LLC hasbeen licensed by the Nevada Gaming Authorities and has become a RegisteredCorporation, none of its membership interests can be issued, sold, assigned,transferred, pledged, or otherwise disposed of without the prior approval ofthe Nevada Board and the Nevada Commission. In addition, the pledge of our equity interests as security for theNotes was approved by the Nevada Board and the Nevada Commission at the time155 East Tropicana, LLC was licensed by and registered with the NevadaCommission, which was necessary in order for such pledge to remain effective.

 

If certain exemptions are grantedunder the Nevada Act to a Registered Corporation, then any person who acquiresmore than 5% of a Registered Corporation’s voting securities is required toreport the acquisition to the Nevada Commission.  The Nevada Act requires that beneficial ownersof more than 10% of a registered corporation’s voting securities apply to theNevada Commission for a finding of suitability within 30 days after theChairman of the Nevada Board mails the written notice requiring the filing fora finding of suitability.  Under certaincircumstances, an “institutional investor,” as defined in the regulations ofthe Nevada Commission, which acquires more than 10%, but not more than 25%, ofour voting securities may apply to the Nevada Commission for a waiver of suchfinding of suitability if that institutional investor holds the votingsecurities for investment purposes only and for a waiver of the requirement foran approval of a change of control if the acquisition is above 20% of thevoting securities.  An institutionalinvestor will not be deemed to hold voting securities for investment purposesunless the voting securities were acquired and are held in the ordinary courseof business as an institutional investor and not for the purpose of causing,directly or indirectly, the election of a majority of the members of our boardof managers, any change in our corporate charter, bylaws, management, policiesor operations, 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:

 

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·             voting on all matters voted on by stockholders;

 

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

 

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

 

If the beneficial holder ofvoting securities who must be found suitable is a corporation, partnership ortrust, it must submit detailed business and financial information including alist of beneficial owners.  The applicantis required to pay all costs of investigation.

 

Under the Nevada Act, undercertain circumstances, an institutional investor as defined in the Nevada Act,which intends to acquire not more than 15% of any class of securities of aprivately-held corporation, limited partnership or limited-liability companythat is also a registered holder or intermediary company of the holder of agaming license, may apply to the Nevada Commission for a waiver of the usualprior licensing or finding of suitability requirements if such institutionalinvestor 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, operating agreement,other organic document, management, policies or operations, or cause any otheraction that the Nevada Commission finds to be inconsistent with holdingsecurities only for investment purposes. Activities that are not deemed to be inconsistent with holdingsecurities only for investment purposes include:

 

·             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.

 

Any person who fails orrefuses to apply for a finding of suitability or a license within 30 daysafter being ordered to do so by the Nevada Commission or the Chairman of theNevada Board, may be found unsuitable. The same restrictions apply to a record owner if the record owner, afterrequest, 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

 

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

 

Additionally, the CCLGLB hastaken the position that it has the authority to approve all persons owning orcontrolling the stock of any corporation controlling a gaming license.

 

We may be required to discloseto the Nevada Board and the Nevada Commission the identities of all holders ofour Notes.  The Nevada Commission may, inits discretion, require the holder of any debt security of a RegisteredCorporation, including our Notes, to file applications, be investigated and befound suitable to own the debt security of a Registered Corporation.  If the Nevada Commission determines that aperson is unsuitable to own a debt security, then pursuant to the Nevada Act,the Registered Corporation can be sanctioned, including the loss of itsapprovals, if without the prior approval of the Nevada 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.

 

We are required to maintaina current membership ledger in Nevada, which may be examined by the NevadaGaming Authorities at any time.  If anysecurities are held in trust by an agent or by a nominee, the record holder maybe required to disclose the identity of the beneficial holder to the NevadaGaming Authorities.  A failure to makesuch disclosure may be grounds 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 torequire our securities to bear a legend indicating that the securities aresubject to the Nevada Act.  However, todate, the Nevada Commission has not imposed such a requirement on us.

 

We may not make a publicoffering of securities without the prior approval of the Nevada Commission ifthe securities or proceeds from the securities are intended to be used toconstruct, acquire or finance gaming facilities in Nevada, or to retire orextend obligations incurred for the purposes of constructing, acquiring orfinancing gaming facilities. Furthermore, any approval, if granted, does not constitute a finding,recommendation or approval by the Nevada Commission or the Nevada Board as tothe accuracy or adequacy of the prospectus or the investment merits of thesecurities offered.  Any representationto the contrary is unlawful.  Pursuant tothe Nevada Act, any entity which is not an “affiliated company,” as such termis defined in the Nevada Act, or which is not otherwise subject to theprovisions of the Nevada Act, including us, which plans to make a publicoffering of securities intending to use such securities or the proceeds fromthe sale thereof for the construction or operation of gaming facilities inNevada, or to retire or extend obligations incurred for such purposes, mayapply to the Nevada Commission 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.

 

Changes in control of aRegistered Corporation through merger, consolidation, stock or assetacquisitions, management or consulting agreements, or any act or conduct by aperson whereby that person obtains control (including foreclosure on pledgedshares), may not occur without the prior approval of the NevadaCommission.  Entities seeking to acquirecontrol or ownership of a Registered 

 

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Corporation must satisfy theNevada Board and Nevada Commission in a variety of stringent standards prior toassuming control of such Registered Corporation.  The Nevada Commission may also require thestockholders, officers, managers and other persons having a materialrelationship or involvement with the entity proposing to acquire control, to beinvestigated and licensed as part of the approval process relating to thetransaction.

 

The Nevada legislature hasdeclared that some corporate acquisitions opposed by management, repurchases ofvoting securities and corporate defense tactics affecting Nevada gaminglicensees, and Registered Corporations that are affiliated with thoseoperations, 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.

 

Approvals are, in certaincircumstances, required from the Nevada Commission before we can makeexceptional repurchases of voting securities above the current market pricethereof 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.

 

License fees and taxes,computed in various ways depending on the type of gaming or activity involved,are payable to the State of Nevada and to the counties and cities in which theNevada licensee’s respective operations are conducted.  Depending upon the particular fee or taxinvolved, these fees and taxes are payable monthly, quarterly or annually andare based upon either:

 

·             a percentage of the gross revenues received;

 

·             the number of gaming devices operated; or

 

·             the number of table games operated.

 

Any person who is licensed,required to be licensed, registered, required to be registered, or is undercommon control with such persons, or “licensees,” and who is or who proposes tobecome involved in a gaming venture outside of Nevada, is required to depositwith the Nevada Board, and thereafter maintain, a revolving fund in the amountof $10,000 to pay the expenses of investigation by the Nevada Board of thelicensees’ participation in foreign gaming. The revolving fund is subject to increase or decrease in the discretionof the Nevada Commission.  Thereafter,licensees are also required to comply with certain reporting requirementsimposed by the Nevada Act.  Licensees arealso subject to disciplinary action by the Nevada Commission if they knowinglyviolate any laws of the foreign jurisdiction pertaining to a foreign gamingoperation, fail to conduct the foreign gaming operation in accordance with thestandards of honesty and integrity required of Nevada gaming operations, engagein activities or enter into associations that are harmful to the State ofNevada or its ability to collect gaming taxes and fees, or employ, contractwith or associate with a person in the foreign operation who has been denied alicense or a finding of suitability in Nevada on the ground of personalunsuitability.

 

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**Potential Changesin Tax and Regulatory Requirements**

** **

In the past, federal andstate legislators and officials have proposed changes in tax law, or in theadministration 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 material adverse effect on ourfinancial results.

 

**Compliance withOther Laws and Regulations**

** **

In addition to theregulations described above, our operations are also subject to extensive stateand local laws, regulations and ordinances that apply to non-gaming businessesgenerally, and, on a periodic basis, we must obtain various other licenses andpermits, including those required to sell alcoholic beverages.  We have not incurred, and do not expect toincur, material expenditures with respect to these laws and regulations.  There can be no assurances, however, that wewill not incur material liability under these laws and regulations in thefuture. See also “Item 1A. Risk Factors—Risks Related to OurBusiness—Governmental Regulations” and “—Factors Beyond Our Control.”

 

## **ITEM 1A.     RISKFACTORS.**

## ** **

The following risks, if anyone or more occurs, could materially harm our business, financial condition orfuture results of operations.

 

**Risks Related to OurBusiness**

 

**GoingConcern—*There is substantial doubt about our ability tocontinue as a going concern.***

** **

Our independent registered public accounting firmincluded an explanatory paragraph that expresses doubt as to our ability tocontinue as a going concern in their audit report contained in this Form 10-Kreport for the year ended December 31, 2009 and 2008.  As discussed in Note 2 to the consolidatedfinancial statements within this Form 10-K report, we have incurredrecurring operating losses, have a working capital deficiency and have anaccumulated deficit.  We cannot provideany assurance that we will in fact operate our business profitably, maintainexisting financings, or obtain sufficient financing in the future to sustainour business in the event we are not successful in our efforts to generatesufficient revenue and operating cash flow and/or obtain a forbearanceagreement from our Note holders.

 

Our ability to continue as a going concern will bedetermined by our ability to obtain additional funding or restructure ornegotiate waivers on our existing indebtedness and to generate sufficientrevenue to cover our operating expenses. The accompanying consolidated financial statements do not include anyadjustments relating to the recoverability and classification of recorded assetamount.

 

**Recent Economic Developments — *Recent instability in thefinancial markets may continue to impact our business.***

 

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Recently, the residential real estate market in LasVegas and the U.S. has experienced a significant downturn due to declining realestate values, substantially reducing mortgage loan originations andsecuritizations, and precipitating more generalized credit market dislocations anda significant contraction in available liquidity globally. These factors,combined with fluctuating oil prices, declining business and consumerconfidence and increased unemployment, have precipitated an economic recession.Individual consumers are experiencing higher delinquency rates on variousconsumer loans and defaults on indebtedness of all kinds have increased.  There can be no assurance that the decline isover and there can be no assurance that government response to these conditionswill successfully address the fundamental weakness, restore consumer confidenceor lead to improvement of the markets. Further declines in real estate values in Las Vegas and the U.S. orelsewhere and continuing credit and liquidity concerns that have had an adverseaffect on our results of operations and are likely to continue until such timeas these aforementioned conditions improve.

 

**DependenceUpon Cash Flow of Property—*With our Credit Facilityfully drawn,* o*ur cash flow to meet ourpayment obligations under the Notes and our other indebtedness and to fund ouroperations is dependent solely on the hotel casino.***

** **

Currentlyour Credit Facility is fully extended and we have no additional availability toborrow against the Credit Facility.  As aresult, we now rely exclusively on cash flow generated by our hotel casino tomeet our payment obligations under our indebtedness and to fund our operationsand planned or committed capital expenditures, including any renovation of ourexisting property.  We failed to pay ourinterest obligation under the Notes on April 1, 2009 and October 1,2009 and anticipate an inability to pay interest on the Notes in 2010.  If adverse regional and national economicconditions persist, worsen, or fail to improve significantly, we could experiencedecreased revenues from our operations attributable to decreases in consumerspending levels and could fail to generate sufficient cash to fund ourliquidity needs or fail to meet our payment obligations for future interestpayments our other indebtedness. We cannot provide assurance that our businesswill generate sufficient cash flow from operations to enable us to pay ourindebtedness or to fund our other liquidity needs.  See “Item 1A. Risk Factors—Risks Related tothe Notes and Other Company Debt—Ability to Service Debt.”

 

**Sensitivity to Consumer Spending**—***Our business is particularly sensitive toreductions in discretionary consumer spending as a result of downturns in theeconomy.***

 

Consumer demand for casino hotel properties, such asours, are particularly sensitive to downturns in the economy and thecorresponding impact on discretionary spending on leisure activities. Changesin discretionary consumer spending or consumer preferences brought about byfactors such as perceived or actual general economic conditions, the currenthousing crisis and the credit crisis, the impact of high energy and food costs,the increased cost of travel, the potential for continued bank failures,perceived or actual disposable consumer income and wealth, effects of thecurrent recession and changes in consumer confidence in the economy, or fearsof war and future acts of terrorism could further reduce customer demand forthe amenities that we offer, thus imposing practical limits on pricing andharming our operations.

 

**Domesticand International Events — *Our business may beadversely impacted by domestic and international events.***

 

The terrorist attacks that took place in the UnitedStates on September 11, 2001, were unprecedented events that createdeconomic and business uncertainties, especially for the travel and tourismindustry.  The potential for futureterrorist attacks, the national and international responses, and other acts ofwar or hostility, including the ongoing conflicts in Iraq and Afghanistan, havecreated 

 

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economic and politicaluncertainties that could materially adversely affect our business, results ofoperations and financial condition in ways we cannot predict.

 

**Gaming Taxes and Fees —*If the State of Nevada or Clark County increasesgaming taxes and fees, our results of operations could be adversely affected.***

** **

State and local authorities raise a significantamount of revenue through taxes and fees on gaming activities. From time totime, legislators and officials have proposed changes in tax laws, or in theadministration of such laws, affecting the gaming industry. In addition,worsening economic conditions could intensify the efforts of state and localgovernments to raise revenues through increases in gaming taxes.  If the State of Nevada or Clark County,Nevada were to increase gaming taxes and fees, our results of operations couldbe adversely affected.

 

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

** **

The Hooters trademark andlogo insignia are the exclusive property of Hooters of America.   Pursuant to certain licenses and anassignment of those license rights to us, we have a royalty-bearing license touse certain intellectual property related to the Hooters brand solely forpurposes of the operation of a Hooters Casino Hotel located at ourproperty.  Our operation of the HootersCasino Hotel is conditioned on payment of certain royalty fees to Hooters ofAmerica and some of our affiliates based on percentages of revenues and salesgenerated by our gaming and restaurant activities, as described under “Item 1.Business—Intellectual Property” and “Item 13. Certain Relationships and RelatedTransactions,” and satisfaction of other conditions under the license.  Failure to satisfy the conditions couldresult in termination of the license. Furthermore, in a bankruptcy of a licensor, the bankruptcy court couldconclude that the trademark license agreements are executory contracts and,subject to certain legal requirements, may approve rejection of the licenseagreements.  Although we would take theposition that our license agreement with Hooters of America is perpetual andnot an executory contract, there can be no assurance that a bankruptcy courtwould so conclude in a bankruptcy of Hooters of America.  Rejection would give rise to a claim fordamages for breach of the license and might prevent us from continuing to usethe trademark or on the same terms.  Theloss of our license rights could prevent us from operating as the HootersCasino Hotel, which would have a material adverse 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.***

** **

We believe we benefit fromthe name recognition and reputation generated by the Hooters restaurants thatare operated worldwide.  We have theright to use the Hooters brand and certain related intellectual property solelyfor purposes of the Hooters Casino Hotel. Hooters Gaming Corporation, anaffiliate under common ownership with Hooters Gaming LLC, is the sole owner ofthe right to use the Hooters brand in connection with the conduct of gaming andthe operation of hotels elsewhere in the state of Nevada. Hooters GamingCorporation has agreed not to operate (or license or assign its rights tooperate) another Hooters Casino Hotel on The Strip until our Notes are nolonger outstanding.  Additionally,Hooters Gaming Corporation has agreed not to operate (or license or assign itsrights to operate) another Hooters Casino Hotel in Clark County, Nevada for aperiod of four years from the issuance of our Notes or such earlier time asnone of our Notes are outstanding. However, Hooters Gaming Corporation or its assignee can exploit theHooters brand and logo in connection with hotel casinos and casinos in otherareas of Nevada and elsewhere, including marketing worldwide, and once theNotes are no longer outstanding, on The Strip. For example, other Hooters Casino Hotels could be 

 

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opened in areas (other thanThe Strip) in Las Vegas and Nevada and throughout the world where gamingoperations are permitted. We cannot assure that the development of other hotelcasinos, casinos or restaurants using the Hooters brand in Nevada or elsewherewill not adversely affect our business, financial condition and results ofoperations.  Nor can we assure that ourbusiness, financial condition and results of operations will not be adverselyaffected by the management of the Hooters brand or any negative public image orother adverse 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.***

** **

Our operation of the HootersCasino Hotel is contingent upon the maintenance of various regulatory licenses,permits, approvals, registrations, findings of suitability, orders andauthorizations.  The laws, regulations,and ordinances requiring these licenses, permits and other approvals generallyrelate to the responsibility, financial suitability and character of the ownersand managers of our gaming operations, as well as persons financiallyinterested or involved in our gaming operations, almost all of whom had neverbeen licensed previously.  The scope ofthe approvals required to operate a facility were extensive.  Failure to maintain the necessary approvalscould adversely affect our ability to operate the Hooters Casino Hotel. See “Item1. Business—Regulation and Licensing.”

 

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

** **

We were 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 limited.  Moreover, our hotel/casino is identified bythe Hooters brand which has not been associated with other hotels orcasinos.  Consequently, we cannot becertain that we will ultimately attract the number and type of hotel and casinocustomers and other visitors we desire to achieve our objective of improvingthe profitability of the hotel casino.

 

We are subject tosignificant business, economic, regulatory and competitive uncertaintiesfrequently encountered by new businesses in competitive environments, many ofwhich are beyond our control.  Because wehave a limited operating history, it may be more difficult for us to preparefor and respond to these types of risks, and the other types of risks describedherein, as compared with an established business.  Our business prospects should be evaluated inlight of the difficulties frequently encountered by companies in the earlystages of gaming projects and the risks inherent in the establishment of a newbusiness enterprise.  There can be noassurance that we will be able to successfully operate the hotel casino ormanage these risks successfully, that the hotel casino will be profitable orthat we will generate sufficient cash flow to meet our payment obligationsunder the Notes and our other indebtedness, which would in turn negativelyaffect our business, financial condition and results of operations.

 

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

** **

Competition in Las Vegas hasincreased over the last several years as a result of significant increases inhotel rooms, casino sizes and convention, trade show and meetingfacilities.  In response to the recenteconomic downturn, many competing properties have significantly reduced theirroom rates, which has increased competition. Our success is dependent upon the success of the hotel casino and itscontinuing ability to attract 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 

 

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amenities, level of service,price, location, entertainment offered, theme and size.  Currently, there are approximately 39 majorgaming properties located on or near The Strip, 16 additional major gamingproperties in the downtown area and additional gaming properties located inother areas of Las Vegas.  Some of thesefacilities are operated by companies that have more than one operatingfacility, and many have greater name recognition and financial and marketingresources than us and market to the same target demographic group as wedo.  Furthermore, additional major hotelcasinos and significant expansion of existing properties, containing asignificant number of hotel rooms and attractions, are expected to open in LasVegas within the coming years.  There canbe no assurance that the Las Vegas market will continue to grow or that hotelcasino resorts will continue to be popular. A decline or leveling off of the growth or popularity of such facilitieswould adversely affect our business, financial condition and results ofoperations.  See “Item 1.Business—Competition.”

 

There also is substantialcompetition among gaming companies in the gaming industry generally, which includesland-based casinos, dockside casinos, riverboat casinos, casinos located onNative American land, including in California, and other forms of legalizedgambling.  If other casinos operate moresuccessfully, if existing properties are enhanced or expanded, or if additionalhotels and casinos are established in and around the locations where we conductbusiness, we may lose market share.  Wealso compete, to some extent, with other forms of gaming on both a local andnational level, including state-sponsored lotteries, Internet gaming, on- andoff-track wagering and card parlors.  Inparticular, the legalization of gaming or the expansion of legalized gaming inor near any geographic area from which we attract or expect to attract asignificant number of our customers could have a significant adverse effect onour business, financial condition and results of operations.

 

Increased competition mayalso require us to make substantial capital expenditures to maintain andenhance the competitive position of our hotel casino.  Because we are highly leveraged, there can beno assurance that we will have sufficient financing to make suchexpenditures.  If we are unable to makesuch expenditures, our competitive position and our results of operations couldbe materially adversely affected.

 

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

** **

As owners and operators ofgaming facilities, we are subject to extensive Nevada state and localregulation.  Nevada state and localgovernment authorities require us and our subsidiaries to maintain gaminglicenses and require our officers and key employees to demonstrate suitabilityto hold gaming licenses.  The Nevadastate and local government may limit, condition, suspend or revoke a licensefor 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.

 

No assurances can be giventhat any new licenses, registrations, findings of suitability, permits andapprovals, including for any proposed expansion of our hotel casino, will berenewed when they expire.  Any failure torenew or maintain our licenses or receive new licenses when necessary wouldhave a material adverse effect on us.

 

We are subject to a varietyof other rules and regulations, including zoning, environmental,construction and land-use laws and regulations governing the serving ofalcoholic beverages.  We also paysubstantial 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.

 

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The compliance costsassociated with these laws, regulations and licenses are significant.  A change in the laws, regulations andlicenses applicable to our business or a violation of any current or futurelaws or regulations or our gaming licenses could require us to make materialexpenditures or could otherwise materially adversely affect our business,financial condition or results of operations. For more detailed information, see “Item 1. Business—Regulation andLicensing.”

 

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

** **

Our employees were notcovered by collective bargaining agreements as of December 31, 2009.  Unionization of our employees could result indisruption in our business and could incur significant costs, both of whichcould have a material adverse effect on our results of operation and financialcondition.  We could experiencesignificant increases in our labor costs which could also have a materialadverse effect on our business, financial condition, and results of operations.

 

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

** **

Neil Kiefer, our chiefexecutive officer is the President, Chief Executive Officer and director ofHooters Inc. and related entities, which are based in Florida, and some ofwhich may have interests adverse to us. Due to Mr. Kiefer’s responsibilities to serve both companies, thereis potential for conflicts of interest. At any particular time, the needs of Hooters Inc. could cause Mr. Kieferto devote attention to Hooters Inc. at the expense of devoting attentionto us.  In addition, matters may arisethat place Mr. 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.***

** **

The economic health of ourbusiness is generally affected by a number of factors that are beyond ourcontrol, including:

 

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

 

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

 

·             levels of disposable income of casino customers;

 

·             increased transportation costs;

 

·             continued increases in healthcare 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 or threatsof 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;

 

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·             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.

 

Any of these factors couldnegatively impact our property or geographic location in particular or the casinoindustry generally, and as a result, our business, financial condition andresults 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.***

** **

We are subject to variousfederal, state and local environmental laws, ordinances and regulations,including those governing discharges to air and water, the generation,handling, management and disposal of petroleum products, asbestos containingmaterials and other hazardous substances, and the health and safety of ouremployees.  Permits may be required forour operations and these permits are subject to renewal, modification and, incertain cases, revocation.  In addition,as a property owner and operator, we may be liable for the costs ofinvestigating and remediating these substances or products on, under or in ourproperty, without regard to whether we knew of, or caused, the presence of thecontaminants, and regardless of whether the practices that resulted in thecontamination were legal at the time they occurred.  The presence of, or failure to remediate properly,the substances may adversely affect our ability to sell or lease our propertyor to borrow funds using it as collateral. Additionally, we may be subject to claims by third parties based ondamages and costs resulting from environmental contamination emanating from ourproperty.

 

We have not identified anysuch issues associated with our property that could reasonably be expected tohave an adverse effect on us or the results of our operations.  However, it is possible that historical orneighboring activities have affected our property and, as a result, there canbe no assurance that material obligations or liabilities under environmentallaws will not arise in the future which may have a material adverse effect onus.  Moreover, it is also possible thatfuture developments could lead to material environmental compliance costs orother liabilities for us and that these costs could have a material adverseeffect on our business and financial condition.

 

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

** **

Although we maintaininsurance that we believe is customary and appropriate for our business, wecannot assure you that insurance will be available or adequate to cover allloss and damage to which our business and our assets might be subjected.  In connection with insurance renewalssubsequent to the terrorist events of September 11, 2001, the insurancecoverage for certain types of damages or occurrences have been diminishedsubstantially 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 to finda replacement for or repair destroyed property and reduce the funds availablefor payment of our obligations on the Notes and our other indebtedness.

