**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**WASHINGTON,D.C. 20549**

----

 

**FORM 10-Q**

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

 

**For the quarterly period ended June 30, 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**

----

 

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

(Exact Name of Registrant as Specified in its Charter)
| **NEVADA  NEVADA**                                                | **20-1363044  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)

----

Indicate by check mark whether the registrant (1) hasfiled all reports required by Section 13 or 15(d) of the Securities ExchangeAct of 1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports) and (2) has been subject to suchfiling requirements for the past 90 days.    Yes  x    No  o

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer andlarge accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):Large accelerated filer o     Accelerated filer o     Non-accelerated filer x

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

 

----

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

 

 

----

**PART I – FINANCIAL INFORMATION**

** **

**Item 1.  Financial Statements.**

** **

**155 EASTTROPICANA, LLC**

**(A NEVADA LIMITED-LIABILITYCOMPANY)**

** **

**CONDENSEDCONSOLIDATED BALANCE SHEETS**

 
| ** **                                                                                                            | ** ** | **June 30,** | ** **  | **December 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------|------------|-------------------|-------------|-----------------------|------------|
| ** **                                                                                                            | ** ** | **2006**          | ** **  | **2005**              | ** ** |
| ** **                                                                                                            | ** ** | **(unaudited)**   | ** **  | ** **            | ** ** |
| **Assets**                                                                                                            | ** ** | ** **        | ** **  | ** **            | ** ** |
| Current assets:                                                                                                       |       |              |        |                  |       |
| Cash and cash  equivalents                                                                                            |       | $                 | 8,544,714   |                  | $          | 14,191,385 |   |
| Accounts  receivable, net of allowance for doubtful accounts of $116,497 and $110,017  in 2006 and 2005, respectively |       | 1,022,931         |        | 647,776               |       |
| Due from Hotel  San Remo                                                                                              |       | 220,841           |        | 30,508                |       |
| Inventories                                                                                                           |       | 909,186           |        | 146,339               |       |
| Prepaid expenses                                                                                                      |       | 2,305,021         |        | 775,836               |       |
| Total current  assets                                                                                                 |       | 13,002,693        |        | 15,791,844            |       |
| Property and equipment,  net                                                                                          |       | 124,276,077       |        | 103,264,703           |       |
| Other long-term assets:                                                                                               |       |              |        |                  |       |
| Restricted cash                                                                                                       |       | 1,498,587         |        | 29,345,513            |       |
| Deferred  financing costs                                                                                             |       | 6,887,569         |        | 7,286,738             |       |
| Intangible  assets                                                                                                    |       | 6,583,073         |        | 6,609,028             |       |
| Other assets                                                                                                          |       | 256,193           |        | 861,565               |       |
| Total other  long-term assets                                                                                         |       | 15,225,422        |        | 44,102,844            |       |
| Total assets                                                                                                          |       | $                 | 152,504,192 |                  | $          | 163,159,391 |   |
|                                                                                                                  |       |              |        |                  |       |
| **Liabilities and Members’ Equity**                                                                              | ** ** | ** **        | ** **  | ** **            | ** ** |
| Current liabilities:                                                                                                  |       |              |        |                  |       |
| Accounts payable                                                                                                      |       | $                 | 4,052,051   |                  | $          | 3,323,099 |   |
| Related party  royalties payable                                                                                      |       | 743,196           |        | —                |       |
| Construction  payable                                                                                                 |       | —            |        | 6,034,450             |       |
| Accrued interest  payable                                                                                             |       | 2,843,750         |        | 2,864,396             |       |
| Accrued  liabilities                                                                                                  |       | 2,391,172         |        | 1,384,649             |       |
| Current portion  of long-term debt                                                                                    |       | 2,150,783         |        | —                |       |
| Total current  liabilities                                                                                            |       | 12,180,952        |        | 13,606,594            |       |
| Long-term debt                                                                                                        |       | 133,101,754       |        | 130,000,000           |       |
| Total  liabilities                                                                                                    |       | 145,282,706       |        | 143,606,594           |       |
|                                                                                                                  |       |              |        |                  |       |
| Commitments and  contingencies                                                                                        |       |              |        |                  |       |
|                                                                                                                  |       |              |        |                  |       |
| Members’ equity:                                                                                                 |       |              |        |                  |       |
| Membership interests                                                                                                  |       | 34,333,375        |        | 34,333,375            |       |
| Accumulated  deficit                                                                                                  |       | (27,111,889       | )           | (14,780,578           | )          |
|                                                                                                                  |       | 7,221,486         |        | 19,552,797            |       |
| Total  liabilities and members’ equity                                                                           |       | $                 | 152,504,192 |                  | $          | 163,159,391 |   |

 

*Theaccompanying notes are an integral part of these condensed consolidated financialstatements.*

3

----

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

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS**

 
| ** **                                                                                                                                                                                                                                          | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                                                                                                                                                                                                                                          | ** ** | **June 30,**                | ** ** | **June 30,**              | ** ** | **June 30,** | ** ** | **June 30,** | ** ** |
| ** **                                                                                                                                                                                                                                          | ** ** | **2006**                         | ** ** | **2005**                       | ** ** | **2006** | ** ** | **2005** | ** ** |
| ** **                                                                                                                                                                                                                                          | ** ** | **(unaudited)**                  | ** ** | **(unaudited)**                | ** ** | **(unaudited)** | ** ** | **(unaudited)** | ** ** |
| Operating  revenues:                                                                                                                                                                                                                                |       |                             |       |                           |       |   |   |   |   |
| Casino                                                                                                                                                                                                                                              |       | $                                | 6,824,271  |                           | $          | — |   | $ | 13,722,302 |   | $ | — |   |
| Food and beverage                                                                                                                                                                                                                                   |       | 6,428,002                        |       | —                         |       | 11,580,978 |   | — |   |
| Hotel and other                                                                                                                                                                                                                                     |       | 6,375,222                        |       | —                         |       | 10,875,478 |   | — |   |
| Related party lease income                                                                                                                                                                                                                          |       | —                           |       | 1,564,390                      |       | — |   | 3,939,324 |   |
|                                                                                                                                                                                                                                                |       | 19,627,495                       |       | 1,564,390                      |       | 36,178,758 |   | 3,939,324 |   |
| Less promotional  allowances                                                                                                                                                                                                                        |       | (1,310,271                       | )          | —                         |       | (2,731,362 | ) | — |   |
| Net operating  revenues                                                                                                                                                                                                                             |       | 18,317,224                       |       | 1,564,390                      |       | 33,447,396 |   | 3,939,324 |   |
|                                                                                                                                                                                                                                                |       |                             |       |                           |       |   |   |   |   |
| Operating  expenses:                                                                                                                                                                                                                                |       |                             |       |                           |       |   |   |   |   |
| Casino                                                                                                                                                                                                                                              |       | 3,995,974                        |       | —                         |       | 6,963,152 |   | — |   |
| Food and beverage                                                                                                                                                                                                                                   |       | 5,379,663                        |       | —                         |       | 9,605,911 |   | — |   |
| Hotel and other                                                                                                                                                                                                                                     |       | 2,480,034                        |       | —                         |       | 4,196,618 |   | — |   |
| General and administrative                                                                                                                                                                                                                          |       | 5,790,726                        |       | —                         |       | 9,116,742 |   | — |   |
| Depreciation and amortization                                                                                                                                                                                                                       |       | 1,687,318                        |       | 406,281                        |       | 2,821,551 |   | 812,562 |   |
| Pre-opening expenses                                                                                                                                                                                                                                |       | —                           |       | 335,146                        |       | 5,292,834 |   | 600,036 |   |
| Related party royalties expense                                                                                                                                                                                                                     |       | 394,779                          |       | —                         |       | 740,476 |   | — |   |
| Loss on disposal of assets                                                                                                                                                                                                                          |       | 221,793                          |       | —                         |       | 1,199,470 |   | — |   |
| Total operating  expenses                                                                                                                                                                                                                           |       | 19,950,287                       |       | 741,427                        |       | 39,936,754 |   | 1,412,598 |   |
| Operating (loss)  income                                                                                                                                                                                                                            |       | (1,633,063                       | )          | 822,963                        |       | (6,489,358 | ) | 2,526,726 |   |
|                                                                                                                                                                                                                                                |       |                             |       |                           |       |   |   |   |   |
| Other income  (expense):                                                                                                                                                                                                                            |       |                             |       |                           |       |   |   |   |   |
| Interest income                                                                                                                                                                                                                                     |       | 120,568                          |       | 562,283                        |       | 401,848 |   | 577,273 |   |
| Interest expense, net of capitalized interest of $0,  $56,583, $202,873, and $88,922 for the three months ended June 30, 2006,  three months ended June 30, 2005, six months ended June 30, 2006, and six months  ended June 30, 2005, respectively |       | (3,222,737                       | )          | (3,092,033                     | )          | (6,243,801 | ) | (4,446,158 | ) |
| Loss on extinguishment of debt                                                                                                                                                                                                                      |       | —                           |       | —                         |       | — |   | (2,246,526 | ) |
| Other income  (expense), net                                                                                                                                                                                                                        |       | (3,102,169                       | )          | (2,529,750                     | )          | (5,841,953 | ) | (6,115,411 | ) |
| Net loss                                                                                                                                                                                                                                            |       | $                                | (4,735,232 | )                              | $          | (1,706,787 | ) | $ | (12,331,311 | ) | $ | (3,588,685 | ) |

 

