**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

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**FORM 10-Q**

 

**(MarkOne)**

 
| ý | **QUARTERLY REPORT PURSUANT TO SECTION 13  OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|--------|--------------------------------------------------------------------------------------------------------|

 

**For the quarterly period ended March 31, 2006**

 

**or**

 
| o | **TRANSITION REPORT PURSUANT TO SECTION 13  OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|---|---------------------------------------------------------------------------------------------------------|

 

**For the transition period from                           to                          **

 

**Commission File Number 333-124924**

 

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

(Exact Name of Registrant as Specified in its Charter)

 

| **NEVADA**                                                      | ** ** | **20-1363044**                           |
|-----------------------------------------------------------------|------------|------------------------------------------|
| **NEVADA**                                                      | ** ** | **20-2546581**                           |
| (State or Other Jurisdiction  of Incorporation or Organization) |       | (I.R.S. Employer  Identification Number) |
|                                                            |       |                                     |
| **115 East Tropicana Avenue  Las Vegas, Nevada**                | ** ** | **89109**                                |
| (Address of Principal Executive Offices)                        |       | (Zip Code)                               |

 

**(702) 597-6076**

(Registrant’s Telephone Number, Including Area Code)

 

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Indicate by check mark whether the registrant (1) hasfiled all reports required by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports) and (2) has beensubject to such filing requirements for the past 90 days.   Yes  ý    No  o

 

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, or a non-accelerated filer. Seedefinition of “accelerated filer and large accelerated filer” in Rule 12b-2of the Exchange Act (Check one):

Large accelerated filer  o          Acceleratedfiler  o         Non-acceleratedfiler  ý

 

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  ý

 

 

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| **PART I –  FINANCIAL INFORMATION**                                                       | **1**      |
|-----------------------------------------------------------------------------------------------------|------------|
| ** **                                                                                          | ** ** |
| Item 1. Financial Statements  (unaudited)                                                           | **1**      |
|                                                                                                |       |
| ***155 EAST TROPICANA, LLC (A Nevada Limited-Liability Company)***                                  | * *   |
| * *                                                                                            | * *   |
| *Condensed Consolidated  Balance Sheets*                                                            | *1*        |
| *Condensed Consolidated  Statements of Operations*                                                  | *2*        |
| *Condensed Consolidated  Statements of Cash Flows*                                                  | *3*        |
| *Notes to Condensed  Consolidated Financial Statements*                                             | *4*        |
| * *                                                                                            | * *   |
| ***HÔTEL SAN RÉMO CASINO AND RESORT (A Division of S.I. Enterprises, Inc.)***             | * *   |
| *** ***                                                                                        | * *   |
| *Condensed  Combined Statement of Operations*                                                       | *11*       |
| *Condensed  Combined Statement of Cash Flows*                                                       | *12*       |
| *Notes to Condensed Combined Financial Statements*                                                  | *13*       |
| * *                                                                                            | * *   |
| Item 2. Management’s  Discussion and Analysis of Financial Condition and Results of Operations | 15         |
|                                                                                                |       |
| Item 3. Quantitative and  Qualitative Disclosures About Market Risk                                 | 21         |
|                                                                                                |       |
| Item 4. Controls and Procedures                                                                     | 22         |
|                                                                                                |       |
| **PART II –  OTHER INFORMATION**                                                          | **24**     |
| ** **                                                                                          | ** ** |
| Item 1. Legal Proceedings                                                                           | 24         |
|                                                                                                |       |
| Item 1A. Risk Factors                                                                               | 24         |
|                                                                                                |       |
| Item 2. Unregistered Sales  of Equity Securities and Use of Proceeds                                | 24         |
|                                                                                                |       |
| Item 3. Defaults Upon Senior  Securities                                                            | 24         |
|                                                                                                |       |
| Item 4. Submission of  Matters to a Vote of Security Holders                                        | 24         |
|                                                                                                |       |
| Item 5. Other Information                                                                           | 24         |
|                                                                                                |       |
| Item 6. Exhibits                                                                                    | 24         |
|                                                                                                |       |
| **SIGNATURES**                                                                                      | **25**     |

 

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# **PART I – FINANCIAL INFORMATION**

# ** **

## **Item 1. Financial Statements.**

## ** **

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

### ** **

### **CONDENSEDCONSOLIDATED BALANCE SHEETS**

### ** **

| ** **                                                                                                           | ** ** | **March 31,** | ** **  | **December 31,** | ** ** |
|----------------------------------------------------------------------------------------------------------------------|------------|--------------------|-------------|-----------------------|------------|
| ** **                                                                                                           | ** ** | **2006**           | ** **  | **2005**              | ** ** |
| ** **                                                                                                           | ** ** | **(unaudited)**    | ** **  | ** **            | ** ** |
| **Assets**                                                                                                           |       |               |        |                  |       |
| Current assets:                                                                                                      |       |               |        |                  |       |
| Cash and cash equivalents                                                                                            |       | $                  | 9,819,849   |                  | $          | 14,191,385 |   |
| Accounts receivable, net of allowance for  doubtful accounts of $117,068 and $110,017 in 2006 and 2005, respectively |       | 914,124            |        | 647,776               |       |
| Due from Hotel San Remo                                                                                              |       | 219,460            |        | 30,508                |       |
| Inventories                                                                                                          |       | 956,732            |        | 146,339               |       |
| Prepaid expenses                                                                                                     |       | 1,714,779          |        | 775,836               |       |
| Total current assets                                                                                                 |       | 13,624,944         |        | 15,791,844            |       |
| Property and equipment, net                                                                                          |       | 124,470,853        |        | 103,264,703           |       |
| Other long-term assets:                                                                                              |       |               |        |                  |       |
| Restricted cash                                                                                                      |       | 15,590,387         |        | 29,345,513            |       |
| Deferred financing costs                                                                                             |       | 7,089,512          |        | 7,286,738             |       |
| Intangible assets                                                                                                    |       | 6,596,051          |        | 6,609,028             |       |
| Other assets                                                                                                         |       | 250,407            |        | 861,565               |       |
| Total other long-term assets                                                                                         |       | 29,526,357         |        | 44,102,844            |       |
| Total assets                                                                                                         |       | $                  | 167,622,154 |                  | $          | 163,159,391 |   |
|                                                                                                                 |       |               |        |                  |       |
| **Liabilities and Members’ Equity**                                                                             |       |               |        |                  |       |
| Current liabilities:                                                                                                 |       |               |        |                  |       |
| Accounts payable                                                                                                     |       | $                  | 4,755,655   |                  | $          | 3,323,099 |   |
| Related party royalties payable                                                                                      |       | 348,417            |        | —                |       |
| Construction payable                                                                                                 |       | 7,063,498          |        | 6,034,450             |       |
| Accrued interest payable                                                                                             |       | 5,693,329          |        | 2,864,396             |       |
| Accrued liabilities                                                                                                  |       | 2,076,584          |        | 1,384,649             |       |
| Current portion of long-term debt                                                                                    |       | 2,392,420          |        | —                |       |
| Total current liabilities                                                                                            |       | 22,329,903         |        | 13,606,594            |       |
| Long-term debt                                                                                                       |       | 133,335,533        |        | 130,000,000           |       |
| Total liabilities                                                                                                    |       | 155,665,436        |        | 143,606,594           |       |
|                                                                                                                 |       |               |        |                  |       |
| Commitments and contingencies                                                                                        |       |               |        |                  |       |
|                                                                                                                 |       |               |        |                  |       |
| Members’ equity:                                                                                                |       |               |        |                  |       |
| Membership interests                                                                                                 |       | 34,333,375         |        | 34,333,375            |       |
| Accumulated deficit                                                                                                  |       | (22,376,657        | )           | (14,780,578           | )          |
|                                                                                                                 |       | 11,956,718         |        | 19,552,797            |       |
| Total liabilities and members’ equity                                                                           |       | $                  | 167,622,154 |                  | $          | 163,159,391 |   |

 

*Theaccompanying notes are an integral part of these condensed consolidatedfinancial statements.*

 

1

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

 