 

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

** **

**Substantial debt- *oursubstantial level of debt could adversely affect our financial condition andprevent us from fulfilling our obligations under the Notes and our other debt.***

** **

We have substantialdebt.   Our substantial level of debt hasadversely affected our financial condition and prevented us from fulfilling ourobligations under the Notes and our other debt. In addition, national and localeconomic conditions have affected our financial condition.  As of December 31, 2009, we have totaldebt of $146.1 million.  Due to economicconditions and our results of operations, we did not  make our scheduled interest payment on ourNotes on April 1, 2009 and October 1, 2009.  We do not believe that we will be able tomake interest payments for the foreseeable future.  We are in default under the indenturegoverning the Notes due to our failure to make previous interest payments.  We are also in default under our CreditFacility due to our failure to make scheduled interest payments on the Notesand our failure to enter into control account agreements on certain of our bankaccounts.   A default under the indenturegoverning our Notes permits the lenders under our Credit Facility to declare adefault under the Credit Agreement.  See “RisksRelated to the Notes and Other Company Debt” regarding limitations oncollateral and ability to exercise remedies. Our substantial debt has had and may have in the future importantconsequences and significant effects on our business. For example, it did orcould:

 

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

 

·             result in further events of default if we fail tosatisfy our other obligations under the Notes or our other debt or fail tocomply with the financial and other restrictive covenants contained in theindenture governing the Notes or our Credit Facility.  Current events of default have resulted in allof our debt becoming immediately due and payable and could permit our lendersto foreclose 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.

 

**Risks Relating To Our Business And Our Capital Structure**

 

**We Are in Breach of Affirmative Covenants Under Our Credit Facility.**

 

In connection with our Credit Facility as defined inItem 7 below, we agreed to affirmative covenants obligating us to, among otherthings, to deliver a deposit account control agreement for each of the Company’sdepository accounts.  In 2009, theCompany received a notice of default, or Notice, on its Credit Facility, whichrelates to the Company’s failure to provide a deposit account control agreement

 

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inrelation to an account at a depository bank and failure to make the scheduledinterest payments on our Notes,  amongother defaults.

 

The Notice further provided that as a result of thedefault, we will no longer have the option to request LIBOR Rate loans.  As a result of losing the availability ofLIBOR Rate loans under the Credit Facility, the interest rate on the CreditFacility has increased to the default rate of 4% over prime.  If we are not successful in negotiating awaiver or forbearance agreement with the holder of the Credit Facilityregarding the Notice the holder would have the ability to accelerate repaymentof all amounts outstanding under the Credit Facility ($14.5 million at December 31,2009), to commence to foreclose on some or all of our assets securing the debt,or exercise other rights and remedies granted under the Credit Facility and asmay be available pursuant to applicable law. If the Credit Facility were to be accelerated, we would be required torefinance or restructure the payments on that debt.  We cannot assure you that we would besuccessful in completing a refinancing or consensual out-of-courtrestructuring, if necessary.

 

**Abilityto Service Debt—*To service our debt, we will require asignificant amount of cash. Based on current operations we are currently unableto service our Notes.***

** **

With our Credit Agreement fully extended, we willrely exclusively on funds generated from our operations to pay our expenses andto pay the amounts due under the Notes, our Credit Facility and our other debt.Due to our current cash and anticipated cash flow from operations, we will notmake the $5.7 million interest payment due on April 1, 2010.  We are already in default under our indentureand Credit Agreement due to our failure to make previous interest payments dueunder the indenture.  Our ability to meetour expenses and pay additional amounts due under the Notes and other debt willdepend on our future performance, which will be affected by financial,business, economic and other factors, many of which we cannot control.  If adverse regional and national economicconditions persist, worsen, or fail to improve significantly, we could experiencedecreased revenues from our operations attributable to decreases in consumerspending levels and could fail to generate sufficient cash to pay additionalamounts due under our debt, including the Notes, or to fund other liquidityneeds, such as future capital expenditures. If recent economic conditions, including the availability of credit,persist, worsen, or fail to improve significantly, we also may be unable torefinance all or part of our debt, sell assets, reduce or delay capitalexpenditures or borrow more money.  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.

 

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

** **

The Notes and any subsidiaryguarantees thereof are secured by a security interest in substantially all ofour and any subsidiary guarantors’ existing and future assets (other thancertain excluded assets), a pledge of our equity interests and the equityinterests in any subsidiary guarantors. As of December 31, 2009, 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 interesttherein.  Some of these may be materialto us and such exclusion could have a material adverse effect on the value ofthe collateral.

 

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**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.***

** **

Our Notes and CreditFacility are secured by a security interest in substantially all of ourexisting and future assets (other than in certain excluded assets) (“Collateral”).  The proceeds of any sale of collateralfollowing an event of default with respect to the Notes may not be sufficientto satisfy, and may be substantially less than, amounts due on the Notes.  No appraisal has been made of thecollateral.  The total value of thecollateral is likely less than the amount due on the Notes.

 

The value of the collateralin the event of liquidation will depend upon market and economic conditions,the availability of buyers and similar factors. By its nature, some or all of the collateral may not have a readilyascertainable market value or may not be saleable or, if saleable, there may besubstantial delays in its liquidation. To the extent that liens, security interests and other rights granted toother parties (including the lenders under our Credit Facility) encumber assetsowned by us, those parties have or may exercise rights and remedies withrespect to the property subject to their liens that could adversely affect thevalue of that collateral and the ability of the trustee under the indenturegoverning the 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.

 

In addition, under theintercreditor agreement between the trustees under the indenture governing theNotes and the lenders under our Credit Facility, the right of the lenders to exerciseremedies with respect to the collateral could delay liquidation of thecollateral.  The gaming licensingprocess, along with bankruptcy laws and other laws relating to foreclosure andsale, as discussed below, also could substantially delay or prevent the abilityof the trustee or any holder of the Notes to obtain the benefit of anycollateral securing the Notes.  Suchdelays could have a material adverse effect on the value of the collateral.

 

The indenture governing theNotes also permits us to designate one or more of our restricted subsidiariesas an unrestricted subsidiary.  If wedesignate a restricted subsidiary as an unrestricted subsidiary, all of theliens on any collateral owned by the unrestricted subsidiary or any of itssubsidiaries and any guarantees of the Notes by the unrestricted subsidiary orany of its subsidiaries will be released under the indenture but notnecessarily under our Credit Facility. Designation of an unrestricted subsidiary will reduce the aggregatevalue of the collateral securing the Notes to the extent that liens on theassets of the unrestricted subsidiary and its subsidiaries are released.  In addition, the creditors of theunrestricted subsidiary and its subsidiaries will have a prior claim (ahead ofthe Notes) on the assets of such unrestricted subsidiary and its subsidiaries.

 

If the proceeds of any saleof collateral are not sufficient to repay all amounts due on the Notes, theholders of the Notes (to the extent not repaid from the proceeds of the sale ofthe collateral), would have only an unsecured claim against our remainingassets.

 

**LienSubordination of Notes—*The lien on the collateralsecuring the Notes are contractually subordinated pursuant to the intercreditoragreement to the liens securing our Credit Facility.***

** **

The security interestssecuring the Notes and any guarantees, if applicable, of the Notes arecontractually subordinated to up to $15.0 million principal amount of debt(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.  We arecurrently in default under our Credit Facility. In addition, lenders of 

 

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furniture, fixtures andequipment financing and other purchase money debt have a security interest in theassets securing that debt, although those assets, so long as they secure onlysuch debt, will not secure the Notes. The indenture permits unlimited gaming furniture, fixtures and equipmentfinancing and up to $2.5 million of other secured purchase moneyfinancing.  As a result, upon anydistribution to our creditors, whether or not in bankruptcy, liquidation,reorganization or similar proceedings, or following acceleration of our debt oran event of default under such debt, the lenders under our Credit Facility willbe entitled to be repaid in full from the proceeds of the assets securing suchdebt before any payment is made to holders of Notes from such proceeds and thelenders of furniture, fixtures and equipment financing and other purchase moneydebt will be entitled to be repaid in full from the proceeds of the assetssecuring such debt before any payment is made to holders of Notes from suchproceeds.

 

Consequently, theliquidation of the collateral securing the Notes may not produce proceeds in anamount sufficient to pay the amounts due on the Notes after also satisfying theobligations to pay our Credit Facility lenders and purchase money lenders, evenif the fair market value of the collateral securing the Notes would besufficient, absent our Credit Facility and purchase money debt, to pay allamounts due on the Notes.  If theproceeds of any sale of collateral are not sufficient to repay all amounts dueon 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.

 

**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.***

** **

A number of the rights andremedies of the trustee and the holders of the Notes are significantly limitedunder the intercreditor agreement.  Forinstance, if the Notes become due and payable prior to the stated maturity orare not paid in full at the stated maturity at a time during which we have debtoutstanding under our Credit Facility, the trustee will not have the right toforeclose upon the collateral that also secures the obligations under ourCredit Facility unless and until the lenders under our Credit Facility fail totake steps to exercise remedies with respect to or in connection with suchcollateral within 90 days following notice to such lenders of the occurrence ofan event of default under the indenture governing the Notes.  We are currently in default under our CreditFacility.  In addition, the intercreditoragreement prevents the trustee and the holders of the Notes from pursuing remedieswith respect to certain of the collateral in an insolvency proceeding.

 

The rights and remedies ofthe trustee also are subject to additional practical limitations with respectto certain collateral so long as such collateral also secures our Credit Facility.  The trustee does not and will not havepossession (if certificated) of our equity interests in any subsidiaryguarantors or the equity interests of 155 East Tropicana, LLC and 155 EastTropicana Finance Corp. (even though such equity interests will constitutecollateral), so long as such equity interests also secure our CreditFacility.  As a result, so long as suchequity interests also secure our Credit Facility, the trustee (although it willhave a perfected security interest in such equity interests) will not be ableto take possession of such equity interests upon the occurrence of an event ofdefault under the indenture governing the Notes.  In addition, the trustee does not have aperfected security interest in certain other portions of the collateral—includingdeposit accounts—that consist of assets that are not perfected by filing aUniform Commercial Code financing statement, or that require that the issuersor any subsidiary guarantor, as applicable, to cause the trustee to obtain “control”(as defined in the Uniform Commercial Code) or possession of such assets (and,after commercially reasonable efforts, the issuers or any such guarantor, asapplicable, are unable to cause the trustee to obtain such control orpossession).

 

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**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.***

** **

In addition to ourintercreditor arrangements with lenders under our Credit Facility, the gaminglaws of the State of Nevada and the licensing processes, along with other lawsrelating to foreclosure and sale, could substantially delay or prevent theability of the trustee or any holder of the Notes to obtain the benefit of anycollateral securing the Notes.  Forexample, if the trustee sought to operate, or retain an operator for, any ofour gaming properties, the trustee would be required to obtain Nevada gaminglicenses.  Potential purchasers of ourgaming properties or the gaming equipment would also be required to obtain aNevada gaming license.  This could limitthe number of potential purchasers in a sale of our gaming properties or gamingequipment, which may delay the sale of and reduce the price paid for thecollateral.

 

In addition, the trustee’sability to repossess and dispose of collateral is subject to the procedural andother restrictions of state real estate, commercial and gaming law, as well asthe prior approval of the lenders under our Credit Facility.  Among other things, if the trustee didconduct a foreclosure sale, and if the proceeds of the sale were insufficient,after expenses, to pay all amounts due on the Notes, the trustee might, undercertain circumstances, be permitted to assert a deficiency claim againstus.  There can be no assurance that thetrustee would be able to obtain a judgment for the deficiency or that we wouldhave sufficient other assets to pay a deficiency judgment.

 

Federal bankruptcy law alsocould impair the trustee’s ability to foreclose upon the collateral.  If we or a guarantor become a debtor in acase under the United States Bankruptcy Code, as amended, or the BankruptcyCode, if any, the automatic stay, imposed by the Bankruptcy Code upon thecommencement of a case, would prevent the trustee from foreclosing upon thecollateral or (if the trustee has already taken control of the collateral) fromdisposing of it, without prior bankruptcy court approval.

 

The bankruptcy court mightpermit us to continue to use the collateral while the bankruptcy case waspending, even if the Notes were then in default.  Under the Bankruptcy Code, holders of Notesand the trustee may be entitled to “adequate protection” of the interest ofholders of Notes in the collateral as provided for in Section 361 of theBankruptcy Code, if necessary to protect against any diminution in value duringthe case.  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.

 

In a bankruptcy case, thecourt would allow a claim for all amounts due under the Notes, including allaccrued and unpaid interest through the date of bankruptcy.  Under the Bankruptcy Code, interest stopsaccruing on the date of bankruptcy except under certain specified circumstances,and there can be no assurance that the court would allow a claim forpost-bankruptcy interest.  If the courtheld that the value of the collateral securing the Notes was less than theamount due, the trustee would be permitted to assert a secured claim in anamount equal to the collateral’s value and an unsecured claim for thedeficiency.

 

For these and other reasons,if we or our subsidiaries, if any, become debtors in cases under the BankruptcyCode, 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;

 

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·             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’sability to foreclose on the collateral on behalf of the holders of Notes may besubject to the consent of third parties, prior liens (as discussed above) andpractical problems associated with the realization of the trustee’s securityinterest in the collateral.

 

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

** **

The indenture governing theNotes and the agreement governing our Credit Facility contain, and any otherfuture debt agreements may contain, numerous covenants imposing financial andoperating restrictions on our business. These restrictions may affect our ability to operate our business, maylimit our ability to take advantage of potential business opportunities as theyarise and may adversely affect the conduct of our current business.  Additionally, as described in the RiskFactors, we are in default under the indenture and Credit Facility.  These covenants place restrictions on ourability and the ability of our restricted subsidiaries to, among other things:

 

·             manage our cash;

 

·             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 unrestricted subsidiaries;and

 

·             use the proceeds of permitted sales of our assets.

 

Our failure to comply withour debt-related obligations could result in additional events of default underthe Notes, Credit Facility and our other debt.

 

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

** **

Upon the occurrence ofspecific “change of control” events and “asset sale” events, in each case asdefined in the indenture governing the Notes, we will be required to offer torepurchase all outstanding Notes at 101% of the principal amount (in the caseof a change of control) and 100% of the principal amount (in the case of anasset sale), in each case, plus accrued and unpaid interest to the date of 

 

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repurchase.  The lenders under our Credit Facility willhave a similar right to be repaid upon a change of control.  Any of our future debt agreements may containsimilar provisions with respect to a change of control or asset sale.  However, we may not have sufficient funds atthe time of the change of control or asset sale to make the required repurchaseof Notes or repayment of our other debt. The terms of our Credit Facility also will limit our ability to purchaseNotes until all debt under our Credit Facility is paid in full.  Any of our future debt agreements may containsimilar restrictions.  If we fail torepurchase any Notes submitted in a change of control or asset sale offer, itwould constitute an event of default under the indenture which would, in turn,constitute an event of default under our Credit Facility and could constitutean event of default under our other debt, even if the change of control itselfwould not cause a default.

 

Important corporate events,such as takeovers, recapitalizations or similar transactions, may notconstitute a change of control under the indenture governing the Notes and thusnot permit the holders of the Notes to require us to repurchase or redeem theNotes.

 

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

** **

We are required to notifythe Nevada Board as to the identity of, and may be required to submitbackground information regarding, each record or beneficial owner of theNotes.  For purposes of these rules, “beneficialinterest” includes all direct and indirect forms of ownership or control,voting power or investment power held through any contract, lien, lease,partnership, stockholding, syndication, joint venture, understanding,relationship, present or reversionary right, title or interest, or otherwise.  The Nevada Board may determine that holdersof the Notes have a “beneficial interest” in the issuers.

 

If the Nevada GamingAuthorities require any person, including a record or beneficial owner of theNotes, to be licensed, qualified or found suitable, that person must apply fora license, qualification or finding of suitability within the time periodspecified by the gaming authority.  Theperson would be required to pay all costs of obtaining a license, qualificationor finding of suitability.  If a holder ofthe Notes is unable or unwilling to obtain such license, qualification orfinding of suitability, such agencies and authorities may not grant us or, ifalready granted, may suspend or revoke our licenses unless we terminate ourrelationship with the holder.  Underthese circumstances, we would be required to repurchase such Notes.  There can be no assurance that we will havesufficient funds or otherwise will be able to repurchase any or all of theNotes.  See “Item 1. Business—Regulationand Licensing.”

 

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

** **

Unless designated as anunrestricted subsidiary, each and any domestic subsidiary we form or acquirewill be required to guarantee the Notes and grant a security interest incertain of its assets (junior to the security interest granted to the lendersunder our Credit Facility) to secure its guarantee.  Under federal bankruptcy law and comparableprovisions of state fraudulent transfer laws, under certain circumstances acourt could avoid (i.e., cancel) a guarantee and the security interest in theguarantor’s assets, and order the return of any payments made hereunder to theguarantor or to a fund for the benefit of its other creditors.

 

A court might take theseactions if it found that when the guarantor entered into its guarantee (or, insome jurisdictions, when payments became due on its guarantee), (i) itreceived less than reasonably equivalent value or fair consideration for itsguarantee, and (ii) any of the following conditions was then satisfied:

 

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

 

·             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.

 

In applying these factors, acourt would likely find that a subsidiary guarantor did not receive fairconsideration or reasonably equivalent value for its guarantee, except to theextent that it benefited directly or indirectly from the Notes’ issuance.  The determination of whether a subsidiary wasor was rendered “insolvent” would vary depending on the law of the jurisdictionbeing applied.  Generally, an entitywould be considered insolvent if the sum of its debts (including contingent orunliquidated debts) is greater than all of its property at a fair valuation orif the present fair salable value of its assets is less than the amount thatwill be required to pay its probable liability on its existing debts (includingcontingent or unliquidated debts) as they become absolute and matured.

 

A court might also avoid aguarantor’s guarantee and the security interest in its assets, if the courtconcluded that the guarantor entered into the guarantee with actual intent tohinder, delay, or defraud creditors.  Ifa court avoided a guarantor’s guarantee, you would no longer have a claimagainst that subsidiary, and the claims of creditors of the subsidiarygenerally would be entitled to payment in full before the subsidiary paid anydividends or made any distributions to us for the purpose of our satisfying anyclaims under the Notes.

 

Similarly, under federalbankruptcy law and comparable provisions of state fraudulent transfer laws,under certain circumstances a court could avoid (i.e., cancel) the Notes andthe security interest in an issuer’s assets, and order the return of anypayments made there under to the issuer or to a fund for the benefit of itsother creditors subject to certain safe-harbor provisions.

 

A court might take theseactions if it found that when an issuer issued the Notes, (i) it receivedless than reasonably equivalent value or fair consideration, and (ii) anyof the following conditions was then satisfied:

 

·             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.

 

In 2005, we used asubstantial portion of the proceeds from the Notes to repay amounts due underour then 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 connectionwith our acquisition of our hotel casino, a court might find that we did notreceive reasonably equivalent value or fair consideration for incurring ourdebt obligations 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.

 

Regardless of the factorsidentified above, a court might also avoid the obligations of the issuers underthe Notes and the security interest in their assets and order the return of anypayments made under 

 

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the Notes either to theissuers or to a fund for the benefit of the issuers’ other creditors if thecourt found that the issuers incurred the obligations under the Notes withactual intent to hinder, delay, or defraud creditors of the issuers.

 

## **ITEM 1B.       UNRESOLVEDSTAFF COMMENTS.**

## ** **

Not applicable.

 

## **ITEM 2.**          PROPERTIES.

## ** **

Our principal propertiescurrently consist of the following:

 

*Hooters Casino Hotel.*  We own the approximately seven-acre site onwhich the Hooters Casino Hotel is located in Las Vegas, Nevada.  The Hooters Casino Hotel consists of anapproximately 29,000 square-foot casino with 696 guest rooms located in thehotel casino building and within two towers. In addition, a six-level, 556-space parking garage is located adjacentto the hotel casino, and 202 additional surface parking spaces are located onthe site.

 

*Executive Offices and ConferenceFacility.*  We own anapproximately two-acre site consisting of a one-level, 17,472 square-footexecutive office building and conference facility and an 183-space parking lot.

 

Our Credit Facility and ourNotes are secured by liens on all of our real property.

 

## **ITEM 3.**          LEGAL PROCEEDINGS.

## ** **

From time to time we areparty to various claims arising in the normal course of business.  Management believes, however, that there areno proceedings pending or threatened against us, which, if determinedadversely, would have a material adverse effect on our financial condition,results of operations or liquidity.

 

## **ITEM 4.**          SUBMISSION OF MATTERSTO A VOTE OF SECURITY HOLDERS.

## ** **

Notapplicable.

 

# **PART II**

# ** **

| **ITEM 5.** | **MARKET FOR REGISTRANT’S COMMON EQUITY AND  RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.** |
|-------------|----------------------------------------------------------------------------------------------------------------------------|

## ** **

## ** **

Not applicable.

 

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## **ITEM 6.**                             SELECTED FINANCIAL DATA.

## ** **

Thehistorical selected financial data of 155 East Tropicana, LLC and of the HôtelSan Rémo Casino and Resort set forth below should be read in conjunction with “Item7. Management’s Discussion and Analysis of Financial Condition and Results ofOperations” and “Item 8. Financial Statements and Supplementary Data.”  The statement of operations data for theperiods ended December 31, 2009, 2008, 2007 and 2006, and the balancesheet data at December 31, 2009 and 2008 of 155 East Tropicana, LLC arederived from, and are qualified by reference to, the audited financial statementsincluded in “Item 8. Financial Statements and Supplementary Data.”

 

**155 EAST TROPICANA, LLC**

** **
| ** **                           | ** ** | **As of or for the periods ended** | ** ** | ** ** | ** ** |
|--------------------------------------|------------|------------------------------------|------------|------------|------------|
| ** **                           | ** ** | **December 31,**              | ** ** | ** ** | ** ** |
| ** **                           | ** ** | **2009**                           | ** ** | **2008**   | ** ** | **2007** | ** ** | **2006** | ** ** | **2005 (1) (2)** | ** ** |
| ** **                           | ** ** | **(dollars in thousands)**         | ** ** |
| **Results of Operations:**           |       |                               |       |       |       |   |   |   |   |   |   |
| Net  revenues (3)                    |       | $                                  | 46,809     |       | $          | 60,095 |   | $ | 66,480 |   | $ | 67,956 |   | $ | 8,001 |   |
| Operating  expenses (4)              |       | 43,721                             |       | 54,282     |       | 59,804 |   | 60,357 |   | 4,314 |   |
| Depreciation                         |       | 6,612                              |       | 6,544      |       | 6,250 |   | 5,842 |   | 1,956 |   |
| Intangible  assets impairment charge |       | —                             |       | 3,458      |       | — |   | — |   | — |   |
| Pre-opening  expense                 |       | —                             |       | —     |       | — |   | 5,293 |   | 4,825 |   |
| Related  party royalties expense     |       | 1,062                              |       | 1,362      |       | 1,387 |   | 1,459 |   | — |   |
| Loss  on disposal of assets          |       | —                             |       | —     |       | — |   | 1,199 |   | — |   |
| Total  operating loss                |       | (4,586                             | )          | (5,551     | )          | (962 | ) | (6,194 | ) | (3,094 | ) |
| Interest  expense, net (5)           |       | (13,659                            | )          | (13,200    | )          | (13,157 | ) | (12,247 | ) | (8,526 | ) |
| Purchase  deposit and extension fee  |       | —                             |       | 5,500      |       | — |   | — |   | — |   |
| Loss  on extinguishment of debt      |       | —                             |       | —     |       | — |   | — |   | (2,247 | ) |
| Net  loss                            |       | $                                  | (18,245    | )          | $          | (13,251 | ) | $ | (14,119 | ) | $ | (18,441 | ) | $ | (13,867 | ) |
| **Balance Sheet:**                   |       |                               |       |       |       |   |   |   |   |   |   |
| Cash  and cash equivalents           |       | $                                  | 5,383      |       | $          | 4,980 |   | $ | 5,862 |   | $ | 6,164 |   | $ | 14,191 |   |
| Total  assets                        |       | 123,102                            |       | 126,427    |       | 139,147 |   | 145,593 |   | 163,159 |   |
| Total  debt (6)                      |       | 146,063                            |       | 141,362    |       | 138,587 |   | 134,940 |   | 130,000 |   |
| Total  liabilities                   |       | 168,206                            |       | 152,686    |       | 152,154 |   | 144,482 |   | 143,607 |   |
| Members’  (deficit) equity      |       | (45,104                            | )          | (26,259    | )          | (13,007 | ) | 1,111 |   | 19,553 |   |

 

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(1)   We obtained ourgaming and liquor licenses, thereby completing the final stage of theacquisition of substantially all the assets and certain liabilities of thehotel casino, in October 2005.  Theresults of operation reflect the casino and hotel operations from November 1,2005 through December 31, 2005.