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

4

----

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

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS**

 
| ** **                                                                                 | ** ** | **Six Months Ended** | ** **  | **Six Months Ended** | ** ** |
|--------------------------------------------------------------------------------------------|------------|--------------------------------|-------------|--------------------------------|------------|
| ** **                                                                                 | ** ** | **June 30,**              | ** **  | **June 30,**              | ** ** |
| ** **                                                                                 | ** ** | **2006**                       | ** **  | **2005**                       | ** ** |
| ** **                                                                                 | ** ** | **(unaudited)**                | ** **  | **(unaudited)**                | ** ** |
| **Cash  Flow From Operating Activities**                                                   | ** ** | ** **                     | ** **  | ** **                     | ** ** |
| Net loss                                                                                   |       | $                              | (12,331,311 | )                              | $          | (3,588,685 | ) |
| Adjustments to reconcile net loss to net cash (used  in) provided by operating activities: |       |                           |        |                           |       |
| Depreciation and amortization                                                              |       | 2,821,551                      |        | 812,562                        |       |
| Amortization of debt issuance costs                                                        |       | 639,726                        |        | 533,152                        |       |
| Amortization of intangible asset                                                           |       | 25,955                         |        | —                         |       |
| Loss on extinguishment of debt                                                             |       | —                         |        | 2,246,526                      |       |
| Loss on disposal of assets                                                                 |       | 1,199,470                      |        | —                         |       |
| Changes in assets and liabilities:                                                         |       |                           |        |                           |       |
| Accounts receivable                                                                        |       | (375,155                       | )           | (202,714                       | )          |
| Inventories                                                                                |       | (762,847                       | )           | —                         |       |
| Prepaid expenses                                                                           |       | (1,529,185                     | )           | (622,444                       | )          |
| Accounts payable                                                                           |       | 728,952                        |        | 2,478,172                      |       |
| Related party royalties payable                                                            |       | 743,196                        |        | —                         |       |
| Accrued interest payable                                                                   |       | (20,646                        | )           | —                         |       |
| Accrued liabilities                                                                        |       | 1,006,523                      |        | 2,935,484                      |       |
| Net cash (used  in) provided by operating activities                                       |       | (7,853,771                     | )           | 4,592,053                      |       |
|                                                                                       |       |                           |        |                           |       |
| **Cash  Flow From Investing Activities**                                                   | ** ** | ** **                     | ** **  | ** **                     | ** ** |
| Capital  expenditures                                                                      |       | (19,267,120                    | )           | (5,003,818                     | )          |
| Decrease in  construction payable                                                          |       | (6,034,450                     | )           | —                         |       |
| Change in  restricted cash                                                                 |       | 27,846,926                     |        | (55,133,857                    | )          |
| Change in other  assets                                                                    |       | 605,372                        |        | (21,721                        | )          |
| Net cash  provided by (used in) investing activities                                       |       | 3,150,728                      |        | (60,159,396                    | )          |
|                                                                                       |       |                           |        |                           |       |
| **Cash  Flow From Financing Activities**                                                   | ** ** | ** **                     | ** **  | ** **                     | ** ** |
| Due from Hotel  San Remo                                                                   |       | (190,333                       | )           | (874,966                       | )          |
| Payment of debt  financing costs                                                           |       | (240,557                       | )           | (7,720,391                     | )          |
| Extinguishment  of debt                                                                    |       | —                         |        | (48,500,000                    | )          |
| Loan penalties  from extinguishment of debt                                                |       | —                         |        | (1,361,750                     | )          |
| Proceeds from  issuance of long-term debt                                                  |       | 304,953                        |        | 130,000,000                    |       |
| Principal  payments on debt                                                                |       | (817,691                       | )           | —                         |       |
| Net cash (used  in) provided by financing activities                                       |       | (943,628                       | )           | 71,542,893                     |       |
|                                                                                       |       |                           |        |                           |       |
| (Decrease)  increase in cash and cash equivalents                                          |       | (5,646,671                     | )           | 15,975,550                     |       |
| Cash and cash  equivalents, beginning of period                                            |       | 14,191,385                     |        | 1,220,851                      |       |
| Cash and cash  equivalents, end of period                                                  |       | $                              | 8,544,714   |                           | $          | 17,196,401 |   |
|                                                                                       |       |                           |        |                           |       |
| **Supplemental  disclosure of cash flow information**                                      | ** ** | ** **                     | ** **  | ** **                     | ** ** |
| Cash paid for  interest, net of capitalized interest                                       |       | $                              | 6,264,447   |                           | $          | 1,126,418 |   |
| Assets acquired through  equipment loans                                                   |       | $                              | 5,765,275   |                           | $          | — |   |

 

*Theaccompanying notes are an integral part of these condensed consolidated financialstatements.*

5

----

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

### **Notes to Condensed ConsolidatedFinancial Statements (unaudited)**

**June 30, 2006**

**1.  Organizationand Basis of Presentation**

155East Tropicana, LLC, a Nevada limited-liability company (the “Company”) wasincorporated on June 17, 2004 to acquire the real and personal property ofthe Hôtel San Rémo Casino and Resort (the “Hôtel San Rémo”) in Las Vegas,Nevada with the intention of renovating the existing casino and hotel facilitywith a “Hooters” entertainment concept and theme.  The renovations were completed and the HôtelSan Rémo property was reopened as the new Hooters Casino Hotel on February 3,2006.  The Company’s business isconcentrated at the one casino and hotel property in Las Vegas, Nevada.  The renovations were financed by the Companyand its wholly owned subsidiary, 155 East Tropicana Finance Corp. through a$130.0 million Senior Secured Notes offering in March 2005.  The Company’s membership interests are heldtwo-thirds through Florida Hooters LLC and one-third through EW CommonLLC.  The initial capitalization of theCompany was provided by Florida Hooters LLC in the form of a $5.0 millioncash contribution and the assignment of rights with respect to the Hooters trademarkand logo and other intellectual property and by EW Common LLC in the form of a$25.0 million deemed capital contribution. The deemed capital contribution from EW Common LLC carries with it apriority return of 4% of the contribution annually.  The payment of this priority return issubject to meeting certain financial covenants associated with the Company’sdebt.

FloridaHooters LLC is a joint venture between Hooters Gaming LLC and Lags Ventures,LLC.  Hooters Gaming LLC is owned by theholders of licenses to operate Hooters restaurants in the Tampa Bay, Florida,Chicago, Illinois and downtown Manhattan in New York as well as for the sale ofwholesale foods and calendars and Nevada hotel/gaming and includes most of theoriginal founders of the Hooters brand. Pursuant to these license rights, the owners of Florida Hooters LLCoperate 41 Hooters restaurants, publish Hooters calendars and operate a Hootersfood business.  Lags Ventures, LLC isowned by a holder of the license rights to Hooters restaurants in South Floridaand the State of Nevada.  The owner ofLags Ventures, LLC is also the founder of the Dan Marino concept restaurantsand owns and operates 4 Dan Marino concept restaurants.

EWCommon LLC is owned 90% by Eastern & Western Hotel Corporation (“Eastern &Western”) and 10% by Michael J. Hessling. Eastern & Western is beneficially owned by Sukeaki and ToyorokuIzumi.  Eastern & Western andits affiliates owned the real property and non-gaming assets of Hôtel San Rémofrom November 1988 until the Company’s acquisition of the Hôtel San Rémoin August 2004.  Mr. Hesslingserved as the executive vice president and the chief executive officer of theHôtel San Rémo from January 1989 until the acquisition, at which time hebecame the Chief Operating Officer of the Company.  Effective as of June 30, 2006, Mr. Hesslingwas also appointed President of the Company.

6

----

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

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

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

FloridaHooters LLC and EW Common LLC entered into a joint venture agreement for thepurpose of forming the Company and documenting the terms of their investmentsand business venture.  Under the terms ofthe joint venture agreement, the venture progressed in three stages.  The first stage involved the formation of theCompany and the conveyance of all the real and non-gaming personal propertyowned by and associated with the Hôtel San Rémo, the leaseback under operatinglease arrangements of these assets to Eastern & Western pursuant tothe casino and hotel lease agreements described in Note 3, and thecontribution through assignment agreements of certain intellectual propertyrights to the Company by the respective members of Florida Hooters LLC.  The second stage related to the raising offinancing to fund the redesign and renovation of the Hôtel San Rémo into theHooters Casino Hotel, the refinancing of the Company’s current debt structureand funding of other working capital requirements was completed in March2005.  The final stage involved securingall licenses necessary to conduct gaming at the hotel casino and the subsequenttermination of the hotel and casino leases. In October 2005, the Company secured their gaming and liquor licensesand on November 1, 2005, assumed the operations of the existing Hôtel SanRémo.  The hotel and casino leases withEastern & Western were terminated on October 31, 2005.

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

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

OnFebruary 3, 2006, the new Hooters Casino Hotel was opened for business. The Hooters Casino Hotel features a casino floor with 658 slot and video pokermachines, 32 table games, 696 newly renovated hotel rooms including 17 suites,a tropical pool area, retail outlets, a day spa, and dining and entertainmentoptions which include a Hooters restaurant, Dan Marino’s Fine Food, a coffeeshop restaurant, a sports bar, and several bars.

7

----

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

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

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

Theaccompanying condensed consolidated financial statements have been prepared bythe Company, without audit, pursuant to the rules and regulations of theSecurities and Exchange Commission. Accordingly, the condensed consolidated financial statements contain alladjustments (consisting of normal recurring adjustments) that, in the opinionof management, are necessary to present fairly the Company’s financialposition, results of operations and cash flows for the interim periods includedherein.  The 2006 interim resultsreflected in these financial statements are not necessarily indicative ofresults to be expected for the full 2006 fiscal year.

Certain of the Company’s accounting policies require that the Companyapply significant judgment in defining the appropriate assumptions forcalculating financial estimates.  Bytheir nature, these judgments are subject to an inherent degree ofuncertainty.  The Company’s judgments arebased in part on its historical experience, terms of existing contracts,observance of trends in the gaming industry and information obtained fromindependent valuation experts or other outside sources. There is no assurance,however, that actual results will conform to estimates.

The accompanying condensedconsolidated financial statements should be read in conjunction with thefinancial statements and notes thereto for the year ended December 31, 2005,included in the Annual Report Form 10-K for the year ended December 31, 2005filed with the Securities and Exchange Commission on March 31, 2006.  Significant intercompany transactions betweenthe Company and its wholly owned subsidiary have been eliminated inconsolidation.

**2.  Long-termDebt**

**Notes Offering**

On March 29, 2005, the Company issued $130.0 millionaggregate principal amount of 83⁄4% Senior Secured Notes due 2012, in a privateplacement (the “old notes”).  On August5, 2005, the Company successfully exchanged all of the old notes for new notes(the “Notes”).  The Notes havesubstantially identical terms as the old notes, except that the Notes have beenregistered under the Securities Act of 1933 and are freely tradable.  Interest payments on the Notes are due semiannually, on April 1 and October 1.  TheNotes are secured by 1) all of the Company’s and, to the extent in existence,subsidiary guarantors’ existing and future assets  (other than certain excluded existing andfuture assets), 2) the Company’s equity interest in any guarantors and 3)existing renovation disbursement and interest reserve accounts as describedbelow.

