**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

** **

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** **

**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 periodended March 31, 2007**

**or**

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

 

**For the transition periodfrom                            to                            **

** **

**Commission File Number333-124924**

** **

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**155 East Tropicana, 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)

 

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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 90days.    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 Acceleratedfiler   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

 

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** **
| **PART I — FINANCIAL  INFORMATION** |
|------------------------------------------|
| Item  1.                                 | Financial  Statements |
| ** **                               | **155 EAST TROPICANA, LLC (A  NEVADA LIMITED-LIABILITY COMPANY)** |
|                                     | Condensed Consolidated Balance Sheets (unaudited) |
|                                     | Condensed Consolidated Statements of Operations  (unaudited) |
|                                     | Condensed Consolidated Statements of Cash Flows  (unaudited) |
|                                     | Notes to Condensed Consolidated Financial Statements  (unaudited) |
| 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**                           |

** **

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# **PART I —FINANCIAL INFORMATION**

## **Item1.  Financial Statements.**

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

### **CONDENSED CONSOLIDATED BALANCE SHEETS**

 
| ** **                                                                                                          | ** ** | **March 31,** | ** **  | **December 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------|------------|--------------------|-------------|-----------------------|------------|
| ** **                                                                                                          | ** ** | **2007**           | ** **  | **2006**              | ** ** |
| ** **                                                                                                          | ** ** | **(unaudited)**    | ** **  | ** **            | ** ** |
| **Assets**                                                                                                          | ** ** | ** **         | ** **  | ** **            | ** ** |
| Current assets:                                                                                                     |       |               |        |                  |       |
| Cash and cash  equivalents                                                                                          |       | $                  | 9,632,408   |                  | $          | 6,164,192 |   |
| Accounts  receivable, net of allowance for doubtful accounts of $90,039 and $99,921 in  2007 and 2006, respectively |       | 2,061,587          |        | 1,609,756             |       |
| Inventories                                                                                                         |       | 860,579            |        | 846,651               |       |
| Prepaid expenses                                                                                                    |       | 1,716,354          |        | 1,569,980             |       |
| Total current  assets                                                                                               |       | 14,270,928         |        | 10,190,579            |       |
| Property and equipment,  net                                                                                        |       | 121,001,389        |        | 122,135,784           |       |
| Other long-term assets:                                                                                             |       |               |        |                  |       |
| Deferred  financing costs                                                                                           |       | 6,017,760          |        | 6,366,625             |       |
| Intangible  assets                                                                                                  |       | 6,544,141          |        | 6,557,119             |       |
| Other assets                                                                                                        |       | 348,273            |        | 343,273               |       |
| Total other  long-term assets                                                                                       |       | 12,910,174         |        | 13,267,017            |       |
| Total assets                                                                                                        |       | $                  | 148,182,491 |                  | $          | 145,593,380 |   |
|                                                                                                                |       |               |        |                  |       |
| **Liabilities and Members’ Equity**                                                                            | ** ** | ** **         | ** **  | ** **            | ** ** |
| Current liabilities:                                                                                                |       |               |        |                  |       |
| Accounts payable                                                                                                    |       | $                  | 3,804,201   |                  | $          | 2,969,064 |   |
| Accrued interest  payable                                                                                           |       | 5,687,500          |        | 2,843,750             |       |
| Accrued  liabilities                                                                                                |       | 2,021,470          |        | 2,266,740             |       |
| Current portion  of long-term debt                                                                                  |       | 2,005,616          |        | 1,859,319             |       |
| Total current  liabilities                                                                                          |       | 13,518,787         |        | 9,938,873             |       |
| Related party royalties  payable                                                                                    |       | 1,808,672          |        | 1,461,881             |       |
| Long-term debt                                                                                                      |       | 134,572,944        |        | 133,081,099           |       |
| Total  liabilities                                                                                                  |       | 149,900,403        |        | 144,481,853           |       |
|                                                                                                                |       |               |        |                  |       |
| Commitments and  contingencies                                                                                      |       |               |        |                  |       |
|                                                                                                                |       |               |        |                  |       |
| Members’ equity:                                                                                               |       |               |        |                  |       |
| Membership  interests                                                                                               |       | 34,333,375         |        | 34,333,375            |       |
| Accumulated  deficit                                                                                                |       | (36,051,287        | )           | (33,221,848           | )          |
|                                                                                                                |       | (1,717,912         | )           | 1,111,527             |       |
| Total  liabilities and members’ equity                                                                         |       | $                  | 148,182,491 |                  | $          | 145,593,380 |   |

 