 

(2)   We wereconsidered a development stage company until November 1, 2005.

 

(3)   Net revenuesfor 2005 include related party lease income of $5.4 million received fromEastern & Western for the lease of the hotel casino from January 1,2005 through October 31, 2005.

 

(4)   Excludesdepreciation expense, intangible assets impairment charge, pre-opening expense,related party royalties expense, and loss on disposal of assets.

 

(5)   Interestexpense, net of interest income.

 

(6)   Total debt isclassified as current, exclusive of the long-term portion of equipment loans.

 

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The following historical information of the HôtelSan Rémo Casino and Resort is derived from its audited financial statements for2005.

 

**HÔTEL SAN RÉMO CASINO AND RESORT**

 
| ** **                            | ** ** | **Ten Months Ended********October 31,** | ** ** |
|---------------------------------------|------------|--------------------------------------------------------|------------|
| ** **                            | ** ** | **2005 (1)**                                      | ** ** |
| ** **                            | ** ** | **(dollars in thousands)**                   | ** ** |
| **Results  of Operations:**           |       |                                                   |       |
| **Revenues:**                         |       |                                                   |       |
| Casino                                |       | $                                                      | 8,947      |   |
| Food and beverage                     |       | 5,557                                                  |       |
| Hotel and other                       |       | 12,217                                                 |       |
| Gross revenues                        |       | 26,721                                                 |       |
| Promotional allowances                |       | (1,770                                                 | )          |
| Net revenues                          |       | $                                                      | 24,951     |   |
|                                  |       |                                                   |       |
| **Operating  expenses:**              |       |                                                   |       |
| Casino                                |       | $                                                      | 5,275      |   |
| Food and beverage                     |       | 4,977                                                  |       |
| Hotel and other                       |       | 3,628                                                  |       |
| General and  administrative           |       | 6,678                                                  |       |
| Depreciation                          |       | 335                                                    |       |
| Related party lease  expense (2)      |       | 5,439                                                  |       |
| Restructuring costs                   |       | —                                                 |       |
| Total operating expense               |       | $                                                      | 26,332     |   |
|                                  |       |                                                   |       |
| Operating (loss) income               |       | $                                                      | (1,381     | ) |
|                                  |       |                                                   |       |
| **Other  income (expenses):**         |       |                                                   |       |
| Interest income from  affiliate       |       | $                                                      | 346        |   |
| Interest expense                      |       | (7                                                     | )          |
| Loss on sale of assets                |       | —                                                 |       |
| Foreign currency  translation         |       | —                                                 |       |
| Total other income  (expenses)        |       | 339                                                    |       |
| (Loss) income before  income taxes    |       | (1,043                                                 | )          |
| Benefit (provision) for  income taxes |       | 397                                                    |       |
| Net (loss) income                     |       | $                                                      | (646       | ) |
|                                  |       |                                                   |       |
| **Balance  sheet**                    |       |                                                   |       |
| Cash and cash  equivalents            |       | $                                                      | 2,903      |   |
| Total assets                          |       | 8,215                                                  |       |
| Total debt                            |       | —                                                 |       |
| Total liabilities                     |       | 4,355                                                  |       |
| Division equity                       |       | 3,860                                                  |       |

 

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(1)          The completion of the finalstage of the acquisition of the Hôtel San Rémo Casino and Resort occurred in October 2005,upon receipt of our gaming and liquor licenses. The results of operation reflect the casino and hotel operations from January 1,2005 through October 31, 2005 when the Hôtel San Rémo Casino and Resortceased operations.

 

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(2)          In connection with the August 3,2004 contribution of the Hôtel San Rémo Casino and Resort real property andnon-gaming assets to us, Eastern & Western entered into leasearrangements to lease back the hotel casino until we received all of the necessarygovernment and regulatory approvals to operate the hotel casino.  In October 2005, we received thenecessary gaming and liquor licenses; therefore, the lease arrangements wereterminated on October 31, 2005.

 

Thefollowing selected quarterly financial data of 155 East Tropicana, LLC for theyears ended December 31, 2009 and 2008 is derived from the quarterlycondensed consolidated financial statements of 155 East Tropicana, LLC . Thefinancial data for the fourth quarter of 2009 and 2008 are derived from theannual consolidated financial statements of 155 East Tropicana, LLC included in“Item 8 Financial Statements and Supplementary Data.

 
| ** **     | ** ** | **155  EAST TROPICANA, LLC**     | ** ** | ** **         | ** ** |
|----------------|------------|----------------------------------|------------|--------------------|------------|
| ** **     | ** ** | **For the fiscal quarter ended** | ** ** | ** **         | ** ** |
| ** **     | ** ** | **March 31,  2009**              | ** ** | **June 30,  2009** | ** ** | **September 30,  2009** | ** ** | **December 31,  2009** | ** ** | **Total** | ** ** |
| ** **     | ** ** | **(dollars in thousands)**       | ** ** | ** **         | ** ** |
| Net revenues   |       | $                                | 13,341     |               | $          | 11,674 |   | $ | 10,729 |   | $ | 11,065 |   | $ | 46,809 |   |
| Operating loss |       | (727                             | )          | (1,622             | )          | (1,916 | ) | (321 | ) | (4,586 | ) |
| Net loss       |       | (4,059                           | )          | (5,050             | )          | (5,378 | ) | (3,758 | ) | (18,245 | ) |
|                |            |                                  |            |                    |            |  |  |  |  |  |  |  |  |  |  |  |

 
| ** **               | ** ** | **155  EAST TROPICANA, LLC**     | ** ** | ** **         | ** ** |
|--------------------------|------------|----------------------------------|------------|--------------------|------------|
| ** **               | ** ** | **For the fiscal quarter ended** | ** ** | ** **         | ** ** |
| ** **               | ** ** | **March 31,  2008**              | ** ** | **June 30,  2008** | ** ** | **September 30,  2008** | ** ** | **December 31,  2008** | ** ** | **Total** | ** ** |
| ** **               | ** ** | **(dollars in thousands)**       | ** ** | ** **         | ** ** |
| Net revenues             |       | $                                | 16,441     |               | $          | 16,123 |   | $ | 14,212 |   | $ | 13,319 |   | $ | 60,095 |   |
| Operating (loss)  income |       | 1,071                            |       | 259                |       | (1,942 | ) | (4,939 | ) | (5,551 | ) |
| Net income  (loss) (1)   |       | (2,195                           | )          | 2,443              |       | (5,261 | ) | (8,238 | ) | (13,251 | ) |
|                          |            |                                  |            |                    |            |  |  |  |  |  |  |  |  |  |  |  |

 

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(1) Netincome for the second quarter of 2008 includes the $5.5 million gain from theforfeited purchase deposit and extension fees related to the cancelled sale toHedwigs and net loss for the fourth quarter of 2008 includes the intangibleassets impairment charge of $3.5 million.

 
| **ITEM 7.** | **MANAGEMENT’S DISCUSSION AND ANALYSIS OF  FINANCIAL CONDITION AND RESULTS OF OPERATION.** |
|-------------|-------------------------------------------------------------------------------------------------|

## ** **

Thefollowing discussion should be read in conjunction with, and is qualified inits entirety by, the financial statements and related notes thereto and otherfinancial information included in “Item 8. Financial Statements andSupplementary Data.”  Certain statementsin this Management’s Discussion and Analysis of Financial Condition and Resultsof Operations are forward-looking.

 

***Economic Conditions and Related Risks and Uncertainties***

 

TheUnited States is currently experiencing a widespread recession accompanied by,among other things, weakness in the commercial and investment banking systemsresulting in reduced credit and capital financing availability, and highlycurtailed gaming and other recreational activities and general discretionaryconsumer spending, and is also engaged in war, all of which are likely tocontinue to have far-reaching effects on economic conditions in the country foran indeterminate period. The effects and duration of these conditions andrelated risks and uncertainties on the Company’s future operations and 

 

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cashflows, including its access to capital or credit financing, cannot be estimatedat this time, but may likely be significant.

 

***Liquidity and Financial Position***

 

Wehave significant indebtedness and financial commitments in 2009.  As of December 31, 2009, we had $160.3million in total debt and unpaid interest. Currently, the Credit Facility is fully extended and we have noadditional availability to borrow against the Credit Facility.  We do not believe we will be able to generatesufficient cash flows from operations to fund our  financial commitments over the next year andcannot provide any assurances that we will be able to raise additional capital.

 

Basedon anticipated future operations, we do not believe that cash on hand at December 31,2009 of $5.3 million and expected cash flows will be adequate to meet our totalfinancial obligations which include (1) anticipated operational expenses, (2) debtservice on equipment leases and Credit Facility, (3) capital expenses and (4) scheduledpayments of interest on the Notes.  Wewere unable to make the interest payment on the Notes due April 1, 2009and October 1, 2009 and do not expect to make the payment due April 1,2010 or October 1, 2010.  Currently,our other obligations are being paid in the normal course of business.  Due to our inability to make the interestpayments , an event of default occurred under the indenture governing theNotes.  As a result, the note holderscould exercise certain remedies provided under the indenture governing theNotes.   We received default and reservationof rights letters (“Default Letters”) from the lenders under the CreditFacility.  The Default Letters state that(i) an event of default exists under the Credit Facility as a result ofour failure to obtain control agreements for one or more deposit accountsestablished and maintained by us and also as a result of failure to payinterest on the Notes, (ii) as a result of the event of default, thelenders are under no further obligation to extend further credit under theCredit Facility, (iii) the lenders will continue to evaluate theirresponse to the event of default, and (iv) we no longer have an option ofpaying the LIBOR interest rate, but must pay the Wells Fargo prime rate plusthe default rate, which is equal to four percentage points above primerate.  The lenders have not elected toaccelerate the indebtedness under the Credit Facility.  We have entered into discussions with thenote holders and the Credit Facility lenders to attempt to negotiateforbearance agreements pursuant to which they would agree not to exercise, fora specified period of time, their remedies under the indenture or the CreditFacility.  We have engaged a financialadvisor to assist with the evaluation of financial and strategic alternatives,which may include a recapitalization, refinancing, restructuring orreorganization of our obligations or a sale of some or all of ourbusiness.  Our advisors and we areactively working toward such a transaction. We cannot be assured that we will be successful in negotiating forbearancewith the note holders or Credit Facility lender or in undertaking any suchalternative transaction in the near term.

 

Ifwe are not successful in obtaining a forbearance or entering into a transactionto address our liquidity and capital structure, the note holders have theability to accelerate repayment of all amounts outstanding under the indenture($144.2 million at December 31, 2009) and the Credit Facility lenders havethe ability to accelerate repayment of all amounts outstanding under the CreditFacility ($14.5 million at December  30, 2009, plus an irrevocable letter ofcredit for $0.5 million at December 31, 2009).  If either the Notes indebtedness or theCredit Facility indebtedness were to be accelerated, we would be required torefinance or restructure the payments on that debt.  We cannot be assured that we would besuccessful in completing a refinancing or restructuring.  If we are unable to do so, we may determineto seek protection under Chapter 11 of the U.S. Bankruptcy Code.

 

The conditions and events described above raise asubstantial doubt about the Company’s ability to continue as a goingconcern.  We have classified most of ourdebt at December 31, 2009, and all debt at December 31, 2008, as acurrent liability on the balance sheet. The accompanying condensed 

 

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consolidatedfinancial statements do not include all adjustments to reflect the possiblefuture effects on the recoverability and classification of assets or theamounts and classifications of liabilities that may result should we be unableto continue as a going concern.

 

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

 

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

 

FloridaHooters LLC is a joint venture between Hooters 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. LagsVentures, LLC is owned by a holder of the license rights to certain Hootersrestaurants in South Florida and the State of Nevada. Pursuant to these licenserights, the owners of Florida Hooters LLC operate 41 Hooters restaurants,publish Hooters calendars, and operate a Hooters foods business. The owner ofLags Ventures, LLC is also the founder of the Dan Marino concept restaurantsand owns and operates 1 Dan Marino concept restaurant.

 

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

 

Ouraffiliates have granted us assignments of certain license agreements pertainingto the use of the Hooters brand as well as the Pete & Shorty’s conceptrestaurant, which will allow us to operate the Hooters Casino Hotel. Theoriginal founders of the Hooters brand sold the trademark rights (excludingcertain rights they retained for themselves) to Hooters of America in 2001. Asa result, Hooters of America is the trademark owner of the Hooters brand andthe operator and franchisor of Hooters restaurants. Pursuant to the Hooterslicense assignment; we are required to pay Hooters of America a royalty fee,which totaled approximately $0.8 million for the year ending December 31,2009. Aside from the abovementioned royalty fee, we are not otherwiseaffiliated with Hooters of America.

 

InAugust 2004, we agreed to the acquisition of the real property and otherassets of the Hôtel San Rémo for approximately $74.6 million includingtransaction costs and expenses, and as adjusted for final purchase priceadjustments.

 

OnMarch 29, 2005, we issued $130.0 million aggregate principal amountof 83⁄4% Senior Secured Notes due 2012, or the old notes, in a private placement.The old notes were subsequently exchanged with new notes, or (“Notes”),registered under the Securities Act of 1933 on Form S-4. Interest paymentson the Notes are due semi-annually, on each April 1 and October 1.

 

Weused the proceeds from the offering to refinance existing indebtedness, andused the remaining proceeds (together with cash from operations and proceedsfrom equipment financing) to renovate the hotel casino and to provide workingcapital.

 

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Inconnection with the offering, we formed a wholly owned subsidiary, 155 EastTropicana Finance Corp., solely for facilitating the offering as a co-issuer ofthe old notes.

 

Wealso entered into a $15.0 million senior secured credit facility (“CreditFacility”) concurrently with the offering. At December 31, 2009, $14.5million was outstanding on the Credit Facility, which, together with a letterof credit in the amount of $0.5 million, represents all of the funds availableunder the Credit Facility.

 

TheCompany was unable to make the interest payment on the Notes due April 1,2009 and October 1, 2009 and does not expect to make the payment due April 1,2010 or October 1, 2010. Currently, our other obligations are being paidin the normal course of business.  Due tothe Company’s inability to make the interest payments, an event of defaultoccurred under the indenture governing the Notes.  As a result, the note holders could exercisecertain remedies provided under the indenture.  The Company has received Notice of Default and Reservation of Rightsletters (the “Default Letters”) from the lenders under the CreditFacility.  The Default Letters state that(i) an event of default exists under the Credit Facility as a result ofthe Company’s failure to obtain control agreements for one or more depositaccounts established and maintained by the Company and as a result of failureto pay interest on the Notes, (ii) as a result of the event of default,the lenders are under no further obligation to extend further credit under theCredit Facility, (iii) the lenders will continue to evaluate theirresponse to the event of default, and (iv) the Company no longer has anoption of paying the LIBOR interest rate, but must pay the Wells Fargo primerate  plus the default rate, which isequal to four percentage points above prime rate.  The lenders have not elected to acceleratethe indebtedness under the Credit Facility. The Company has entered into discussions with the note holders and theCredit Facility lenders to attempt to negotiate forbearance agreements pursuantto which they would agree not to exercise, for a specified period of time,their remedies under the indenture or the Credit Facility.  The Company has engaged a financial advisorto assist with its evaluation of financial and strategic alternatives, whichmay include a recapitalization, refinancing, restructuring or reorganization ofits obligations or a sale of some or all of its business.  The Company and its advisors are activelyworking toward such a transaction.  TheCompany cannot be assured that it will be successful in negotiating forbearancewith the note holders or Credit Facility lender or in undertaking any suchalternative transaction in the near term.

 

Priorto November 1, 2005 we conducted no business operations other than inconnection with the acquisition and subsequent leasing of the Hôtel San Rémo.Through October 31, 2005, Eastern & Western held the gaminglicense in Nevada and owned all gaming assets by the Hôtel San Rémo. Under acasino lease and hotel lease, Eastern & Western operated the Hôtel SanRémo. 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 wereterminated.

 

Casinorevenue is derived primarily from patrons wagering on slot machines, tablegames and other gaming activities. Table games include blackjack, craps,roulette, and specialty games. Casino revenue is defined as the win from gamingactivities, computed as the difference between gaming wins and losses, not thetotal amount wagered. “Table game drop” and “slot handle” are casino industryspecific terms used to identify the amount wagered by patrons for a casinotable game or slot machine, respectively. “Table game hold” and “slot hold”represent the percentage of the total amount wagered by the patron that thecasino has won. Hold is derived by dividing the amount won by the casino (“table

 

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gamewin” and “slot win”) by the amount wagered by the patron. Casino revenue isrecognized at the end of each gaming day.

 

Casinorevenues vary from time to time due to general economic conditions, table gamehold, slot hold, and occupancy percentages at the Hooters Casino Hotel andother hotels in Las Vegas. Casino revenues also vary depending upon the amountof gaming activity as well as variations in the odds for different games ofchance. Casino revenues, room revenues, food and beverage revenues, and otherrevenues vary due to general economic conditions and competition.

 

Room revenueis derived from rooms and suites rented to 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 roomsoccupied, and is computed by dividing the number of rooms occupied by the totalnumber of rooms available. Room revenue is recognized at the time the roomis provided to the guest.

 

Food,beverage and entertainment revenues are derived from food and beverage sales inthe food, bar and entertainment outlets of the hotel casino, includingrestaurants, room service, bars, entertainment showroom and banquets. Food,beverage, and entertainment revenue is recognized at the time food and/orbeverage is provided to the guest. “Covers” are the number of patrons served ina food outlet. “Average check” is the average amount of food and beveragerevenue charged to patrons on their restaurant checks.

 

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Thefollowing table summarizes the results of operations of 155 East Tropicana, LLC(in thousands):

 
| ** **                                 | ** ** | **155 E. Tropicana, LLC**          | ** ** | **155 E. Tropicana, LLC**          | ** ** | ** **                 | ** ** | **155 E. Tropicana, LLC**          | ** ** | ** **                 | ** ** |
|--------------------------------------------|------------|------------------------------------|------------|------------------------------------|------------|----------------------------|------------|------------------------------------|------------|----------------------------|------------|
| ** **                                 | ** ** | **Year Ended  December 31,  2009** | ** ** | **Year Ended  December 31,  2008** | ** ** | **%  Change  2009 - 2008** | ** ** | **Year Ended  December 31,  2007** | ** ** | **%  Change  2008 - 2007** | ** ** |
| ** **                                 | ** ** | **(dollars in thousands)**         | ** ** |
| Casino revenues                            |       | $                                  | 18,089     |                               | $          | 24,951                     |       | -27.5                              | %          | $                          | 24,993     |   | -0.2 | % |
| Casino expenses                            |       | 10,991                             |       | 14,572                             |       | -24.6                      | %          | 14,883                             |       | -2.1                       | %          |
| Profit margin                              |       | 39.2                               | %          | 41.6                               | %          |                       |       | 40.5                               | %          |                       |       |
|                                       |       |                               |       |                               |       |                       |       |                               |       |                            |       |
| Food, beverage  and entertainment revenues |       | $                                  | 18,680     |                               | $          | 22,137                     |       | -15.6                              | %          | $                          | 23,318     |   | -5.1 | % |
| Food, beverage  and entertainment expenses |       | 11,400                             |       | 14,501                             |       | -21.4                      | %          | 17,722                             |       | -18.2                      | %          |
| Profit margin                              |       | 39.0                               | %          | 34.5                               | %          |                       |       | 24.0                               | %          |                       |       |
|                                       |       |                               |       |                               |       |                       |       |                               |       |                            |       |
| Hotel and other  revenues                  |       | $                                  | 15,048     |                               | $          | 20,686                     |       | -27.3                              | %          | $                          | 24,484     |   | -15.5 | % |
| Hotel and other  expenses                  |       | 6,758                              |       | 8,066                              |       | -16.2                      | %          | 9,222                              |       | -12.5                      | %          |
| Profit margin                              |       | 55.1                               | %          | 61.0                               | %          |                       |       | 62.3                               | %          |                       |       |
|                                       |       |                               |       |                               |       |                       |       |                               |       |                            |       |
| Promotional  allowances                    |       | $                                  | 5,009      |                               | $          | 7,678                      |       | -34.8                              | %          | $                          | 6,316      |   | 21.6 | % |
| Percent of gross  revenues                 |       | 9.7                                | %          | 11.3                               | %          |                       |       | 8.7                                | %          |                       |       |
|                                       |       |                               |       |                               |       |                       |       |                               |       |                            |       |
| General and  administrative expenses       |       | $                                  | 12,925     |                               | $          | 16,624                     |       | -22.3                              | %          | $                          | 17,978     |   | -7.5 | % |
| Percent of net  revenues                   |       | 27.6                               | %          | 27.7                               | %          |                       |       | 27.0                               | %          |                       |       |
|                                       |       |                               |       |                               |       |                       |       |                               |       |                            |       |
| Restructuring  expense                     |       | $                                  | 1,647      |                               | $          | 519                        |       | 217.3                              | %          |                       |       |   |   |
| Percent of net  revenues                   |       | 0.9                                | %          | 0.1                                | %          |                       |       |                               |       |                       |       |
|                                       |       |                               |       |                               |       |                       |       |                               |       |                            |       |
| Depreciation  expense                      |       | $                                  | 6,612      |                               | $          | 6,544                      |       | 1.0                                | %          | $                          | 6,250      |   | 4.7 | % |
|                                       |       |                               |       |                               |       |                       |       |                               |       |                            |       |
| Intangible  assets impairment charge       |       | $                                  | 600        |                               | $          | 3,458                      |       | -82.6                              | %          | $                          | —     |   |   |   |
|                                       |       |                               |       |                               |       |                       |       |                               |       |                            |       |
| Related party  royalties expense           |       | $                                  | 1,062      |                               | $          | 1,362                      |       | -22.0                              | %          | $                          | 1,387      |   | -1.8 | % |
|                                       |       |                               |       |                               |       |                       |       |                               |       |                       |       |
| Purchase deposit  and extension fee        |       | $                                  | —     |                               | 5,500      |                       |       |                               | $          | —                     |       |   |   |
|                                       |       |                               |       |                               |       |                       |       |                               |       |                       |       |
| Interest income                            |       | $                                  | 1          |                               | $          | 124                        |       | -99.2                              | %          | $                          | 91         |   | 36.3 | % |
|                                       |       |                               |       |                               |       |                       |       |                               |       |                       |       |
| Interest expense                           |       | $                                  | 13,660     |                               | $          | 13,324                     |       | 2.5                                | %          | $                          | 13,248     |   | 0.6 | % |

 

***Comparison of Year Ended December 31, 2009 with the Year Ended December 31,2008***

 

Net operating revenues for the year ended December 31,2009 were $46.8 million, a decrease of $13.3 million or 22.1%, from $60.1million of net operating revenues for the year ended December 31, 2008.

 

We offset most of the $13.3 million decline in netoperating revenues through targeted cost reductions of $12.2 million.  The operating loss for the year ended December 31,2009 declined by $0.4 million from the prior year.

 

As discussed earlier, during 2009, there have beendecreases in visitor volumes to Las Vegas and in customer spending, includingconvention participants, principally due to the status of the national, stateand local economies.  In addition, wehave been challenged with conditions that affect our property in particular.  We closed 235 rooms or approximately a thirdof our rooms on May 28, 2009 in order to retrofit the plumbingrisers.  These rooms re-opened  August of 2009.  In addition, the county was working on layingutilities down our frontage street, Tropicana Avenue, in order to provideutilities to the new airport terminal currently under construction.  This disrupted the auto traffic flow into ourproperty and disrupted the walk-in traffic to our property via the walkwaybetween the MGM Grand Hotel and us.  Thisdisruption occurred for most of the third quarter and was completed in September 2009.  To offset 

 

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these business disruptions and economic conditions, we have continuedto focus on managing costs.

 

*Casino.*  Casinorevenues decreased by $6.9 million to $18.1 million for the year ended December 31,2009, compared to $25.0 million for the year ended December 31, 2008because of decreased traffic in the casino and a decrease in spending perplayer.