8

----

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

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

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

**NotesOffering (continued)**

The Notes are redeemable atthe option of the Company on or after April 1, 2009.  The indenture governing the Notes requiredthe Company to establish a renovation disbursement account and an interestreserve account.  The balance in therenovation account at June 30, 2006 was $1.5 million, and is included inrestricted cash in the accompanying condensed consolidated balance sheet.  The interest reserve account no longer existsas of April 1, 2006, after the second interest payment on the Notes waspaid.  The indenture also containscertain provisions which restrict or limit the Company’s ability to, amongother things, incur more debt, pay dividends, redeem stock or make otherdistributions, enter into transactions with affiliates or transfer or sellassets.  The Company used the proceedsfrom the old notes offering to retire existing indebtedness, (and together withcash from operations and proceeds from equipment financing) renovate andconstruct the Hooters Casino Hotel and provide for general working capitalneeds.  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 million senior secured credit facility(the “Credit Facility”) concurrently with the offering of the old notes.  The Credit Facility is a four-year revolvingCredit Facility of $15.0 million, maturing on March 30, 2009. The originalCredit Facility called for restrictions on the availability of the full $15.0million amount of the Credit Facility, based on a multiple of the trailingtwelve-month EBITDA (“Borrowing Base”). EBITDA is defined for any fiscal period as the Company’s consolidatednet income (or loss), minus extraordinary gains and interest income, plusinterest expense, income taxes and depreciation and amortization for suchperiod, and subject to other adjustments as defined in the Credit Facilityagreement.  On January 30, 2006, theCredit Facility was amended to allow the Company, during the period of February1 through June 30, 2006, to obtain advances in the aggregate principal amountof up to $15.0 million, without regard to the multiple of EBITDArequirement.  The Company drew $304,953against the Credit Facility during the six months ended June 30, 2006 (all ofwhich was outstanding at June 30, 2006) to pay the lender a fee related to thisamendment and to pay for other expenses related to the Credit Facility.

At March 31, 2006, the Company failed to meet twocovenant requirements associated with the Credit Facility involving (1) themaintenance of a rolling twelve month adjusted EBITDA of $1,000,000 and (2) asenior debt to EBITDA ratio of 21:1 at March 31, 2006.  Specifically, therolling twelve month adjusted EBITDA at March 31, 2006 was approximately$700,000 and the senior debt to EBITDA ratio was 30:1.  The Company received a waiver of default fromthe agent for the lender through March 31, 2006.  The Credit Facility wasamended on June 6, 2006.  The followingamendments were made to the Credit Facility: (1) permanently removed theBorrowing Base concept which limited the amount that 

9

----

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

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

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

**Senior Secured Credit Facility (continued)**

could be borrowed under the credit agreement, (2) modified thedefinition of EBITDA, allowing for the add back of all pre-opening costs andremoving the previous $6.0 million cap, and (3) amended the financial covenantrequirements to alter the applicable periods when the Company must meet certainminimum EBITDA and maximum senior debt ratios. An amendment fee of $100,000 was paid to the lender in June 2006.  At June 30, 2006, the Company was incompliance with the amended covenants.

At the Company’s option, the interest rate will be either the agent forthe lender’s prime rate plus 2.00% per annum or LIBOR plus 3.50% perannum.  As of June 30, 2006, the CreditFacility carried the interest rate of 10.25% per annum.  All the obligations under the Credit Facilityare secured by first priority liens on and security interest in all of theCompany’s and any guarantor’s existing and future properties and assets.  The lien on the collateral that secures theNotes are contractually subordinated to the liens securing the principal amountof borrowings under the Credit Facility of up to $15.0 million (plus relatedinterest, fees, indemnities, costs and expenses).  The Credit Facility required the Company topay unused commitment fees of 0.50% per annum on any unused portion of theCredit Facility, and, if terminated prior to the third anniversary date, aprepayment premium of 1.00% of the maximum credit amount for each year orpartial year remaining from the termination date to the third anniversary date.  The Credit Facility also contains customaryfinancial covenants and other events of default.

**Intercreditor Agreement**

Concurrently with theclosing of the old notes offering and Credit Facility, the Company entered intoan intercreditor agreement, which defines the rights of the lenders under theCredit Facility in relation to the rights of the trustee and the holders of theNotes with respect to****the collateralsecuring the Notes.  The intercreditoragreement, among other things, provides that the liens securing the Notes andany guarantees thereof are contractually subordinated (other than the securityinterests in the renovation disbursement account, which are senior, andinterest reserve account, which does not secure the Credit Facility) to theliens securing the principal amount of indebtedness of up to $15.0 million(plus related interest, fees, indemnities, costs and expenses) under the CreditFacility.  The trustee’s ability toexercise rights and remedies in respect of the collateral are also subject tothe terms of the intercreditor agreement.

**EquipmentPurchase Agreements**

During the first quarter of 2006, the Companyentered into loan agreements to purchase approximately $5.8 million in slotsand hotel equipment.  The loans, whichare collateralized by the equipment purchased, have terms ranging from 12months to 5 years.  Interest ratesimputed on the slot equipment purchase of $5.6 million and hotel equipmentpurchase of $0.2 million were 3.327% and 10.75%, respectively.  At June 30, 2006, $4.9 million wasoutstanding on these agreements.  TheCompany did not enter into new loan agreements during the second quarter of2006.

10

----

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

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

**3.  Lease Agreements**

InJuly 2004, 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 were subsequently terminated on October31, 2005 as a result of the operations of the hotel and casino being assumed bythe Company on November 1, 2005.

**CasinoLease**

Priorto its termination on October 31, 2005, the casino lease covered those portionsof the Hôtel San Rémo containing the showroom, gaming and liquor servicingareas, the casino floor where gaming activities occur, surveillance areas,count rooms, the cashier’s cage and other areas ancillary to the casinofootprint.

Minimummonthly base-rent payments of $125,000 were due from August 3, 2004 until thetermination of the lease on October 31, 2005, which totaled $375,000 and$750,000 for the three months and six months ended June 30, 2005, respectively.

**HotelLease**

The hotel lease betweenEastern & Western and the Company covered those portions of the HôtelSan Rémo containing all non-casino areas, including the hotel.  Prior to its termination on October 31, 2005,minimum lease payments due under the hotel lease consisted of a minimum rent anda percentage rent. The minimum rent was $250,000 per month.  The percentage rent was equal to 100% of allrevenues received from the operations of the hotel, less actual operationalexpenses (including minimum rent). Percentage rental income earned for the three months and six monthsended June 30, 2005 were $439,390 and $1,689,324, respectively.  Total rental income earned under the hotellease was $1,189,390 and $3,189,324 for the three months and six months endedJune 30, 2005.

**4.  Related Party Transactions**

**RoyaltiesExpense**

Pursuant to agreements related to the use of certaintrademarks, the Company must pay fees and royalties to related parties.  Afee equal to 3% of all net profits earned from gaming activities is payable toHooters Gaming Corporation, a consent fee equal to 6% of net revenues generatedby the Dan Marino’s Restaurant and 13 Martini Bar is payable to Lags Ventures,Inc. and a consent fee of 4% of gross sales from Hooters branded restaurant,including the gross sales with any merchandise with a Hooters logo, is payableto Las Vegas Wings, Inc.  The total fees accrued at June 30, 2006 forthese related parties are $743,196.

11

----

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

**Notes to CondensedConsolidated Financial Statements (unaudited) (continued)**

**4.  Related Party Transactions**

**RoyaltiesExpense (continued)**

The payment of the related party royalties isrestricted under the Notes’ indenture.  The fees can only be paid afterthe close of the fiscal year and only if the Company’s debt coverage ratio is1.5 to 1 for that fiscal year.  The payments of the royalty fees arefurther limited to the sum of 2% of revenue and 3% of EBITDA as defined inthe indenture.

**Hawkeye Construction andMillwork, Inc.**

Hawkeye Construction and Millwork, Inc. is co-owned by David Lageschulte,a member of the Company’s management board and an indirect beneficial owner of33.27% of the Company’s membership interest. Hawkeye Construction and Millwork, Inc. managed the constructionand renovation of the Hooters Casino Hotel and received as compensation forsuch services 2% of the construction and furniture, fixtures and equipmentcosts, not to exceed a total of $600,000. The Company’s payments to Hawkeye Construction and Millwork, Inc.totaled $340,545 and $138,975 for the six months ended June 30, 2006 and 2005,respectively.

**Provident Advertising& Marketing, Inc.**

**The majority shareholder of ProvidentAdvertising & Marketing, Inc. (“Provident”) is Edward C. Droste,a member of the Company’s management board and an indirect beneficial owner of3.96% of the Company’s membership interests. Provident has been engaged by the Company to provide services related tothe planning and development of an initial advertising and marketing plan andfor the continued development and implementation of a strategic marketing planfor the operation of the Hooters Casino Hotel. The fees paid to Provident during the six months ended June 30, 2006 and2005 totaled $1,885,457 and $102,192, respectively.  The marketing fees paid to Provident prior tothe grand opening of Hooters Casino Hotel were included in pre-openingexpenses in the accompanying consolidated statement of operations.  The fees paid to Provident also includepurchases of uniforms and gift shop items for resale.**

***5.  Commitments andContingencies***

***Litigation***

From time to time, the Company is a party to variousclaims arising in the normal course of business.  Management believes, however, that there areno proceedings pending or threatened against the Company which, if determinedadversely, would have a material adverse effect on the Company’s financialcondition, results of operations or liquidity.

12

----

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

**Notes to CondensedConsolidated Financial Statements (unaudited) (continued)**

***5.  Commitments andContingencies***

***Contractual Commitments***

OnFebruary 25, 2005, the Company entered into a $36.5 millionguaranteed maximum price contract with The PENTA Building Group, Inc. forthe renovation, construction and upgrade of the Hôtel San Rémo.  Upon receiving the necessary buildingpermits, the renovation and construction of the Hôtel San Rémo commenced inApril 2005.  The Company has paidapproximately $36.3 million to The PENTA Building Group, Inc. and the contractis complete.  The final payment was madeprior to June 30, 2006.