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

3

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

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

 
| ** **                                                                                                                           | ** ** | **Three Months Ended  March 31,  2007 ** | ** ** | **Three Months Ended  March 31,  2006 ** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------|------------|--------------------------------------------------------------|------------|
| ** **                                                                                                                           | ** ** | **(unaudited)**                                              | ** ** | **(unaudited)**                                              | ** ** |
| Operating revenues:                                                                                                                  |       |                                                         |       |                                                         |       |
| Casino                                                                                                                               |       | $                                                            | 6,143,284  |                                                         | $          | 6,673,511 |   |
| Food and  beverage                                                                                                                   |       | 5,906,906                                                    |       | 5,152,976                                                    |       |
| Hotel and other                                                                                                                      |       | 6,634,913                                                    |       | 4,500,256                                                    |       |
|                                                                                                                                 |       | 18,685,103                                                   |       | 16,326,743                                                   |       |
| Less promotional  allowances                                                                                                         |       | (1,430,763                                                   | )          | (1,421,091                                                   | )          |
| Net operating revenues                                                                                                               |       | 17,254,340                                                   |       | 14,905,652                                                   |       |
|                                                                                                                                 |       |                                                         |       |                                                         |       |
| Operating expenses:                                                                                                                  |       |                                                         |       |                                                         |       |
| Casino                                                                                                                               |       | 3,438,752                                                    |       | 2,742,658                                                    |       |
| Food and  beverage                                                                                                                   |       | 4,502,110                                                    |       | 4,226,248                                                    |       |
| Hotel and other                                                                                                                      |       | 2,151,436                                                    |       | 1,716,584                                                    |       |
| General and  administrative                                                                                                          |       | 4,713,930                                                    |       | 3,326,016                                                    |       |
| Depreciation and  amortization                                                                                                       |       | 1,696,604                                                    |       | 1,134,233                                                    |       |
| Related party  royalties expense                                                                                                     |       | 346,790                                                      |       | 345,697                                                      |       |
| Pre-opening  expenses                                                                                                                |       | —                                                       |       | 5,292,834                                                    |       |
| Loss on disposal  of assets                                                                                                          |       | —                                                       |       | 977,677                                                      |       |
| Total operating  expenses                                                                                                            |       | 16,849,622                                                   |       | 19,761,947                                                   |       |
| Operating income (loss)                                                                                                              |       | 404,718                                                      |       | (4,856,295                                                   | )          |
|                                                                                                                                 |       |                                                         |       |                                                         |       |
| Other income (expense):                                                                                                              |       |                                                         |       |                                                         |       |
| Interest income                                                                                                                      |       | 37,428                                                       |       | 281,280                                                      |       |
| Interest  expense, net of capitalized interest of $0 and $229,096   for the three months ended March 31, 2007 and 2006, respectively |       | (3,271,585                                                   | )          | (3,021,064                                                   | )          |
| Other income (expense),  net                                                                                                         |       | (3,234,157                                                   | )          | (2,739,784                                                   | )          |
| Net loss                                                                                                                             |       | $                                                            | (2,829,439 | )                                                            | $          | (7,596,079 | ) |

 

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

 

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

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

| ** **                                                                                 | ** ** | **Three Months Ended  March 31,  2007** | ** ** | **Three Months Ended  March 31,  2006** | ** ** |
|--------------------------------------------------------------------------------------------|------------|--------------------------------------------------------|------------|--------------------------------------------------------|------------|
| ** **                                                                                 | ** ** | **(unaudited)**                                        | ** ** | **(unaudited)**                                        | ** ** |
| **Cash Flow From Operating  Activities**                                                   |       |                                                   |       |                                                   |       |
| Net loss                                                                                   |       | $                                                      | (2,829,439 | )                                                      | $          | (7,596,079 | ) |
| Adjustments to  reconcile net loss to net cash provided by (used in) operating activities: |       |                                                   |       |                                                   |       |
| Depreciation and  amortization                                                             |       | 1,696,604                                              |       | 1,134,233                                              |       |
| Amortization of  debt issuance costs                                                       |       | 348,866                                                |       | 197,406                                                |       |
| Amortization of  intangible asset                                                          |       | 12,978                                                 |       | 12,977                                                 |       |
| Loss on disposal  of assets                                                                |       | —                                                 |       | 977,677                                                |       |
| Changes in  assets and liabilities:                                                        |       |                                                   |       |                                                   |       |
| Accounts  receivable                                                                       |       | (451,831                                               | )          | (266,348                                               | )          |
| Inventories                                                                                |       | (13,928                                                | )          | (810,393                                               | )          |
| Prepaid expenses                                                                           |       | (146,374                                               | )          | (938,943                                               | )          |
| Accounts payable                                                                           |       | 835,137                                                |       | 1,432,556                                              |       |
| Accrued interest  payable                                                                  |       | 2,843,750                                              |       | 2,828,933                                              |       |
| Accrued  liabilities                                                                       |       | (245,270                                               | )          | 691,935                                                |       |
| Related party  royalties payable                                                           |       | 346,791                                                |       | 348,417                                                |       |
| Net cash provided by  (used in) operating activities                                       |       | 2,397,284                                              |       | (1,987,629                                             | )          |
|                                                                                       |       |                                                   |       |                                                   |       |
| **Cash Flow From Investing  Activities**                                                   |       |                                                   |       |                                                   |       |
| Capital expenditures                                                                       |       | (249,590                                               | )          | (17,552,965                                            | )          |
| Change in other assets                                                                     |       | (5,000                                                 | )          | 611,158                                                |       |
| Increase in  construction payable                                                          |       | —                                                 |       | 1,029,048                                              |       |
| Decrease in restricted  cash                                                               |       | —                                                 |       | 13,755,126                                             |       |
| Net cash used in  investing activities                                                     |       | (254,590                                               | )          | (2,157,633                                             | )          |
|                                                                                       |       |                                                   |       |                                                   |       |
| **Cash Flow From Financing  Activities**                                                   |       |                                                   |       |                                                   |       |
| Proceeds from issuance  of long-term debt                                                  |       | 1,843,074                                              |       | 172,755                                                |       |
| Principal payments on  equipment purchase agreements                                       |       | (517,552                                               | )          | (210,077                                               | )          |
| Due from Hôtel San Rémo                                                          |       | —                                                 |       | (188,952                                               | )          |
| Net cash provided by  (used in) financing activities                                       |       | 1,325,522                                              |       | (226,274                                               | )          |
|                                                                                       |       |                                                   |       |                                                   |       |
| Increase (decrease) in  cash and cash equivalents                                          |       | 3,468,216                                              |       | (4,371,536                                             | )          |
| Cash and cash  equivalents, beginning of period                                            |       | 6,164,192                                              |       | 14,191,385                                             |       |
| Cash and cash equivalents,  end of period                                                  |       | $                                                      | 9,632,408  |                                                   | $          | 9,819,849 |   |
|                                                                                       |       |                                                   |       |                                                   |       |
| **Supplemental disclosure of cash  flow information**                                      |       |                                                   |       |                                                   |       |
| Cash paid for interest,  net of capitalized interest                                       |       | $                                                      | 427,835    |                                                   | $          | 192,131 |   |
|                                                                                       |       |                                                   |       |                                                   |       |
| Assets acquired through  equipment loans                                                   |       | $                                                      | 312,619    |                                                   | $          | 5,765,275 |   |