### **CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**

### ** **

| ** **                                                                                                                               | ** ** | **Three Months Ended  March 31,** | ** ** | **Three Months Ended  March 31,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                                                                               | ** ** | **2006**                                         | ** ** | **2005**                                         | ** ** |
| ** **                                                                                                                               | ** ** | **(unaudited)**                                  | ** ** | **(unaudited)**                                  | ** ** |
| Operating revenues:                                                                                                                      |       |                                             |       |                                             |       |
| Casino                                                                                                                                   |       | $                                                | 6,898,031  |                                             | $          | — |   |
| Food and beverage                                                                                                                        |       | 5,152,976                                        |       | —                                           |       |
| Hotel and other                                                                                                                          |       | 4,500,256                                        |       | —                                           |       |
| Related party lease income                                                                                                               |       | —                                           |       | 2,374,934                                        |       |
|                                                                                                                                     |       | 16,551,263                                       |       | 2,374,934                                        |       |
| Less promotional allowances                                                                                                              |       | (1,421,091                                       | )          | —                                           |       |
| Net operating revenues                                                                                                                   |       | 15,130,172                                       |       | 2,374,934                                        |       |
|                                                                                                                                     |       |                                             |       |                                             |       |
| Operating expenses:                                                                                                                      |       |                                             |       |                                             |       |
| Casino                                                                                                                                   |       | 2,967,178                                        |       | —                                           |       |
| Food and beverage                                                                                                                        |       | 4,226,248                                        |       | —                                           |       |
| Hotel and other                                                                                                                          |       | 1,716,584                                        |       | —                                           |       |
| General and administrative                                                                                                               |       | 3,326,016                                        |       | —                                           |       |
| Depreciation and amortization                                                                                                            |       | 1,134,233                                        |       | 406,281                                          |       |
| Pre-opening expenses                                                                                                                     |       | 5,292,834                                        |       | 264,890                                          |       |
| Related party royalties expense                                                                                                          |       | 345,697                                          |       | —                                           |       |
| Loss on disposal of assets                                                                                                               |       | 977,677                                          |       | —                                           |       |
| Total operating expenses                                                                                                                 |       | 19,986,467                                       |       | 671,171                                          |       |
| Operating (loss) income                                                                                                                  |       | (4,856,295                                       | )          | 1,703,763                                        |       |
|                                                                                                                                     |       |                                             |       |                                             |       |
| Other income (expense):                                                                                                                  |       |                                             |       |                                             |       |
| Interest income                                                                                                                          |       | 281,280                                          |       | 14,990                                           |       |
| Interest expense, net of capitalized  interest of $229,096 and $32,339 for the three months ended March 31, 2006  and 2005, respectively |       | (3,021,064                                       | )          | (1,354,125                                       | )          |
| Loss on extinguishment of debt                                                                                                           |       | —                                           |       | (2,246,526                                       | )          |
| Other income (expense), net                                                                                                              |       | (2,739,784                                       | )          | (3,585,661                                       | )          |
| Net loss                                                                                                                                 |       | $                                                | (7,596,079 | )                                                | $          | (1,881,898 | ) |

 

*Theaccompanying notes are an integral part of these condensed consolidatedfinancial statements.*

 

2

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

 

### **CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

### ** **

| ** **                                                                                 | ** ** | **Three Months Ended** | ** ** | **Three Months Ended** | ** ** |
|--------------------------------------------------------------------------------------------|------------|----------------------------------|------------|----------------------------------|------------|
| ** **                                                                                 | ** ** | **March 31,**               | ** ** | **March 31,**               | ** ** |
| ** **                                                                                 | ** ** | **2006**                         | ** ** | **2005**                         | ** ** |
| ** **                                                                                 | ** ** | **(unaudited)**                  | ** ** | **(unaudited)**                  | ** ** |
| **Cash Flow From Operating Activities**                                                    |       |                             |       |                             |       |
| Net loss                                                                                   |       | $                                | (7,596,079 | )                                | $          | (1,881,898 | ) |
| Adjustments to reconcile net loss to net  cash (used in) provided by operating activities: |       |                             |       |                             |       |
| Depreciation and amortization                                                              |       | 1,134,233                        |       | 406,281                          |       |
| Amortization of debt issuance costs                                                        |       | 197,406                          |       | 227,707                          |       |
| Amortization of intangible asset                                                           |       | 12,977                           |       | —                           |       |
| Loss on extinguishment of debt                                                             |       | —                           |       | 2,246,526                        |       |
| Loss on disposal of assets                                                                 |       | 977,677                          |       | —                           |       |
| Changes in assets and liabilities:                                                         |       |                             |       |                             |       |
| Accounts receivable                                                                        |       | (266,348                         | )          | —                           |       |
| Inventories                                                                                |       | (810,393                         | )          | —                           |       |
| Prepaid expenses                                                                           |       | (938,943                         | )          | 10,009                           |       |
| Accounts payable                                                                           |       | 1,432,556                        |       | 623,874                          |       |
| Related party royalties payable                                                            |       | 348,417                          |       | —                           |       |
| Accrued interest payable                                                                   |       | 2,828,933                        |       | —                           |       |
| Accrued liabilities                                                                        |       | 691,935                          |       | 91,734                           |       |
| Net cash (used in) provided by operating  activities                                       |       | (1,987,629                       | )          | 1,724,233                        |       |
|                                                                                       |       |                             |       |                             |       |
| **Cash Flow From Investing Activities**                                                    |       |                             |       |                             |       |
| Capital expenditures                                                                       |       | (17,552,965                      | )          | (772,792                         | )          |
| Increase in construction payable                                                           |       | 1,029,048                        |       | —                           |       |
| Change in restricted cash                                                                  |       | 13,755,126                       |       | (57,964,393                      | )          |
| Change in other assets                                                                     |       | 611,158                          |       | (11,987                          |       |
| Net cash used in investing activities                                                      |       | (2,157,633                       | )          | (58,749,172                      | )          |
|                                                                                       |       |                             |       |                             |       |
| **Cash Flow From Financing Activities**                                                    |       |                             |       |                             |       |
| Due to/from Hotel San Remo                                                                 |       | (188,952                         | )          | (1,145,214                       | )          |
| Payment of debt financing costs                                                            |       | —                           |       | (7,343,856                       | )          |
| Extinguishment of debt                                                                     |       | —                           |       | (48,500,000                      | )          |
| Loan penalties from extinguishment of debt                                                 |       | —                           |       | (1,361,750                       | )          |
| Proceeds from issuance of long-term debt                                                   |       | 172,755                          |       | 130,000,000                      |       |
| Principal payments on debt                                                                 |       | (210,077                         | )          | —                           |       |
| Net cash (used in) provided by financing  activities                                       |       | (226,274                         | )          | 71,649,180                       |       |
|                                                                                       |       |                             |       |                             |       |
| (Decrease) increase in cash and cash  equivalents                                          |       | (4,371,536                       | )          | 14,624,241                       |       |
| Cash and cash equivalents, beginning of  period                                            |       | 14,191,385                       |       | 1,220,851                        |       |
| Cash and cash equivalents, end of period                                                   |       | $                                | 9,819,849  |                             | $          | 15,845,092 |   |
|                                                                                       |       |                             |       |                             |       |
| **Supplemental disclosure of cash flow  information**                                      |       |                             |       |                             |       |
| Cash paid for interest, net of capitalized  interest                                       |       | $                                | 192,131    |                             | $          | 1,126,418 |   |
|                                                                                       |       |                             |       |                             |       |
| Assets acquired through equipment loans                                                    |       | $                                | 5,765,275  |                             | $          | — |   |

 

*Theaccompanying notes are an integral part of these condensed consolidatedfinancial statements.*

 

3

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

 

### **Notes to Condensed Consolidated Financial Statements (unaudited)**

### ** **

**March 31, 2006**

 

**1.Organization and Basis of Presentation**

** **

155 East Tropicana, LLC, a Nevada limited-liability company (the “Company”)was incorporated on June 17, 2004 to acquire the real and personalproperty of the Hôtel San Rémo Casino and Resort (the “Hôtel San Rémo”) in LasVegas, Nevada with the intention of renovating the existing casino and hotelfacility with a “Hooters” entertainment concept and theme. The renovations werecompleted and the Hôtel San Rémo property was reopened as the new Hooters CasinoHotel on February 3, 2006. The Company’s business is concentrated at theone casino and hotel property in Las Vegas, Nevada. The renovations werefinanced by the Company and its wholly owned subsidiary, 155 East TropicanaFinance Corp. through a $130 million Senior Secured Notes offering in March 2005.The Company’s membership interests are held two-thirds through Florida HootersLLC and one-third through EW Common LLC. The initial capitalization of theCompany was provided by Florida Hooters LLC in the form of a$5.0 million cash contribution and the assignment of rights with respectto the Hooters trademark and logo and other intellectual property and by EWCommon LLC in the form of a $25.0 million deemed capitalcontribution. The deemed capital contribution from EW Common LLC carries withit a priority return of four percent of the contribution annually. The paymentof this priority return is subject to meeting certain financial covenantsassociated with the Company’s debt.

 

Florida Hooters LLC is a joint venture between Hooters Gaming LLC andLags Ventures, LLC. Hooters Gaming LLC is owned by the holders of licenses tooperate Hooters restaurants in the Tampa Bay, Florida, Chicago, Illinois anddowntown Manhattan in New York as well as for the sale of wholesale foods andcalendars and Nevada hotel/gaming and includes most of the original founders ofthe Hooters brand. Pursuant to these license rights, the owners of FloridaHooters LLC operate 41 Hooters restaurants, publish Hooters calendars and operatea Hooters food business. Lags Ventures, LLC is owned by a holder of the licenserights to Hooters restaurants in South Florida and the State of Nevada. Theowner of Lags Ventures, LLC is also the founder of the Dan Marino conceptrestaurants and owns and operates 4 Dan Marino concept restaurants.