TheCompany has entered into operational contracts totaling $5.5 million at June30, 2006.

**Hooters of America Royalty Payments**

Beginning on February 3, 2006, the Company isrequired to pay the owner of the Hooters trademark, Hooters of America, aroyalty fee equal to 2% of all net revenues of the hotel and casino (excludingthe Dan Marino’s Restaurant and 13 Martini Bar) and 1% of revenues from thePete and Shorty’s Tavern less miscellaneous expenses.  The total fees paid to Hooters of Americawere approximately $329,518 and $598,913 for the three months and six monthsended June 30, 2006, respectively.  Thesefees are included in general and administrative expenses on the accompanyingcondensed consolidated statements of operations.

**Preferred Return**

The Company’smembership interest includes an EW Common preferred account which accumulates apreferred return rate of 4% per annum on the $25.0 million accountbalance.  Such preferred return beganaccruing on March 1, 2006, whether or not there are profits or funds availablefor the payment of the preferred return. Under the Notes indenture, the preferred return to EW Common is payableonly if the Company’s coverage ratio of EBITDA to fixed charges (as defined inthe indenture) is 1.5 to 1 for the fiscal year as measured after the close ofthe fiscal year.  As of June 30, 2006,$334,931 relating to the preferred account has been accumulated, but has notbeen paid.

13

----

**HÔTEL SAN RÉMO CASINO AND RESORT**

**(ADIVISION OF S.I. ENTERPRISES, INC.)**

**CONDENSEDCOMBINED STATEMENTS OF OPERATIONS**

 
| ** **                                 | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|--------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                                 | ** ** | **June 30,**                | ** ** | **June 30,**              | ** ** |
| ** **                                 | ** ** | **2005**                         | ** ** | **2005**                       | ** ** |
| ** **                                 | ** ** | **(unaudited)**                  | ** ** | **(unaudited)**                | ** ** |
|                                       |       |                             |       |                           |       |
| Operating revenues:                        |       |                             |       |                           |       |
| Casino                                     |       | $                                | 2,896,134  |                           | $          | 6,214,024 |   |
| Food and  beverage                         |       | 1,721,714                        |       | 3,635,669                      |       |
| Hotel and other                            |       | 3,989,556                        |       | 8,450,754                      |       |
|                                       |       | 8,607,404                        |       | 18,300,447                     |       |
| Less promotional  allowances               |       | (528,595                         | )          | (1,111,726                     | )          |
| Net operating revenues                     |       | 8,078,809                        |       | 17,188,721                     |       |
| Operating expenses:                        |       |                             |       |                           |       |
| Casino                                     |       | 1,658,072                        |       | 3,423,254                      |       |
| Food and  beverage                         |       | 1,569,423                        |       | 3,141,979                      |       |
| Hotel and other                            |       | 1,079,711                        |       | 2,198,183                      |       |
| General and  administrative                |       | 1,991,808                        |       | 4,033,578                      |       |
| Depreciation  expense                      |       | 93,748                           |       | 187,928                        |       |
| Related party  lease expense               |       | 1,564,390                        |       | 3,939,324                      |       |
| Total operating  expenses                  |       | 7,957,152                        |       | 16,924,246                     |       |
| Operating income                           |       | 121,657                          |       | 264,475                        |       |
| Other income (expense):                    |       |                             |       |                           |       |
| Interest income                            |       | 106,410                          |       | 206,365                        |       |
| Interest expense                           |       | (2,327                           | )          | (4,934                         | )          |
| Other income (expense),  net               |       | 104,083                          |       | 201,431                        |       |
| Income before income  taxes                |       | 225,740                          |       | 465,906                        |       |
| (Benefit from)  provision for income taxes |       | (94,866                          | )          | 239,403                        |       |
| Net income                                 |       | $                                | 320,606    |                           | $          | 226,503 |   |

 

*The accompanying notes are an integral part of these condensed combinedfinancial statements.*

14

----

**HÔTEL SANRÉMO CASINO AND RESORT**

**(ADIVISION OF S.I. ENTERPRISES, INC.)**

**CONDENSEDCOMBINED STATEMENT OF CASH FLOWS**

 
| ** **                                                                         | ** ** | **Six Months Ended** | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                                         | ** ** | **June 30,**              | ** ** |
| ** **                                                                         | ** ** | **2005**                       | ** ** |
| ** **                                                                         | ** ** | **(unaudited)**                | ** ** |
| **Cash  Flow From Operating Activities**                                           | ** ** | ** **                     | ** ** |
| Net income                                                                         |       | $                              | 226,503    |   |
| Adjustments to reconcile net income to net cash  provided by operating activities: |       |                           |       |
| Depreciation                                                                       |       | 187,928                        |       |
| Deferred income taxes                                                              |       | 239,403                        |       |
| Change in operating assets and liabilities:                                        |       |                           |       |
| Accounts receivable                                                                |       | (70,108                        | )          |
| Provision for doubtful accounts                                                    |       | (21,051                        | )          |
| Inventories                                                                        |       | 40,617                         |       |
| Prepaid expenses                                                                   |       | 17,673                         |       |
| Accounts payable                                                                   |       | 155,130                        |       |
| Accrued expenses                                                                   |       | (493,873                       | )          |
| Net cash  provided by operating activities                                         |       | 282,222                        |       |
|                                                                               |       |                           |       |
| **Cash  Flow From Investing Activities**                                           | ** ** | ** **                     | ** ** |
| Capital  expenditures                                                              |       | (15,699                        | )          |
| Net increase in  other assets                                                      |       | (220,541                       | )          |
| Net cash used in  investing activities                                             |       | (236,240                       | )          |
|                                                                               |       |                           |       |
| **Cash  Flow From Financing Activities**                                           | ** ** | ** **                     | ** ** |
| Net decrease in  due from 155 East Tropicana, LLC                                  |       | 874,966                        |       |
| Principal  payments on long-term debt                                              |       | (138,726                       | )          |
| Advances to  affiliates, net                                                       |       | (1,699,473                     | )          |
| Net cash used in  financing activities                                             |       | (963,233                       | )          |
|                                                                               |       |                           |       |
| Decrease in cash  and cash equivalents                                             |       | (917,251                       | )          |
| Cash and cash  equivalents, beginning of period                                    |       | 4,470,919                      |       |
| Cash and cash  equivalents, end of period                                          |       | $                              | 3,553,668  |   |
|                                                                               |       |                           |       |
| **Supplemental  disclosure of cash flow information:**                             | ** ** | ** **                     | ** ** |
| Cash paid during period  for interest                                              |       | $                              | 4,934      |   |

 

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

15

----

**HÔTEL SAN RÉMO CASINO AND RESORT**

**(ADIVISION OF S.I. ENTERPRISES, INC.)**

**Notes toCondensed Combined Financial Statements (unaudited)**

 

**June30, 2005**

**1.  Organization and Basis of Presentation**

The accompanying condensed combined financial statements present theoperations of Hôtel San Rémo Casino and Resort (“Hôtel San Rémo”), a divisionof S.I. Enterprises, Inc. (the “Parent Company”), a Nevada Corporation,which is located in Las Vegas, Nevada. Hôtel San Rémo commenced gaming operations on February 16,1990.  The accompanying condensedcombined financial statements represent the operations of the hotel and gamingfacilities and include certain accounts of Eastern & Western HotelCorporation (“Eastern & Western”) and I&P Corporation, Colorado (“I&P”),both Nevada corporations.  ThroughOctober 31, 2005, Eastern & Western held the gaming license in Nevadaand owned all gaming assets used by Hôtel San Rémo.  I&P owned the real property andnon-gaming assets of Hôtel San Rémo until August 3, 2004, at which timethey were acquired by 155 East Tropicana, LLC (see Note 2) and then leased backto Hôtel San Rémo pursuant to the casino lease and hotel lease arrangements(see Note 3).  Members of the Izumifamily are 100% owners of S.I. Enterprises, Inc., which owns 100% of Eastern& Western and owns 100% of I&P. The principal business of Eastern & Western prior to the merger ofI&P into Eastern & Western, was the owner and operator of the hotel.

Related to the events described above and in Note 2, effective November1, 2005, Hôtel San Rémo ceased operations as the remainder of its assets weretransferred to 155 East Tropicana, LLC and to its former owner.  Accordingly, the accompanying condensedcombined financial statements present only the statements of operations for thethree and six months ended June 30, 2005 and the statement of cash flows forthe six months ended June 30, 2005.

The accompanying condensed combined financial statements have beenprepared by Hôtel San Rémo, without audit, pursuant to the rules andregulations of the Securities and Exchange Commission.  Accordingly, the condensed combined financialstatements contain all adjustments (consisting of normal recurring adjustments)that, in the opinion of management, are necessary to present fairly the HôtelSan Rémo’s results of operations and cash flows for the interim periodsincluded herein.

The accompanying condensed combined financial statements should be readin conjunction with the financial statements and notes thereto for the yearended December 31, 2005, included in the Annual Report Form 10-K for the yearended December 31, 2005 filed with the Securities and Exchange Commission onMarch 31, 2006.  All significantintercompany accounts and transactions have been eliminated in the condensedcombined financial statements.

16

----

**HÔTEL SANRÉMO CASINO AND RESORT**

**(ADIVISION OF S.I. ENTERPRISES, INC.)**

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

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

InAugust 2004, 155 East Tropicana, LLC (“155”) agreed to the acquisition ofthe real property and other assets of Hôtel San Rémo for approximately$72.5 million including transaction costs and expenses.  155 is a joint venture between FloridaHooters LLC and EW Common LLC.  EW CommonLLC was formed to hold Eastern & Western’s membership interest in155.  EW Common LLC is owned 90% byEastern & Western and 10% by Michael J. Hessling, the executive vicepresident and chief executive officer of Hôtel San Rémo.  Initially, 155 acquired $67.5 million of thereal property and non-gaming assets and agreed that the remaining $5.0 millionin gaming assets would be transferred to 155 upon obtaining the gaming andliquor licenses necessary to take over operations of the hotel and casino.  In October 2005, 155 secured its gaming andliquor licenses and on November 1, 2005, assumed the operations of the hoteland casino.  On November 1, 2005, theremaining Hôtel San Rémo gaming assets were also transferred to 155 in exchangefor an additional $5.0 million interest in 155 with a priority return.  The casino and hotel leases were terminatedon October 31, 2005.  Immediately priorto the acquisition in 2004, the real property and non-gaming assets ofHôtel San Rémo with a net book value of $25,956,004 and long-term debt of$43,745,708 were transferred to EW Common LLC.  Because EW Common LLC and Hôtel San Rémoare entities under common control, these transfers were reflected as divisionequity transactions.