 

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

 

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

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

**March 31, 2007**

**1.  Organizationand Basis of Presentation**

155East Tropicana, LLC, a Nevada limited-liability company (the “Company”)was incorporated on June 17, 2004 to acquire the real and personalproperty of the Hôtel San Rémo Casino and Resort (the “Hôtel San Rémo”) in LasVegas, Nevada with the intention of renovating the existing casino and hotelfacility with 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 that closed on March 29, 2005.  The Company’s membership interests are heldtwo-thirds through Florida Hooters LLC and one-third through EW CommonLLC.  The initial capitalization of theCompany was provided by Florida Hooters LLC in the form of a $5.1 millioncash contribution and the assignment of rights with respect to the Hooterstrademark and logo and other intellectual property and by EW Common LLC in theform of a $25.0 million deemed capital contribution.  The deemed capital contribution from EWCommon LLC carries with it a priority return of four percent on thecontribution annually.  The payment ofthis priority return is subject to meeting certain financial covenantsassociated with the Company’s debt.

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

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

FloridaHooters LLC and EW Common LLC entered into a joint venture agreement for thepurpose of forming the Company and documenting the terms of their investmentsand business venture.

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

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

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

OnFebruary 3, 2006, the newly renovated and re-branded Hooters Casino Hotel wasopened for business.  The Hooters Casino Hotel currently features a casinofloor with 650 slot and video poker machines, 33 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. The renovations included a redesign of the mainentrance, a renovation and expansion of the casino and restaurant areas, aremodel of the hotel rooms and a renovation and expansion of the pool area.

Aspermitted by the rules and regulations of the Securities and ExchangeCommission, certain information and footnote disclosures normally included infinancial statements prepared in accordance with generally accepted accountingprinciples have been condensed or omitted. These condensed consolidated financial statements should be read inconjunction with the Company’s 2006 annual consolidated financial statementsand notes thereto included in the Company’s Annual Report on Form 10-K for theyear ended December 31, 2006.

Inthe opinion of management, the accompanying unaudited condensed consolidatedfinancial statements contain all adjustments — which include normal recurringadjustments — necessary to present fairly the Company’s financial position asof March 31, 2007, the results of its operations for the three month periodsended March 31, 2007 and 2006.  Theresults of operations for such periods are not necessarily indicative of the resultsto be expected for the full year.

**2.  Reclassifications**

Certain reclassifications, having no effecton net loss, have been made to the previously issued condensed consolidatedfinancial statements to conform to the current period’s presentation of theCompany’s condensed consolidated financial statements.