 

EW Common LLC is owned 90% by Eastern & Western HotelCorporation (“Eastern & Western”) and 10% by Michael J. Hessling.Eastern & Western is beneficially owned by Sukeaki and Toyoroku Izumi.Eastern & Western and its affiliates owned the real property andnon-gaming assets of Hôtel San Rémo from November 1988 until the Company’sacquisition of the Hôtel San Rémo in August 2004. Mr. Hessling servedas the executive vice president and the chief operating officer of the HôtelSan Rémo from January 1989 until the acquisition, at which time he becamethe chief operating officer of the Company.

 

4

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

 

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

 

**1.Organization and Basis of Presentation (continued)**

 

Florida Hooters LLC and EW Common LLC entered into a joint ventureagreement for the purpose of forming the Company and documenting the terms oftheir investments and business venture. Under the terms of the joint ventureagreement, the venture progressed in three stages. The first stage involved theformation of the Company and the conveyance of all the real and non-gamingpersonal property owned by and associated with the Hôtel San Rémo, theleaseback under operating lease arrangements of these assets to Eastern &Western pursuant to the casino and hotel lease agreements described inNote 3, and the contribution through assignment agreements of certainintellectual property rights to the Company by the respective members ofFlorida Hooters LLC. The second stage related to the raising of financing tofund the redesign and renovation of the Hôtel San Rémo into the Hooters CasinoHotel, the refinancing of the Company’s current debt structure and otherworking capital requirements was completed in March 2005. The final stageinvolved securing all licenses necessary to conduct gaming at the hotel casinoand the subsequent termination of the hotel and casino leases. In October 2005,the Company secured their gaming and liquor licenses and on November 1,2005, assumed the operations of the existing Hôtel San Rémo. The hotel andcasino leases with Eastern & Western were terminated on October 31,2005.

 

Pursuant to the joint venture agreement, Florida Hooters LLC and EWCommon LLC entered into an operating agreement. Under the terms of theoperating agreement, Florida Hooters LLC has the right to appoint six managersand EW Common LLC has the right to appoint three managers to a managementboard. Certain transactions, including key operational matters, the sale of allor substantially all of the Company’s assets, a merger or consolidation andvarious governance matters require the unanimous approval of the managementboard.

 

Prior to November 1, 2005, the Company had conducted no businessother than in connection with the acquisition and subsequent leasing of theHôtel San Rémo, and was considered a development stage company. The Hôtel SanRémo is a division of S.I. Enterprises, Inc., a Nevada corporation.Through October 31, 2005, Eastern & Western held the gaminglicense in Nevada and owned all gaming assets used by Hôtel San Rémo.Commencing November 1, 2005, all operations, assets and liabilities of theformer Hôtel San Rémo are included in the Company’s financial statements, andeffective that date the Company was no longer in the development stages.

 

On February 3, 2006, the new Hooters Casino Hotel was opened forbusiness. The Hooters Casino Hotel features a casino floor with 658 slot andvideo poker machines, 31 table games, 696 newly renovated hotel rooms including17 suites, a tropical pool area, retail outlets, a day spa, and dining andentertainment options which include a Hooters restaurant, Dan Marino’s FineFood, a coffee shop restaurant, a sports bar, and several bars.

 

5

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**155 EAST TROPICANA, LLC**

**(A NEVADA LIMITED-LIABILITY COMPANY)**

** **

**Notes to Condensed Consolidated Financial Statements (unaudited)(continued)**

 

**2.Long-term Debt**

** **

**Notes Offering**

 

OnMarch 29, 2005, the Company issued $130.0 million aggregate principalamount of 83⁄4% Senior Secured Notes due 2012, in a private placement (the “oldnotes”). On August 5, 2005, the Company successfully exchanged all of theold notes for new notes (the “Notes”). The Notes have substantially identicalterms as the old notes, except that the Notes have been registered under theSecurities Act of 1933 and are freely tradable. Interest payments on the Notes aredue semi annually, on April 1 and October 1. The first payment wasmade on October 1, 2005. The Notes are secured by all of the Company’sand, to the extent in existence, subsidiary guarantors’ 1) existing and futureassets  (other than certain excludedexisting and future assets), 2) the Company’s equity interest in any guarantorsand 3) existing renovation disbursement and interest reserve accounts asdescribed below.

 

The Notes are redeemable at the option of theCompany on or after April 1, 2009. The indenture governing the Notesrequired the Company to establish a renovation disbursement account and aninterest reserve account. The balances in the renovation account and theinterest reserve account at March 31, 2006 were $9.9 million and $5.7million, respectively, and are included in restricted cash in the accompanyingcondensed consolidated balance sheet. The indenture also contains certainprovisions which restrict or limit the Company’s ability to, among otherthings, 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 old notes offering to retireexisting indebtedness and (together with cash from operations and proceeds fromequipment financing), renovate and construct the Hooters Casino Hotel andprovide for general working capital needs. Related to this retirement ofexisting indebtedness, the Company recognized a loss on extinguishment of debtin the amount of $2,246,526 during 2005.

 

**Senior Secured Credit Facility**

 

The Company entered into a $15.0 millionsenior secured credit facility concurrently with the offering of the old notes.The senior secured credit facility is a four-year revolving credit facility ofup to the lesser of $15.0 million or three times trailing twelve month EBITDAthrough September 30, 2006 and two times thereafter; provided that themultiple of EBITDA requirement will not apply if outstanding borrowings areless than $7.5 million. EBITDA is defined for any fiscal period as the Company’sconsolidated net income (or loss), minus extraordinary gains and interestincome, plus interest expense, income taxes and depreciation and amortizationfor such period, and subject to other adjustments as defined in the creditfacility agreement. On January 30, 2006, the senior secured creditfacility was amended to allow the Company, during the period of February 1,2006 to June 30, 2006, to obtain advances in the aggregate principalamount of up to $15.0 million, without regard to the multiple of

 

6

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**155 EAST TROPICANA, LLC**

**(A NEVADA LIMITED-LIABILITY COMPANY)**

** **

**Notes to Condensed Consolidated Financial Statements (unaudited)(continued)**

 

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

 

EBITDArequirement. The Company drew $172,755 against the senior secured creditfacility during the quarter ended March 31, 2006 (all of which wasoutstanding at March 31, 2006) to pay the bank fee related to thisamendment and to pay for other expenses related to the credit facility.

 

At March 31, 2006, we failed to meet two covenant requirementsassociated with the senior secured credit facility. We were required tomaintain a rolling twelve month adjusted EBITDA of $1,000,000 and a Senior Debtto EBITDA ratio of 21:1 at March 31, 2006. Due to construction disruption andpre-opening expenses experienced during the construction period, we fell shortof the required EBITDA by approximately $300,000 and exceeded theminimum Senior Debt to EBITDA ratio. We have received a waiver of default fromthe agent for the lenders through March 31, 2006. We are in currentnegotiations with the agent for the lender to modify the covenant and the termsfor borrowing against the senior secured credit facility in the future.

 

At the Company’s option, the interest ratewill be either the agent for the lender’s prime rate plus 2.00% per annum orLIBOR plus 3.50% per annum. All the obligations under the senior secured creditfacility are secured by first priority liens on and security interest in all ofthe Company’s and guarantor’s existing and future properties and assets. Thelien on the collateral that secures the Notes are contractually subordinated tothe liens securing the principal amount of borrowings under the senior securedcredit facility of up to $15.0 million (plus related interest, fees,indemnities, costs and expenses). The senior secured credit facility requiredthe Company to pay unused commitment fees of 0.50% per annum on any unusedportion of the senior secured credit facility, and, if terminated prior to thethird anniversary date, a prepayment premium of 1.00% of the maximum creditamount for each year or partial year remaining from the termination date to thethird anniversary date. The senior secured credit facility also containscustomary financial covenants and other events of default.

 

**Intercreditor Agreement**

 

Concurrently with the closing of the old notes offering and seniorsecured credit facility, the Company entered into an intercreditor agreement, whichdefines the rights of the lenders under the senior secured credit facility inrelation to the rights of the trustee and the holders of the Notes with respectto****the collateral securing the Notes. Theintercreditor agreement, among other things, provides that the liens securingthe Notes and any guarantees thereof are contractually subordinated (other thanthe security interests in the renovation disbursement account, which will besenior, and interest reserve account, which will not secure the senior securedcredit facility) to the liens securing the principal amount of indebtedness ofup to $15.0 million (plus related interest, fees, indemnities, costs andexpenses) under the senior secured credit facility. The trustee’s ability toexercise rights and remedies in respect of the collateral are also subject tothe terms of the intercreditor agreement.

 

7

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**155 EAST TROPICANA, LLC**

**(A NEVADA LIMITED-LIABILITY COMPANY)**

** **

**Notes toCondensed Consolidated Financial Statements (unaudited) (continued)**

 

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

 

**Equipment Purchase Agreements**

 

During the first quarter of 2006, the Company entered into loanagreements to purchase approximately $5.8 million in slots and hotel equipment.The loans, which are collateralized by the equipment purchased, have termsranging from 12 months to 5 years. Interest rates imputed on the slot equipmentpurchase of $5.6 million and hotel equipment purchase of $0.2 million were3.327% and 10.75%, respectively.