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

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

**3.  Lease Agreements**

In connection with the acquisition of Hôtel San Rémo’s real propertyand non-gaming assets by 155, Eastern & Western, as lessee, and 155 enteredinto lease agreements to lease back the casino and hotel property previouslyowned by Hôtel San Rémo.  Upon thereceipt of gaming and liquor licensing by 155, these leases were terminated onOctober 31, 2005 and the operations of the hotel and casino were assumed by155.   Total lease expense related tothese lease agreements was $1,564,390 and $3,939,324 for the three months andsix months ended June 30, 2005, respectively.

17

----

**HÔTEL SANRÉMO CASINO AND RESORT**

**(ADIVISION OF S.I. ENTERPRISES, INC.)**

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

**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.*  Hôtel San Rémo is party to various litigationarising in the normal course of business. 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.

18

----

## **Item 2.  Management’s Discussion and Analysis ofFinancial Condition and Results of Operations.**

Thefollowing discussion and analysis should be read together with our unauditedconsolidated financial statements and the accompanying notes.  This discussion contains forward-lookingstatements, within the meaning of Section 27A of Securities Act of 1933, asamended, Section 21E of the Securities Exchange Act of 1934, as amended, andthe Private Securities Litigation Reform Act of 1995, including statementsregarding our expected financial position, business and financing plans.  Some of the forward-looking statements can beidentified by the use of forward-looking term such as “believes,” “expects,” “may,”“will,” “should,” “could,” “seek,” “intends,” “plans,” “estimates,” “anticipates,”or other comparable terms. Forward-looking statements involve inherent risks and uncertaintieswhich could cause actual results to differ materially from those in theforward-looking statement, including those discussed herein and elsewhere inour Annual Report on Form 10-K filed with the Securities and ExchangeCommission, or the Commission, on March 31, 2006, particularly under theheading “Risk Factors.”  We cautionreaders not to place undue reliance upon any such forward-looking statements,which speak only as of the date made.

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

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

Florida Hooters LLC is a joint venture betweenHooters Gaming LLC and Lags Ventures, LLC. Hooters Gaming LLC is owned by the holders of licenses to operateHooters restaurants in the Tampa Bay, Chicago and Manhattan areas as well asfor wholesale foods, calendars and Nevada hotel/gaming, and includes most ofthe original founders of the Hooters brand. Lags Ventures, LLC is owned by a holder of the license rights to Hootersrestaurants in South Florida and the State of Nevada.  Pursuant to these license rights, the ownersof Florida Hooters LLC operate 41 Hooters restaurants, publish Hooterscalendars, and operate a Hooters foods business.  The owner of Lags Ventures, LLC is also thefounder of the Dan Marino concept restaurants and owns and operates 4 DanMarino concept restaurants.

Eastern & Western owns 90% of EW Common LLC,while our President and interim Chief Operating Officer, Michael Hessling, ownsthe balance.  Eastern & Western isbeneficially owned by Sukeaki and Toyoroku Izumi.  Eastern & Western owned the Hôtel SanRémo from November 1988 until our acquisition of the Hôtel San Rémo in2004.  Mr. Hessling served as the HôtelSan Rémo’s executive vice president and chief executive officer from January1989 until the acquisition, at which time he became our Chief OperatingOfficer.  Effective as of June 30, 2006,Mr. Hessling was appointed President of the Company.  Mr. Hessling will continue to serve on themanagement board and will act as both President and Chief Operating Officeruntil a new Chief Operating Officer is appointed.

Our affiliates have granted us assignments ofcertain license agreements pertaining to the use of the Hooters brand as wellas the Dan Marino, “13” Martini Bar and Pete & Shorty’s conceptrestaurants, which will allow us to operate the Hooters Casino Hotel.  The original founders of the Hooters brandsold the trademark rights (excluding certain rights they retained forthemselves) to Hooters of America in 2001. As a result, Hooters of America is the trademark owner of the Hootersbrand and the operator and

19

----

franchisor of 424 Hooters restaurants. Pursuant to the Hooters license assignment, we are required to payHooters of America a royalty fee, which totaled $598,913 from February 3, 2006(grand opening) through June 30, 2006. Aside from the abovementioned royalty fee, we are not otherwiseaffiliated with Hooters of America.

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

On March 29, 2005, we issued $130.0 millionaggregate principal amount of 83⁄4% Senior Secured Notes due 2012, or the oldnotes, in a private placement.  The oldnotes were subsequently exchanged with new notes, or the Notes, registered withthe Commission.  Interest payments on theNotes are due semi-annually, on each April 1 and October 1.  We used the proceeds from the old notesoffering to refinance existing indebtedness, and have used and are using theremaining proceeds (together with cash from operations and proceeds fromequipment financing), to renovate the hotel casino and to provide workingcapital.

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

We also entered into a $15.0 million seniorsecured credit facility (the “Credit Facility”) concurrently with the offeringof the old notes.  As discussed in moredetail under Liquidity and Capital Resources (155 East Tropicana, LLC), theCredit Facility was amended on January 1, 2006, and again on June 6, 2006.  During the six months ended June 30, 2006, wedrew $304,953 against the Credit Facility (all of which was outstanding at June30, 2006) to pay the lender fees related to the amendments of the CreditFacility.

Priorto November 1, 2005, we conducted no business or operations other than inconnection with the acquisition and subsequent leasing of the Hôtel SanRémo.  Through October 31, 2005, Eastern& Western held the gaming license in Nevada and owned all gaming assetsused by the Hôtel San Rémo.  Under a casinolease and hotel lease, Eastern & Western operated the Hôtel San Rémo.  After obtaining the necessary gaming andliquor licenses to operate the hotel casino in October 2005, we assumedoperations of the hotel casino on November 1, 2005 and the leases with Eastern& Western were terminated.

 

20

----

The renovations included a redesign of the main entrance, a renovationand expansion of the casino and restaurant areas, a remodel of the hotel roomsand a renovation and expansion of the pool area.  On February 3, 2006, the new Hooters CasinoHotel was opened for business.  The Hooters Casino Hotel features a casinofloor with 658 slot and video poker machines, 32 table games, 696 newlyrenovated hotel rooms including 17 suites, a tropical pool area, retailoutlets, a day spa, and dining and entertainment options which include aHooters restaurant, Dan Marino’s Fine Food, a coffee shop restaurant, a sportsbar, and several bars.

In August 2004, we acquired the real property andother assets of the Hôtel San Rémo. Since November 1, 2005, we have also operated the hotel casino, andaccordingly, have a limited operating history. Therefore, the discussion of operations herein focuses on the revenuesand expenses for the six months and quarter ended June 30, 2006 and 2005 as ifthere was no change in ownership or operation of the hotel casino.

***Results of Operations***

Wegenerated hotel, casino, food and beverage, entertainment and retail revenuesat the hotel casino property.  During thesix months ending June 30, 2006, approximately 37.9% of the gross revenue wasderived from the casino, 30.1% from hotel and other, and 32.0% from food andbeverage.

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

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

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

Casinorevenues vary from time to time due to general economic conditions, table gamehold, slot hold, and occupancy percentages at the Hooters Casino Hotel andother hotels in Las Vegas.  Casinorevenues also vary depending upon the amount of gaming activity as well asvariations in the odds for different games of chance.  Casino revenues, room revenues, food andbeverage revenues, and other revenues vary due to general economic conditionsand competition.  During 2006, Las Vegashas

21

----

continued to experience an upward trend in total visitation, as well asgaming win, hotel occupancy and hotel daily average room rates.