7

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

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

### **3.  Long-termDebt**

Long-termdebt consists of the following

|                                     | ** ** | **March 31,** | ** **  | **December 31,** | ** ** |
|-------------------------------------|------------|--------------------|-------------|-----------------------|------------|
| ** **                          | ** ** | **2007**           | ** **  | **2006**              | ** ** |
| 8.75% Senior  secured notes (1)     |       | $                  | 130,000,000 |                  | $          | 130,000,000 |   |
| Senior secured  credit facility (2) |       | 2,755,684          |        | 912,610               |       |
| Equipment  purchase agreements (3)  |       | 3,822,876          |        | 4,027,808             |       |
| Total debt                          |       | 136,578,560        |        | 134,940,418           |       |
| Less: Current  portion of debt      |       | (2,005,616         | )           | (1,859,319            | )          |
| Total long-term  debt               |       | $                  | 134,572,944 |                  | $          | 133,081,099 |   |

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(1)          $130.0 million aggregate principal amount of8.75% Senior Secured Notes issued on March 29, 2005 and due on 2012.

(2)          Outstanding draws against the Senior SecuredCredit Facility as of March 31, 2007 and December 31, 2006, due on March 30,2009.  At the Company’s option, theinterest rate will be either the agent for the lender’s prime rate plus 2.00%per annum or LIBOR plus 3.50% per annum. As of March 31, 2007, the Credit Facility carried an interest rate of8.985% per annum.

(3)          During the first quarter ended March 31,2007, the Company entered into a $0.3 million loan agreement to purchaseapproximately $0.4 million in hotel equipment. The loan, which is collateralized by the equipment purchased, has a termof 18 months with an imputed interest rate of 12.7%.

**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 fee of 4% of cash sales from the Hooters branded restaurant, and 3%of the gross sales with any merchandise with a Hooters logo, is payable to LasVegas Wings, Inc.  The total fees accrued at March 31, 2007 for HootersGaming Corporation, Lags Venture, Inc. and Las Vegas Wings, Inc. were $1.0million, $0.2 million, and $0.6 million, respectively.  The Company began accruing these fees whenthe Hooters Casino Hotel opened on February 3, 2006.  The payment of these royalty fees isrestricted under the indenture governing the Notes.

8

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

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

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

**Provident Advertising & Marketing, Inc.**

The majority shareholder of Provident Advertising &Marketing, Inc. (“Provident”) is Edward C. Droste, a member of the Company’smanagement board and an indirect beneficial owner of 3.96% of the Company’smembership interests.  Provident wasengaged by the Company to provide services related to the planning anddevelopment of an initial advertising and marketing plan and for the continueddevelopment and implementation of a strategic marketing plan for the HootersCasino Hotel.  Provident continues to beinvolved as the Company’s advertising firm. In addition, the Company purchases Hooters logo items from Provident foruniforms and for resale in the Company’s gift shops.  The amounts paid to Provident during the quartersended March 31, 2007 and 2006 totaled $0.4 million and $1.1 million,respectively.

***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.

***Contractual Commitments***

TheCompany has entered into operational contracts totaling $10.9 million at March31, 2007.

**Hooters of America Royalty Payments**

Beginning on February 3, 2006, the Company wasrequired 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 $0.3 million and $0.3 million for the quarters ended March 31, 2007 and2006, respectively.  These fees areincluded in general and administrative expenses on the accompanying condensedconsolidated statements of operations.

9

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

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

***5.  Commitments andContingencies*** (continued)

***PreferredReturn***

The Company’s membership interests include anEW Common LLC preferred account which accumulates a preferred return rate of 4%per annum on the $25.0 million account balance. Such preferred return began accumulating on March 1, 2006, andaccumulates whether or not there are profits or funds available for the paymentof the preferred return.  Under the Notesindenture, the preferred return to EW Common LLC is payable only if the Company’scoverage ratio of EBITDA to fixed charges (as defined in the indenture andafter giving effect to the payment of the preferred return) is 1.5 to 1 for thefiscal year as measured after the close of the fiscal year.  As of March 31, 2007, $1.1 million relatingto the preferred account has accumulated, but has not been paid.  As the Company’s coverage ratio of EBITDA tofixed charges did not meet this defined ratio, no liability has been recordedin the accompanying consolidated financial statements at March 31, 2007 andDecember 31, 2006.

***6.  Subsequent Events***

On April 30, 2007, the Company entered into adefinitive Asset Purchase Agreement (the “Agreement”) with Hedwigs Las VegasTop Tier, LLC (the “Buyer”), and on May 3, 2007, the Company entered into adefinitive Casino Operations Lease (the “Lease”) with the Buyer.  Additionally, on May 7, 2007, the Companyentered into a First Amendment to Asset Purchase Agreement (the “Amendment”)with the Buyer.

Under the terms of the Agreement, the Buyer hasoffered to purchase essentially all of the assets of the Company for a purchaseprice of $95.0 million in cash, the payment of certain accrued royalties, andthe assumption of certain outstanding liabilities of the Company.  The Buyer will also be responsible for theCompany’s $130.0 million in principal amount of 8.75% Senior Secured Notes due2012.  Under the terms of the Amendment,the requirements under the Agreement that certain additional related agreementsbe completed no later than May 7, 2007 were amended to reflect that all of therelated agreements have been either agreed to or will be agreed to in thefuture, if and when required under the terms of the Agreement.  In connection with the Amendment, the Companyreceived from the Buyer a nonrefundable earnest money deposit of $1.0 million,which will be applied against the purchase price if the transaction closes.