 

**3. Lease Agreements**

 

The Company, as lessor, entered into a casino lease and hotel leasewith Eastern & Western covering the real property and non-gamingassets of the Hôtel San Rémo acquired by the Company. The leases weresubsequently terminated on October 31, 2005 and the operations of thehotel and casino were assumed by the Company on November 1, 2005.

 

**Casino Lease**

 

Prior to its termination on October 31, 2005, the casino leasecovered those portions of the Hôtel San Rémo containing the showroom, gaming andliquor servicing areas, the casino floor where gaming activities occur,surveillance areas, count rooms, the cashier’s cage and other areas ancillaryto the casino footprint.

 

Minimum monthly base-rent payments of $125,000 were due from August 3,2004 until the termination of the lease on October 31, 2005, which totaled$375,000 for the quarter ended March 31, 2005.

 

**Hotel Lease**

 

The hotel lease between Eastern & Western and the Companycovered those portions of the Hôtel San Rémo containing all non-casino areas,including the hotel. The hotel lease was terminated on October 31, 2005.Minimum lease payments due under the hotel lease consisted of a minimum rentand a percentage rent. The minimum rent was $250,000 per month. The percentagerent was equal to 100% of all revenues received from the operations of thehotel, less actual operational expenses (including minimum rent). Percentagerental income earned for the quarter ended March 31, 2005 was $1,249,934.The total rental income earned under the hotel lease was $1,999,934 for thequarter ended March 31, 2005. There were no rent receivables under thehotel lease at March 31, 2006 or December 31, 2005.

 

8

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**155 EAST TROPICANA, LLC**

**(A NEVADA LIMITED-LIABILITY COMPANY)**

** **

**Notes toCondensed Consolidated Financial Statements (unaudited) (continued)**

 

**4.Related Party Transactions**

** **

**RoyaltiesExpense**

 

Pursuantto agreements related to the use of certain trademarks, the Company must payfees and royalties to related parties. A fee equal to 3% of all net profitsearned from gaming activities is payable to Hooters Gaming Corporation, aconsent fee equal to 6% of net revenues generated by the Dan Marino’sRestaurant and 13 Martini Bar is payable to Lags Ventures, Inc. and aconsent fee of 4% of gross sales from Hooters branded restaurant, including thegross sales with any merchandise with a Hooters logo, is payable to Las VegasWings, Inc. The total fees accrued at March 31, 2006 for theserelated parties are $348,417.

 

Thepayment of the related party royalties is restricted under the Notes indenture.The fees can only be paid after the close of the fiscal year and only if theCompany’s debt coverage ratio is 1.5 to 1 for that fiscal year. The payments ofthe royalty fees are further limited to the sum of 2% of revenue and 3%of EBITDA as defined in the indenture.

 

**HawkeyeConstruction and Millwork, Inc.**

 

Hawkeye Construction and Millwork, Inc.are managing the construction and renovation of the Hooters Casino Hotel andreceive as compensation for such services 2% of the construction and furniture,fixtures and equipment costs, not to exceed $600,000. The Company’s payments toHawkeye Construction and Millwork, Inc. totaled $223,720 and $150,000 forthe quarters ended March 31, 2006 and 2005, respectively.

 

**ProvidentAdvertising & Marketing, Inc.**

 

ProvidentAdvertising & Marketing, Inc. (“Provident”) has been engaged bythe Company to provide services related to the planning and development of aninitial advertising and marketing plan and for the continued development andimplementation of a strategic marketing plan for the operation of the HootersCasino Hotel. The fees paid to Provident during the quarters ended March 31,2006 and 2005 totaled $1,068,855 and $38,362, respectively. The marketing feespaid to Provident are included in pre-opening expenses in the accompanyingconsolidated statement of operations. The fees paid to Provident also includepurchases of uniforms and gift shop items for resale.

 

9

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**155 EAST TROPICANA, LLC**

**(A NEVADA LIMITED-LIABILITY COMPANY)**

** **

**Notes toCondensed Consolidated Financial Statements (unaudited) (continued)**

 

**5.Commitments and Contingencies**

 

***Litigation***

*** ***

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

*** ***

***ContractualCommitments***

*** ***

On February 25, 2005, the Company entered into a$36.5 million guaranteed maximum price contract with The PENTA BuildingGroup, Inc. for the renovation, construction and upgrade of the Hôtel SanRémo. Upon receiving the necessary building permits, the renovation andconstruction of the Hôtel San Rémo commenced in April 2005. At March 31,2006, approximately $35.8 million of the $36.5 million had been incurred.

 

**Hooters of America Royalty Payments**

 

Beginningon February 3, 2006, the Company has been required to pay the owner of theHooters trademark, Hooters of America, a royalty fee equal to 2% of all netrevenues of the hotel and casino (excluding the Dan Marino’s Restaurant and 13Martini Bar) and 1% of revenues from the Pete and Shorty’s Tavern lessmiscellaneous expenses. The total fees paid to Hooters of America for thequarter ended March 31, 2006 was approximately $269,000, and are includedin general and administrative expenses on the accompanying condensedconsolidated statement of operations.

 

**Preferred Return**

 

The Company’smembership interest includes an EW Common preferred account which accumulates apreferred return rate of 4 percent per annum on the $25.0 million account balance.Such preferred return accrues beginning on March 1, 2006, whether or notthere are profits or funds available for the payment of dividends. Under theNotes indenture, the preferred return to EW Common is payable only if theCompany’s coverage ratio of EBITDA to fixed charges (as defined in theindenture) is 1.5 to 1 for the fiscal year as measured after the close of thefiscal year. As of March 31, 2006, $84,931 relating to the preferredaccount has been accumulated, but has not been paid.

 

10

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**HÔTEL SAN RÉMO CASINO AND RESORT**

**(A DIVISION OF S.I. ENTERPRISES, INC.)**

 

### **CONDENSED COMBINED STATEMENT OF OPERATIONS**

### ** **

| ** **                    | ** ** | **Three Months Ended  March 31,  2005** | ** ** |
|-------------------------------|------------|----------------------------------------------|------------|
| ** **                    | ** ** | **(unaudited)**                              | ** ** |
|                          |       |                                         |       |
| Operating revenues:           |       |                                         |       |
| Casino                        |       | $                                            | 3,317,890  |   |
| Food and beverage             |       | 1,913,955                                    |       |
| Hotel and other               |       | 4,461,198                                    |       |
|                          |       | 9,693,043                                    |       |
| Less promotional allowances   |       | (583,131                                     | )          |
| Net operating revenues        |       | 9,109,912                                    |       |
| Operating expenses:           |       |                                         |       |
| Casino                        |       | 1,765,182                                    |       |
| Food and beverage             |       | 1,572,556                                    |       |
| Hotel and other               |       | 1,118,472                                    |       |
| General and administrative    |       | 2,041,770                                    |       |
| Depreciation expense          |       | 94,180                                       |       |
| Related party lease expense   |       | 2,374,934                                    |       |
| Total operating expenses      |       | 8,967,094                                    |       |
| Operating income              |       | 142,818                                      |       |
| Other income (expense):       |       |                                         |       |
| Related party interest income |       | 99,955                                       |       |
| Interest expense              |       | (2,607                                       | )          |
| Other income (expense), net   |       | 97,348                                       |       |
| Income before income taxes    |       | 240,166                                      |       |
| Provision for income taxes    |       | 334,269                                      |       |
| Net loss                      |       | $                                            | (94,103    | ) |

 

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

 

11

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**HÔTEL SAN RÉMO CASINO AND RESORT**

**(A DIVISION OF S.I. ENTERPRISES, INC.)**

 

### **CONDENSED COMBINED STATEMENT OF CASH FLOWS**

### ** **

| ** **                                                                       | ** ** | **Three Months Ended  March 31,  2005** | ** ** |
|----------------------------------------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                                                       | ** ** | **(unaudited)**                              | ** ** |
| **Cash Flow From Operating Activities**                                          |       |                                         |       |
| Net loss                                                                         |       | $                                            | (94,103    | ) |
| Adjustments to reconcile net loss to net  cash provided by operating activities: |       |                                         |       |
| Depreciation                                                                     |       | 94,180                                       |       |
| Deferred income taxes                                                            |       | 334,269                                      |       |
| Change in operating assets and liabilities:                                      |       |                                         |       |
| Accounts receivable                                                              |       | (181,335                                     | )          |
| Inventories                                                                      |       | 35,928                                       |       |
| Prepaid expenses                                                                 |       | (62,709                                      | )          |
| Accounts payable                                                                 |       | 137,290                                      |       |
| Accrued expenses                                                                 |       | 130,037                                      |       |
| Net cash provided by operating activities                                        |       | 393,557                                      |       |
|                                                                             |       |                                         |       |
| **Cash Flow From Investing Activities**                                          |       |                                         |       |
| Capital expenditures                                                             |       | 15,699                                       |       |
| Net increase in other assets                                                     |       | (266,901                                     | )          |
| Net cash used in investing activities                                            |       | (251,202                                     | )          |
|                                                                             |       |                                         |       |
| **Cash Flow From Financing Activities**                                          |       |                                         |       |
| Net change in due from 155 East Tropicana, LLC                                   |       | 1,145,214                                    |       |
| Principal payments on long-term debt                                             |       | (69,363                                      | )          |
| Advances to affiliates, net                                                      |       | (1,746,490                                   | )          |
| Net cash used in financing activities                                            |       | (670,639                                     | )          |
|                                                                             |       |                                         |       |
| Decrease in cash and cash equivalents                                            |       | (528,284                                     | )          |
| Cash and cash equivalents, beginning of period                                   |       | 4,470,919                                    |       |
| Cash and cash equivalents, end of period                                         |       | $                                            | 3,942,635  |   |
|                                                                             |       |                                         |       |
| **Supplemental disclosure of cash flow information:**                            | ** ** | ** **                                   | ** ** |
| Cash paid during period for interest                                             |       | $                                            | 2,607      |   |