 

Tablegames revenue was $6.7 million for the year ended December 31, 2009, adecrease of $2.2 million, or 24.4%, compared to the table games revenue of $8.9million from the prior year.  Table gamedrop decreased to $37.9 million, or by 27.0%, for the year ended December 31,2009 compared to $51.9 million for the year ended December 31, 2008, whiletable game hold percentage increased from 17.1% in 2008 to 17.7% in 2009.  The table games generated an average win pertable of $752 per day for the year of 2009 compared to $932 for the year of2008.

 

Slotrevenue of $11.0 million for the year ended December 31, 2009 was adecrease of $4.5 million or 28.8% compared to $15.5 million in the same periodin 2008.  The average win per machine perday was $49 for the year ended December 31, 2009 compared to $67 for theyear of 2008.

 

Casino expenses decreased by $3.6 million or 24.6%to $11.0 million for the year ended December 31, 2009 compared to $14.6million for the year ended December 31, 2008. The profit margin for casinooperations decreased from 41.6% during the year ended December 31, 2008 to39.2% during the year ended December 31, 2009.

 

*Food, beverage and entertainment.*  Food, beverage and entertainment revenue was$18.7 million for the year ended December 31, 2009 as compared to $22.1million for December 31, 2008, a decrease of $3.4 million or 15.6%.  The food revenues decreased $1.9 million or12.9% to $12.8 million for the year ending December 31, 2009 compared to$14.7 million for the year ending December 31, 2008. Beverage revenue(which includes complimentary beverages) decreased by $1.6 million or 21.0% to$5.8 million for the year ended December 31, 2009 from $7.4 million duringthe year ended December 31, 2008. Showroom revenue decreased $0.8 million in 2009 to $0.6 million ascompared to showroom revenue of $1.4 million in 2008.  Our showroom acts were changed to “four-wall”events in March 2009.  The acts keepmost of the revenue in the showroom, but also cover most of the expenses.

 

Food,beverage and entertainment expenses decreased from $14.5 million during theyear ended December 31, 2008 to $11.4 million during the year ended December 31,2009, a decrease of $3.1 million or 21.4%. The profit margin for food, beverage and entertainment operationsincreased from 34.5% during the year ended December 31, 2008 to 39.0%during the year ended December 31, 2009 due to operational efficiencies inpayroll and cost of sales in the food and beverage departments.  We saved $0.7 million in showroom expensesbecause we adopted a “four-wall” format as described above.

 

*Hotel and other.*  Hoteland other revenue (which includes hotel room revenue, retail, and othermiscellaneous revenue) decreased by $5.7 million, or 27.3%, to $15.0 millionfor the year ended December 31, 2009 from $20.7 million for the year endedDecember 31, 2008.  Room revenuedecreased $5.4 million or 35.5% to $9.8 million for the year ended December 31,2009 compared to $15.2 million in 2008 due to the drop in visitors to LasVegas, disruptions caused by the closure of rooms for retrofitting and roadconstruction along our frontage street. The average daily room rate decreased to $49 for the year ended December 31,2009 compared to $66 for the prior year. The occupancy rate fell from 91.6% 

 

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in2008 to 87% in 2009.  The number of roomsoccupied declined, partially due to the 235 rooms taken out of service from May 28,2009 to August 14, 2009 for plumbing retrofit.

 

Salesfrom the retail outlets was $3.6 million in the year ended December 31,2009, a decrease of $0.8 million from the year ended December 31, 2008.

 

Hotel and other expenses decreased by $1.3 millionor 16.2% from $8.1 million during the year ended December 31, 2008 to $6.8million during the year ended December 31, 2009 due to operationalefficiencies in payroll and departmental expenses. The profit margin for hoteland other was 55.1% for the year ended December 31, 2009 compared to 61.0%for the same period in the prior year..

 

*General and administrative.*  General and administrative expense includes costsassociated with corporate marketing, information technology, and finance,accounting, and property operations. General and administrative expense decreased $3.7 million or 24.6% to$12.9 million for the year ended December 31, 2009 compared to $16.6 millionfor the year ended December 31, 2008. This decrease was principally due tosignificant decreases in advertising and marketing expenses, legal fees andvarious other administrative costs.

 

*Restructuring expense*.  Restructuring expenses associated withfinancial advisory services and related legal expenses for the year ended December 31,2009 were $1.6 million.  These expensesbegan in September 2008 and are expected to continue in future monthsuntil our recapitalization, refinancing, restructuring or reorganization of ourobligations, or sale of some or all of the business assets is completed.  No assurances can be given that we will beable to complete a restructuring of our obligations.

 

*Depreciation and amortization expense.*  Depreciation and amortization expense of $6.6million for the year ended December 31, 2009 increased by $0.1 million, or1.0%, from $6.5 million for the year ended December 31, 2008.

 

*Intangible assets impairment charge. *With respect to our indefinite-lived intangible assets, we performedour annual test during the fourth quarter of 2009.  As a result of this analysis, we recognized anon-cash impairment charge of $0.6 million to write-down the Hooters licensingtrademark.  As a result of a decrease inrevenue from food and beverage and the continuing economic conditions, welowered our forecasts of cash flow from food and beverage operations in futureyears, which results in the impairment charge.

 

*Related party royalties expense.*  Beginning on February 3, 2006, weincurred related party royalty fees pursuant to agreements with Hooters GamingCorporation, Lags Ventures, Inc., and Las Vegas Wings, Inc.  These related party royalties expense totaled$1.4 million for the year ended December 31, 2008 as compared to $1.1million for year ended December 31, 2009. The payment of the related partyroyalties is restricted under the Notes indenture.  The fees can only be paid after the close ofthe fiscal year and only if our debt coverage ratio is 1.5 to 1 for that fiscalyear and certain other conditions are met. We can not be in default on our Notes. We have not and will not qualify to pay out related party royaltyexpenses in the foreseeable future.

 

*Income on forfeited deposits and extension fees*.  In June of 2008, we recorded income onforfeited deposits and extension fees of $5.5 million in connection with thetermination of the purchase 

 

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agreement with Hedwigs Las Vegas Top Tier, LLC.

 

*Interest expense.* Interest expense was $13.7 million for the year ended December 31,2009, compared to $13.3 million for the year ended December 31, 2008, anincrease of $0.4 million due to an increase in the debt outstanding on the lineof credit and an increase in the interest rate on the line of credit.

 

*Provision for income taxes.*  155 is a limited-liability company and istreated as a partnership for federal income tax purposes.  Accordingly, a provision for federal incometaxes is not recorded on our consolidated financial statements.  Taxable income or loss will be included inthe income tax returns of the members.

 

***Comparison of Year Ended December 31, 2008 with the Year ended December 31,2007***

 

The current state of the economy has negativelyimpacted our results of operations in 2008 and we expect that impact tocontinue in 2009.  Because we are in thehospitality and recreation business, which is largely dependant ondiscretionary spending, we believe that the weak housing market, increases inunemployment, decreases in air flights to Las Vegas, decreases in the value ofstock and other investments and the general tightening of spending on businesstravel have all affected visitations to Las Vegas and the spending budget ofour customers.

 

Our operating results of the first quarter of 2009indicate to us that there may be further decreases in visitor volumes to LasVegas and in customer spending, including convention participants.  Because of these economic conditions, we havecontinued to focus on managing costs. For 2009 we froze management salaries, are managing staffing levels,will not make matching contributions to the 401K plan and will continue toeliminate other operating expenses where possible.

 

Net loss of $13.3 million was generated for the yearended December 31, 2008 compared to a net loss of $14.1 million for theyear ended 2007.  The $0.8 millionimprovement was due to $5.5 million in income from forfeited deposits andextension fees as described in more detail in the paragraphs below, nettedagainst a non-cash impairment charge to intangible assets of $3.5 million and adecline in net revenue.

 

The operating loss of $5.6 million for the yearended December 31, 2008 increased by $4.6 million from a loss of $1.0million in the same period last year.  Wecharged a $3.5 million write-down of goodwill and other intangible assets tooperations in 2008.  In addition, theremaining decrease in profitability from operations was due to a decline inrevenues of $6.4 million, partially offset by a cost savings of $5.3 million inother operating expenses.

 

Net operating revenues for the year ended December 31,2008 were $60.1 million; a decrease of $6.4 million or 9.6%, from $66.5 millionof net operating revenues for the year ended December 31, 2007 and werelargely as a result of the $3.8 million or 15.5% decline in hotel and otherrevenues.

 

*Casino.*  Casinorevenues were flat at $25.0 million for both years ended December 31, 2008and 2007, in spite of a decline on the Las Vegas Strip of 10.6% in gamingrevenue for the year ended December 31, 2008 according to Gaming RevenueReport issued by the Nevada State Gaming Control Board.  We outperformed the market due to newaggressive slot promotions offered during the year.

 

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Tablegames revenue was $8.9 million for the year ended December 31, 2008, adecrease of $0.7 million, or 7.2%, compared to the table games revenue of $9.6million from the prior year.  Table gamedrop decreased to $51.9 million, or by 9.0%, for the year ended December 31,2008 compared to $57.0 million for the year ended December 31, 2007, whiletable game hold percentage increased from 16.8% in 2007 to 17.1% in 2008.  The table games generated an average win pertable of $932 per day for the year ended 2008 compared to $873 for the yearended 2007. Slot revenue of $15.5 million for the year ended December 31,2008 was an increase of $0.8 million or 5.5% compared to $14.7 million in thesame period in 2007.  The average win permachine per day was $67 for the year ended December 31, 2008 compared to$62 for the same period in 2007.

 

Casino expenses decreased by $0.3 million or 2.1% to$14.6 million for the year ended December 31, 2008 compared to $14.9million for the year ended December 31, 2007.  The decrease was due to controls over payrolland benefits in the table games department that saved $0.7 million in expenses,partially offset by additional casino marketing expense.  The profit margin for casino operationsincreased from 40.5% during the year ended December 31, 2007 to 41.6%during the year ended December 31, 2008.

 

*Food, beverage and entertainment.*  Food, beverage and entertainment revenue was$22.1 million for the year ended December 31, 2008 as compared to $23.3million for December 31, 2007, a decrease of $1.2 million or 5.1%.  The food revenues decreased $0.7 million or5.6% to $12.2 million for the year ending December 31, 2008 compared to$12.9 million for the year ending December 31, 2007. Beverage revenue(which includes complimentary beverages) decreased by $1.0 million or 10.4% to$8.5 million for the year ended December 31, 2008 from $9.5 million duringthe year ended December 31, 2007. Showroom revenue increased $0.6 million in 2008 to $1.4 million ascompared to showroom revenue of $0.8 million in 2007.

 

Food,beverage and entertainment expenses decreased from $17.7 million during theyear ended December 31, 2007 to $14.5 million during the year ended December 31,2008, a decrease of $3.2 million or 18.2%. The cost savings were due to the consolidation of food operations fromthree restaurants to two and the elimination of excess labor in foodpreparation.  The profit margin for food,beverage and entertainment operations increased from 24.0% during the yearended December 31, 2007 to 34.5% during the year ended December 31,2008 due to operational efficiencies in payroll and cost of sales.

 

*Hotel and other.*  Hoteland other revenue (which includes hotel room revenue, retail, spa and othermiscellaneous revenue) decreased by $3.8 million, or 15.5%, to $20.7 millionfor the year ended December 31, 2008 from $24.5 million for the year endedDecember 31, 2007.  Room revenuedecreased $3.0 million or 16.2% to $15.2 million for the year ended December 31,2008 compared to $18.2 million in 2007 due to a drop in average daily room rate(“ADR”). The ADR decreased by 18.5% to $66 for the year ended December 31,2008 compared to $81 for the prior year. This drop in ADR exceeds the Las Vegas average decline in ADR of 9.8% aspublished for 2008 by the Las Vegas Convention and Visitor Authority (“LVCVA”).  Occupancy for the year ended December 31,2008 increased to 91.6% compared to 89.6% for year ended December 31,2007, an increase of 2.0% in the hotel occupancy.  According to the LVCVA, the average occupancyin Las Vegas dropped 4.4% and visitor counts dropped 4.4% in 2008.

 

Salesfrom the retail outlets was $4.4 million in the year ended December 31,2008, a decrease of $0.5 million from the year ended December 31, 2007.

 

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Hotel and other expenses decreased by $1.1 millionor 12.5% from $9.2 million during the year ended December 31, 2007 to $8.1million during the year ended December 31, 2008 due to operationalefficiencies in payroll and departmental expenses. The profit margin for hoteland other was 61.0% for the year ended December 31, 2008 compared to 62.3%for the same period in the prior year.

 

*General and administrative.*  General and administrative expense includescosts associated with  marketing,information technology, and finance, accounting, property operations and in2008, corporate restructuring costs. General and administrative expense decreased $0.9 million or 4.6% to$17.1 million for the year ended December 31, 2008 compared to $18.0million for the year ended December 31, 2007. This decrease wasprincipally due to a $0.3 million decrease in payroll and benefits, $0.1million in insurance, $0.2 million in utilities, $0.2 in advertising expenses,$0.6 million in general expenses, offset by $0.5 million spent for corporaterestructuring consultants.

 

*Depreciation and amortization expense.*  Depreciation and amortization expense of $6.5million for the year ended December 31, 2008 increased by $0.3 million, or4.7%, from $6.2 million for the year ended December 31, 2007.

 

*Intangible assets impairment charge*.  With respect to our goodwill and otherindefinite-lived intangible assets, we performed our annual test during thefourth quarter of 2008.  As a result ofthis analysis, we recognized a non-cash impairment charge of $2.2 million towrite-off the goodwill associated with the acquisition of the San Remo Hotel &Casino in 2004 and a non-cash $1.3 million write-down of the Hooters licensing,trademark.  The impairment chargesresulted from factors impacted by current economic conditions.  We lowered our forecasts of cash flows fromoperations in future years and applied a higher discount rate as a result ofthe turmoil in the credit and equity markets.

 

*Related party royalties expense.*  Beginning on February 3, 2006, weincurred related party royalty fees pursuant to agreements with Hooters GamingCorporation, Lags Ventures, Inc., and Las Vegas Wings, Inc.  These related party royalties expense totaled$1.4 million during both the years ended December 31, 2008 and 2007. Thepayment of the related party royalties is restricted under the Notesindenture.  The fees can only be paidafter the close of the fiscal year and only if our debt coverage ratio is 1.5to 1 for that fiscal year.  The paymentsof the royalty fees are further limited to the sum of 2% of revenue and 3% ofEBITDA as defined in the indenture.

 

*Income on purchase deposit and extension fee*.  In June of 2008, we recorded income onforfeited deposits and extension fees of $5.5 million in connection with thetermination of the purchase agreement (the “Purchase Agreement”) with HedwigsLas Vegas Top Tier, LLC. (“Hedwigs”).

 

*Interest income.* Interest income was $124,000 for the year ended December 31, 2008,compared to $91,000 for the year ended December 31, 2007.

 

*Interest expense.* Interest expense was $13.3 million for the year ended December 31,2008, compared to $13.2 million for the year ended December 31, 2007, anincrease of $0.1 million due to an increase in the debt outstanding on the lineof credit.  .

 

*Provision for income taxes.*  155 is a limited-liability company and istreated as a partnership for federal income tax purposes.  Accordingly, a provision for federal incometaxes is not recorded on our 

 

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consolidatedfinancial statements.  Taxable income orloss will be included in the income tax returns of the members.

 

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

 

For additional discussion ofour liquidity and capital resources, please see “Liquidity and FinancialPosition” discussion presented in the Executive Overview at the beginning ofItem 7, “Management Discussion and Analysis of Financial Condition and Resultsof Operations” and Note 2 to the accompanying consolidated financialstatements.

 

For year ended December 31, 2009, we wereprovided $0.8 million of cash from operating activities.

 

For the year ended December 31, 2009, $2.8million of cash was used for capital expenditures largely as a result of $2.4million in expenditures for the retrofit of the rooms.  We also spent $0.2 million during 2009 fordeposits.

 

For the year ended December 31, 2009, we wereprovided $2.7 million in cash from financing activities. We borrowed $3.4million on our line of credit, offset by $0.7 million in principal payments ondebt.

 

TheNotes indenture contains certain provisions, which restrict or limit ourability to, among other things, incur more debt, pay dividends, redeem stock ormake other distributions, enter into transactions with affiliates or transferor sell assets.

 

Our Credit Facility is a revolving credit facility of $15.0million.  As of December 31, 2009,we had outstanding draws of $14.5 million. An additional $0.5 million of theCredit Facility is not available due to an outstanding letter of credit issued.   Currently, the Credit Facility is fullyextended and we have no additional availability to borrow against the CreditFacility.  All outstanding principal andinterest under the Credit Facility is due and payable on September 30,2011 unless accelerated under the default provisions.  Due to the defaults under the Note indentureand Credit Facility, we have classified the amount due under the CreditFacility and Notes and some equipment purchase debt, totaling $145.1 million,as a current liability at December 31, 2009.

 

At December 31, 2009, we had cash and cashequivalents of approximately $5.4 million. As discussed earlier in the Executive Overview at the beginning of Item 2,“Management Discussion and Analysis of Financial Condition and Results ofOperations” and Note 2 to the accompanying consolidated financial statements,we are in default under both the indenture and the Credit Facility and we haveentered into discussions with the note holders and the Credit Facility lenderto attempt to negotiate forbearance agreements pursuant to which they wouldagree not to exercise, for a specified period of time, their remedies under theindenture or the Credit Facility.  Wecannot assure you that we will be successful in negotiating a forbearance withthe note holders or Credit Facility lender or in undertaking any financial orstrategic alternative transaction in the near term.

 

**ContractualObligations**

 

Thefollowing table summarizes the contractual commitments of 155 East Tropicana,LLC as of December 31, 2009:

 

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| ** **                                   | ** ** | **Payments Due By Year**   | ** ** |
|----------------------------------------------|------------|----------------------------|------------|
| ** **                                   | ** ** | **Total**                  | ** ** | **Less than  1 year** | ** ** | **1-3   years** | ** ** | **4-5   years** | ** ** | **Thereafter** | ** ** |
| ** **                                   | ** ** | **(dollars in thousands)** | ** ** |
| Debt  (1)                                    |       | $                          | 158,680    |   | 158,680 |   | — |   | — |   | — |   |
| Equipment  purchase financing agreements (2) |       | 1,583                      |       | 657 |   | 926 |   | — |   | — |   |
| Operating  contracts (3)                     |       | 3,581                      |       | 3,371 |   | 206 |   | 4 |   | — |   |
| Total                                        |       | $                          | 163,844    |   | $ | 162,708 |   | $ | 1,132 |   | $ | 4 |   | $ | — |   |
|                                              |            |                            |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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(1)   The debtrepresents the $14.5 million in outstanding draws against our Credit Facilityas of December 31, 2009 with an original due date on September 30,2011 and the $130.0 million Notes issued on March 29, 2005 and due in2012.  The company is in default on bothof these facilities and interest of $14.2 million has not been paid on thenotes.  The repayment dates have beenadjusted for potential acceleration under the default provisions of thecontracts.  The debt balance includes$14.2 million in accrued, unpaid interest on the notes.

 

(2)   We entered intovarious equipment purchase agreements in connection with the renovation andrebranding of the Hooters Casino Hotel. During the first quarter of 2009, we entered into an equipment purchaseagreement for $2.0 million in slot system equipment.

 

(3)   Operatingcontracts represent various contracts for services in connection with theoperations of the Hooters Casino Hotel.

 

***Critical Accounting Policies and Estimates***

 

Managementhas identified the following critical accounting policies that affect the moresignificant judgments and estimates used in the preparation of 155 EastTropicana, LLC’s consolidated 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 thefuture.  Changes in these estimates andassumptions may have a material affect on the results of operations andfinancial condition of 155 East Tropicana, LLC.

 

Webelieve that the following critical accounting policies affect significantjudgments and estimates used in the preparation of the consolidated financialstatements:

 

*Cash and Cash Equivalents*.  We consider all highly liquid investmentspurchased with original maturities of three months or less to be cashequivalents.  The carrying amount of cashand equivalents approximates its fair value.

 

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*Accounts Receivable.* Accounts receivable are duewithin one year and are recorded net of amounts estimated to beuncollectible.  We reserve an estimatedamount for receivables to reduce the receivables to their net realizable valuewhich approximate 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.*  Inventoriesare stated at the lower of cost (using the first-in, first-out method) ormarket values.

 

*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 our assets are reviewed when events or changes incircumstances indicate that the carrying amount of the asset may not berecoverable in accordance with Financial Accounting Standards Board, or theFASB Statement No. 144, Accounting for the Impairment or Disposal ofLong-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 has occurred,then an impairment loss is recognized in the consolidated statement ofoperations and the related assets are adjusted to their estimated fair valueless sales costs.

 

*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) thevalue of intellectual property related to the Hooters brand contributed to uspursuant to an assignment agreement with Florida Hooters LLC, (2) thevalue of the slot club customer list acquired from Eastern & Western,and (3) the excess of the purchase price over the fair market value of theHôtel San Rémo assets acquired, or Goodwill.

 

InJune 2001, the FASB issued Statement of Financial Accounting Standards No. 142,*Goodwill and Other Intangible Assets*, orSFAS No. 142. We evaluate the amortization periods and possible impairmentof its intangible assets in accordance with SFAS No. 142 on an annualbasis.  The intellectual property relatedto the Hooters brand contributed to us and the Goodwill are intangible assetsnot subject to amortization.  The slot customerlist is being amortized using the straight line method over five years.

 

Weperform our annual impairment test for goodwill and indefinite-lived intangibleassets in the fourth quarter of each year. Goodwill was tested for impairment using a discounted cash flow analysisbased on our forecasted future results discounted for cost of capital in 2008and as a result was written-off in 2008. The impairment of the Company’s Hooter’s license trademark is tested forimpairment using the relief-from-royalty method.

 

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Thereare several estimates inherent in evaluating these assets for impairment.  In particular, future cash flow estimatesare, by their nature, subjective and actual results may differ materially fromour estimates.  In addition, thedetermination of capitalization rates and discount rates used in the goodwillimpairment test are highly judgmental and dependent in large part onexpectations of future market conditions.

 

SeeIntangible Assets in Note 3 of the consolidated financial statements fordiscussion of impairment of goodwill and Hooter’s license trademark recorded in2008 and 2009.

 

*Jackpots and Prizes.* We have progressive slotmachines.  As coins are played, theamount available to win increases and will be paid out when the jackpot isawarded.  In accordance with industrypractice, we record the liability and expense related to such progressives asincurred.

 

*Casino Revenues and Promotional Allowances.*  In accordance with industry practice, werecognize as casino revenue the net win from gaming activities, which is thedifference between gaming wins and losses. The retail value of rooms, food, and beverage furnished to customerswithout charge is included in gross revenues and then deducted as promotionalallowances.

 

*Player Club Points.*  Prior to March 31, 2009, our slot cluballowed customers to earn cash back. Currently our slot club allows customers to earn certain complimentaryproducts, based on the volume of the customer’s gaming activity.  Prior to March 31, 2009, we recorded aliability for the estimated cost of cash back earned by customers and notredeemed. Currently, at the time redeemed, the retail value of complimentariesunder the program is recorded as revenue with a corresponding offsetting amountincluded in promotional allowances.  Thecost associated with complimentary food, beverage, rooms and entertainmentredeemed under the program is recorded in casino costs and expenses.  Play Club points redeemed for cash were alsorecorded as a promotional allowance.

 

*Advertising.*  Prepaidadvertising costs are expensed the first time the advertising takes place.  Advertising costs are included in general andadministrative expenses.

 

*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 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 income taxes has been recorded in theaccompanying consolidated financial statements since the taxable income or lossis included in the income tax return of the members.

 

*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.

 

*Reclassifications.*  Certain reclassifications, having no effecton net loss, have been made to the previously issued consolidated financialstatements to conform to the current period’s presentation of the Company’sfinancial statements.