Under the terms of the Lease, upon the closingprovided for in the Agreement, the Company, as tenant, will lease from theBuyer, as landlord, the portion of the hotel in which the gaming operations arepresently located and will conduct all gaming operations until the earlier of(i) the last day of the month following the month in which the Buyer obtainsall applicable gaming approvals necessary to conduct the gaming operations or(ii) June 30, 2008, unless otherwise extended pursuant to the terms of theLease.  Because the commencement of theLease term is contingent upon the closing provided for in the Agreement, therecan be no assurance that the Lease term will ever commence.

10

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

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

***6.  Subsequent Events(continued)***

### The Agreement provides for a closing by October 31, 2007; but undercertain conditions may be closed as late as June 30, 2008.  The closing will be subject to the completionof due diligence, financing, and licensing, among other customary conditions.There can be no assurance that (i) the conditions to closing under Agreementwill ever be satisfied, or (ii) any transaction contemplated under theAgreement will be consummated, or (iii) if a transaction is consummated, itwill be on the same or similar terms as currently provided under the Agreement.

 

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## **Item2.  Management’s Discussion and Analysisof Financial Condition and Results of Operations.**

Thefollowing discussion and analysis should be read together with our unauditedcondensed consolidated 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 (“Commission”) on April 2, 2007, particularly under the heading “RiskFactors.”  We caution readers not toplace undue reliance upon any such forward-looking statements, which speak onlyas of the date made.

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

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

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

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

Our affiliates have granted us assignments ofcertain license agreements pertaining to the use of the Hooters brand as wellas the Dan Marino, 13 Martini Bar and Pete & Shorty’s concept restaurants,which will allow us to operate the Hooters Casino Hotel.  The original founders of the Hooters brand soldthe trademark rights (excluding certain rights they retained for themselves) toHooters of America in 2001.  As a result,Hooters of America is the trademark owner of the Hooters brand and the operatorand franchisor of Hooters restaurants. Pursuant to the Hooters license assignment, we are required to payHooters of America a royalty fee, which totaled approximately $0.3 million forthe quarter ended March 31, 2007.  Asidefrom the abovementioned royalty fee, we are not otherwise affiliated with Hootersof America.

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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.

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, registeredunder the Securities Act of 1933 on Form S-4. Interest payments on the Notes are due semi-annually, on each April 1and October 1.  We used the proceeds fromthe old notes offering to refinance existing indebtedness, and used 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 (“Credit Facility”) concurrently with the offering ofthe old notes.  At March 31, 2007, $2.8million was outstanding on the Credit Facility.

***Results of Operations***

Wegenerate hotel, casino, food and beverage, entertainment and retail revenues atthe hotel casino property.  During thequarter ended March 31, 2007, approximately 32.9% of the gross revenue wasderived from the casino, 31.6% from food and beverage, and 35.5% from hotel andother.

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.

Casino revenues vary from time to time due togeneral economic conditions, table game hold, slot hold, and occupancypercentages at the Hooters Casino Hotel and other hotels in Las Vegas.  Casino revenues also vary depending upon theamount of gaming activity as well as variations in the odds for different gamesof chance.  Casino revenues, roomrevenues, food and beverage revenues, and other revenues vary due to generaleconomic conditions and competition. During 2007, Las Vegas has continued to experience an upward trend intotal visitation, as well as gaming win, hotel occupancy and hotel dailyaverage room rates.

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 the

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number of rooms occupied by the total number of rooms available.  Room revenue is recognized at the time theroom is provided to the guest.

Food and beverage revenues are derived from food andbeverage sales in the food outlets of the hotel casino, including restaurants,room service and banquets.  Food andbeverage revenue is recognized at the time food and/or beverage is provided tothe 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.