 

*The accompanying notes arean integral part of these condensed combined financial statements.*

 

12

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**HÔTEL SAN RÉMO CASINO AND RESORT**

**(A DIVISION OF S.I. ENTERPRISES, INC.)**

 

### **Notesto Condensed Combined Financial Statements(unaudited)**

### ** **

**March 31, 2005**

** **

**1.Organization and Basis of Presentation**

** **

The accompanying condensed combined financialstatements present the operations of Hôtel San Rémo Casino and Resort (“HôtelSan Rémo”), a division of S.I. Enterprises, Inc. (the “Parent Company”), aNevada Corporation, which is located in Las Vegas, Nevada. Hôtel San Rémocommenced gaming operations on February 16, 1990. The accompanyingcondensed combined financial statements represent the operations of the hoteland gaming facilities and include certain accounts of Eastern &Western Hotel Corporation (“Eastern & Western”) and I&PCorporation, Colorado (“I&P”), both Nevada corporations. Through October 31,2005, Eastern & Western held the gaming license in Nevada and ownedall gaming assets used by Hôtel San Rémo. I&P owned the real property andnon-gaming assets of Hôtel San Rémo until August 3, 2004, at which timethey were acquired by 155 East Tropicana, LLC (see Note 2) and then leased backto Hôtel San Rémo pursuant to the casino lease and hotel lease arrangements(see Note 3). Members of the Izumi family are 100% owners of S.I. Enterprises, Inc.,which owns 100% of Eastern & Western and owns 100% of I&P. Theprincipal business of Eastern & Western prior to the merger of I&Pinto Eastern & Western, was the owner and operator of the hotel.

 

Related to the events described above and inNote 2, effective November 1, 2005, Hôtel San Rémo ceased operations asthe remainder of its assets were transferred to 155 East Tropicana, LLC and toits former owner. Accordingly, the accompanying condensed combined financialstatements present only the statements of operations and cash flows for thethree months ended March 31, 2005.

 

All significant intercompany accounts andtransactions have been eliminated in the combined financial statements.

 

**2.Acquisition by 155 East Tropicana, LLC**

** **

In August 2004, 155 East Tropicana, LLC(“155”) agreed to the acquisition of the real property and other assets ofHôtel San Rémo for approximately $72.5 million including transaction costsand expenses. 155 is a joint venture between Florida Hooters LLC and EW CommonLLC. EW Common LLC was formed to hold Eastern & Western’s membershipinterest in 155. EW Common LLC is owned 90% by Eastern & Westernand 10% by Michael J. Hessling, the executive vice president and chiefoperating officer of Hôtel San Rémo. Initially, 155 acquired $67.5 million ofthe real property and non-gaming assets and agreed that the remaining $5.0million in gaming assets would be transferred to 155 upon obtaining the gamingand liquor licenses necessary to take over operations of the hotel and casino. InOctober 2005, 155 secured their gaming and liquor licenses and on November 1,2005, assumed the operations of the hotel and casino. On November 1,2005, the remaining Hôtel San Rémo gaming assets were also transferred to 155in exchange for an additional $5.0 million interest in 155 with a priorityreturn. The casino and hotel leases were terminated on October 31, 2005.Immediately prior to the

 

13

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**HÔTEL SAN RÉMO CASINO AND RESORT**

**(A DIVISION OF S.I. ENTERPRISES, INC.)**

 

**Notes to Condensed Combined Financial Statements(unaudited) (continued)**

 

**2.Acquisition by 155 East Tropicana, LLC (continued)**

 

acquisition in 2004, the real property and non-gaming assets of HôtelSan Rémo with a net book value of $25,956,004 and long-term debt of $43,745,708were transferred to EW Common LLC. Because EW Common LLC and HôtelSan Rémo are entities under common control, these transfers were reflected asdivision equity transactions.

 

The acquisition was funded by 155 through aterm loan totaling $48.5 million which was used to extinguish the HôtelSan Rémo’s existing indebtedness of $43.7 million, a commitment to pay theformer owner of Hôtel San Rémo $1.3 million and the issuance to EW CommonLLC of a 331¤3% membership interest with priority return valued at$20.0 million.

 

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

 

**3.Lease Agreements**

** **

In connection with the acquisition of HôtelSan Rémo’s real property and non-gaming assets by 155, Eastern &Western, as lessee, and 155 entered into lease agreements to lease back thecasino and hotel property previously owned by Hôtel San Rémo. Upon the receiptof gaming and liquor licensing by 155, these leases were terminated on October 31,2005 and the operations of the hotel and casino were assumed by 155. Totallease expense related to these lease agreements was $2,374,934 for the threemonths ended March 31, 2005.

 

**4. Commitments and Contingencies**

 

*Non-Compete.*Under the terms of the casino lease and thehotel lease, Eastern & Western has agreed that Hôtel San Rémo will notoperate a similar casino or hotel business at any other location in ClarkCounty, Nevada, including any location within a hotel and/or casino property.

 

*Litigation.*HôtelSan Rémo is party to various litigation arising in the normal course ofbusiness. Management is of the opinion that the ultimate resolution of thesematters will not have a material adverse effect on the financial position, cashflows, or the results of operations of Hôtel San Rémo.

 

14

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## **Item2. Management’s Discussion and Analysis of Financial Condition and Results ofOperations.**

## ** **

The following discussion andanalysis should be read in conjunction with the “Selected Financial Data” andthe audited financial statements and related notes included in our AnnualReport on Form 10-K filed with the SEC on March 31, 2006.

 

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

 

Wewere formed on June 17, 2004 to acquire the Hôtel San Rémo Casino andResort, or the Hôtel San Rémo, from Eastern & Western HotelCorporation, or Eastern & Western. Our common membership interests areheld two-thirds through Florida Hooters LLC and one-third through EW CommonLLC.

 

FloridaHooters LLC is a joint venture between Hooters Gaming LLC and Lags Ventures,LLC. Hooters Gaming LLC is owned by the holders of licenses to operate Hootersrestaurants in the Tampa Bay, Chicago and Manhattan areas as well as forwholesale foods, calendars and Nevada hotel/gaming, and includes most of theoriginal founders of the Hooters brand. Lags Ventures, LLC is owned by a holderof the license rights to Hooters restaurants in South Florida and the State ofNevada. Pursuant to these license rights, the owners of Florida Hooters LLCoperate 41 Hooters restaurants, publish Hooters calendars, and operate aHooters foods business. The owner of Lags Ventures, LLC is also the founder ofthe Dan Marino concept restaurants and owns and operates 4 Dan Marino conceptrestaurants.

 

Eastern &Western owns 90% of EW Common LLC, while our chief operating officer, MichaelHessling, owns the balance. Eastern & Western is beneficially owned bySukeaki and Toyoroku Izumi. Eastern & Western owned the Hôtel San Rémofrom November 1988 until our acquisition of the Hôtel San Rémo in 2004. Mr. Hesslingserved as the Hôtel San Rémo’s executive vice president and chief operatingofficer from January 1989 until the acquisition, at which time he becameour chief operating officer.

 

Ouraffiliates have granted us assignments of certain license agreements pertainingto the use of the Hooters brand as well as the Dan Marino, “13” Martini Bar andPete & Shorty’s concept restaurants, which will allow us to operatethe Hooters Casino Hotel. The original founders of the Hooters brand sold thetrademark rights (excluding certain rights they retained for themselves) toHooters of America in 2001. Pursuant to the Hooters license assignment, we arerequired to pay the owner of the Hooters trademark, Hooters of America, aroyalty fee, which totaled $269,000 from February 3, 2006 (grand opening)through March 31, 2006. As a result, Hooters of America is the trademarkowner of the Hooters brand and the operator and franchisor of 424 Hooters restaurants.Aside from the abovementioned royalty fee, we are not otherwise affiliated withHooters 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 including transactioncosts and expenses, and as adjusted for final purchase price adjustments.Initially, we acquired $67.5 million of the real property and non-gaming assetsand agreed that additional cash payments associated with the transfer ofworking capital and the remaining $5.0 million in gaming assets would betransferred to us upon obtaining the gaming and liquor licenses necessary totake over operations of the hotel casino. In connection with theacquisition, we refinanced $43.7 million of Eastern & Western’sexisting indebtedness, incurred additional expenses and obligations of $5.9million, and issued to Eastern & Western $25.0 million of preferredmembership interest representing one-third of our common membership interests.EW Common LLC was formed to hold Eastern & Western’s membershipinterests in us. Concurrently, we issued to Florida Hooters LLC two-thirds ofour common membership interests in exchange for $5.1 million cash and theassignment of certain rights with respect to trademarks and licenses valued at$4.2 million, based on an appraisal from a third-party appraiser.