 

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*RecentlyIssued Accounting Pronouncements.* In June 2009, theFinancial Accounting Standards Boards (“FASB”) issued Accounting StandardsUpdate No. 2009-01, “Generally Accepted Accounting Principles” (ASC Topic105), which establishes the FASB Accounting Standards Codification (“Codification”or “ASC”) as the single source of authoritative nongovernmental U.S. generallyaccepted accounting principles (“GAAP”). Effective for financial statementsissued for interim and annual periods ending after September 15, 2009, theCodification does not change current U.S. GAAP, but is intended to simplifyuser access to all authoritative U.S. GAAP by providing all the authoritativeliterature related to a particular topic in one place. All existing accountingstandard documents are superseded and all other accounting literature notincluded in the Codification will be considered non-authoritative. TheCodification also includes most, but not necessarily all, relevant Securitiesand Exchange Commission (“SEC”) guidance organized using the same topicalstructure in separate sections within the Codification.

 

TheCompany adopted the Codification, effective July 1, 2009, which requiresreferences to authoritative U.S. GAAP to refer to the appropriate section ofthe Codification. The adoption of the Codification does not have an impact onthe Company’s financial position, results of operations or cash flows. In orderto ease the transition to the Codification, Codification cross-references areprovided alongside the references to the Standards issued and adopted prior tothe adoption of the Codification.

 

In August 2009,the FASB issued Accounting Standards Update (“ASU”) No. 2009-05, whichamends Fair Value Measurements and Disclosures — Overall (ASC Topic 820-10) toprovide guidance on the fair value measurement of liabilities. This update,among other matters, provides guidance on how to measure fair value incircumstances in which a quoted price in an active market for the identicalliability is not available. This update is effective beginning in the fourthquarter of 2009.

 

In June 2009, the FASB issued (“SFAS”) No. 167,“Amendments to FASB Interpretation No. 46(R)” (ASC Topic 810). Theguidance is intended to improve financial reporting by providing additionalguidance to companies involved with variable interest entities and by requiringadditional disclosures about a company’s involvement in variable interestentities. This guidance is effective for interim and annual periods endingafter November 15, 2009.  TheCompany does not expect the adoption of SFAS 167 to have a material impact onits consolidated financial statements.

 

InJune 2009, the FASB issued SFAS No. 166, “Accounting for Transfers ofFinancial Assets” (ASC Topic 860) which will require more information abouttransfers of financial assets and where companies have continuing exposure tothe risk related to transferred financial assets. It eliminates the concept ofa qualifying special purpose entity, changes the requirements for derecognizingfinancial assets, and requires additional disclosure. This standard iseffective for interim and annual periods ending after November 15, 2009.The Company does not expect the adoption of SFAS 166 to have a material impacton its consolidated financial statements.

 

Avariety of proposed or otherwise potential accounting standards are currentlyunder study by standard-setting organizations and certain regulatory agencies.Because of the tentative and preliminary nature of such proposed standards, wehave not yet determined the effect, if any, that the implementation of suchproposed standards would have on our consolidated financial statements.

 

**ITEM 7A**.       **Quantitative and Qualitative Disclosures About Market Risk**.

 

Thefollowing discusses our exposure to market risk related to changes in interestrates, equity prices and foreign currency exchange rates.  We do not believe that their respectiveexposure to market risk is material.

 

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Marketrisk is risk of loss arising from changes in market rates and prices, such asinterest rates, foreign currency exchange rates and commodity prices.  At December 31, 2009, we had$130,000,000 aggregate principal amount of the Notes, slot equipment purchaseagreements of $1.5 million carrying an interest rate of 7.0%  The Notes carry a fixed interest rate of 8.75%.  Since the Notes and equipmentpurchase agreements have fixed interest rates, there is no market riskassociated with these loans other than fair value market risk, which we believeto be insignificant.  We have market riskassociated with funds that may be borrowed on our $15.0 million CreditFacility, due to an interest rate that floats with the prime rate.  The term of our Credit Facilitywill mature on September 30,2011 unless there is acceleration under the default provisions.  At December 31, 2009, $14.5 million wasoutstanding under the variable rate Credit Facility, carrying interest at7.25%.  Assuming a 100 basis-point changein prime at December 31, 2009, and assuming no change in the fundsborrowed on the $15.0 million Credit Facility, our annual interest cost wouldchange by approximately $145,000.  Wereceived a Notice of Default and Reservation of Rights letter (the “DefaultLetter”) from the lenders under the Credit Facility that states that events ofdefault exist and that as a result of such defaults the applicable interestrate was increased to the default rate, which equals the Wells Fargo prime rateplus four percentage points.  At December 31,2009, the default rate based on prime rate was 7.25%.

 

**We do not have any significantforeign currency exchange rate risk or commodity price risk and do notcurrently trade any market sensitive instruments.**

 

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## **ITEM 8.**                             FINANCIAL STATEMENTS ANDSUPPLEMENTARY DATA.

## ** **

**INDEX TO FINANCIAL STATEMENTS**

** **

Thefollowing consolidated financial statements of 155 East Tropicana, LLC are presentedherein on the pages indicated:

 

**155EAST TROPICANA, LLC**

 
| **AUDITED  CONSOLIDATED FINANCIAL STATEMENTS:**          |   |
|----------------------------------------------------------|--------|
| Report of Independent  Registered Public Accounting Firm | 48     |
| Consolidated Balance  Sheets                             | 49     |
| Consolidated  Statements of Operations                   | 50     |
| Consolidated  Statements of Members’ Equity         | 51     |
| Consolidated  Statements of Cash Flows                   | 52     |
| Notes to  Consolidated Financial Statements              | 54     |

 

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**Report of Independent RegisteredPublic Accounting Firm**

 

Tothe Members of 155 East Tropicana, LLC:

 

Wehave audited the accompanying consolidated balance sheets of 155 EastTropicana, LLC and its subsidiary (the “Company”) as of December 31, 2009and 2008, and the related consolidated statements of operations, members’equity (deficit), and cash flows for each of the three years in the periodended December 31, 2009. These financial statements are theresponsibility of the Company’s management.  Our responsibility is toexpress an opinion on these financial statements based on our audits.

 

Weconducted our audits in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that weplan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. We are not engaged toperform an audit of the Company’s internal control over financialreporting.  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 Company’sinternal control over financial reporting. Accordingly, we express no such opinion. 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.

 

Inour opinion, the financial statements referred to above present fairly, inall material respects, the consolidated financial position of the Company andits subsidiary at December 31, 2009 and 2008, and the consolidated resultsof their operations and their cash flows for each of the three years in theperiod ended December 31, 2009, in conformity with U.S. generally acceptedaccounting principles.

 

Theaccompanying financial statements have been prepared assuming that the Companywill continue as a going concern. As more fully described in Note 2, theCompany has incurred recurring operating losses, has a working capitaldeficiency and has an accumulated deficit. In addition, on April 7, 2009, the Company received a Notice ofDefault and Reservation of Rights Letter in connection with the Company’scredit facility.  The Company has beenunable to meet 2009 payment obligations under certain debt agreements andanticipates they will be unable to meet 2010 payment obligations under certaindebt agreements, which, absent forbearance or waiver from the creditors, willresult in additional  events ofdefault.  These conditions raisesubstantial doubt about the Company’s ability to continue as a going concern.Management’s plans in regard to these matters also are described in Note2.  The 2009 financial statements do not include any adjustments toreflect the possible future effects on the recoverability and classification ofassets or the amounts and classification of liabilities that may result fromthe outcome of this uncertainty.

 

 

/s/ Ernst & YoungLLP

 

LasVegas, Nevada

March 31,2010

 

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

 

### **CONSOLIDATEDBALANCE SHEETS**

 
| ** **                                                                                                           | ** ** | **December 31,** | ** **  | **December 31,** | ** ** |
|----------------------------------------------------------------------------------------------------------------------|------------|-----------------------|-------------|-----------------------|------------|
| ** **                                                                                                           | ** ** | **2009**              | ** **  | **2008**              | ** ** |
| **Assets**                                                                                                           | ** ** | ** **            |        |                  |       |
| Current  assets:                                                                                                     |       |                  |        |                  |       |
| Cash  and cash equivalents                                                                                           |       | $                     | 5,382,524   |                  | $          | 4,980,299 |   |
| Accounts  receivable, net of allowance for doubtful accounts of $80,681 and $199,872 in  2009 and 2008, respectively |       | 572,016               |        | 662,683               |       |
| Inventories                                                                                                          |       | 857,161               |        | 839,643               |       |
| Prepaid  expenses                                                                                                    |       | 1,141,389             |        | 1,409,819             |       |
| Total  current assets                                                                                                |       | 7,953,090             |        | 7,892,444             |       |
| Property  and equipment, net                                                                                         |       | 109,468,531           |        | 111,254,020           |       |
| Other  long-term assets:                                                                                             |       |                  |        |                  |       |
| Deferred  financing costs                                                                                            |       | 2,614,971             |        | 3,801,924             |       |
| Intangible  assets                                                                                                   |       | 2,343,258             |        | 2,995,168             |       |
| Other  assets                                                                                                        |       | 722,456               |        | 483,695               |       |
| Total  other long-term assets                                                                                        |       | 5,680,685             |        | 7,280,787             |       |
| Total  assets                                                                                                        |       | $                     | 123,102,306 |                  | $          | 126,427,251 |   |
|                                                                                                                 |       |                  |        |                  |       |
| **Liabilities and Members’ Equity**                                                                             | ** ** | ** **            | ** **  | ** **            | ** ** |
| Current  liabilities:                                                                                                |       |                  |        |                  |       |
| Accounts  payable                                                                                                    |       | $                     | 1,590,036   |                  | $          | 2,794,378 |   |
| Accrued  interest payable                                                                                            |       | 14,311,346            |        | 2,843,750             |       |
| Accrued  liabilities                                                                                                 |       | 968,903               |        | 1,475,062             |       |
| Current  portion of long-term debt                                                                                   |       | 145,137,293           |        | 141,362,004           |       |
| Total  current liabilities                                                                                           |       | 162,007,578           |        | 148,475,194           |       |
| Related  party royalties payable                                                                                     |       | 5,272,584             |        | 4,210,567             |       |
| Long-term  debt                                                                                                      |       | 925,913               |        | —                |       |
| Total  liabilities                                                                                                   |       | 168,206,075           |        | 152,685,761           |       |
|                                                                                                                 |       |                  |        |                  |       |
| Commitments  and contingencies                                                                                       |       |                  |        |                  |       |
|                                                                                                                 |       |                  |        |                  |       |
| Members’  (deficit) equity:                                                                                     |       |                  |        |                  |       |
| Membership  interests                                                                                                |       | 34,333,375            |        | 34,333,375            |       |
| Accumulated  deficit                                                                                                 |       | (79,437,144           | )           | (60,591,885           | )          |
|                                                                                                                 |       | (45,103,769           | )           | (26,258,510           | )          |
| Total  liabilities and members’ deficit                                                                         |       | $                     | 123,102,306 |                  | $          | 126,427,251 |   |

 

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

 

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

 

### **CONSOLIDATEDSTATEMENTS OF OPERATIONS**

 
| ** **                                                         | ** ** | **Year Ended December 31,** | ** **  | **Year Ended December 31,** | ** ** | **Year Ended December 31,** | ** ** |
|--------------------------------------------------------------------|------------|----------------------------------|-------------|----------------------------------|------------|----------------------------------|------------|
| ** **                                                         | ** ** | **2009**                         | ** **  | **2008**                         | ** ** | **2007**                         | ** ** |
|                                                               |       |                             |        |                             | ** ** | ** **                       | ** ** |
| Operating  revenues:                                               |       |                             |        |                             |       |                             |       |
| Casino                                                             |       | $                                | 18,089,346  |                             | $          | 24,950,887                       |       | $ | 24,993,443 |   |
| Food,  beverage and entertainment                                  |       | 18,680,330                       |        | 22,136,579                       |       | 23,318,248                       |       |
| Hotel  and other                                                   |       | 15,048,351                       |        | 20,685,695                       |       | 24,483,805                       |       |
|                                                               |       | 51,818,027                       |        | 67,773,161                       |       | 72,795,496                       |       |
| Less  promotional allowances                                       |       | (5,008,971                       | )           | (7,678,360                       | )          | (6,315,609                       | )          |
| Net  operating revenues                                            |       | 46,809,056                       |        | 60,094,801                       |       | 66,479,887                       |       |
|                                                               |       |                             |        |                             |       |                             |       |
| Operating  expenses:                                               |       |                             |        |                             |       |                             |       |
| Casino                                                             |       | 10,991,269                       |        | 14,572,098                       |       | 14,882,800                       |       |
| Food,  beverage and entertainment                                  |       | 11,399,733                       |        | 14,501,343                       |       | 17,721,954                       |       |
| Hotel  and other                                                   |       | 6,757,923                        |        | 8,065,765                        |       | 9,222,140                        |       |
| General  and administrative                                        |       | 12,925,461                       |        | 16,624,001                       |       | 17,977,767                       |       |
| Restructuring  expense                                             |       | 1,646,804                        |        | 518,893                          |       | —                           |       |
| Depreciation  and amortization                                     |       | 6,612,073                        |        | 6,543,518                        |       | 6,249,991                        |       |
| Intangible  assets impairment charge                               |       | 600,000                          |        | 3,458,131                        |       | —                           |       |
| Related  party royalties expense                                   |       | 1,062,017                        |        | 1,361,772                        |       | 1,386,914                        |       |
| Total  operating expenses                                          |       | 51,995,280                       |        | 65,645,521                       |       | 67,441,566                       |       |
| Operating  loss                                                    |       | (5,186,224                       | )           | (5,550,720                       | )          | (961,679                         | )          |
|                                                               |       |                             |        |                             |       |                             |       |
| Other  income (expense):                                           |       |                             |        |                             |       |                             |       |
| Interest  expense                                                  |       | (13,660,428                      | )           | (13,324,441                      | )          | (13,248,133                      | )          |
| Interest  income                                                   |       | 1,393                            |        | 123,983                          |       | 90,953                           |       |
| Forfeited  purchase deposit and extension fee                      |       | —                           |        | 5,500,000                        |       | —                           |       |
| Other  income (expense), net                                       |       | (13,659,035                      | )           | (7,700,458                       | )          | (13,157,180                      | )          |
| Net  loss                                                          |       | $                                | (18,845,259 | )                                | $          | (13,251,178                      | )          | $ | (14,118,859 | ) |
|                                                               |       |                             |        |                             |       |                             |       |
| Income  (loss) allocable to preferred and common member interests: |       |                             |        |                             |       |                             |       |
| Income  allocable to preferred interest EW Common, LLC             |       | $                                | 1,000,000   |                             | $          | 1,000,000                        |       | $ | 1,000,000 |   |
|                                                               |       |                             |        |                             |       |                             |       |
| Loss  allocable to common member interests                         |       | (19,845,259                      | )           | (14,251,178                      | )          | (15,118,859                      | )          |
| Net  loss                                                          |       | $                                | (18,845,259 | )                                | $          | (13,251,178                      | )          | $ | (14,118,859 | ) |

 

*The accompanying notes are an integral part of theseconsolidated financial**statements*****

 

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

 

### **CONSOLIDATEDSTATEMENTS OF MEMBERS’ (DEFICIT) EQUITY**

** **
| ** **                                             | ** ** | **Florida Hooters********LLC** | ** **  | **EW Common********LLC** | ** ** | **Total**   | ** ** |
|--------------------------------------------------------|------------|--------------------------------|-------------|--------------------------|------------|-------------|------------|
| ** **                                             | ** ** | ** **                     | ** **  | ** **               | ** ** | ** **  | ** ** |
| Balance  at December 31, 2006                     |       | (12,814,523                    | )           | 13,926,050               |       | 1,111,527   |       |
|                                                   |       |                           |        |                     |       |        |       |
| Net  loss during the year ended December 31, 2007 |       | (9,412,573                     | )           | (4,706,286               | )          | (14,118,859 | )          |
|                                                   |       |                           |        |                     |       |        |       |
| Balance  at December 31, 2007                     |       | (22,227,096                    | )           | 9,219,764                |       | (13,007,332 | )          |
|                                                   |       |                           |        |                     |       |        |       |
| Net  loss during the year ended December 31, 2008 |       | (8,834,163                     | )           | (4,417,015               | )          | (13,251,178 | )          |
|                                                   |       |                           |        |                     |       |        |       |
| Balance  at December 31, 2008                     |       | (31,061,259                    | )           | 4,802,749                |       | (26,258,510 | )          |
|                                                   |       |                           |        |                     |       |        |       |
| Net  loss during the year ended December 31, 2009 |       | (12,563,507                    | )           | (6,281,752               | )          | (18,845,259 | )          |
|                                                   |       |                           |        |                     |       |        |       |
| Balance  at December 31, 2009                     |       | $                              | (43,624,766 | )                        | $          | (1,479,003  | )          | $ | (45,103,769 | ) |
|                                                        |            |                                |             |                          |            |             |            |  |  |  |

 

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

 

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

 

### **CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

 
| ** **                                                                       | ** ** | **Year Ended********December 31,********2009** | ** **  | **Year Ended********December 31,********2008** | ** ** | **Year Ended********December 31,********2007** | ** ** |
|----------------------------------------------------------------------------------|------------|-----------------------------------------------------|-------------|-----------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                                       | ** ** | ** **                                          | ** **  | ** **                                          | ** ** | ** **                                          | ** ** |
| **Cash  Flow From Operating Activities**                                         | ** ** | ** **                                          |        |                                                |       |                                                |       |
| Net loss                                                                         |       | $                                                   | (18,845,259 | )                                                   | $          | (13,251,178                                         | )          | $ | (14,118,859 | ) |
| Adjustments to  reconcile net loss to net cash provided by operating activities: |       |                                                |        |                                                |       |                                                |       |
| Depreciation and  amortization                                                   |       | 6,612,073                                           |        | 6,543,518                                           |       | 6,249,991                                           |       |
| Amortization of debt  issuance costs                                             |       | 1,186,953                                           |        | 1,169,237                                           |       | 1,395,464                                           |       |
| Amortization of  intangible asset                                                |       | 51,910                                              |        | 51,910                                              |       | 51,910                                              |       |
| Intangible assets  impairment charge                                             |       | 600,000                                             |        | 3,458,131                                           |       | —                                              |       |
| Changes in assets and  liabilities:                                              |       |                                                |        |                                                |       |                                                |       |
| Accounts receivable                                                              |       | 90,667                                              |        | 1,217,771                                           |       | (270,698                                            | )          |
| Inventories                                                                      |       | (17,519                                             | )           | 91,386                                              |       | (84,378                                             | )          |
| Prepaid expenses                                                                 |       | 268,430                                             |        | 166,537                                             |       | (6,376                                              | )          |
| Accounts payable                                                                 |       | (1,204,343                                          | )           | (179,855                                            | )          | 5,169                                               |       |
| Accrued interest  payable                                                        |       | 11,467,596                                          |        | —                                              |       | —                                              |       |
| Accrued liabilities                                                              |       | (506,159                                            | )           | 75,132                                              |       | (866,810                                            | )          |
| Related party royalties  payable                                                 |       | 1,062,017                                           |        | 1,361,771                                           |       | 1,386,915                                           |       |
| Net cash provided by  (used in) operating activities                             |       | 766,366                                             |        | 704,360                                             |       | (6,257,672                                          | )          |
|                                                                             |       |                                                |        |                                                |       |                                                |       |
| **Cash  Flow From Investing Activities**                                         | ** ** | ** **                                          |        |                                                |       |                                                |       |
| Capital expenditures                                                             |       | (2,795,822                                          | )           | (713,026                                            | )          | (886,100                                            | )          |
| (Increase) decrease in  other assets                                             |       | (238,760                                            | )           | (147,674                                            | )          | 7,251                                               |       |
| Net cash used in  investing activities                                           |       | $                                                   | (3,034,582  | )                                                   | $          | (860,700                                            | )          | $ | (878,849 | ) |

 

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

 

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

 

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

 
| ** **                                             | ** ** | **Year Ended********December 31,********2009** | ** ** | **Year Ended********December 31,********2008** | ** ** | **Year Ended********December 31,********2007** | ** ** |
|--------------------------------------------------------|------------|-----------------------------------------------------|------------|-----------------------------------------------------|------------|-----------------------------------------------------|------------|
|                                                   |       |                                                | ** ** | ** **                                          | ** ** | ** **                                          | ** ** |
| **Cash  Flow From Financing Activities**               | ** ** | ** **                                          |       |                                                |       |                                                |       |
| Proceeds from issuance  of debt                        |       | 3,400,117                                           |       | 4,824,212                                           |       | 5,342,955                                           |       |
| Principal payments on  equipment purchase agreements   |       | (729,676                                            | )          | (2,049,565                                          | )          | (2,008,635                                          | )          |
| Redemption of purchase  deposits and extension fees    |       | —                                              |       | (5,500,000                                          | )          | —                                              |       |
| Proceeds from purchase  deposit and extension payments |       | —                                              |       | 2,000,000                                           |       | 3,500,000                                           |       |
| Net cash provided by  (used in) financing activities   |       | 2,670,441                                           |       | (725,353                                            | )          | 6,834,320                                           |       |
|                                                   |       |                                                |       |                                                |       |                                                |       |
| Increase (decrease) in  cash and cash equivalents      |       | 402,225                                             |       | (881,692                                            | )          | (302,201                                            | )          |
| Cash and cash  equivalents, beginning of period        |       | 4,980,299                                           |       | 5,861,991                                           |       | 6,164,192                                           |       |
| Cash and cash  equivalents, end of period              |       | $                                                   | 5,382,524  |                                                | $          | 4,980,299                                           |       | $ | 5,861,991 |   |
|                                                   |       |                                                |       |                                                |       |                                                |       |
| **Supplemental  disclosure of cash flow information**  | ** ** | ** **                                          |       |                                                |       |                                                |       |
| Cash paid for interest                                 |       | $                                                   | 1,098,471  |                                                | $          | 12,155,204                                          |       | $ | 11,852,669 |   |
|                                                   |       |                                                |       |                                                |       |                                                |       |
| Assets acquired through  equipment purchase agreements |       | $                                                   | 2,030,761  |                                                | $          | —                                              |       | $ | 312,619 |   |

 

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

 

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

 

### **NOTES TOCONSOLIDATED FINANCIAL STATEMENTS**

### ** **

**December 31, 2009**

 

**1.  Organizationaland Basis of Presentation**

 

155 East Tropicana, LLC, aNevada limited-liability company (the “Company”) was incorporated on June 17,2004 to acquire the real and personal property of the Hôtel San Rémo Casino andResort (the “Hôtel San Rémo”) in Las Vegas, Nevada with the intention ofrenovating the existing casino and hotel facility with a “Hooters”entertainment concept and theme.  Therenovations were completed and the Hôtel San Rémo property was reopened as thenew Hooters Casino Hotel on February 3, 2006.  The Company’s business is concentrated at theone 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 10. The payment of this priority return is subject to meeting certainfinancial covenants associated with the Company’s debt.

 

Florida Hooters LLC is ajoint venture between Hooters Gaming LLC and Lags Ventures, LLC.  Hooters Gaming LLC is owned by the holders oflicenses 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 41 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 of LagsVentures, LLC is also the founder of the Dan Marino concept restaurants andowns and operates 1 Dan Marino concept restaurant.

 

EW Common LLC is owned 90%by Eastern & Western Hotel Corporation (“Eastern & Western”)and 10% by the president of the Company. Eastern & Western and its affiliates owned the real propertyand non-gaming assets of Hôtel San Rémo from November 1988 until theCompany’s acquisition of the Hôtel San Rémo in August 2004.

 

Florida Hooters LLC and EWCommon LLC entered into a joint venture agreement for the purpose of formingthe Company and documenting the terms of their investments and businessventure.

 

The Hooters Casino Hotelfeatures a casino floor with 615 slot and video poker machines, 24 table games,696 hotel rooms including 17 suites, a tropical pool area, retail outlets, anddining and

 

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

 

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

### ** **

**1.  Organizational andBasis of Presentation (continued)**

 

entertainment options whichinclude a Hooters restaurant, and Mad Onion restaurant, (formerly Dan Marino’srestaurant) a sports bar, and several bars and Night Owl Showroom.

 

Significant intercompanytransactions between the Company and its wholly owned subsidiary have beeneliminated in consolidation.

 

In preparing these financial statements, the Companyhad evaluated events and transactions for potential recognition or disclosurethrough March 31, 2010, the date the financial statements were issued.