The following table summarizes the results ofoperations of 155, doing business as the Hooters Casino Hotel (which opened onFebruary 3, 2006), for the quarter and six months ended June 30, 2006 and thecombined results of operations of the Hôtel San Rémo and 155 for the quarterand six months ended June 30, 2005 (in thousands, except for percentages):
| ** **                           | ** ** | **155**                 | ** ** | **COMBINED**      | ** ** | ** **              | ** ** | **155**             | ** ** | **COMBINED**        | ** ** | ** **    | ** ** |
|--------------------------------------|------------|-------------------------|------------|-------------------|------------|-------------------------|------------|---------------------|------------|---------------------|------------|---------------|------------|
| ** **                           | ** ** | **Quarter**             | ** ** | **Quarter**       | ** ** | ** **              | ** ** | **Six Months** | ** ** | **Six Months** | ** ** | ** **    | ** ** |
| ** **                           | ** ** | **Ended**               | ** ** | **Ended**         | ** ** | **%**                   | ** ** | **Ended**           | ** ** | **Ended**           | ** ** | **%**         | ** ** |
| ** **                           | ** ** | **June 30,**       | ** ** | **June 30,** | ** ** | **Change**              | ** ** | **June 30,**   | ** ** | **June 30,**   | ** ** | **Change**    | ** ** |
| ** **                           | ** ** | **2006**                | ** ** | **2005**          | ** ** | **2006-2005**           | ** ** | **2006**            | ** ** | **2005**            | ** ** | **2006-2005** | ** ** |
| ** **                           | ** ** | **(in thousands)** | ** ** | ** **        | ** ** | **(in thousands)** | ** ** | ** **          | ** ** |
| Casino revenues                      |       | $                       | 6,824      |              | $          | 2,896                   |       | 135.6               | %          | $                   | 13,722     |          | $          | 6,214 |   | 120.8 | % |
| Casino expenses                      |       | 3,996                   |       | 1,658             |       | 141.0                   | %          | 6,963               |       | 3,423               |       | 103.4         | %          |
| Profit margin                        |       | 41.4                    | %          | 42.7              | %          |                    |       | 49.3                | %          | 44.9                | %          |          |       |
|                                 |       |                    |       |              |       |                    |       |                |       |                |       |          |       |
| Food and  beverage revenues          |       | $                       | 6,428      |              | $          | 1,722                   |       | 273.3               | %          | $                   | 11,581     |          | $          | 3,636 |   | 218.5 | % |
| Food and  beverage expenses          |       | 5,380                   |       | 1,569             |       | 242.8                   | %          | 9,606               |       | 3,142               |       | 205.7         | %          |
| Profit margin                        |       | 16.3                    | %          | 8.8               | %          |                    |       | 17.1                | %          | 13.6                | %          |          |       |
|                                 |       |                    |       |              |       |                    |       |                |       |                |       |          |       |
| Hotel and other  revenues            |       | $                       | 6,375      |              | $          | 3,990                   |       | 59.8                | %          | $                   | 10,875     |          | $          | 8,451 |   | 28.7 | % |
| Hotel and other  expenses            |       | 2,480                   |       | 1,080             |       | 129.7                   | %          | 4,197               |       | 2,198               |       | 90.9          | %          |
| Profit margin                        |       | 61.1                    | %          | 72.9              | %          |                    |       | 61.4                | %          | 74.0                | %          |          |       |
|                                 |       |                    |       |              |       |                    |       |                |       |                |       |          |       |
| Promotional  allowances              |       | $                       | 1,310      |              | $          | 529                     |       | 147.9               | %          | $                   | 2,731      |          | $          | 1,112 |   | 145.7 | % |
| Percent of gross  revenues           |       | 6.7                     | %          | 6.1               | %          |                    |       | 7.5                 | %          | 6.1                 | %          |          |       |
|                                 |       |                    |       |              |       |                    |       |                |       |                |       |          |       |
| General and  administrative expenses |       | $                       | 5,791      |              | $          | 1,992                   |       | 190.7               | %          | $                   | 9,117      |          | $          | 4,034 |   | 126.0 | % |
| Percent of net  revenues             |       | 31.6                    | %          | 24.7              | %          |                    |       | 27.3                | %          | 23.5                | %          |          |       |
|                                 |       |                    |       |              |       |                    |       |                |       |                |       |          |       |
| Preopening  expenses                 |       | $                       | —     |              | $          | 335                     |       | -100.0              | %          | $                   | 5,293      |          | $          | 600 |   | 782.1 | % |
| Percent of net revenues              |       | —                  |       | 4.1               | %          |                    |       | 15.8                | %          | 3.5                 | %          |          |       |

 

The following discussion presents an analysis of thehotel casino’s results of operations for the quarter and six months ended June30, 2006 and 2005, respectively.

***Comparison of Quarter Ended June 30, 2006 with the Quarter Ended June30, 2005***

Netoperating revenues for the quarter ended June 30, 2006 were $18.3 million, anincrease of $10.2 million or 126.7%, from $8.1 million of net operatingrevenues generated by Hôtel San Rémo during the same period in the previousyear.  The significant increase in netoperating revenues was due to increased activity in the casino and food andbeverage outlets related to the new Hooters Casino Hotel, as discussed below.

*Casino.* Casino revenues increased by $3.9 million to $6.8 million for thequarter ended June 30, 2006, compared to $2.9 million for the quarter endedJune 30, 2005.  Table games revenue was$3.0 million in 2006, an increase of $2.1 million, or 245.3%, compared to thetable games revenue of $0.9 million from the prior year’s quarter.  Table game drop increased to $16.8 million,or by 171.5%, for the quarter ended June 30, 2006 compared to the quarter endedJune 30, 2005, but table game hold percentage decreased from 18.4% in 2005 to17.6% in 2006.  The table games generatedan average win per table of

22

----

$1,622 per day for the quarter ended June 30, 2006 as compared to $627per day for the quarter ended June 30, 2005. Slot revenue of $3.8 million for the quarter ended June 30, 2006 was anincrease of 86.4% compared to $2.0 million in the same period in 2005.  The average win per machine per day was $67for the quarter ended June 30, 2006 as compared to $43 for the quarter endedJune 30, 2005.  This is a decrease fromthe average win per machine per day of $99 experienced in the first two monthsafter opening the Hooters Casino Hotel. We have experienced disruptions on the slot floor in May and June as weadded new slot products and modified our slot floor layout.  We are also increasing our promotionalefforts to attract additional slot play.

Casinoexpenses increased by 141.0% to $4.0 million for the quarter ended June 30,2006 compared to $1.7 million for the quarter ended June 30, 2005 due toincreases in payroll and other operational expenses.  The profit margin for casino operations alsodecreased slightly from 42.7% during the quarter ended June 30, 2005 to 41.4%during the quarter ended June 30, 2006 due to increases in other operationalexpenses during 2006.

*Food and beverage.*  Foodand beverage revenue was $6.4 million for the quarter ended June 30, 2006 ascompared to $1.7 million for 2005, an increase of 273.3%.  The increase was a result of added foodcovers after the grand opening of Hooters Casino Hotel.  Covers increased in all restaurantsdramatically after the grand opening. Beverage revenue (which includes complimentary beverages) increased by$2.9 million, or 605.4%, from $0.5 million during the quarter ended June 30,2005.

Food and beverage expenses increased from $1.6million during the quarter ended June 30, 2005 to $5.4 million during thequarter ended June 30, 2006, an increase of $3.8 million.  The increase is due to increases in payroll,cost of food, and other operational expenses associated with the increase inbusiness volume.  However, the number offood and beverage outlets also increased from Hôtel San Rémo’s five outlets tonine outlets at Hooters Casino Hotel after the grand opening.  The profit margin for food and beverageoperations increased by 7.5% for the quarter ended June 30, 2006 due tooperational efficiencies in payroll and cost of sales.

*Hotel and other.*  Hoteland other revenue (which includes hotel room revenue, retail, spa and other miscellaneousrevenue) increased by $2.4 million, or 59.8%, to $6.4 million for the quarterended June 30, 2006 from $4.0 million for the quarter ended June 30, 2005.  Room revenue was $4.5 million for the quarterended June 30, 2006 compared to $3.7 million in 2005.  This increase was a result of an increase inaverage daily room rates partially offset by a decrease in occupancyrates.  Average daily room ratesincreased by 37.1% from $70 for the quarter ended June 30, 2005 to $96 for thequarter ended June 30, 2006, while occupancy rates decreased from 85.5% for thequarter ended June 30, 2005 to 73.9% for the quarter ended June 30, 2006.

Sales from our retail outlets selling Hooters logomerchandise increased the amount of other revenue significantly.  Retail revenue was $1.5 million or 23.7% ofhotel and other revenue in the quarter ended June 30, 2006 and has increasedfrom $0.2 million during the quarter ended June 30, 2005, an increase of $1.3million.

Hoteland other expenses increased by 129.7% from $1.1 million during the quarterended June 30, 2005 to $2.5 million during the quarter ended June 30, 2006 dueto increases in cost of sales, payroll, and other expenses in hotel and retailoperations.  The profit margin for roomwas 66.5% in the second quarter of 2006 compared to 74.2% for that same periodin the prior year due to increased payroll expense and upgraded roomamenities.  Retail sales generated aprofit margin of 29.0%.

23

----

*General and administrative.* General and administrative expense includes costs associated withcorporate marketing, information technology, finance, accounting, and propertyoperations.  General and administrativeexpense increased $3.8 million to $5.8 million for the quarter ended June 30,2006 compared to $2.0 million for the quarter ended June 30, 2005.  This increase was principally due tosignificant increases in advertising and marketing, and payroll expenses forthe quarter ended June 30, 2006.

*Depreciation and amortizationexpense.*  Depreciation and amortization expense of $1.7million for the quarter ended June 30, 2006 increased by $1.2 million, or237.4%, from $0.5 million for the quarter ended June 30, 2005.  The increase in depreciation expense was dueto additional depreciation of fixed asset additions placed in service beginningFebruary 3, 2006.

*Related party royalties expense.* Beginning on February 3, 2006, we incurred related party royalty feespursuant to agreements with Hooters Gaming Corporation, Lags Ventures, Inc.,and Las Vegas Wings, Inc.  These relatedparty royalties expense totaled $0.4 million during the quarter ended June 30,2006.  The payment of the related partyroyalties is restricted under the Notes indenture.  The fees can only be paid after the close ofthe fiscal year and only if our debt coverage ratio is 1.5 to 1 for that fiscalyear.  The payments of the royalty feesare further limited to the sum of 2% of revenue and 3% of EBITDA, as defined inthe indenture.

*Loss on disposal of assets.*  Theloss on disposal of assets in the second quarter of 2006 of $0.2 million is theresult of retiring and replacing certain old slot machines and other equipmentand replacing the carpeting on the casino floor in connection with the HootersCasino Hotel remodel.

*Interest income.* Interest income was $0.1 million for the quarter ended June 30, 2006,compared to $0.7 million for the quarter ended June 30, 2005.  The decrease resulted from greater interestincome earned during 2005 on the investment of $130.0 million in Notesproceeds.

*Interest expense.* Interest expense was $3.2 million for the quarter ended June 30, 2006,compared to $3.1 million for the quarter ended June 30, 2005, an increase of$0.1 million.  The increase in interestexpense is largely attributable to $0.1 million in interest expense on the CreditFacility and the equipment purchase agreements we entered into during 2006.

*Related party lease income.* During the period from August 3, 2004 through October 31, 2005, weleased the hotel casino to Eastern & Western under two separate leaseagreements.  Pursuant to the casino leaseagreement, the casino, showroom, liquor servicing areas and other casinorelated areas were leased for $125,000 per month.  Pursuant to the hotel lease agreement for thehotel, restaurants, and other areas of the hotel casino property, rental incomewas $250,000 per month, plus a percentage rent equal to 100% of all revenuesreceived by Eastern & Western from the operation of the hotel andrestaurants, less operating expenses and working capital reserves, as defined inthe hotel lease agreement.  For thequarter ended June 30, 2005, a total of $1.6 million was earned in rentalincome under the casino and hotel leases.

*Provision for income taxes.*  155is a limited-liability company and is treated as a partnership for federalincome tax purposes.  Accordingly, aprovision for federal income taxes is not recorded on our consolidatedfinancial statements.  Taxable income orloss will be included in the income tax returns of the members.