 

15

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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 notes, or the Notes, registeredwith the Securities and Exchange Commission, or the Commission. Interestpayments on the Notes are due semi-annually, on each April 1 and October 1.We used the proceeds from the old notes offering to refinance existingindebtedness, and have used and are using the remaining proceeds (together withcash from operations and proceeds from equipment financing), to renovate thehotel casino and to provide working capital. The indenture governing the Notesrequired us to establish a renovation disbursement account in the amount of$50.8 million and interest reserve account in the amount of $11.2 million.These accounts are presented on our consolidated balance sheet as restrictedcash, and totaled approximately $15.6 million at March 31, 2006. On October 1,2005 and April 1, 2006, the first two semi-annual interest payments weremade using funds from the interest reserve account.

 

Inconnection with the offering of the old notes, we formed a wholly ownedsubsidiary, 155 East Tropicana Finance Corp., solely for the purpose offacilitating the old notes offering as a co-issuer of the old notes.

 

Wealso entered into a $15.0 million senior secured credit facility concurrentlywith the offering of the old notes. During the quarter ended March 31,2006, the Company drew $172,755 against the senior secured credit facility topay the bank fee related to the January 30, 2006 amendment of the seniorsecured credit facility.

 

Prior to November 1,2005, we conducted no business or operations other than in connection with theacquisition and subsequent leasing of the Hôtel San Rémo. Through October 31,2005, Eastern & Western held the gaming license in Nevada and ownedall gaming assets used by the Hôtel San Rémo. Under a casino lease and hotellease, Eastern & Western operated the Hôtel San Rémo. After obtainingthe necessary gaming and liquor licenses to operate the hotel casino in October 2005,we assumed operations of the hotel casino on November 1, 2005 and theleases with Eastern & Western were terminated.

 

Therenovations included a redesign of the main entrance, a renovation andexpansion of the casino and restaurant areas, a remodel of the hotel rooms anda renovation and expansion of the pool area. On February 3, 2006, the newHooters Casino Hotel was opened for business. The Hooters Casino Hotel features a casino floor with 658 slot and videopoker machines, 31 table games, 696 newly renovated hotel rooms including 17suites, a tropical pool area, retail outlets, a day spa, and dining andentertainment options which include a Hooters restaurant, Dan Marino’s FineFood, a coffee shop restaurant, a sports bar, and several bars.

 

InAugust 2004, we acquired the real property and other assets of the HôtelSan Rémo. Since November 1, 2005, we have also operated the hotel casino,and accordingly, have a limited operating history. Therefore, the discussion ofoperations herein focuses on the revenues and expenses for the quarter ended March 31,2006 and 2005 as if there was no change in ownership or operation of the hotelcasino.

 

***Results of Operations***

 

We generated hotel, casino,food and beverage, entertainment and retail revenues at the hotel casinoproperty. During the quarter ending March 31, 2006, approximately 41.7% ofthe gross revenue was derived from the casino, 27.2% from hotel and other, and31.1% from food and beverage.

 

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

 

16

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thepatron that the casino has won. Hold is derived by dividing the amount won bythe casino (“table game win” and “slot win”) by the amount wagered by thepatron. Casino revenue is recognized at the end of each gaming day.

 

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 rented room perday. “Occupancy percentage” defines the total percentage of rooms occupied, andis computed by dividing the number of rooms occupied by the total number ofrooms available. Room revenue is recognized at the time the room isprovided to the guest.

 

Foodand beverage revenues are derived from food and beverage sales in the foodoutlets of the hotel casino, including restaurants, bars, room service andbanquets. Food and beverage 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.

 

Casino revenues vary fromtime to time due to general economic conditions, table game hold, slot hold,and occupancy percentages at the Hooters Casino Hotel and other hotels in LasVegas. Casino revenues also vary depending upon the amount of gaming activityas well as variations in the odds for different games of chance. Casinorevenues, room revenues, food and beverage revenues, and other revenuesvary due to general economic conditions and competition. During 2006, Las Vegashas continued to experience an upward trend in total visitation, as well asgaming win, hotel occupancy and hotel daily average room rates.

 

The following tablesummarizes the results of operations of 155 East Tropicana, LLC doing businessas the Hooters Casino Hotel (which opened on February 3, 2006) for thequarter ended March 31, 2006, and the combined results of operations ofthe Hôtel San Rémo and 155 East Tropicana, LLC for the quarter endedMarch 31, 2005 (in thousands):

 
| ** **                          | ** ** | **155 East Tropicana, LLC**             | ** ** | **COMBINED**                            | ** ** | **%  Change  2006 - 2005** | ** ** |
|-------------------------------------|------------|-----------------------------------------|------------|-----------------------------------------|------------|----------------------------|------------|
| ** **                          | ** ** | **Quarter Ended  March 31,  2006** | ** ** | **Quarter Ended  March 31,  2005** | ** ** | ** **                 |
| ** **                          | ** ** | **(in thousands)**                      | ** ** | ** **                              | ** ** |
| Casino revenues                     |       | $                                       | 6,898      |                                    | $          | 3,318                      |       | 107.9 | % |
| Casino expenses                     |       | 2,967                                   |       | 1,765                                   |       | 68.1                       | %          |
| Profit margin                       |       | 57.0                                    | %          | 46.8                                    | %          |                       |       |
|                                |       |                                    |       |                                    |       |                       |       |
| Food and beverage revenues          |       | $                                       | 5,153      |                                    | $          | 1,914                      |       | 169.2 | % |
| Food and beverage expenses          |       | 4,226                                   |       | 1,573                                   |       | 168.8                      | %          |
| Profit margin                       |       | 18.0                                    | %          | 17.8                                    | %          |                       |       |
|                                |       |                                    |       |                                    |       |                       |       |
| Hotel and other revenues            |       | $                                       | 4,500      |                                    | $          | 4,461                      |       | 0.9 | % |
| Hotel and other expenses            |       | 1,717                                   |       | 1,118                                   |       | 53.5                       | %          |
| Profit margin                       |       | 61.9                                    | %          | 74.9                                    | %          |                       |       |
|                                |       |                                    |       |                                    |       |                       |       |
| Promotional allowances              |       | $                                       | 1,421      |                                    | $          | 583                        |       | 143.7 | % |
| Percent of gross revenues           |       | 8.6                                     | %          | 6.0                                     | %          |                       |       |
|                                |       |                                    |       |                                    |       |                       |       |
| General and administrative expenses |       | $                                       | 3,326      |                                    | $          | 2,042                      |       | 62.9 | % |
| Percent of net revenues             |       | 22.0                                    | %          | 22.4                                    | %          |                       |       |
|                                |       |                                    |       |                                    |       |                       |       |
| Preopening expenses                 |       | $                                       | 5,293      |                                    | $          | 265                        |       | 1,898.1 | % |
| Percent of net revenues             |       | 35.0                                    | %          | 2.9                                     | %          |                       |       |

 

17

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Thefollowing discussion presents an analysis of hotel casino’s results ofoperations for the quarters ended March 31, 2006 and 2005, respectively.

 

***Comparison of Quarter Ended March 31, 2006 with the Quarter Ended March 31,2005***

 

The results of operationsfor the quarter ended March 31, 2006 includes the month of January 2006when the property was essentially closed for remodeling and the first twomonths of operations of the Hooters Casino Hotel from February 3, 2006through March 31, 2006. Net operating revenues for the quarter ended March 31,2006 were $15.1 million, an increase of $6.0 million or 66.1%, from $9.1million of net operating revenues generated by Hôtel San Rémo during the sameperiod in the previous year. Included in the 2006 first quarter’s net revenueswere $14.8 million generated by the Hooters Casino Hotel operations beginningon February 3, 2006. The increase in net operating revenues was due toincreased activity in the casino and food and beverage outlets related to the newHooters Casino Hotel.