 

**2.  Liquidity and Financial Position**

 

The Company has significant indebtedness andfinancial commitments in 2009.  As of December 31,2009, the Company has $160.3 million in total debt and unpaid interest.  Currently, the Senior Secured CreditFacility, (“Credit Facility”), is fully extended and the Company has noadditional availability to borrow against the Credit Facility.  The Company does not believe it will be ableto generate sufficient cash flows from operations to fund its financialcommitments over the next year and cannot provide any assurances that it willbe able to raise additional capital.

 

Based on anticipated future operations, the Companydoes not believe that cash on hand at December 31, 2009 of $5.4 millionand expected cash flows in 2010 will be adequate to meet the total financialobligations which include (1) anticipated operational expenses, (2) debtservice on equipment leases and the Credit Facility, (3) capital expensesand (4) scheduled payments of interest on the Notes.  The Company was unable to make the interestpayment on the Notes due April 1, 2009 and October 1, 2009 and doesnot expect to make the payment due April 1, 2010 or October 1, 2010.Currently, our other obligations are being paid in the normal course ofbusiness.  Due to the Company’s inabilityto make the interest payments, an event of default occurred under the indenturegoverning the Notes.  As a result, thenote holders could exercise certain remedies provided under the indenture.   The Company has received Notice of Defaultand Reservation of Rights letters (the “Default Letters”) from the lendersunder the Credit Facility.  The DefaultLetters state that (i) an event of default exists under the CreditFacility as a result of the Company’s failure to obtain control agreements forone or more deposit accounts established and maintained by the Company and as aresult of failure to pay interest on the Notes, (ii) as a result of theevent of default, the lenders are under no further obligation to extend furthercredit under the Credit Facility, (iii) the lenders will continue toevaluate their response to the event of default, and (iv) the Company nolonger has an option of paying the LIBOR interest rate, but must pay the WellsFargo prime rate  plus the default rate,which is equal to four percentage points above prime rate.  The lenders have not elected to acceleratethe indebtedness under the Credit Facility. The Company has entered into discussions with the note holders and theCredit Facility lenders to attempt to negotiate

 

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

 

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

### ** **

**2. Liquidity and FinancialPosition (continued)**

 

forbearanceagreements pursuant to which they would agree not to exercise, for a specifiedperiod of time, their remedies under the indenture or the Credit Facility.  The Company has engaged a financial advisorto assist with its evaluation of financial and strategic alternatives, whichmay include a recapitalization, refinancing, restructuring or reorganization ofits obligations or a sale of some or all of its business.  The Company and its advisors are activelyworking toward such a transaction.  TheCompany cannot be assured that it will be successful in negotiating forbearancewith the note holders or Credit Facility lender or in undertaking any suchalternative transaction in the near term.

 

Ifthe Company is not successful in obtaining a forbearance or entering into atransaction to address its liquidity and capital structure, the note holdershave the ability to accelerate repayment of all amounts outstanding under theindenture ($144.2 million at December 31, 2009) and the Credit Facilitylenders have the ability to accelerate repayment of all amounts outstandingunder the Credit Facility ($14.5 million at December 31, 2009, plus anirrevocable letter of credit for $0.5 million at December 31, 2009).  If either the Notes indebtedness or theCredit Facility indebtedness were to be accelerated, the Company would berequired to refinance or restructure the payments on that debt.  The Company cannot be assured that it will besuccessful in completing a refinancing or restructuring.  If the Company is unable to do so, it maydetermine to seek protection under Chapter 11 of the U.S. Bankruptcy Code.

 

The conditions and events described above raise asubstantial doubt about the Company’s ability to continue as a goingconcern.  The Company has classified mostof its debt at December 31, 2009, and all debt at December 31, 2008,as a current liability on the balance sheet. The accompanying condensed consolidated financial statements do notinclude all adjustments to reflect the possible future effects on therecoverability and classification of assets or the amounts and classificationsof liabilities that may result should the Company be unable to continue as agoing concern.

 

**3.  Summary ofSignificant 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.

 

*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 netrealizable value 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 $140,000, $394,800 and$160,880 for the years ended December 31, 2009, 2008 and 2007respectively.

 

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

 

### **NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)**

### ** **

**3.****             ****Summaryof Significant Accounting Principles (continued)**

 

*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.

 

Depreciation is provided ona straight-line basis over the estimated useful life of the assets.  The service lives of assets are generally 30to 40 years for buildings and 3 to 10 years for furniture and equipment.

 

The carrying values of theCompany’s assets are reviewed when events or changes in circumstances indicatethat the carrying amount of the asset may not be recoverable in accordance with*Financial Accounting Standards Board (FASB)Statement No. 144, Accounting for the Impairment or Disposal of Long-livedAssets*.  Under SFAS No. 144,an asset impairment is determined to exist when events or changes incircumstances indicate that the carrying amount of an asset may not berecoverable and if estimated future cash flows, undiscounted and withoutinterest 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.  During the fourthquarter of 2009, the Company reviewed the carrying values of the Company’sassets and determined that no impairment of the long-lived assets had occurred

 

*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) thevalue of the slot club customer list acquired from Eastern & Western,and (3) the excess of the purchase price over the fair market value of theassets acquired (“Goodwill”).  Theintellectual property related to the Hooters brand contributed to the Companyand the Goodwill are intangible assets not subject to amortization.  The slot customer list is being amortizedusing the straight line method over five years.

 

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

 

### **NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)**

### ** **

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

 

In accordance with SFAS 142, “Goodwill and OtherIntangible Assets”, we test for impairment of goodwill and indefinite-livedintangible assets annually. For the years ending December 31, 2008 and2007, we utilized the income approach for goodwill, which focuses on theincome-producing capability of the respective property during the fourthquarter of each fiscal year. The underlying premise of this approach is thatthe value of an asset can be measured by the present worth of the net economicbenefit (cash receipts less cash outlays) to be received over the life of thesubject asset. The steps followed in applying this approach include estimatingthe expected after-tax cash flows attributable to the property and convertingthese after-tax cash flows to present value through discounting. Thediscounting process uses a rate of return, which accounts for both the time valueof money and investment risk factors. The present value of the after-tax cashflows is the totaled to arrive at an indication of the fair value of theassets. If the fair value of the assets exceeds the carrying value, theimpairment is measured based on the difference between the calculated fairvalue and the carrying value. We determined that there was no impairment during2007.** **Wedetermined there was impairment during 2008 and recorded an impairment chargeof $2.2 million in the fourth quarter of 2008. This resulted in the write-off of the goodwill as of December 31,2008.  **(**SeeNote 5)

 

The impairment of the Company’s Hooter’s licensetrademark is tested for annual impairment using the relief-from-royaltymethod.  We determined that there was noimpairment during 2007.  We determinedthere was impairment during 2009 and 2008 and recorded an impairment charge of$0.6 million and $1.3 million in the fourth quarter for each year,respectively.  (See Note 5)

 

*Jackpots and Prizes.* The Companyhas progressive slot machines.  As coinsare played, the amount available to win increases and will be paid out when thejackpot is awarded.  In accordance withindustry practice, the Company records the liability and expense related tosuch progressives as incurred.

 

*Casino Revenues and PromotionalAllowances*.  Inaccordance with industry practice, the Company recognizes as casino revenue thenet win from gaming activities, which is the difference between gaming wins andlosses.  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 departmentalcost of providing such promotional allowances is included in casino costs andexpenses and consists of the following for the years ended December 31,2009, 2008 and 2007 (dollars in thousands):

 
| ** **        | ** ** | **2009** | ** ** | **2008** | ** ** | **2007** | ** ** |
|-------------------|------------|----------|------------|----------|------------|----------|------------|
| Food and Beverage |       | $        | 925        |     | $          | 1,144    |       | $ | 1,028 |   |
| Hotel and other   |       | 403      |       | 725      |       | 428      |       |
|              |       | $        | 1,328      |     | $          | 1,869    |       | $ | 1,456 |   |

 

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

 

### **NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)**

### ** **

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

 

*Player Club Points.*  The Company’s slot club program allowscustomers to redeem points earned from their gaming activity for complimentaryfood, beverage, rooms, and entertainment. Prior to March 31, 2009, the Company allowed points earned in theslot club program to be redeemed as cash. At the time redeemed, the retail value of complimentaries under theprogram is recorded as revenue with a corresponding offsetting amount includedin promotional allowances.  The costassociated with complimentary food, beverage, rooms, and entertainment redeemedunder the program is recorded in casino operating expenses.

 

The Company has recorded thevalue of points earned and redeemed for cash rebates as promotionalallowances.  Such amounts totaled$65,633, $349,344 and $535,905 for the years ended December 31, 2009, 2008and 2007 respectively.

 

*Advertising.*  Prepaid advertising costs are expensed thefirst time the advertising takes place. Prepaid advertising included in prepaidexpenses was $163,931 and $143,590 at December 31, 2009, and 2008respectively.  Advertising costs includedin general and administrative expenses were $2,507,126, $4,214,084 and$4,379,402 for the years ended December 31, 2009, 2008, and 2007,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.  There was no capitalizedinterest for the years ended December 31, 2009, 2008, or 2007.

 

*Income Taxes.*  The Company is a limited-liability companyand is taxed as a partnership for federal income tax purposes. Accordingly, noprovision for federal income taxes has been recorded in the accompanyingconsolidated financial statements since the taxable income or loss is includedin the income tax return of the members. As the Company is not liable for federal income tax, the Company hasrecorded no liability associated with uncertain tax positions. The Companyfiles income tax returns in the US federal jurisdiction. The statute oflimitation for Internal Revenue Service (“IRS”) examination of the Companys’federal tax returns is determined by the statute governing the tax returns ofits members.

 

*Use of Estimates*.  The preparation of financial statements inconformity with generally accepted accounting principles in the United Statesrequires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities and disclosure of contingent assets andliabilities at the date of the financial statements, and the reported amountsrevenues and expenses during the reporting periods. Actual results could differfrom those estimates.

 

*Reclassifications.* Certainreclassifications of participation fees and player club points, having noeffect on net income (loss), have been made to the previously issued condensedconsolidated financial statements to conform to the current period’spresentation of the Company’s condensed consolidated financial statements.

 

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

 

### **NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)**

### ** **

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

 

*Income (Loss) Allocable toPreferred and Common Member Interests*.  A schedule is presented on the consolidatedstatements of operations which allocates net income (loss) between thepreferred interest held by EW Common, LLC and the common member interests. Asdescribed in footnote 10, Preferred Return, a preferred return beganaccumulating on March 1, 2006 and accumulates whether or not there areprofits or funds available for the payment of the preferred return. Under theNotes indenture, the preferred return is payable only if the Company’s coverageratio meets certain criteria. No payments have ever been made through December 31,2009 or in subsequent periods.

 

*Recently Issued Accounting Pronouncements*.  In June 2009,the Financial Accounting Standards Boards (“FASB”) issued Accounting StandardsUpdate No. 2009-01, “Generally Accepted Accounting Principles” (ASC Topic105), which establishes the FASB Accounting Standards Codification (“Codification”or “ASC”) as the single source of authoritative nongovernmental U.S. generallyaccepted accounting principles (“GAAP”). Effective for financial statementsissued for interim and annual periods ending after September 15, 2009, theCodification does not change current U.S. GAAP, but is intended to simplifyuser access to all authoritative U.S. GAAP by providing all the authoritativeliterature related to a particular topic in one place. All existing accountingstandard documents are superseded and all other accounting literature notincluded in the Codification will be considered non-authoritative. TheCodification also includes most, but not necessarily all, relevant Securitiesand Exchange Commission (“SEC”) guidance organized using the same topicalstructure in separate sections within the Codification.

 

The Company adopted the Codification, effective July 1,2009,  requiring references toauthoritative U.S. GAAP to refer to the appropriate section of theCodification. The adoption of the Codification does not have an impact on theCompany’s financial position, results of operations or cash flows. In order toease the transition to the Codification, Codification cross-references areprovided alongside the references to the Standards issued and adopted prior tothe adoption of the Codification.

 

InAugust 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-05,which amends Fair Value Measurements and Disclosures — Overall (ASC Topic820-10) to provide guidance on the fair value measurement of liabilities. Thisupdate, among other matters, provides guidance on how to measure fair value incircumstances in which a quoted price in an active market for the identicalliability is not available. This update was adopted by the Company in 2009.

 

InJune 2009, the FASB issued (“SFAS”) No. 167, “Amendments to FASBInterpretation No. 46(R)” (ASC Topic 810). The guidance is intended toimprove financial reporting by providing additional guidance to companiesinvolved with variable interest entities and by requiring additionaldisclosures about a company’s involvement in variable interest entities. Thisguidance was effective for interim and annual periods ending after November 15,2009.  The adoption of SFAS 167 did nothave a material impact on the consolidated financial statements.

 

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

 

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

### ** **

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

 

In June 2009, the FASB issued SFAS No. 166,“Accounting for Transfers of Financial Assets” (ASC Topic 860) which requiredmore information about transfers of financial assets and where companies havecontinuing exposure to the risk related to transferred financial assets. Iteliminates the concept of a qualifying special purpose entity, changes therequirements for derecognizing financial assets, and requires additionaldisclosure. This standard was effective for annual periods ending after November 15,2009. The adoption of SFAS 166 did not have an impact on the consolidatedfinancial statements.

 

A variety of proposed or otherwise potentialaccounting standards are currently under study by standard-settingorganizations and certain regulatory agencies. Because of the tentative andpreliminary nature of such proposed standards, we have not yet determined theeffect, if any, that the implementation of such proposed standards would haveon our consolidated financial statements.

 

**4.  Propertyand Equipment**

 

Propertyand equipment consists of the following at December 31, 2009 and 2008(dollars in thousands):

 
| ** **                         | ** ** | **2009** | ** ** | **2008** | ** ** |
|------------------------------------|------------|----------|------------|----------|------------|
| Land                               |       | $        | 38,932     |     | $          | 38,932 |   |
| Buildings and improvements         |       | 74,858   |       | 72,465   |       |
| Furniture, fixtures and  equipment |       | 22,616   |       | 20,201   |       |
| Construction in progress           |       | 57       |       | 39       |       |
| Subtotal                           |       | 136,464  |       | 131,637  |       |
| Less: accumulated  depreciation    |       | (26,995  | )          | (20,383  | )          |
| Property and equipment,  net       |       | $        | 109,469    |     | $          | 111,254 |   |

 

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

 

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

### ** **

**5. Intangible Assets**

** **

Intangibleassets consist of the following at December 31, 2009 and 2008 (dollars inthousands):

 
| ** **                                           | ** ** | **2009** | ** ** | **2008** | ** ** |
|------------------------------------------------------|------------|----------|------------|----------|------------|
| Licensing, trade name                                |       | $        | 2,300      |     | $          | 2,900 |   |
| Slot customer list                                   |       | 260      |       | 260      |       |
| Subtotal                                             |       | 2,560    |       | 3,160    |       |
| Less: accumulated  amortization (slot customer list) |       | (217     | )          | (165     | )          |
| Intangible assets, net                               |       | $        | 2,343      |     | $          | 2,995 |   |

 

*Goodwill.*  As part of the allocation of the purchaseprice of the Hôtel San Rémo, the Company recorded goodwill from the acquisitionof Hôtel San Rémo, representing the excess of the purchase price over the fairmarket value of assets acquired.

 

As a result of the Company’sannual impairment test of the goodwill, the Company recognized a non-cashimpairment charge to goodwill of $2,158,000 in the fourth quarter of 2008.  This resulted in the write-off of allgoodwill.  The charge is included in “Intangibleassets impairment charge” in the accompanying consolidated statements ofoperations.  Such charge was impacted bycurrent market conditions including: (1) current cash flow forecastsreflecting lower expectations; (2) higher discount rates resulting fromturmoil in the credit and equity markets; and (3) lower valuationmultiples for gaming assets.

 

*Licensing,trade name.  *The Hooterslicensing agreement, which pertains to the usage of the Hooters name forcasino, restaurant and hotel operations was originally valued at $4.2million.  The fair value of the licensingagreement was determined using the relief-from-royalty method and wasnegatively impacted by the factors discussed above relating to the impairmentof goodwill.  The Company recognized anon-cash impairment charge to licensing, trade names of $1.3 million and $0.6million in the fourth quarter of 2008 and 2009, respectively.  The charges are included in “Intangibleassets impairment charge” in the accompanying consolidated statements ofoperations.

 

*Intellectual property.*  The Company has entered into anassignment agreement with Florida Hooters LLC which grants the Company theright to use certain intellectual property in connection with the operations ofthe Hooters Casino Hotel.  Theintellectual property consists of (i) an exclusive license for the Hooterstrademark and logo insignia in connection with gaming, casino or combinedhotel, gaming and casino operations, (ii) a non-exclusive license to usethe Hooters restaurant concept, (iii) an exclusive license to operate and promoterestaurants, taverns, lounges and “Dan Marino’s Fine Food & Spirits” (iv) anon-exclusive, royalty-free license to use the Pete & Shorty’s mark ata restaurant, bar and lounge, in each case solely for purposes of a HootersCasino Hotel located at the Hôtel San Rémo property.  The

 

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

 

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

### ** **

**5.  Intangible Assets (continued)**

** **

**license agreement to operate and promote a “DanMarino’s Fine Food & Spirits” was terminated in November 2009.**

** **

The Hooters trademark and logo insignia are theexclusive property of HI Limited Partnership. Florida Hooters LLC originally obtained the license for the trademarkand logo insignia through an assignment from Hooters Gaming Corporation, anaffiliated entity under common ownership with Hooters Gaming LLC.  Hooters Gaming Corporation is owned directlyor indirectly by certain members of the Company or members of the Company’smanagement board.  The underlying licenseagreement was executed****betweenHI Limited Partnership 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 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 Hooters restaurantconcept is the exclusive property of Hooters of America, Inc., anunrelated party. Florida Hooters LLC originally obtained the right for use ofthe Hooters restaurant concept at the Hooters Casino Hotel through anassignment from Hooters Gaming Corporation, who in turn, was granted the rightfrom Las Vegas Wings, Inc., an affiliated entity under common ownershipwith Lags Ventures, LLC.

 

Pursuant to the terms of theassignment agreement with Florida Hooters LLC related to the Hooters trademark,logo, and restaurant concept and Lags Ventures, LLC related to the Dan Marino’sconcept restaurants, the Company must pay fees and royalties to Hooters GamingCorporation, HI Limited Partnership, Las Vegas Wings, Inc. and Lags Ventures, Inc.  Payments to Hooters Gaming****Corporation are accrued at three percent of all net profitsdirectly earned from the gaming activities at the Hooters Casino Hotel.  HI Limited Partnership will be paid an annualfee equal to $500.

 

In addition, the Company isrequired 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 located in the Hooters Casino Hotel. Payment of these feesis restricted under the indenture governing the Notes.  Dan Marino’s Fine Food and Spirits wasreplaced by

 

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

 

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

### ** **

**5.  Intangible Assets (continued)**

** **

the Mad Onion in November 2009. Use of the Pete & Shorty’s mark partly owned by certain membersof the Company’s management board is royalty-free.

 

Hooters Gaming Corporation, HI Limited Partnership,and Las Vegas Wings, Inc. agreed to subordinate payment of theirrespective fees in favor of certain payments required under the Company’soperating agreement.  Payment is furthersubject to meeting certain financial ratios associated with the Company’sNotes.

 

*Slot customer list.*  As part of the acquisition of the realproperty and other assets of the Hôtel San Rémo (see Note 2), the Companyacquired the slot customer list valued by a third-party appraiser at$260,000.  It is being amortized overfive years using the straight line method.

 

**6.   Debt**

** **

**Notes Offering**

 

On March 29, 2005,the Company issued $130.0 million aggregate principal amount of 83⁄4% SeniorSecured Notes due 2012, in a private placement (the “old notes”).  On August 5, 2005, the Companysuccessfully exchanged all of the old notes for new notes (the “Notes”).  The Notes have substantially identical termsas the old notes, except that the Notes have been registered under theSecurities Act of 1933.  Interestpayments on the Notes are due semi annually, on April 1 and October 1.  The Notes are secured by all of the Company’sand, to the extent in existence, subsidiary guarantors’ (1)  existing andfuture assets (other than certain excluded existing and future assets), (2) theCompany’s equity interest in any guarantors.

 

The Notes are redeemable at the option of theCompany on or after April 1, 2009. The indenture governing the Notescontains certain provisions which restrict or limit the Company’s ability to,among other things, incur more debt, pay dividends, redeem stock or make otherdistributions, enter into transactions with affiliates or transfer or sellassets. The Company used the proceeds from the Notes to retire existingindebtedness and (together with cash from operations and proceeds fromequipment financing), renovate and construct the Hooters Casino Hotel andprovide for general working capital needs. The Company was unable to make the interest payments on the Notes due April 1,2009 and October 1, 2009 and anticipates that it will be unable to makethe interest payments due in 2010.  Dueto the Company’s inability to make the interest payments, an event of defaultoccurred under the indenture governing the Notes.  As a result, the note holders could exercisecertain remedies provided under the indenture.

 

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

 

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

### ** **

**6. Debt (continued)**

** **

**Senior Secured Credit Facility**

 

There are $14.5 million inoutstanding draws against the Senior Secured Credit Facility (“Credit Facility”)as of December 31, 2009 and an additional letter of credit for $0.5million is outstanding, which fully extends the Credit Facility.  It is due on September 30, 2011 unlessaccelerated under the default provisions.  The Credit Facility is currently in default and the lenders have theability to accelerate repayment of all amounts outstanding under the creditagreement.

 

The Company has receivedNotice of Default and Reservation of Rights letters (the “Default Letters”)from the lenders under the Credit Facility. The Default Letters state that (i) an event of default exists underthe Credit Facility as a result of the Company’s failure to obtain controlagreements for one or more deposit accounts established and maintained by theCompany and as a result of failure to pay interest on the Notes, (ii) as aresult of the event of default, the lenders are under no further obligation toextend further credit under the Credit Facility, (iii) the lenders willcontinue to evaluate their response to the event of default, and (iv) theCompany no longer has an option of paying the LIBOR interest rate, but must paythe Wells Fargo prime rate plus the default rate, which is equal to fourpercentage points above prime rate.  Thelenders have not elected to accelerate the indebtedness under the CreditFacility.  The Company has entered intodiscussions with the note holders and the Credit Facility lenders to attempt tonegotiate forbearance agreements pursuant to which they would agree not toexercise, for a specified period of time, their remedies under the indenture orthe Credit Facility.  The Company hasengaged a financial advisor to assist with its evaluation of financial and strategicalternatives, which may include a recapitalization, refinancing, restructuringor reorganization of its obligations or a sale of some or all of itsbusiness.  The Company and its advisorsare actively working toward such a transaction. The Company cannot be assured that it will be successful in negotiatingforbearance with the note holders or Credit Facility lender or in undertakingany such alternative transaction in the near term.

 

The lenders have not electedto accelerate the indebtedness under the Credit Facility.  The lenders have informed the Company that asa result of the defaults, the applicable interest rate was increased to thedefault rate, which equals the Wells Fargo prime rate plus four percentagepoints or 7.25% as of December 31, 2009. Interest payments on the Credit Facility are paid and current.

 

**Intercreditor Agreement**

 

Concurrently with the closing of the old notesoffering and the Credit Facility, the Company entered into an intercreditoragreement, which defines the rights of the lenders under the Credit Facility inrelation to the rights of the trustee and the holders of the Notes with respectto****the collateral securing the Notes.

 

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

 

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

### ** **

**6.  Debt(continued)**

** **

The intercreditor agreement, among other things, provides that theliens securing the Notes and any guarantees thereof are contractuallysubordinated to the liens securing the principal amount of indebtedness of upto $15.0 million (plus related interest, fees, indemnities, costs and expenses)under the Credit Facility. The trustee’s ability to exercise rights andremedies in respect of the collateral are also subject to the terms of theintercreditor agreement.