24

----

***Comparison of Six Months Ended June 30, 2006 with the Six Months EndedJune 30, 2005***

Theresults of operations for the six months ended June 30, 2006 includes the monthof January 2006 when the property was essentially closed for remodeling and thefirst five months of operations of the Hooters Casino Hotel from February 3,2006 through June 30, 2006.  Netoperating revenues for the six months ended June 30, 2006 were $33.4 million,an increase of $16.2 million or 94.6%, from $17.2 million of net operating revenuesgenerated by Hôtel San Rémo during the same period in the previous year.  Included in the net revenues for the firstsix months of 2006 were $33.1 million generated by the Hooters Casino Hoteloperations beginning on February 3, 2006. The increase in net operating revenues was due to increased activity inthe casino and food and beverage outlets related to the new Hooters CasinoHotel.

*Casino.* Casino revenues increased by $7.5 million to $13.7 million for the sixmonths ended June 30, 2006, compared to $6.2 million for the six months endedJune 30, 2005.  Casino revenue of $13.6million was generated after the grand opening on February 3, 2006.  Table games revenue was $5.9 million in 2006,an increase of $4.0 million, or 209.4%, compared to the table games revenue of$1.9 million from the prior year’s first six months.  With the exception of $34,000, all tablegames revenue was generated after the grand opening.  Table game drop increased to $33.9 million,or by 234.4%, for the six months ended June 30, 2006 compared to the six monthsended June 30, 2005, but table game hold percentage decreased from 18.8% in2005 to 17.4% in 2006.  The table gamesgenerated an average win per table of $1,204 per day after February 3, 2006 ascompared to $702 for the same period in 2005. Slot revenue of $7.6 million for the six months ended June 30, 2006 wasan increase of 77.7% compared to $4.3 million in the same period in 2005.  With the exception of $0.1 million, theentire slot revenue was generated after the grand opening.  The average win per machine per day was $80from February 3, 2006 to June 30, 2006 compared to $45 for the same period in2005.

Casinoexpenses increased by 103.4% to $7.0 million for the six months ended June 30,2006 compared to $3.4 million for the six months ended June 30, 2005 due toincreases in payroll and other operational expenses.  However, the profit margin for casinooperations increased from 44.9% during the six months ended June 30, 2005 to49.3% during the six months ended June 30, 2006 due to payroll expenses beingproportionally lower during 2006 in comparison to revenue.  The percentage of payroll expenses incomparison to revenue for the six months ended June 30, 2006 and 2005 were24.4% and 29.5%, respectively.

*Food and beverage.*  Foodand beverage revenue was $11.6 million for the six months ended June 30, 2006as compared to $3.6 million for 2005, an increase of 218.5%.  The increase in food revenues was a result ofincreased customer volume after the grand opening.  Beverage revenue (which includes complimentarybeverages) increased by $4.3 million, or 406.5%, from $1.1 million during thesix months ended June 30, 2005.

Food and beverage expenses increased from $3.1million during the six months ended June 30, 2005 to $9.6 million during thesix months ended June 30, 2006, an increase of $6.5 million.  The increase is due to increases in payroll,cost of food, and other operational expenses associated with the increase inbusiness volume.  However, the number offood and beverage outlets also increased from Hôtel San Rémo’s five outlets tonine outlets at Hooters Casino Hotel after the grand opening.  The profit

25

----

margin for food and beverage operations increased from 13.6% during thesix months ended June 30, 2005 to 17.1% during the six months ended June 30,2006 due to operational efficiencies in payroll and cost of sales.

*Hotel and other.*  Hoteland other revenue (which includes hotel room revenue, retail, spa and othermiscellaneous revenue) increased by $2.4 million, or 28.7%, to $10.9 millionfor the six months ended June 30, 2006 from $8.5 million for the six monthsended June 30, 2005.  Room revenueslightly decreased to $7.7 million for the six months ended June 30, 2006compared to $7.8 million in 2005.  Thisdecrease was the result of the hotel being essentially closed from January 2 toFebruary 2, 2006.  As planned, theCompany made the decision to stop taking room reservations after January 2,2006 to accommodate the remodeling activities for the grand opening.  For the months of February through June 2006,room revenue was $7.5 million with an occupancy rate of 76.6% and average dailyroom rate of $101.  This compares to roomrevenue of $6.7 million for the same five months in 2005, with an occupancyrate of 87.4% and an average daily rate of $75. The Company has committed to increase sales and marketing efforts tocontinue the improvement of our occupancy rates in the third and fourthquarters of 2006.

Sales from our retail outlets selling Hooters logomerchandise largely offset the decline in room revenue.  Retail revenue was $2.6 million or 24.3% ofhotel and other revenue in the six months ended June 30, 2006 and has increasedfrom $0.5 million during the six months ended June 30, 2005, an increase of $2.1million.

Hoteland other expenses increased by 90.9% from $2.2 million during the six monthsended June 30, 2005 to $4.2 million during the six months ended June 30, 2006due to increases in payroll and other expenses in hotel and retailoperations.  The profit margin for roomswas 66.7% in the second quarter of 2006 compared to 75.3% for the same periodin the prior year due to increased payroll expense and upgraded roomamenities.  Retail sales generated aprofit margin of 30.0%.

*General and administrative.* General and administrative expense includes costs associated withcorporate marketing, information technology, finance, accounting, and propertyoperations.  General and administrativeexpense increased $5.1 million to $9.1 million for the six months ended June30, 2006 compared to $4.0 million for the six months ended June 30, 2005.  This increase was principally due toincreases in advertising and marketing, and payroll expenses for the six monthsended June 30, 2006.

*Depreciation and amortizationexpense.*  Depreciation and amortization expense of $2.8million for the six months ended June 30, 2006 increased by $1.8 million, or182.0%, from $1.0 million for the six months ended June 30, 2005.  The increase in depreciation expense was dueto additional depreciation of fixed asset additions placed in service beginningFebruary 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 increasedby $4.7 million to $5.3 million for the six months ended June 30, 2006 comparedto $0.6 million during the six months ended June 30, 2005, largely due toincreased training expenses during the month of January 2006 and the costs ofthe grand opening celebration for the Hooters Casino Hotel in February 2006.

26

----

*Related party royalties expense.* Beginning on February 3, 2006, we incurred related party royalty feespursuant to agreements with Hooters Gaming Corporation, Lags Ventures, Inc.,and Las Vegas Wings, Inc.  These relatedparty royalties expense totaled $0.7 million during the six months ended June30, 2006.  The payment of the relatedparty royalties is restricted under the Notes indenture.  The fees can only be paid after the close ofthe fiscal year and only if our debt coverage ratio is 1.5 to 1 for that fiscalyear.  The payments of the royalty fees arefurther limited to the sum of 2% of revenue and 3% of EBITDA as defined in theindenture.

*Loss on disposal of assets.*  Theloss on disposal of assets in 2006 of $1.2 million is the result of retiringand replacing certain old slot machines and other equipment and the carpetingon the casino floor in connection with the Hooters Casino Hotel remodel.

*Interest income.* Interest income was $0.4 million for the six months ended June 30, 2006,compared to $0.8 million for the six months ended June 30, 2005.  The decrease resulted from greater interestincome earned during 2005 on the investment of $130.0 million in old notesproceeds.

*Interest expense.* Interest expense was $6.2 million for the six months ended June 30,2006, compared to $4.4 million for the six months ended June 30, 2005, anincrease of $1.8 million.  The increasein interest expense is largely attributable to $5.7 million in interest expenseon the $130.0 million in old notes, issued in March 2005, which were exchangedfor the Notes.

*Loss on extinguishment of debt.*  Theloss on extinguishment of debt in 2005 was related to the payoff of our bankloan with the proceeds of the old notes on March 29, 2005.

*Related party lease income.* During the period from August 3, 2004 through October 31, 2005, weleased the hotel casino to Eastern & Western under two separate lease agreements.  Pursuant to the casino lease agreement, thecasino, showroom, liquor servicing areas and other casino related areas wereleased for $125,000 per month.  Pursuantto the hotel lease agreement for the hotel, restaurants, and other areas of thehotel casino property, rental income was $250,000 per month, plus a percentagerent equal to 100% of all revenues received by Eastern & Western from theoperation of the hotel and restaurants, less operating expenses and workingcapital reserves, as defined in the hotel lease agreement.  For the six months ended June 30, 2005, atotal of $3.9 million was received in rental income under the casino and hotelleases.

*Provision for income taxes.*  155is a limited-liability company and is treated as a partnership for federalincome tax purposes.  Accordingly, aprovision for federal income taxes is not recorded on our consolidatedfinancial statements.  Taxable income orloss will be included in the income tax returns of the members.

27

----

***Contractual Obligations***

The following table summarizes the contractualcommitments of 155 as of June 30, 2006:
| ** **                         | ** ** | **Payments Due By Year** | ** ** |
|------------------------------------|------------|-----------------------------------------|------------|
| ** **                         | ** ** | ** **                              | ** ** | **Less than** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                         | ** ** | **Total**                               | ** ** | **1 year** | ** ** | **1-3 years** | ** ** | **3-5 years** | ** ** | **Thereafter** | ** ** |
| ** **                         | ** ** | **(dollars in thousands)**    | ** ** |
| Equipment  purchase agreements (1) |       | $                                       | 4,948      |   | $ | 2,151 |   | $ | 2,797 |   | $ | — |   | $ | — |   |
| Long-term debt (2)                 |       | 130,305                                 |       | — |   | 305 |   | 130,000 |   | — |   |
| Operating  contracts (3)           |       | 5,460                                   |       | 2,903 |   | 2,200 |   | 357 |   | — |   |
| Total                              |       | $                                       | 140,713    |   | $ | 5,054 |   | $ | 5,302 |   | $ | 130,357 |   | $ | — |   |

 

----

(1)   155 entered into various equipment purchase agreements for the new HootersCasino Hotel.

(2)   The long-term debt represents the $130.0 million in Notes due in 2012,and amounts drawn against the Credit Facility during the six months ended June30, 2006.

(3)   Operating contracts represent various contracts for services in connectionwith the operations of the hotel.