 

*Casino. *Casinorevenues increased by $3.6 million to $6.9 million for the quarter ended March 31,2006, compared to $3.3 million for the quarter ended March 31, 2005.Casino revenue of $6.8 million was generated after the grand opening on February 3,2006. Table games revenue was $2.9 million in 2006, an increase of $1.9million, or 180.1%, compared to the table games win of $1.0 million from theprior year’s quarter. With the exception of $34,000, all table games revenuewas generated after the grand opening. Table game drop increased to $17.1million, or by 210.8%, for the quarter ended March 31, 2006 compared tothe quarter ended March 31, 2005, but table game hold percentage decreasedfrom 19.1% in 2005 to 17.2% in 2006. The table games generated an average winper table of $1,556 per day after February 3, 2006. Slot revenue of $3.8million for the quarter ended March 31, 2006 was an increase of 70.0%compared to $2.3 million in the same period in 2005. With the exception of $0.1million, the entire slot revenue was generated after the grand opening. Theaverage win per machine per day was $99 from February 3, 2006 to March 31,2006.

 

Casino expenses increased by68.1% to $3.0 million for the quarter ended March 31, 2006 compared to$1.8 million for the quarter ended March 31, 2005 due to increases inpayroll and other operational expenses. However, the profit margin for casinooperations increased from 46.8% during the quarter ended March 31, 2005 to57.0% during the quarter ended March 31, 2006.

 

*Food and beverage.*Food and beverage revenue was $5.2 million for the quarter ended March 31,2006 as compared to $1.9 million for 2005, an increase of 169.2%. The increasewas a result of added food covers and increased check averages after the grandopening. In addition, beverage revenue (which includes complimentary beverages)increased by $1.3 million, or 235.9%, from $0.6 million during the quarterended March 31, 2005.

 

Foodand beverage expenses increased from $1.6 million during the quarter ended March 31,2005 to $4.2 million during the quarter ended March 31, 2006, an increaseof $2.6 million. The increase is due to increases in payroll, cost of food, andother operational expenses associated with the increase in business volume. Thenumber of food and beverage outlets also increased from Hôtel San Rémo’s fiveoutlets to nine outlets at Hooters Casino Hotel after the grand opening. Theprofit margin for food and beverage operations remained relatively flat from17.8% during the quarter ended March 31, 2005 to 18.0% during the quarterended March 31, 2006.

 

*Hotel and other.*Hotel and other revenue (which includes hotel room revenue,retail, spa and other miscellaneous revenue) remained consistent at $4.5million in 2006 and 2005. Room revenue was $3.3 million for the quarterended March 31, 2006 compared to $4.2 million in 2005. This decrease was

 

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theresult of a drop in room revenue after January 1, 2006. As planned,the Company made the decision to stop taking room reservations after January 2,2006 to accommodate the remodeling activities for the grand opening. For themonths of February and March 2006, room revenue was $3.1 millionwith an occupancy rate of 66.3% and average daily room rate of $111.57.This compares to room revenue of $3.1 million for the same two months in2005, with an occupancy rate of 90.1% and an average daily rate of $81.28. TheCompany has committed to increase sales and marketing efforts to improveoccupancy in the second quarter of 2006.

 

Salesfrom the Company’s retail outlets selling Hooters logo merchandise largelyoffset the decline in room revenue. Retail revenue has increased from $0.3million during the quarter ended March 31, 2005 to $1.1 million during thequarter ended March 31, 2006, an increase of $0.8 million.

 

Hotel and other expensesincreased by 53.5% from $1.1 million during the quarter ended March 31,2005 to $1.7 million during the quarter ended March 31, 2006 due toincreases in payroll and other expenses in hotel and retail operations. Due tothe increase in expenses, the hotel and other profit margin decreased substantiallyfrom 74.9% during the quarter ended March 31, 2005 to 61.9% during thequarter ended March 31, 2006.

 

*General and administrative.*General and administrative expense includes costs associated withcorporate marketing, information technology, finance, accounting, and propertyoperations. General and administrative expense increased $1.3 million to $3.3million for the quarter ended March 31, 2006 compared to $2.0 million forthe quarter ended March 31, 2005. This increase was principally due toincreases in advertising and marketing, and franchise fees due to Hooters ofAmerica totaling $269,000 in February and March 2006.

 

*Depreciation expense.*Depreciation expense of $1.1 million for the quarter ended March 31,2006 increased by $0.6 million, or 126.6%, from $0.5 million for the quarterended March 31, 2005. The increase in depreciation expense was due toadditional depreciation of fixed asset additions placed in service on February 3,2006.

 

*Pre-opening expenses.*Pre-opening expenses are costs associated with the start-up activitiesfor the new Hooters Casino Hotel and consist of salaries and wages, legal,professional, advertising, marketing, and other general administrativeexpenses. Pre-opening expenses increased by $5.0 million to $5.3 million forthe quarter ended March 31, 2006 compared to $0.3 million during thequarter ended March 31, 2005 largely due to increased training expensesduring the month of January 2006 and the costs of the grand openingcelebration for the Hooters Casino Hotel in February 2006.

 

*Related party royalties expense.*  Beginning on February 3, 2006, the Companyincurred related party royalty fees pursuant to agreements with Hooters GamingCorporation, Lags Ventures, Inc., and Las Vegas Wings, Inc.  These related party royalties expense totaled$345,697 during the quarter ended March 31, 2006.  The payment of the related party royalties isrestricted under the Notes indenture. The fees can only be paid after the close of the fiscal year and only ifthe Company’s debt coverage ratio is 1.5 to 1 for that fiscal year.  The payments of the royalty fees are furtherlimited to the sum of 2% of revenue and 3% of EBITDA as defined in theindenture.

 

*Loss on disposal of assets.*The loss on disposal of assets in 2006 of $1.0 million is the result ofretiring and replacing certain old slot machines and other equipment inconnection with the Hooters Casino Hotel remodel.

 

*Interest income.*Interest income was $0.3 million for the quarter ended March 31,2006, compared to $0.1 million for the quarter ended March 31, 2005. Theincrease resulted from interest income received by us on the investment of oldnotes proceeds for the quarter ended March 31, 2006.

 

*Interest expense.*Interest expense was $3.0 million for the quarter ended March 31,2006, compared to $1.4 million for the quarter ended March 31, 2005, anincrease of $1.6 million. The increase in interest expense is largelyattributable to $2.8 million in interest expense on the $130.0 million inNotes.

 

*Loss on extinguishment of debt.*The loss on extinguishment of debt in 2005was related to the payoff of our bank loan with the proceeds of the old noteson March 29, 2005.

 

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*Related party lease income.*During the period from August 3, 2004 through October 31,2005, we leased the hotel casino to Eastern & Western under twoseparate lease agreements. Pursuant to the casino lease agreement, the casino,showroom, liquor servicing areas and other casino related areas were leased for$125,000 per month. Pursuant to the hotel lease agreement for the hotel,restaurants, and other areas of the hotel casino property, rental income was$250,000 per month, plus a percentage rent equal to 100% of all revenuesreceived by Eastern & Western from the operation of the hotel andrestaurants, less operating expenses and working capital reserves, as definedin the hotel lease agreement. For the quarter ended March 31, 2005, atotal of $2,374,934 was received in rental income under the casino lease andhotel leases.

 

*Provision for income taxes.*155 East Tropicana, LLC is a limited-liability company and is treatedas a partnership for federal income tax purposes. Accordingly, a provision forfederal income taxes is not recorded on 155 East Tropicana, LLC’s consolidatedfinancial statements. Taxable income or loss will be included in the income taxreturns of the members.

 

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

 

For the quarter ended March 31,2006, $2.2 million of cash was used in investing activities, consisting of ause of cash for capital expenditures of $16.5 million partially offset by areduction in restricted funds of $13.8 million and a reduction in other assetsof $0.6 million. At March 31, 2006, $15.6 million was held as restrictedcash and was used to pay a $5.7 million bond interest payment on April 1,2006 and for construction payables of $7.1 million. The remaining balance ofapproximately $2.8 million will be used to pay outstanding construction bills,repay the Company for construction paid from operating cash, and the balance ofapproximately $1.2 million, which represents interest earned on the restrictedfunds, will be available for general purposes.

 

TheNotes indenture contains certain provisions which restrict or limit our abilityto, among other things, incur more debt, pay dividends, redeem stock or makeother distributions, enter into transactions with affiliates or transfer orsell assets.

 

InMarch 2005, we entered into a $15.0 million senior secured creditfacility concurrently with the offering of the old notes. The senior securedcredit facility, as amended on January 30, 2006, is a four year revolvingcredit facility of up to $15.0 million through June 30, 2006, andthereafter, the lesser of $15.0 million or three times the trailing twelvemonth EBITDA (net income (or loss), minus extraordinary gains and interestincome, plus interest expense; income taxes and depreciation and amortization,as further defined in the senior secured credit facility) through September 30,2006, and two times thereafter; provided that the multiple of EBITDArequirement will not apply if the borrowings are less than $7.5 million.EBITDA is defined in the senior credit facility and allows for the exclusion ofcertain expenditures. We did not have any borrowings outstanding on this creditfacility at December 31, 2005. On January 30, 2006, the seniorsecured credit facility was amended to allow us, during the period of February 1,2006 through June 30, 2006, to obtain advances in the aggregate principalamount of up to $15 million, without regard to the multiple of EBITDArequirement. We drew $172,755 against the senior secured credit facility duringthe first quarter of 2006 (all of which was outstanding at March 31, 2006)to pay bank fees related to this amendment and other credit line expenses.