 

**Fair Value of Financial Instruments**

 

The Notes and Credit Facilitiy are currentlyin default.  The Notes are not trading,so there is no market data available on the trading value of the Notes.  Based on the fact that the Company isfinancially unable to pay the interest on the Notes and due to the currentcredit market, the value of the Notes are substantially and materially impaired.Based on trading values of the bonds of other casino/hotel properties that havedefaulted on their interest payments, we currently estimate the fair marketvalue of our Notes to be $23.0 million. However, this value is subject to continuously changing circumstancesand every casino/hotel property is subject to varying financial and physicalconditions.  The Company believes thatthe value of the $14.5 million Credit Facility has not been impaired due to itssenior secured position against all of the Company’s assets.

 

**Equipment Purchase Agreements**

 

During the year ended December 31, 2009, the Company entered intoloan agreements for $2.0 million in equipment. The equipment loans, which are collateralized by the equipmentpurchased, have terms ranging from 3 years to 5 years.  Interest rates on slot equipment purchases of$2.0 million and hotel equipment purchase of $0.2 million were 7.0% and 10.75%,respectively.  At December 31, 2009$1,540,000 and $44,000 were outstanding under these agreements, respectively.All equipment purchase agreements mature in 2012.

 

Scheduled maturities ofequipment purchase agreements are as follows (amount in thousands):

** **
| **Years ending  December 31,** | ** ** | ** ** | ** ** |
|-------------------------------------|------------|------------|------------|
| 2010                                |       | $          | 657        |   |
| 2011                                |       | 662        |       |
| 2012                                |       | 264        |       |
| Total                               |       | $          | 1,583      |   |

 

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

 

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

### ** **

**7. Membership Interests**

** **

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 in cash and theintellectual property described in Note 5 for a 66 (2)¤3% membership interest in theCompany. Further, all pre-development costs incurred by Florida Hooters LLC arecredited to the Florida Hooters LLC capital account.

 

EW Common LLC received a 33 1¤3% membership interest withpriority return for a $20.0 million deemed initial capital contribution aspart of the Company’s acquisition of the real property and non-gaming assets ofthe Hôtel San Rémo. In October 2005, the Company secured their gaming and liquor licenses and on November 1,2005, assumed the operations of the hotel casino.  Upon obtaining the necessary licenses tooperate the hotel casino, the Company acquired the gaming assets from Eastern &Western consisting primarily of slot machines and customer lists and creditedthe capital account of EW Common LLC 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 the re-opening of Hooters Casino Hotel.

 

**8.  Profit-SharingPlan**

 

The Company has a deferred compensation planestablished pursuant to Section 401(k) of the Internal Revenue Codefor all regular full-time employees not covered by a collective bargainingagreement who 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.  Contributions of approximately $-0-, $65,000and $77,000 were made by the Company in 2009, 2008 and 2007, respectively.  Amounts expensed under the plan foradministrative expenses for the years ended December 31, 2009, 2008 and2007 totaled $8,000, $8,150 and $12,145, respectively.

 

**9.  Related Party Transactions**

 

**Royalties Expense**

 

Pursuant to agreements related to the use of certaintrademarks (see Note 5), the Company must pay fees and royalties to related parties. A fee equal to 3% of all net profits earned from gaming activities ispayable to Hooters Gaming Corporation, a consent fee equal to 6% of netrevenues generated by the Dan Marino’s Restaurant is payable to Lags Ventures, Inc.and a fee of 4% of cash sales from Hooters branded restaurant, and 3% of thegross sales with any merchandise with a Hooters logo, is payable to Las VegasWings, Inc.  The total fees accrued at December 31, 2009 forHooters Gaming Corporation, Lags Venture, Inc. and Las Vegas Wings, Inc.were $2.7 million, $0.9 million,

 

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

 

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

### ** **

**9. Related Party Transactions (continued)**

** **

and$1.6 million, respectively. The payment of these royalty fees is restrictedunder the indenture governing the Notes.

 

**Provident Advertising & Marketing, Inc.**

 

The majority shareholder of Provident Advertising &Marketing, Inc. (“Provident”) is Edward C. Droste, a member of the Company’smanagement board and an indirect beneficial owner of 3.96% of the Company’smembership interests.  Provident wasengaged by the Company to provide services related to the planning anddevelopment of an initial advertising and marketing plan and for the continueddevelopment and implementation of a strategic marketing plan for the HootersCasino Hotel.  They continue to be involvedas the Company’s advertising firm.  Inaddition, the Company purchases Hooters logo items from Provident for uniformsand for resale in the Company’s gift shops. The fees paid to Provident during the years ended December 31,2009, 2008, and 2007 totaled $0.9 million,, $1.1 million, and $1.8 million,,respectively.

 

**The Notesissued by the Company require the Company to engage an independent valuationfirm to determine that the related party transactions are valued at arm’s-lengthprices if the total expenditures to Provident aggregate $2.5 million. In 2006,a nationally-recognized valuation firm issued a favorable opinion that therelated party transactions with Provident had been conducted in a mannerconsistent with the arm’s-length standard.**

** **

**10.  Commitmentsand Contingencies**

** **

***Litigation***

*** ***

**From timeto time, the Company is a party to various claims arising in the normal courseof business.  Management believes,however, that there are no proceedings pending or threatened against theCompany which, if determined adversely, would have a material adverse effect onthe Company’s financial condition, results of operations or liquidity.**

** **

***Contractual Commitments***

*** ***

The Company has entered intooperational contracts totaling $3.6 million at December 31, 2009.

 

**Hooters of America Royalty Payments**

 

Beginning on February 3,2006, the Company was required to pay the owner of the Hooters trademark,Hooters of America, a royalty fee equal to 2% of all net revenues of the hoteland casino

 

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

 

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

### ** **

**10.  Commitments and Contingencies (continued)**

** **

(excluding the Dan Marino’sRestaurant and 13 Martini Bar) and 1% of revenues from the Pete and Shorty’s Tavernless miscellaneous expenses.  The totalfees paid to Hooters of America were approximately $0.8 million, $1.1 millionand $1.2 million for the years ended December 31, 2009, 2008 and 2007,respectively.  These fees are included ingeneral and administrative expenses on the accompanying condensed consolidatedstatements of operations.

 

***Preferred Return***

*** ***

The Company’s membership interests include an EWCommon LLC preferred account which accumulates a preferred return rate of 4%per annum on the $25.0 million account balance. Such preferred return began accumulating on March 1, 2006, andaccumulates whether or not there are profits or funds available for the paymentof the preferred return.  Under the Notesindenture, the preferred return to EW Common LLC is payable only if the Company’scoverage ratio of EBITDA to fixed charges (as defined in the indenture andafter giving effect to the payment of the preferred return) is 1.5 to 1 for thefiscal year as measured after the close of the fiscal year.  As of December 31, 2009, $3.8 millionrelating to the preferred account has accumulated, but has not been paid.  As the Company’s coverage ratio of EBITDA tofixed charges did not meet this defined ratio, no liability has been recordedin the accompanying consolidated financial statements at December 31,2009.

 

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## **ITEM 9. **CHANGES IN ANDDISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

 

Not applicable.

 

## **ITEM 9A(T).  CONTROLS AND PROCEDURES.**

## ** **

### **Evaluation ofDisclosure Controls**

### ** **

We evaluated theeffectiveness of our disclosure controls and procedures as of the end of the2009 fiscal year.  This evaluation wasdone with the participation of our management, including our Chief ExecutiveOfficer, President, Chief Operating Officer, and Chief Financial Officer.

 

Disclosure controls andprocedures are controls and other procedures that are designed to ensure thatinformation required to be disclosed by us in the reports that we file orsubmit under the Securities Exchange Act of 1934 are recorded, processed,summarized and reported within the time periods specified in the Securities andExchange 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 managers, as appropriate to allow timelydecisions regarding required disclosure.

 

### **Limitations on theEffectiveness of Controls**

### ** **

Our management does notexpect that our disclosure controls and procedures or our internal controlsover financial reporting will prevent all error and all fraud.  A control system, no matter how wellconceived 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 be consideredrelative to its costs.  Because of theinherent limitations in all control systems, no evaluation of controls canprovide absolute assurance that all control issues and instances of fraud, ifany, within us have been detected.  Theseinherent limitations include the realities that judgments in decision-makingcan be faulty and that breakdowns can occur because of simple error or mistake.Additionally, controls can be circumvented by the individual acts of somepersons, by collusion of two or more 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 occur andmay not be detected.

 

### **Conclusions**

### ** **

Based on this evaluation,the our Chief Executive Officer and Chief Financial Officer have evaluated ourdisclosure controls and procedures (as defined in the Securities Exchange Actof 1934 Rules 13a-15(e) and 15d- 15(e)) as of December 31, 2009,and have concluded that these are effective to timely alert them to materialinformation relating to us required to be included in the reports that we fileor submit under the Securities Exchange Act of 1934.

 

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**Management’s Report onInternal Control Over Financial Reporting**

 

The management of the Company is responsiblefor establishing and maintaining adequate internal control over financialreporting. The Company’s internal control system was designed to providereasonable assurance to the Company’s management and board of directorsregarding the preparation and fair presentation of published financialstatements.

 

Management assessed the effectiveness of theCompany’s internal control over financial reporting (as defined in theSecurities Exchange Act of 1934 Rules 13a-15(f) and 15d-15(f)) as of December 31,2009. In making this assessment, it used the criteria set forth by theCommittee of Sponsoring Organizations of the Treadway Commission (COSO) inInternal Control — Integrated Framework. Based on our assessment we believethat, as of December 31, 2009, the Company’s internal control overfinancial reporting is effective based on those criteria.

 

This annual report does not include anattestation report of the company’s registered public accounting firm regardinginternal control over financial reporting. Management’s report was not subjectto attestation by the Company’s registered public accounting firm pursuant totemporary rules of the Securities and Exchange Commission that permit thecompany to provide only management’s report in this annual report.

 

### **Changes inInternal Controls**

 

There were no changes in our internalcontrols over financial reporting that occurred during our last fiscal quarter,*i.e.*, the quarter ended December 31,2009, that have materially affected, or are reasonably likely to materiallyaffect, our internal controls over financial reporting.

 

## **ITEM 9B.       OTHER INFORMATION.**

 

Not applicable.

 

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# **PART III**

 

## **ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATEGOVERNANCE.**

 

The following information summarizes thebusiness experience during at least the past five years of each of ourexecutive officers and the members of our management board.

 
| **Name**                  | ** ** | **Age** | ** ** | **Position(s)**                    | ** ** |
|---------------------------|------------|---------|------------|------------------------------------|------------|
| Neil G. Kiefer            |       | 58      |       | Chief  Executive Officer           |       |
| Michael J. Hessling       |       | 57      |       | President  and Management Board    |       |
| Gary A. Gregg             |       | 58      |       | Chief  Operating Officer           |       |
| Deborah J. Pierce         |       | 61      |       | Chief  Financial Officer           |       |
| Cynthia Cameron           |       | 51      |       | Vice-President  of Human Resources |       |
| John T. Blakely           |       | 65      |       | Management  Board                  |       |
| Gilbert DiGiannantonio(1) |       | 61      |       | Management  Board                  |       |
| Edward C. Droste          |       | 58      |       | Management  Board                  |       |
| Sukeaki Izumi(2)          |       | 72      |       | Management  Board                  |       |
| Toyoroku Izumi(2)         |       | 47      |       | Management  Board                  |       |
| Dennis D. Johnson         |       | 59      |       | Management  Board                  |       |
| David L. Lageschulte      |       | 58      |       | Management  Board                  |       |
| William R. Ranieri(1)     |       | 89      |       | Management  Board                  |       |

 

----

(1)             Mr. DiGiannantonio is the son-in-lawof Mr. Ranieri.

 

(2)             Mr. Sukeaki Izumi is the father of Mr. ToyorokuIzumi.

 

**Business Experience**

 

*Neil G. Kiefer.*  Mr. Kiefer was appointed our ChiefExecutive Officer in August 2004. Mr. Kiefer has been involved in theHooters organization since its inception in 1983, when he incorporated theoriginal Hooters entity, Hooters Inc. From 1983 to 1992, Mr. Kieferserved as general outside counsel to Hooters Inc. and its related Hootersentities. From May 1992 to June 1994, Mr. Kiefer served asPresident and Chief Executive Officer of Hooters Management Corporation, themanaging entity for Hooters Inc. and its affiliated companies. Since June 1994,Mr. Kiefer has served as President and Chief Executive Officer ofHooters Inc. and all other Hooters corporations affiliated withHooters Inc. Mr. Kiefer was elected to the Hooters Inc. board ofdirectors in 1994 and continues to serve on the board.

 

*Michael J. Hessling.*  Mr. Hessling was appointed to ourmanagement board in July 2004 and was appointed our President in June 2006.Mr. Hessling has been involved in the gaming industry since 1979 when hejoined Caesars Palace as Manager of Financial Planning. Before his departure in1983, Mr. Hessling was promoted to Assistant Vice President of Planningand Administration and, after assisting in the opening of Caesars Tahoe, servedas management liaison between 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. Hesslingserved as general manager of several small casinos in Las Vegas. From 1989 to2005, Mr. Hessling was a part owner of and served as Treasurer and adirector for Beatty Future Inc., which owned a casino motel in ruralNevada. From 1989 until June 2004, Mr. Hessling served as ExecutiveVice President, General Manager and Chief Operating Officer of the Hôtel SanRémo.

 

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*Gary A. Gregg.*  Mr. Gregg was appointed our ChiefOperating Officer in October 2006. From 1988 to 1993, Mr. Gregg served as President for the FlamingoHilton Laughlin and was responsible for the property’s operations andprofitability.  From 1993 to 1997, Mr. Greggserved as President and Senior Vice President for the Las Vegas Hilton andHilton Hotels Corporation, where he was responsible for the company’s overalloperations and profitability.  From 1998to 2001, Mr. Gregg served as General Manager for the Regency Casino byHyatt located in Thessaloniki, Greece, where, in addition to his operationalresponsibilities, he was also responsible for overall regulatory issuesincluding 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 2004until October 2006, Mr. Gregg served as President for Daily Edge, LLCwhere he managed sales representatives, trade shows, and associated sales andmarketing services.

 

*Deborah J. Pierce.*  Ms. Pierce was appointed our ChiefFinancial Officer in February 2005. From June 1995 to May 1998, Ms. Pierceserved as Vice President of Finance for Tropicana Resort & Casino andwas responsible for various financial and operational aspects of theorganization’s business. From June 1998 to November 1998, Ms. Pierceserved as Chief Financial Officer, Secretary and Treasurer of Palace REIT, areal estate investment trust formed in 1998 to acquire office and industrialproperties in selected 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. Pierceserved as Chief Financial Officer of Fantasy Springs Resort & Casino.

 

*Cynthia Cameron. *Ms. Cameron has over 30years in the Gaming Industry.  In 2005she was retained as Vice-President of Human Resources during the transition toHooters Casino Hotel, charged with the responsibility of rebranding theworkforce, tripling the employee base, training and recruiting, and developingand implementation of all new company policies, procedures and benefits.  She holds a Professional in Human ResourcesCertification (PHR) from the National Society for Human Resources Management.

 

*John T. Blakely.*  Mr. Blakely was appointed to ourmanagement board in July 2004. Mr. Blakely has been practicing law inFlorida since 1970. In 1973, Mr. Blakely practiced in the Tampa andClearwater offices of Johnson, Blakely, Pope, Bokor, Ruppel and Burns and was apartner when he left in 2003. Since 2003, Mr. Blakely has been a partnerwith the Naples office of Roetzel & Andress, a national law firm basedin Akron, Ohio. Mr. Blakely has served as Director (1999 to 2002) andPresident (2001 to 2002) of the Port Royal Club in Naples, Florida.

 

*Gilbert DiGiannantonio.*  Mr. DiGiannantonio was appointed to ourmanagement board in July 2004. Mr. DiGiannantonio is one of theoriginal founders of the Hooters restaurant, concept and brand. He served asthe Vice President of Operations and Vice President of Hooters Inc. inpast years. Mr. DiGiannantonio is also the co-owner of one Hootersrestaurant in Las Vegas, Nevada and the restaurant Casa Ludovico in PalmHarbor, Florida. In addition, he is an owner of the Pete & Shorty’s ofClearwater restaurant.

 

*Edward C. Droste.*  Mr. Droste was appointed to ourmanagement board in July 2004. Mr. Droste is one of the originalfounders of the Hooters restaurant, concept and brand. Mr. Drosteco-founded several restaurant concepts, including Pete & Shorty’sTavern and Adobe Gila’s and was involved in the conceptual development of DanMarino’s Town Tavern and Stumps Supper Club. Currently, Mr. Droste servesas Chief Executive Officer of Provident Management Corporation, a resortmanagement company, which he founded (since 1989), and as a director forHooters Management Corporation (since 1992). In

 

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1986, Mr. Drostefounded Provident Advertising & Marketing, Inc., which isresponsible for coordinating the promotional activities for the Hootersrestaurants and the national distribution of the Hooters calendar. In 1995, Mr. Drostefounded Provident Entertainment, Inc., an entertainment company thatproduces a two-hour radio talk show and is in talks to produce a motionpicture. Mr. Droste also serves on the board of directors for the OutbackBowl (since 2004), the H. Lee Moffitt Cancer Center & ResearchInstitute Foundation, Inc. (since 2003), and the Clearwater RegionalChamber of Commerce (since 1993).  Mr. Drosteis currently serving as the Chairman for the H. Lee Moffitt Cancer Center andResearch Institute Foundation, Inc.

 

*Sukeaki Izumi.*  Mr. Izumi was appointed to ourmanagement board in July 2004. Mr. Izumi was the founder of Eastern &Western, which was formed in 1988 to acquire, remodel, expand and operate theHôtel San Rémo property. Since 1988, Mr. Izumi has served as the Presidentand 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 1990and I &F Corporation, Japan (since 1973). ).  He also owned Beatty Future, Inc.from 1989 to 2005, which owned a casino motel in rural Nevada.   Mr. Izumi served as President, Chairmanand Director of Hakusui Tech, Co., Ltd. from 1992 to 2002. Hakusui Tech.Co., Ltd. filed an application for the commencement of civilrehabilitation proceedings with a Japanese court in June 2002. As a resultof such filing, the company underwent court-supervised reorganization.  On January 31, 2006, the Japanese courthas released Hakusui Tech. Co., Ltd. from its supervision, and Hakusui Tech.Co., Ltd. is no longer involved in civil rehabilitation proceedings.  Currently, Hakusui Tech. Co., Ltd. is a goodstanding corporation.

 

*Toyoroku Izumi.*  Mr. Izumi was appointed to ourmanagement 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 civil rehabilitation proceedingswith a Japanese court on June 21, 2002. As a result of such filing, thecompany underwent court-supervised reorganization.  On January 31, 2006, the Japanese courthas released Hakusui Tech. Co., Ltd. from its supervision, and Hakusui Tech.Co., Ltd. is no longer involved in civil rehabilitation proceedings.  Currently, Hakusui Tech. Co., Ltd. is a goodstanding corporation.

 

*Dennis D. Johnson.*  Mr. Johnson was appointed to ourmanagement board in August 2004. Mr. Johnson is one of the originalfounders of the Hooters restaurant, concept and brand. In 1994, Mr. Johnsonjoined the corporate office of Hooters Inc. and was responsible formaintaining the integrity of the Hooters trademark through quality control,store inspections and site selections until 2002. From 1994 to 2004, Mr. Johnsonserved as the Vice President of Hooters Management Corporation. Since 2000, Mr. Johnsonhas served as the Vice President of Merchandise Sales. Since 1992, Mr. Johnsonhas been a member of the Hooters Management Corporation board of directors.

 

*David L. Lageschulte.*  Mr. Lageschulte was appointed to ourmanagement board in July 2004. Mr. Lageschulte is the controllingshareholder of the original licensee of the Hooters restaurant concept andbrand. Mr. Lageschulte controls and is the Chief Executive Officer of 19Hooters restaurants which operate throughout Southeast and Southwest Florida,and in the State of Nevada. Mr. Lageschulte is the Chief Executive Officerof LTP Management Group, Inc., a restaurant managing entity for 32restaurants, which he established in 1987. Mr. Lageschulte co-foundedseveral restaurant and entertainment concepts including Dan Marino’s Fine Food &Spirits, Adobe Gila’s, Ugly Tuna Saloona, Stumps Supper Club and Splitsville. Mr. Lageschultealso owns several corporations, in Florida and other states, which are

 

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involved in an array ofoperations including health and fitness centers, heavy equipment sales andleasing, well drilling and real estate investments.

 

*William R. Ranieri.*  Mr. Ranieri was appointed to ourmanagement board in July 2004. Mr. Ranieri is one of the originalfounders of the Hooters restaurant, concept and brand and, since 1983, hasserved as a director for Hooters Management Corporation, Hooters Inc. andits related entities.

 

**Committees of our Management Board**

 

Our management board currently does not haveany committees. More specifically, our management board does not have acompensation committee or an audit committee. The guidelines and pay levels forthe compensation of executive officers are generally established by themanagement board. All the functions of an audit committee are performed by theentire management board.

 

**Code of Ethics**

 

Due to our limited size, wehave not yet adopted a code of ethics that applies to our principal executiveofficer, principal financial officer, principal accounting officer orcontroller, or persons performing similar functions.

 

## **ITEM 11. EXECUTIVECOMPENSATION.**

 

**Compensation Discussion and Analysis**

 

We do not have a compensation committee orformalized program for determining executive compensation.  All decisions regarding executivecompensation for the Chief Executive Officer, President, and Chief OperatingOfficer are made at the sole discretion of our management board.  Our Chief Executive Officer, President, andChief Operating Officer have the discretion to award reasonable annual payincreases for other executives.  Themanagement board has not used an outside consultant in connection with makingcompensation decisions.

 

Our management board strives to award executivecompensation at a level that will attract, motivate, and retain talented anddedicated executive officers.  For thefiscal year ended December 31, 2008, the components of compensation fornamed executive officers were base salary, paid premiums for life insurancepolicies, and company contributions to our 401(k) plan.

 

In setting base salaries, the management boardconsiders executive experience, current position’s responsibility, and certainrelevant market data. Bonuses may be awarded to salaried employees andexecutive management. The bonuses are discretionary and are based on financialachievement evaluated at the time the bonuses are granted.  No bonuses were awarded during the fiscalyear ending December 31, 2009 and one bonus was awarded for the fiscalyear ended December 31, 2008.

 

Executive officers are eligible to participate inour 401(k) plan as are all regular full-time employees not covered by acollective bargaining agreement who have completed at least three months ofcontinuous service.  The Company’scontributions to the 401(k) plan are at the discretion of the managementboard.  The Company’s plan allows for acompany match of 25% of each dollar contributed by the employee, not to exceed1% of a participant’s annual compensation.