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The following table summarizes the results ofoperations of 155, doing business as the Hooters Casino Hotel (which opened onFebruary 3, 2006), for the quarters ended March 31, 2007 and 2006 (inthousands, except for percentages):
| ** **                           | ** ** | **Quarter Ended  March 31,  2007** | ** ** | **Quarter Ended  March 31,  2006** | ** ** | **%  Change  2006 - 2005** | ** ** |
|--------------------------------------|------------|----------------------------------------------|------------|----------------------------------------------|------------|--------------------------------------|------------|
| ** **                           | ** ** | **(in thousands)**                      | ** ** | ** **                                   | ** ** |
| Casino revenues                      |       | $                                            | 6,143      |                                         | $          | 6,674                                |       | -7.9 | % |
| Casino expenses                      |       | 3,439                                        |       | 2,743                                        |       | 25.4                                 | %          |
| Profit margin                        |       | 44.0                                         | %          | 58.9                                         | %          |                                 |       |
|                                 |       |                                         |       |                                         |       |                                 |       |
| Food and  beverage revenues          |       | $                                            | 5,907      |                                         | $          | 5,153                                |       | 14.6 | % |
| Food and  beverage expenses          |       | 4,502                                        |       | 4,226                                        |       | 6.5                                  | %          |
| Profit margin                        |       | 23.8                                         | %          | 18.0                                         | %          |                                 |       |
|                                 |       |                                         |       |                                         |       |                                 |       |
| Hotel and other  revenues            |       | $                                            | 6,635      |                                         | $          | 4,500                                |       | 47.4 | % |
| Hotel and other  expenses            |       | 2,151                                        |       | 1,717                                        |       | 25.3                                 | %          |
| Profit margin                        |       | 67.6                                         | %          | 61.9                                         | %          |                                 |       |
|                                 |       |                                         |       |                                         |       |                                 |       |
| Promotional  allowances              |       | $                                            | 1,431      |                                         | $          | 1,421                                |       | 0.7 | % |
| Percent of gross  revenues           |       | 7.7                                          | %          | 8.7                                          | %          |                                 |       |
|                                 |       |                                         |       |                                         |       |                                 |       |
| General and  administrative expenses |       | $                                            | 4,714      |                                         | $          | 3,326                                |       | 41.7 | % |
| Percent of net  revenues             |       | 27.3                                         | %          | 22.3                                         | %          |                                 |       |
|                                 |       |                                         |       |                                         |       |                                 |       |
| Preopening  expenses                 |       | $                                            | —     |                                         | $          | 5,293                                |       | -100.0 | % |
| Percent of net revenues              |       | 0.0                                          | %          | 35.5                                         | %          |                                 |       |

 

The following discussion presents an analysis of thehotel casino’s results of operations for the quarters ended March 31, 2007 and2006, respectively.

***Comparison of Quarter Ended March 31, 2007 with the Quarter Ended March31, 2006***

Netoperating revenues for the quarter ended March 31, 2007 were $17.3 million, anincrease of $2.3 million or 15.8%, from $14.9 million of net operating revenuesgenerated during the same period in the previous year.  During the quarter ended March 31, 2006,operations were essentially closed from January 1 through February 2, 2006while substantial remodeling was performed on all public areas of the casinohotel.  Minimal revenue of $0.6 millionwas generated during the remodel period.

Expensesbefore interest, depreciation, related-party royalties, pre-opening expenses,and loss on disposal totaled $14.8 million for the quarter ended March 31,2007, an increase of $2.8 million or 23.3%, from $12.0 million during the sameperiod in the previous year.  Again, thecomparison of these expenses is affected by the near closure of all operationsduring substantial remodeling from January 1 through February 2, 2006.  Most of the expenses incurred during theremodeling period fell into the category of pre-opening expense.

Duringthe first quarter of 2007, we began implementing several changes aimed atincreasing visitor volume to the property for our 2007 fiscal period,including: (1) increasing our presence through television, radio, andinterstate billboards to build awareness of Hooters Casino Hotel in SouthernCalifornia, (2) converting 13 Martini Bar to the new Night Owl Showroom, whichopened on April 20, 

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2007, featuring veterancomedy stand-up artist Bobby Slayton, “The Pitbull of Comedy,” (3) featuringvalue-priced food offerings in our restaurants, and (4) introducing newmarketing promotions and other gaming-oriented events.  Our management has also identified slotrevenue as a revenue source that needs to be enhanced.  During the first quarter of 2007, we havemodified our slot floor and begun promoting our new Owl Rewards Club featuringcash back with programs such as HOOT Million Dollar Swipe and other giveaways.

*Casino.*  Casinorevenues decreased by $0.6 million to $6.1 million for the quarter ended March31, 2007, compared to $6.7 million for the quarter ended March 31, 2006 inspite of the fact that the casino only generated $0.1 million in revenue duringthe substantial closure of the casino for the period from January 1 throughFebruary 2, 2006.  During the months ofFebruary and March 2006, after the grand opening of Hooters Casino Hotel, weexperienced unusually high revenues in the casino as visitors came to see the newproperty.

Table games revenue was $2.6 million in the firstquarter of 2007, a decrease of $0.3 million, or 12.6%, compared to the tablegames revenue of $2.9 million from the prior year’s quarter.  With the exception of $34,000, all tablegames revenue for the first quarter of 2006 was generated after the grandopening on February 3, 2006.  Table gamedrop decreased by $0.9 million, or 5.1%, to $16.2 million for the quarter endedMarch 31, 2007 compared to the quarter ended March 31, 2006, and table gamehold percentage decreased from 17.2% in 2006 to 15.8% in 2007.  The decrease in table game drop whencomparing the first quarter of 2007 to 2006 is attributable to higher dropamounts during the first two months of operations of the Hooters Casino Hotelin 2006.  The table games generated anaverage win per table of $1,196 per day for the quarter ended March 31, 2007 ascompared to $1,596 per day for the period from February 3 through March 31,2006.  According to the Gaming RevenueReports published by the Nevada State Gaming Control Board, the average win pertable per day for Las Vegas Strip casinos with annual gaming revenue of $36.0to $72.0 million was $1,027 for the quarter ended March 31, 2007.