 

Thesenior secured credit facility also contains customary financial covenants andother covenants and events of default. The senior credit facility can be usedfor additional working capital or capital expenditures, at our discretion. At March 31,2006, we failed to meet two covenant requirements associated with the seniorsecured credit facility. We were required to maintain a rolling twelve monthadjusted EBITDA of $1,000,000 and a Senior Debt to EBITDA ratio of 21:1 at March 31,2006. Due to construction disruption and pre-opening expenses experiencedduring the construction period, we fell short of the required EBITDA byapproximately $300,000 and exceeded the minimum Senior Debt to EBITDA ratio. Wehave received a waiver of default from the agent for the lenders through March31, 2006. We are incurrent negotiations with the agent for the lender to modify the covenant andthe terms for borrowing against the senior secured credit facility in thefuture.

 

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Asanticipated in our $130.0 million Note offering document, we entered into equipmentfinancing of $5.8 million during the quarter ending March 31, 2006.

 

Weused $2.0 million of cash in operating activities during the quarter ended March 31,2006, largely due to our net loss of $7.6 million offset by non-cash charges of$2.3 million and increases in our operating payables.

 

Webelieve that we have the flexibility to cover operational contingencies,working capital needs, capital expenditures, and debt service obligationsduring 2006 through the use of cash (which was $9.8 million at March 31,2006), restricted cash (which was $15.6 million at March 31, 2006), ourcash flow from operations, and our ability to draw against our $15.0 millionsenior secured credit facility.

 

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

 

Forthe quarter ended March 31, 2005, Hôtel San Rémo generated $0.4 million incash flow from operations.

 

Forthe quarter ended March 31, 2005, net cash of $0.3 million was used ininvesting activities as a result of purchasing other assets.

 

Forthe quarter ended March 31, 2005, net cash of $0.7 million was used infinancing activities as a result of advances to affiliates.

 

Asthe result of the above factors, the Hôtel San Rémo’s net cash decreased $0.5million, from $4.4 million at December 31, 2004 to $3.9 million at March 31,2005.

 

Asof November 1, 2005, Hôtel San Rémo ceased operations as a hotel andcasino business, as all remaining assets were transferred to either 155 EastTropicana, LLC or the former owner of the hotel.

 

***Critical Accounting Policies and Estimates***

 

A description of critical accounting policiesand estimates is included in the management discussion and analysis included inour Annual Report on Form 10-K filed with the Commission on March 31,2006.

 

## **Item 3. 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 believethat our respective exposure to market risk is material.

 

Marketrisk is risk of loss arising from changes in market rates and prices, such asinterest rates, foreign currency exchange rates and commodity prices. At March 31,2006, we had $130,000,000 aggregate principal amount Senior Secured Notes due April 2,2012 and $5.8 million in equipment purchase loans with fixed interest rates.The Notes carry a fixed interest rate of 83⁄4%, provided no events of defaultremain unresolved. Since the Notes and equipment purchase loans have fixedinterest rates, there is no market risk associated with these loans. We havemarket risk associated with funds that may be borrowed on the$15.0 million senior secured credit facility, due to an interest rate thatfloats with the LIBOR or prime rate. The term of the senior secured creditfacility will mature on March 30, 2009. At

 

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March 31,2006, $172,755 was outstanding under this variable rate credit facility.

 

**We do not have any significant foreign currency exchange rate risk orcommodity price risk and do not currently trade any market sensitiveinstruments.**

 

## **Item 4. Controls and Procedures.**

## ** **

## ***Evaluation of Disclosure Controls***

## ** **

We evaluated the effectiveness of our disclosurecontrols and procedures as of three months ended March 31, 2006. Thisevaluation was done with the participation of our management, including ourChief Executive Officer and Chief Financial Officer.

 

Disclosure controls and procedures are controls andother procedures that are designed to ensure that information required to bedisclosed by us in the reports that we file or submit under the SecuritiesExchange Act of 1934 are recorded, processed, summarized and reported withinthe time periods specified in the Commission’s rules and forms. Disclosurecontrols and procedures include, without limitation, controls and proceduresdesigned to ensure that information required to be disclosed by us in thereports that we file under the Securities Exchange Act of 1934 is accumulatedand communicated to our manager, as appropriate to allow timely decisions regardingrequired disclosure.

 

## ***Limitations on the Effectiveness of Controls***

## ** **

Our management does not expect that our disclosurecontrols and procedures or our internal controls over financial reporting willprevent all error and all fraud. A control system, no matter how well conceivedand operated, can provide only reasonable, but not absolute, assurance that theobjectives of a control system are met. Further, any control system reflectslimitations on resources, and the benefits of a control system must beconsidered relative to its costs. Because of the inherent limitations in allcontrol systems, no evaluation of controls can provide absolute assurance thatall control issues and instances of fraud, if any, within us have beendetected. These inherent limitations include the realities that judgments indecision-making can be faulty and that breakdowns can occur because of simpleerror or mistake. Additionally, controls can be circumvented by the individualacts of some persons, by collusion of two or more people, or by managementoverride of a control. The design of a control system is also based uponcertain 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 inadequatebecause of changes in conditions, or the degree of compliance with the policiesor procedures may deteriorate. Because of the inherent limitations in acost-effective control system, misstatements due to error or fraud may occurand may not be detected.

 

## ***Conclusions***

## ** **

Based on this evaluation, our Chief Executive Officerand Chief Financial Officer have evaluated our disclosure controls andprocedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and15d-15(e)) as of March 31, 2006, and have concluded that they areeffective to timely alert them to material information relating to us requiredto be included in the reports that we file or submit under the SecuritiesExchange Act of 1934.

 

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## ***Changes in Internal Controls***

## ** **

Therewere no changes in our internal controls over financial reporting that occurredduring our last fiscal quarter, *i.e.*,the quarter ended March 31, 2006, that have materially affected, or arereasonably likely to materially affect, our internal controls over financialreporting.

 

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# **PART II – OTHER INFORMATION**

# ** **

## **Item 1. Legal Proceedings.**

## ** **

None.

 

## **Item 1A. Risk Factors.**

## ** **

None.

 

## **Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.**

## ** **

None.

 

## **Item 3. Defaults Upon Senior Securities.**

## ** **

None.

 

## **Item 4. Submission of Matters to a Vote of Security Holders.**

## ** **

None.

 

## **Item 5. Other Information.**

## ** **

AtMarch 31, 2006, we failed to meet two covenant requirements associatedwith the senior secured credit facility. We were required to maintain a rollingtwelve month adjusted EBITDA of $1,000,000 and a Senior Debt to EBITDA ratio of21:1 at March 31, 2006. Due to construction disruption and pre-openingexpenses experienced during the construction period, we fell short of therequired EBITDA by approximately $300,000 and exceeded the minimum Senior Debtto EBITDA ratio. We have received a waiver of default from the agent for thelenders through March 31, 2006. We are in current negotiations with the agent for the lender to modifythe covenant and the terms for borrowing against the senior secured creditfacility in the future.

 

Furtherdetails are disclosed in the letter agreement attached as Exhibit 10.1 tothis quarterly report on form 10-Q.

 

## **Item 6. Exhibits.**

## ** **

Exhibits:

 

10.1                           Letter Agreement related to Credit Facility between Wells FargoFoothill, Inc., and 155 East Tropicana, LLC and 155 East Tropicana FinanceCorp.

 

31.1                           Certification pursuant to §302 of theSarbanes-Oxley Act of 2002, Deborah J. Pierce

 

31.2                           Certification pursuant to §302 of theSarbanes-Oxley Act of 2002, Neil G. Kiefer

 

32.1                           Certification pursuant to §906 of theSarbanes-Oxley Act of 2002, Deborah J. Pierce

 

32.1                           Certification pursuant to §906 of theSarbanes-Oxley Act of 2002, Neil G. Kiefer

 

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# **SIGNATURES**

# ** **

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 
| **155  EAST TROPICANA, LLC** |                                                                                     |
|------------------------------|------------------------------------------------------------------------------------------|
|                         |                                                                                     |
|                         |                                                                                     |
|                         |                                                                                     |
| By:                          | /s/  Deborah J. Pierce                                                                   | May 15,  2006 |
|                         |  Deborah J. Pierce                                                                  |   |
|                         | * Chief Financial Officer (Principal Financial and Chief  Accounting Officer)* | * * |

 
| **155  EAST TROPICANA FINANCE CORP.** |                                                                                    |
|---------------------------------------|-----------------------------------------------------------------------------------------|
|                                  |                                                                                    |
|                                  |                                                                                    |
|                                  |                                                                                    |
| By:                                   | /s/  Deborah J. Pierce                                                                  | May 15,  2006 |
|                                  |  Deborah J. Pierce                                                                 |   |
|                                  | * Chief Financial Office (Principal Financial and Chief  Accounting Officer)* | * * |

 

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