 

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**Summary Compensation Table**

 

The following table sets forth the cash compensationwe paid to the five most highly compensated employees during the year ended December 31,2009 for services to the Chief Executive Officer, Chief Financial Officer, andcertain other most highly compensated executive officers during the year ended December 31,2009:

 
| **Name  and Principal Position**                  | ** ** | **Year** | ** ** | **Salary** | ** ** | **Bonus** | ** ** | **All  Other  Compensation  (1)** | ** ** | **Total** | ** ** |
|---------------------------------------------------|------------|----------|------------|------------|------------|-----------|------------|-----------------------------------|------------|-----------|------------|
| Neil  G. Kiefer  Chief Executive Officer          |       | 2009     |       | $          | 100,000    |      | $          | —                            |       | $         | 1,445      |   | $ | 101,445 |   |
|                                              | 2008       |     | $          | 100,000    |       | $         | —     |                              | $          | 1,576     |       | $ | 101,576 |   |
|                                              | 2007       |     | $          | 100,000    |       | $         | —     |                              | $          | 1,000     |       | $ | 101,000 |   |
| Deborah  J. Pierce  Chief Financial Officer       |       | 2009     |       | $          | 170,887    |      | $          | —                            |       | $         | 2,218      |   | $ | 173,105 |   |
|                                              | 2008       |     | $          | 170,887    |       | $         | —     |                              | $          | 2,503     |       | $ | 193,390 |   |
|                                              | 2007       |     | $          | 160,961    |       | $         | —     |                              | $          | 2,155     |       | $ | 163,116 |   |
| Michael  J. Hessling  President                   |       | 2009     |       | $          | 275,000    |      | $          | —                            |       | $         | 1,445      |   | $ | 276,445 |   |
|                                              | 2008       |     | $          | 275,000    |       | $         | —     |                              | $          | 1,213     |       | $ | 276,213 |   |
|                                              | 2007       |     | $          | 275,000    |       | $         | —     |                              | $          | 1,188     |       | $ | 276,188 |   |
| Kim  L. Tyler  Sr. VP of Food & Beverage |       | 2009     |       | $          | 61,782     | **(2)**   | $          | —                            |       | $         | 314        |   | $ | 62,096 |   |
|                                              | 2008       |     | $          | 170,887    |       | $         | —     |                              | $          | 2,303     |       | $ | 173,190 |   |
|                                              | 2007       |     | $          | 160,957    |       | $         | —     |                              | $          | 2,155     |       | $ | 163,112 |   |
| Cynthia  Cameron                                  |       |     |       |       |       |      |       |                              |       |      |       |   |   |   |   |
| VP  of Human Resources                            |       | 2009     |       | $          | 112,645    |      | $          | —                            |       | $         | 773        |   | $ | 113,418 |   |
| Gary  Gregg  Chief Operating Officer              |       | 2009     |       | $          | 300,000    |      | $          | —                            |       | $         | 1,445      |   | $ | 301,445 |   |
|                                              | 2008       |     | $          | 300,000    |       | $         | —     |                              | $          | 2,838     |       | $ | 302,838 |   |
|                                              | 2007       |     | $          | 250,000    |       | $         | —     |                              | $          | 2,488     |       | $ | 252,488 |   |
|                                                   |            |          |            |            |            |           |            |                                   |            |           |            |  |  |  |  |  |

 

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(1)          All other compensationincludes $538 in premiums paid for life insurance policies insuring the livesof the executive officers and the Company’s contributions to the employees’ 401(k) plan.

 

(2)          Kim Tyler left the Companyin May 2009.

 

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**Employment Contracts**

 

EffectiveOctober 31, 2006, we signed an employment agreement with Michael J.Hessling to serve as President.  Theterms of the agreement stated that Mr. Hessling serve as our President fora period of one year from the effective date of the agreement.  Under the signed employment agreement, Mr. Hesslingwas paid an annual base salary of $275,000 and was entitled to participate in abonus program, if a bonus program had been established for our seniormanagement team. Subsequent to October 31, 2007, Mr. Hessling hascontinued to serve as President without an employment contract, at the sameannual base salary of $275,000.

 

EffectiveOctober 30, 2006, we signed an employment agreement with Gary A. Gregg toserve as Chief Operating Officer.  Theterms of the agreement state that Mr. Gregg will serve as our ChiefOperating Officer for a period of three years from the effective date of theagreement.  Mr. Gregg was awarded araise in salary on June 9, 2008. Under the signed employment agreement, Mr. Gregg was paid an annualbase salary of $250,000 through June 8, 2008 and $300,000 annual basesalary thereafter.  He was entitled toparticipate in bonus program and if we chose to terminate Mr. Gregg’semployment without cause, Mr. Gregg was entitled to receive separation payequal to six months of base salary.  Subsequentto November 1, 2009, Mr. Gregg has continued to serve as ChiefOperating Officer without an employment contract, at the same annual basesalary of $300,000.

 

EffectiveFebruary 1, 2005, we signed an employment agreement with Deborah J. Pierceto serve as our Chief Financial Officer. Under the signed employment agreement, Ms. Pierce will be paid anannual base salary of $150,000 plus annual raises, and will be entitled toparticipate in a bonus program for up to $50,000, if a bonus program isestablished.  If we choose to terminate Ms. Pierce’semployment without cause, Ms. Pierce will be entitled to receiveseparation pay equal her monthly gross salary for six months after thetermination.

 

EffectiveOctober 27, 2004, we signed an employment agreement with Kim L. Tyler toserve as our Senior Vice-President of Food and Beverage.  Kim Tyler left the company on May 4,2009.  Under the terms of his agreement,Kim Tyler was not paid any separation pay in connection with his departure fromthe company.

 

**Compensation of Management Board**

 

The members of our management board currentlydo not receive any separate compensation for serving on our management board.All members of our management board are reimbursed for air, meal, and othertravel expenses incurred in connection with attendance at board meetings.

 

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

 

We do not maintain a stock option plan or anysimilar employee benefit plan. Accordingly, during the last fiscal year, we have not issued any optionsor stock to any of its executive officers or directors.  In addition, there have not been anyexercises or re-pricings of stock options or stock appreciation rights held byany of our executive officers or directors.

 

**Management BoardInterlocks and Insider Participation**

 

Gary A. Gregg, our ChiefOperating Officer, participates in discussions regarding compensation forexecutive officers and other employees.

 

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**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.**

 

**ManagementBoard Compensation Report**

 

Our management board hasreviewed and discussed the above Compensation Discussion and Analysis with ourmanagement and determined that the Compensation Discussion and Analysis beincluded in this annual report.

 

 
| March 31,  2010 | 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      |

 

## **ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIALOWNERS AND MANAGEMENT.**

 

The following table shows informationregarding the beneficial ownership of our membership interests as of December 31,2009, and sets forth the number of and percentage owned by:

 

·                  each person known to ownbeneficially more than 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 “beneficial owner” of asecurity if that person has or shares “voting power,” which includes the powerto vote or to direct the voting of the security, or “investment power,” whichincludes the power to dispose of or to direct the disposition of the security.

 
| **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                                     | %          |

 

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| **Name of Beneficial Owner**                                           |   | **Number of Units  Beneficially Owned** |   | **Percent of  Units  Owned Beneficially** |   |
|------------------------------------------------------------------------|--------|-----------------------------------------|--------|-------------------------------------------|--------|
| Gilbert DiGiannantonio(2)                                              |   |                                    |   |                                      |   |
| 107 Hampton Road #200                                                  |   |                                    |   |                                      |   |
| Clearwater, FL 33759                                                   |   | 15.58                                   |   | 15.58                                     | %      |
| William Ranieri(3)                                                     |   |                                    |   |                                      |   |
| 107 Hampton Road #200                                                  |   |                                    |   |                                      |   |
| Clearwater, FL 33759                                                   |   | 6.23                                    |   | 6.23                                      | %      |
| Edward Droste(4)                                                       |   |                                    |   |                                      |   |
| 107 Hampton Road #200                                                  |   |                                    |   |                                      |   |
| Clearwater, FL 33759                                                   |   | 5.65                                    |   | 5.65                                      | %      |
| Dennis Johnson(5)                                                      |   |                                    |   |                                      |   |
| 107 Hampton Road #200                                                  |   |                                    |   |                                      |   |
| Clearwater, FL 33759                                                   |   | 0.62                                    |   | 0.62                                      | %      |
| Neil Kiefer(6)                                                         |   |                                    |   |                                      |   |
| 107 Hampton Road #200                                                  |   |                                    |   |                                      |   |
| Clearwater, FL 33759                                                   |   | 1.57                                    |   | 1.57                                      | %      |
| 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) |   | 96.27                                   |   | 96.27                                     | %      |

 

----

(1)   The membership interests of Florida Hooters LLC areowned 50.1% by Hooters Gaming LLC and 49.9% by Lags Ventures, LLC.

 

(2)   By virtue of his 46.65% ownership interest in HootersGaming LLC, Mr. DiGiannantonio is deemed to beneficially own 15.58% of ourmembership interests.

 

(3)   By virtue of his 18.66% ownershipinterest in Hooters Gaming LLC, Mr. Ranieri is deemed to beneficially own6.23% of our membership interests.

 

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(4)   By virtue of his 16.92% ownershipinterest in Hooters Gaming LLC, Mr. Droste is deemed to beneficially own5.65% of our membership interests.

 

(5)   By virtue of his 1.87% ownership interestin Hooters Gaming LLC, Mr. Johnson is deemed to beneficially own 0.62% ofour membership interests.

 

(6)   By virtue of his 4.71% ownership interestin Hooters Gaming LLC, Mr. Kiefer is deemed to beneficially own 1.57% ofour membership interests.

 

(7)   By virtue of his sole ownership andcontrol of Lags Ventures, LLC, Mr. Lageschulte is deemed to beneficiallyown all of our membership interests beneficially owned by LagsVenture, LLC.

 

(8)   The membership interests of EW Common LLCare owned 90% by Eastern & Western and 10% by Michael Hessling.

 

(9)   Eastern & Western is whollyowned by S.I. Enterprises, Inc.

 

(10)S.I. Enterprises, Inc. was convertedinto a limited-liability company on February 28, 2005 and is now known asS.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 soleownership of Eastern & Western, S.I. Enterprises, Inc. is deemedto beneficially own all of our membership interests beneficially owned byEastern & 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 EWCommon LLC, Mr. Hessling is deemed to beneficially own 3.33% of ourmembership interests.

 

## **ITEM 13. CERTAINRELATIONSHIPS 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 considerrelated party 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.

 

**Florida Hooters LLC and Related Entities**

 

We have entered into an assignment agreementwith Florida Hooters LLC whereby we have been assigned (i) a license touse certain intellectual property related to the Hooters brand in connectionwith gaming, casino or combined hotel gaming and casino operations at theHooters Casino Hotel property; (ii) a non-exclusive license to use theHooters restaurant 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 Fine Food &Spirits” and “‘13’ Martini Bar,” which is operated in conjunction with DanMarino’s Fine Food & Spirits, at the Hooters Casino Hotelproperty.  Pursuant to the assignmentagreement, we must pay certain fees to related entities.

 

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Hooters Gaming Corporation is a relatedentity which is owned by certain members of our management board (GilbertDiGiannantonio (52.078%), William Ranieri (20.831%), Edward Droste (12.510%),and Dennis Johnson (2.083%)) as well as some of our other indirect minorityinterest owners. Las Vegas Wings, Inc. is a related entity that is ownedby David Lageschulte (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 assignmentagreement with Florida Hooters LLC, we accrued the following fees beginning on February 3,2006, the opening of the Hooters Casino Hotel:

 

·                  *Hooters Gaming Corporation.*  We pay Hooters Gaming Corporation a fee equalto three percent of all net gaming revenues generated from our gamingactivities (as defined by Nevada law). The fee accrues on a monthly basis.

 

·                  *Las Vegas Wings, Inc.*  We pay Las Vegas Wings, Inc. a consentfee equal to four percent of gross cash sales from any Hooters brandedrestaurant and three percent of the gross cash sales of any merchandise with aHooters logo at any location on or about the Hooters Casino Hotel.  This consent fee accrues monthly.

 

·                  *Lags Ventures, Inc.*  The “Dan Marino’s Fine Food &Spirits” and “‘13’ Martini Bar” marks used in connection with restaurantservices at the Hooters Casino Hotel property, required us to pay Lags Ventures, Inc.a royalty equal to six percent of gross cash sales generated from suchestablishments. The agreement was terminated on November 1, 2009.  This mark fee was calculated on a monthlybasis, subject to any subordination or deferral agreed to by Lags Ventures, Inc.In addition to the mark fee, we were responsible for paying Lags Ventures, Inc.all training fees, set-up fees and other start-up items customarily incurred byLags Ventures, Inc. in similar licensing situations.

 

Hooters Gaming Corporation, Las Vegas Wings, Inc.and Lags Ventures, Inc. have agreed to subordinate payment of theirrespective fees in favor of the obligations of 155 East Tropicana, LLC and itssubsidiaries under the Notes and any guarantees of the Notes, certain paymentsto be made pursuant to our operating agreement, and any fees due to any of themwill accrue and remain unpaid until there is sufficient net cash flow fromoperations to make all of the foregoing payments. In addition, the foregoingfees are subject to applicable limitations in the indenture governing theNotes, such as the limitation on restricted payments to the extent theyconstitute restricted payments.

 

**Other Transactions**

** **

*Provident Advertising &Marketing, Inc.*  ProvidentAdvertising & Marketing, Inc.’s majority shareholder is Edward C.Droste, a member of our management board and an indirect beneficial owner of3.96% of our membership interests. Beginning 2004, Provident Advertising & Marketing, Inc.provided us with services relating to the planning and development of anadvertising and marketing plan.  The aggregatemarketing fee and merchandise fee paid to Provident Advertising &Marketing, Inc. for the years ended December 31, 2009, 2008 and 2007was approximately $0.1 million, $0.1 million, and $0.2 million,respectively.  For the years ended December 31,2009, 2008 and 2007, we paid $0.9 million, $1.0 million, and $1.6 million,respectively, to Provident Merchandise Sourcing, and $0, $502, and $6,420,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. We will continue to engage Provident Advertising & Marketing, Inc.for the continued

 

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development andimplementation of a strategic marketing plan in connection with the HootersCasino Hotel.

 

Our Notes indenture required that we engagean independent valuation firm to determine that the related party transactionsare valued at arm’s-length prices if the total expenditures to Providentaggregate $2.5 million.  Anationally-recognized valuation firm issued a favorable opinion in 2006 thatthe related party transactions with Provident had been conducted in a mannerconsistent with the arm’s length standard.

 

*Pete & Shorty’s, Inc.*  Pete & Shorty’s, Inc. is ownedby our chief executive officer, Neil Kiefer (6.39%), certain members of ourmanagement board (Gilbert DiGiannantonio (12.77%), William Ranieri (4.26%),Edward Droste (14.00%), and Dennis Johnson (9.34%), and an indirect minorityinterest owner. In March 2005, we entered into a license agreement withPete & Shorty’s, Inc. whereby we were granted 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 thelicense agreement, we can also use the mark in connection with affiliatedmerchandise, entertainment and casino services.

 

## **ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES.**

 

The aggregate accountingfees billed and services provided by Ernst & Young LLP, our principalaccountants, to us for 2009 and 2008 are as follows:

 
| **155  East Tropicana, LLC** | ** ** | **Year ended********December 31,********2009** | ** ** | **Year ended********December 31,********2008** | ** ** |
|------------------------------|------------|-----------------------------------------------------|------------|-----------------------------------------------------|------------|
|                         |       |                                                |       |                                                |       |   |   |
| Audit fees (1)               |       | $                                                   | 192,462    |                                                | $          | 156,110 |   |
|                         |       |                                                |       |                                                |       |
| Total fees                   |       | $                                                   | 192,462    |                                                | $          | 156,110 |   |

 

----

(1)         Represents the aggregate fees Ernst &Young LLP billed us for professional services for the audits of our annualfinancial statements and review of financial statements included in our reportson Form 10-Q or services that are normally provided by Ernst &Young LLP in connection with those filings.

 

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

 

# **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 “Item8. Financial Statements and Supplementary Data” above.

 

(2)   Financial Statement Schedules.

 

Not applicable.

 

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(3)   Exhibit Index.

 

See exhibits listed on the Exhibit Index following the signature page ofthis Annual Report, where said Exhibit Index is incorporated herein byreference.

 

(b)   Exhibits.

 

Included as exhibits are the items listed in the Exhibit Index.

 

(c)            Financial Statement Schedules

 

Not applicable.

 

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## **SIGNATURES**

## ** **

Pursuant to the requirements of Section 13or 15(d) of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.

 
| ** **                | **155 EAST TROPICANA, LLC** |
|---------------------------|-----------------------------|
| ** **                | (Registrant)                |
|                      |                        |   |
|                      |                        |   |
|                      | By:                         | /s/  Neil G. Kiefer |
| Date: March 31, 2010 |                        | Neil  G. Kiefer |
|                      | Its:                        | Chief Executive Officer |

 

Pursuantto the requirements of the Securities and Exchange Act of 1934, this report hasbeen signed below by the following persons on behalf of the registrant and inthe capacities and on the dates included.

 
| **Signature**         | ** ** | **Title**                           | ** ** | **Date**            |
|-----------------------|------------|-------------------------------------|------------|---------------------|
|                  |       |                                |       |                |
| /s/ Neil G. Kiefer    |       | Chief Executive Officer  (Principal |       | March 31, 2010 |
| Neil G. Kiefer        |       | Executive Officer)                  |       |                |
|                  |       |                                |       |                |
|                  |       |                                |       |                |
| /s/ Deborah J. Pierce |       | Chief Financial Officer  (Principal |       | March 31, 2010 |
| Deborah J. Pierce     |       | Financial and Accounting  Officer)  |       |                |
|                  |       |                                |       |                |
|                  |       |                                |       |                |
| /s/ Michael Hessling  |       | President and  Management Board     |       | March 31, 2010 |
| Michael Hessling      |       |                                |       |                |
|                  |       |                                |       |                |
|                  |       |                                |       |                |
| /s/ Toyoroku Izumi    |       | Management Board                    |       | March 31, 2010 |
| Toyoroku Izumi        |       |                                |       |                |

 

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| **Signature**               | ** ** | **Title**        | ** ** | **Date**             |
|-----------------------------|------------|------------------|------------|----------------------|
|                        |       |             |       |                 |
| /s/ Sukeaki  Izumi          |       | Management Board |       | March 31,  2010 |
| Sukeaki Izumi               |       |             |       |                 |
|                        |       |             |       |                 |
|                        |       |             |       |                 |
| /s/ William Ranieri         |       | Management Board |       | March 31,  2010 |
| William Ranieri             |       |             |       |                 |
|                        |       |             |       |                 |
|                        |       |             |       |                 |
| /s/ David  Lageschulte      |       | Management Board |       | March 31,  2010 |
| David  Lageschulte          |       |             |       |                 |
|                        |       |             |       |                 |
|                        |       |             |       |                 |
| /s/ Edward  Droste          |       | Management Board |       | March 31,  2010 |
| Edward Droste               |       |             |       |                 |
|                        |       |             |       |                 |
|                        |       |             |       |                 |
| /s/ Gilbert  DiGiannantonio |       | Management Board |       | March 31,  2010 |
| Gilbert  DiGiannantonio     |       |             |       |                 |
|                        |       |             |       |                 |
|                        |       |             |       |                 |
| /s/ John Blakely            |       | Management Board |       | March 31,  2010 |
| John Blakely                |       |             |       |                 |
|                        |       |             |       |                 |
|                        |       |             |       |                 |
| /s/ Dennis  Johnson         |       | Management Board |       | March 31,  2010 |
| Dennis Johnson              |       |             |       |                 |

 

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## **SIGNATURES**

 

Pursuant to the requirements of Section 13or 15(d) of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.

 
|                      | **155 EAST TROPICANA FINANCE  CORP.** |
|---------------------------|---------------------------------------|
|                      | (Registrant)                          |
|                      |                                  |   |
|                      |                                  |   |
|                      | By:                                   | /s/  Neil G. Kiefer |
| Date: March 31, 2010 |                                  | Neil  G. Kiefer |
|                      | Its:                                  | Chief Executive Officer |

 

 

Pursuantto the requirements of the Securities and Exchange Act of 1934, this report hasbeen signed below by the following persons on behalf of the registrant and inthe capacities and on the dates included.

 
| **Signature**         | ** ** | **Title**                           | ** ** | **Date**            |
|-----------------------|------------|-------------------------------------|------------|---------------------|
|                  |       |                                |       |                |
| /s/ Neil G. Kiefer    |       | President (Principal  Executive     |       | March 31, 2010 |
| Neil G. Kiefer        |       | Officer)                            |       |                |
|                  |       |                                |       |                |
|                  |       |                                |       |                |
| /s/ Deborah J. Pierce |       | Treasurer (Principal  Financial and |       | March 31, 2010 |
| Deborah J. Pierce     |       | Accounting Officer)                 |       |                |
|                  |       |                                |       |                |
|                  |       |                                |       |                |
| /s/ Michael Hessling  |       | Vice President,  Secretary and      |       | March 31, 2010 |
| Michael Hessling      |       | Director                            |       |                |
|                  |       |                                |       |                |
|                  |       |                                |       |                |
| /s/ Toyoroku Izumi    |       | Director                            |       | March 31, 2010 |
| Toyoroku Izumi        |       |                                |       |                |

 

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| **Signature**               | ** ** | **Title** | ** ** | **Date**             |
|-----------------------------|------------|-----------|------------|----------------------|
|                        |       |      |       |                 |
| /s/ Sukeaki  Izumi          |       | Director  |       | March 31,  2010 |
| Sukeaki Izumi               |       |      |       |                 |
|                        |       |      |       |                 |
|                        |       |      |       |                 |
| /s/ William  Ranieri        |       | Director  |       | March 31,  2010 |
| William Ranieri             |       |      |       |                 |
|                        |       |      |       |                 |
|                        |       |      |       |                 |
| /s/ David  Lageschulte      |       | Director  |       | March 31,  2010 |
| David  Lageschulte          |       |      |       |                 |
|                        |       |      |       |                 |
|                        |       |      |       |                 |
| /s/ Edward  Droste          |       | Director  |       | March 31,  2010 |
| Edward Droste               |       |      |       |                 |
|                        |       |      |       |                 |
|                        |       |      |       |                 |
| /s/ Gilbert  DiGiannantonio |       | Director  |       | March 31,  2010 |
| Gilbert  DiGiannantonio     |       |      |       |                 |
|                        |       |      |       |                 |
|                        |       |      |       |                 |
| /s/ John Blakely            |       | Director  |       | March 31,  2010 |
| John Blakely                |       |      |       |                 |
|                        |       |      |       |                 |
|                        |       |      |       |                 |
| /s/ Dennis  Johnson         |       | Director  |       | March 31,  2010 |
| Dennis Johnson              |       |      |       |                 |

 

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## **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.                                                                                                                                                              |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.1          |       | 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.                                                                                                                               |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.2          |       | 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. |

 

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| **Index No.** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                 |
|---------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |       |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.3          |       | 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.                                                      |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.4          |       | 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.                                                                           |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.5          |       | 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.                                                                                                                                                         |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.6          |       | 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.                                                                         |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.7          |       | 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.                              |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.8          |       | 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.                                                |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.9          |       | 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.                                                     |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.10         |       | 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.                                  |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.11         |       | 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.                                                                                         |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.12         |       | 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.                                                     |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.13         |       | 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. |

 

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| **Index No.** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                       |
|---------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.14         |       | 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. |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.15         |       | 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.                       |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.16         |       | 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.                                                                                      |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.17         |       | 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.                                                                                  |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.18         |       | 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.                                  |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.19         |       | 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.                                                                                                      |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.20         |       | 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.                                                                                            |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.21         |       | 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.                                                                                             |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.22         |       | 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.                                                                                |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.23         |       | 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.                                                                                                                |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.24         |       | 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.                                                                                                                   |

 

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Tableof Contents

 
| **Index No.** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                      |
|---------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |       |                                                                                                                                                                                                                                                                                                                                                 |
| 10.25         |       | 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.                                               |
|          |       |                                                                                                                                                                                                                                                                                                                                                 |
| 10.26         |       | 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.                                                      |
|          |       |                                                                                                                                                                                                                                                                                                                                                 |
| 10.27         |       | 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.                                 |
|          |       |                                                                                                                                                                                                                                                                                                                                                 |
| 10.28         |       | 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.                                                    |
|          |       |                                                                                                                                                                                                                                                                                                                                                 |
| 10.29         |       | 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. |
|          |       |                                                                                                                                                                                                                                                                                                                                                 |
| 10.30         |       | 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.                                                                                                                      |
|          |       |                                                                                                                                                                                                                                                                                                                                                 |
| 10.31         |       | 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.                                                                                                          |
|          |       |                                                                                                                                                                                                                                                                                                                                                 |
| 10.32         |       | Employment  Agreement between 155 East Tropicana, LLC and Deborah J. Pierce dated  February 1, 2005, incorporated by reference to registrant’s  Form 10-K, as filed with the Securities and Exchange Commission on  April 2, 2007.                                                                                               |
|          |       |                                                                                                                                                                                                                                                                                                                                                 |
| 10.33         |       | Amendment  Number four to Credit Agreement dated August 13, 2008, incorporated by  reference to registrants’ quarterly report Form 10-Q, as filed with  Securities and Exchange Commission on August 14, 2008.                                                                                                                   |
|          |       |                                                                                                                                                                                                                                                                                                                                                 |
| 12            |       | Computation  of Ratio of Earnings to Fixed Charges                                                                                                                                                                                                                                                                                                   |
|          |       |                                                                                                                                                                                                                                                                                                                                                 |
| 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                                                                                                                                                                                                                                                     |

 

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