Slot revenue of $3.4 million for the quarter endedMarch 31, 2007 was a decrease of 5.0% compared to $3.6 million in the sameperiod in 2006.  Slot revenue for thefirst quarter of 2006 was bolstered by the additional traffic after the grandopening of the Hooters Casino Hotel.  Theaverage win per machine per day was $65 for the quarter ended March 31, 2007 ascompared to $99 for the period from February 3 through March 31, 2006.  According to the Gaming Revenue Reportspublished by the Nevada State Gaming Control Board, the average win per machineper day for Las Vegas Strip casinos with annual gaming revenue of $36.0 to$72.0 million was $114 for the quarter ended March 31, 2007.  During the first quarter of 2007, ourmanagement has continued to implement strategies to increase slot play.  In the summer of 2006, we added new slotmachines to the floor and reconfigured the floor to make it more inviting.  We continued by targeting our marketingefforts at increasing slot play through more aggressive slot club awards, modificationsto the pay tables on the slot machines to award more and larger payouts, directmailing campaigns, and other promotions and programs aimed at increasing theflow of customers to the casino floor. We are continuing to implement these programs in 2007.

Casinoexpenses increased by 25.4% to $3.4 million for the quarter ended March 31,2007 compared to $2.7 million for the quarter ended March 31, 2006 due toincreases in payroll and other operational expenses when comparing a full threemonths of operations to a short period of February 3 through March 31,2006.  The profit margin for casinooperations also decreased from 58.9% during the quarter ended March 31, 2006 to44.0% during the quarter ended March 31, 2007. However, the profit 

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margin during the quarterended March 31, 2007 is comparable to more current trends; for example, theprofit margin of 45.6% during the quarter ended December 31, 2006.  The slight decrease in profit margin islargely due to increased staffing for the new Owl Rewards Club.

*Food and beverage.*  Foodand beverage revenue was $5.9 million for the quarter ended March 31, 2007 ascompared to $5.2 million for 2006 (when restaurants were only open fromFebruary 3 through March 31, 2006), an increase of $0.7 million, or 14.6%.  Beverage revenue (which includes complimentarybeverages) decreased by $0.3 million, or 15.5%, from $1.9 million during thequarter ended March 31, 2006.  Thedecrease in beverage revenue is largely attributable to the closing of the 13Martini Bar for the month of March 2007 for remodeling.  The 13 Martini Bar generated $0.2 million inrevenue for the month of March 2006.

Food and beverage expenses increased from $4.2million during the quarter ended March 31, 2006 to $4.5 million during thequarter ended March 31, 2007, an increase of $0.3 million due to the impact ofa full quarter’s operations in 2007.  Theprofit margin for food and beverage operations increased to 23.8% for thequarter ended March 31, 2007 as compared to 18.0% for the same quarter in 2006due to increased payroll efficiencies.

*Hotel and other.*  Hoteland other revenue (which includes hotel room revenue, retail, spa and othermiscellaneous revenue) increased by $2.1 million, or 47.4%, to $6.6 million forthe quarter ended March 31, 2007, from $4.5 million for the quarter ended March31, 2006.  Room revenue was $5.1 millionfor the quarter ended March 31, 2007 compared to $3.3 million in 2006.  Average daily room rates decreased by 19.6%from $112 for the period from February 3 through March 31, 2006 to $90 for thequarter ended March 31, 2007, and occupancy rates increased from 66.3% for theperiod from February 3 through March 31, 2006 to 91.3% for the quarter endedMarch 31, 2007.  Almost all the roomswere out of service and under remodeling in the month of January 2006.

Sales from our retail outlets selling Hooters logomerchandise increased the amount of other revenue significantly.  Retail revenue was $1.3 million during thequarter ended March 31, 2007, an increase of $0.2 million, from $1.1 millionduring the quarter ended March 31, 2006, when retail operations were only openfrom February 3 through March 31, 2006.

Hoteland other expenses increased by $0.5 million, or 25.3%, from $1.7 millionduring the quarter ended March 31, 2006 to $2.2 million during the quarter endedMarch 31, 2007, due to partial closing of operations in 2006 from January 1through February 2, 2006.  The profitmargin for hotel and other revenue was 67.6% in the first quarter of 2007compared to 61.9% for that same period in the prior year.

*General and administrative.* General and administrative expense includes costs associated withmarketing, information technology, finance, accounting, and propertyoperations.  General and administrative expenseincreased $1.4 million to $4.7 million for the quarter ended March 31, 2007compared to $3.3 million for the quarter ended March 31, 2006.  Again, the lower expenses in the firstquarter of 2006 were due to the partial closing of operations due to theremodel.  General and administrativeexpenses have also increased from $4.2 million for the fourth quarter of2006.  The increase of $0.5 million islargely attributable to increases in payroll expenses and fees paid for outsideservices.