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

Forthe six months ended June 30, 2006, we used $7.9 million of cash in operatingactivities during the six months ended June 30, 2006, largely due to our netloss of $12.3 million, which was offset by non-cash charges of $4.7 million.

Forthe six months ended June 30, 2006, $3.2 million of cash was provided byinvesting activities, consisting of a use of cash for capital expenditures of$25.3 million offset by a reduction in restricted funds of $27.8 million and areduction in other assets of $0.6 million.  At June 30, 2006, $1.5 million was held as restricted cash.  This balance largely represents interestearned on the restricted funds, and will be available for general purposes inthe future.

For the six months ended June 30, 2006, we used $0.9million of cash in financing activities, largely as a result of principalpayments on equipment debt.

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

We entered into a $15.0 million senior secured credit facility (the “CreditFacility”) concurrently with the offering of the old notes.  The Credit Facility is a four-year revolvingCredit Facility of $15.0 million, maturing on March 30, 2009. The originalCredit Facility called for restrictions on the availability of the full $15.0million amount of the Credit Facility, based on a multiple of the trailingtwelve-month EBITDA, or Borrowing Base. EBITDA is defined for any fiscal period as our consolidated net income(or loss), minus extraordinary gains and interest income, plus interestexpense, income taxes and depreciation and amortization for such period, andsubject to other adjustments as defined in the Credit Facility agreement.  On January 30, 2006, the Credit Facility wasamended to allow us, during the

28

----

periodof February 1, 2006 to June 30, 2006, to obtain advances in the aggregateprincipal amount of up to $15.0 million, without regard to the Borrowing Baserequirement.  We drew $304,953 againstthe Credit Facility during the six months ended June 30, 2006 (all of which wasoutstanding at June 30, 2006) to pay the lender fees related to this amendmentand to pay for other expenses related to the Credit Facility.  Subsequent to June 30, 2006, we drew anadditional $330,000 against the Credit Facility for slot machine purchases.

At March 31, 2006, we failed to meet two covenantrequirements associated with the Credit Facility involving (1) the maintenanceof a rolling twelve month adjusted EBITDA of $1,000,000 and (2) a senior debtto EBITDA ratio of 21:1 at March 31, 2006. Specifically, the rolling twelve month adjusted EBITDA at March 31, 2006was approximately $700,000 and the senior debt to EBITDA ratio was 30:1.  On May 11, 2006, we received a waiver ofdefault from the agent for the lender through March 31, 2006.  The CreditFacility was amended on June 6, 2006. The following amendments were made to the Credit Facility: (1)permanently removed the Borrowing Base concept which limited the amount thatcould be borrowed under the credit agreement, (2) modified the definition ofEBITDA, allowing for the add back of all pre-opening costs and removing theprevious $6.0 million cap, and (3) amended the financial covenant requirementsto alter the applicable periods when we must meet certain minimum EBITDA and maximumsenior debt ratios.  An amendment fee of$100,000 was paid to the lender in June 2006. At June 30, 2006, we were in compliance with the amended covenants.

As anticipated in our $130.0 million Note offeringdocument, we entered into equipment financing of $5.8 million during the sixmonths ending June 30, 2006, of which $4.9 million was outstanding at June 30,2006.

We expect to spend approximately $2.3 million incapital expenditures in 2006 above the amount spent for remodeling.  Approximately $0.8 million will be paid forfrom slot financing and most of the remaining $1.5 million has already beenspent.

We believe that we have the flexibility to coveroperational contingencies, working capital needs, capital expenditures, anddebt service obligations during 2006 through the use of cash (which totaled$8.5 million at June 30, 2006), restricted cash (which totaled $1.5 million atJune 30, 2006), our cash flow from operations, and our ability to draw againstour $15.0 million Credit Facility.

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

For the six months ended June 30, 2005, Hôtel SanRémo generated $0.3 million in cash flow from operations, primarily due to netincome of $0.2 million generated during the six months.

For the six months ended June 30, 2005, net cash of$0.2 million was used in investing activities as a result of purchasing otherassets.

For the six months ended June 30, 2005, net cash of$1.0 million was used in financing activities largely as a result of advancesto affiliates.

As the result of the above factors, the Hôtel SanRémo’s net cash decreased $0.9 million, from $4.5 million at December 31, 2004to $3.6 million at March 31, 2005.

As of November 1, 2005, Hôtel San Rémo ceasedoperations as a hotel and casino business, as all remaining assets weretransferred to either 155 or the former owner of the hotel.

29

----

***Critical Accounting Policies and Estimates***

A description of critical accounting policies and estimates is includedin the management discussion and analysis included in our Annual Report on Form10-K for the year ended December 31, 2005 filed with the Commission on March31, 2006.

## **Item3.  Quantitative and QualitativeDisclosures About Market Risk.**

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

Market risk is risk of loss arising from changes inmarket rates and prices, such as interest rates, foreign currency exchangerates and commodity prices.  At June 30,2006, we had $130,000,000 aggregate principal amount Senior Secured Notes dueApril 2, 2012, slot equipment purchase agreements of $5.6 million carrying animputed interest rate of 3.327%, and hotel equipment purchase agreements of$0.2 million carrying an imputed interest rate of 10.75%.  The Notes carry a fixed interest rate of 83⁄4%,provided no events of default remain unresolved.  Since the Notes and equipment purchase loanshave fixed interest rates, there is no market risk associated with theseloans.  We have market risk associatedwith funds that may be borrowed on the $15.0 million Credit Facility, dueto an interest rate that floats with the LIBOR or prime rate.  The term of the Credit Facility will matureon March 30, 2009.  At June 30, 2006,$304,953 was outstanding under this variable rate Credit Facility, carryinginterest at 10.25%.

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

## **Item4.  Controls and Procedures.**

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

We evaluated theeffectiveness of our disclosure controls and procedures as of three monthsended June 30, 2006.  This evaluation wasdone with the participation of our management, including our Chief ExecutiveOfficer and Chief Financial Officer.

Disclosure controls andprocedures are controls and other procedures that are designed to ensure thatinformation required to be disclosed by us in the reports that we file orsubmit under the Securities Exchange Act of 1934 are recorded, processed,summarized and reported within the time periods specified in the Commission’srules and forms.  Disclosure controls andprocedures include, without limitation, controls and procedures designed toensure that information required to be disclosed by us in the reports that wefile under the Securities Exchange Act of 1934 is accumulated and communicatedto our manager, as appropriate to allow timely decisions regarding requireddisclosure.

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

Our management does notexpect that our disclosure controls and procedures or our internal controlsover financial reporting will prevent all error and all fraud.  A control system, no matter how wellconceived and operated, can provide only reasonable, but not absolute,assurance that the objectives of a control system are met.  Further, any control system reflectslimitations on resources, and the benefits of a control system must beconsidered relative to its costs. Because of the inherent limitations in all control systems, noevaluation of controls can provide absolute assurance that all control issuesand instances of fraud, if any, within us have been detected.  These inherent limitations include therealities that judgments

30

----

in decision-makingcan be faulty and that breakdowns can occur because of simple error or mistake.Additionally, controls can be circumvented by the individual acts of somepersons, by collusion of two or more people, or by management override of acontrol.  Because the design of a controlsystem is based upon certain assumptions about the likelihood of future events,there can be no assurance that any design will succeed in achieving its statedgoals under all potential future conditions. Over time, controls may become inadequate because of changes inconditions, or the degree of compliance with the policies or procedures maydeteriorate. Because of the inherent limitations in a cost-effective controlsystem, misstatements due to error or fraud may occur and may not be detected.

## ***Conclusions***

Based on this evaluation,our Chief Executive Officer and Chief Financial Officer have evaluated ourdisclosure controls and procedures (as defined in the Securities Exchange Actof 1934 Rules 13a-15(e) and 15d-15(e)) as of June 30, 2006, and have concludedthat they are effective to timely alert them to material information relatingto us required to be included in the reports that we file or submit under theSecurities Exchange Act of 1934.

## ***Changes in InternalControls***

There were no changes in our internal controls overfinancial reporting that occurred during our last fiscal quarter, *i.e.*, the quarter ended June 30, 2006,that have materially affected, or are reasonably likely to materially affect,our internal controls over financial reporting.

31

----

# **PART II —OTHER INFORMATION**

## **Item1.  Legal Proceedings.**

None.

## **Item1A.  Risk Factors.**

None.

## **Item2.  Unregistered Sales of EquitySecurities and Use of Proceeds.**

None.

## **Item3.  Defaults Upon Senior Securities.**

None.

## **Item4.  Submission of Matters to a Vote ofSecurity Holders.**

None.

## **Item5.  Other Information.**

None.

## **Item6.  Exhibits.**

Exhibits:

31.1         Certificationpursuant to §302 of the Sarbanes-Oxley Act of 2002, Deborah J. Pierce

31.2         Certificationpursuant to §302 of the Sarbanes-Oxley Act of 2002, Neil G. Kiefer

32.1         Certificationpursuant to §906 of the Sarbanes-Oxley Act of 2002, Deborah J. Pierce

32.1         Certificationpursuant to §906 of the Sarbanes-Oxley Act of 2002, Neil G. Kiefer

32

----

# **SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized.
| **155 EAST TROPICANA, LLC** |                                                                                                                  |
|-----------------------------|-----------------------------------------------------------------------------------------------------------------------|
|                        |                                                                                                                  |
|                        |                                                                                                                  |
| By:                         |   /s/  Deborah J. Pierce                                                                                    |                 August 14, 2006 |
|                        |   Deborah  J. Pierce                                                                                        |   |
|                        | *  Chief Financial  Officer    (Principal Financial and Chief*

*  Accounting Officer)* | * * |

 
| **155 EAST TROPICANA FINANCE  CORP.** |                                                                                                                |
|---------------------------------------|---------------------------------------------------------------------------------------------------------------------|
|                                  |                                                                                                                |
|                                  |                                                                                                                |
| By:                                   |   /s/  Deborah J. Pierce                                                                                  |                 August 14, 2006 |
|                                  |   Deborah  J. Pierce                                                                                      |   |
|                                  | *  Chief Financial  Officer    (Principal Financial and Chief    Accounting Officer)* | * * |

 

33

----