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*Depreciation and amortizationexpense.*  Depreciation and amortization expense of $1.7million for the quarter ended March 31, 2007 increased by $0.6 million, or49.6%, from $1.1 million for the quarter ended March 31, 2006 largely becauseproperty and equipment associated with the remodeling were not placed intoservice until February 3, 2006.

*Related party royalties expenses.* 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 expenses remained flat at $0.3 million for the quarters endedMarch 31, 2007 and 2006.  The payment ofthe related party 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 feesare further limited to the sum of 2% of revenue and 3% of EBITDA, as defined inthe indenture.

*Interest income.* Interest income was approximately $37,000 for the quarter ended March31, 2007, compared to $0.3 million for the quarter ended March 31, 2006.  The interest income for the quarter endedMarch 31, 2006 was largely generated on the $9.9 million in construction fundsheld during that quarter.

*Interest expense.*  Interestexpense was $3.3 million for the quarter ended March 31, 2007, compared to $3.0million for the quarter ended March 31, 2006, an increase of $0.3 million.  Interest expense for the quarter ended March31, 2006 was lower because we capitalized interest of $0.2 million duringconstruction.

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

***Contractual Obligations***

The following table summarizes the contractualcommitments of 155 East Tropicana, LLC as of March 31, 2007:
| ** **                         | ** ** | **Payments Due By Year** | ** ** |
|------------------------------------|------------|-----------------------------------------|------------|
| ** **                         | ** ** | **Total**                               | ** ** | **Less than  1 year** | ** ** | **1-3 years** | ** ** | **4-5 years** | ** ** | **Thereafter** | ** ** |
| ** **                         | ** ** | **(dollars in thousands)**    | ** ** |
| Long-term debt  (1)                |       | $                                       | 132,756    |   | $ | — |   | $ | 2,756 |   | $ | — |   | $ | 130,000 |   |
| Equipment  purchase agreements (2) |       | 3,823                                   |       | 2,006 |   | 1,782 |   | 35 |   | — |   |
| Operating  contracts (3)           |       | 10,944                                  |       | 7,005 |   | 2,905 |   | 988 |   | 46 |   |
| Total                              |       | $                                       | 147,523    |   | $ | 9,011 |   | $ | 7,443 |   | $ | 1,023 |   | $ | 130,046 |   |

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(1)        The long-term debt represents the $2.8million in outstanding draws against the Credit Facility as of March 31, 2007due on March 30, 2009 and the $130.0 million Notes issued on March 29, 2005 anddue on 2012.

(2)          We entered into various equipment purchaseagreements in connection with the renovation and rebranding of the HootersCasino Hotel.

(3)          Operating contracts represent variouscontracts for services in connection with the operations of the Hooters CasinoHotel.

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

Forthe quarter ended March 31, 2007, $2.4 million of cash was provided byoperating activities, which resulted from our net loss of $2.8 million beinglargely offset by $2.4 million of non-cash depreciation and amortizationcharges, and payment-restricted related party royalty fees, in addition tosubstantial increases to interest payable and accounts payable of $2.8 millionand $0.8 million, respectively.

Forthe quarter ended March 31, 2007, we used $0.3 million of cash in investingactivities largely due to capital expenditures.

For the quarter ended March 31, 2007, $1.3 millionof cash was provided by financing activities, as a result of $1.8 million inproceeds from the Credit Facility, partially offset by principal payments of$0.5 million 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.

Our four-year revolving Credit Facility of $15.0 million, which matureson March 30, 2009, currently has outstanding draws of $2.8 million at March 31,2007.  All outstanding principal andinterest under the Credit Facility is due and payable on March 30, 2009.

During the quarter ended March 31, 2007, we enteredinto a new equipment financing agreement for $0.3 million.  At March 31, 2007, $3.8 million wasoutstanding under equipment financing agreements.

We believe that we have the flexibility to coveroperational contingencies, working capital needs, capital expenditures, anddebt service obligations during 2007 through the use of cash (which totaled$9.6 million at March 31, 2007, including $3.8 million required in dailyoperations), our cash flow from operations, and our ability to draw against our$15.0 million Credit Facility, along with other available equipment financing.

OnApril 30, 2007, we entered into an Asset Purchase Agreement (the “Agreement”)with Hedwigs Las Vegas Top Tier, LLC (the “Buyer”), which was amended on May 7,2007.  Pursuant to the terms of theAgreement, the Buyer has offered to purchase essentially all of our assets fora purchase price of $95.0 million in cash, the payment of certain accruedroyalties, and the assumption of certain outstanding debt.  The Buyer also agreed to be responsible forthe Notes.  We received from the Buyer anonrefundable earnest money deposit of $1.0 million, which will be appliedagainst the purchase price, if the transaction closes.  There can be no assurance that the conditionsto closing under the Agreement will ever be satisfied, or any transactioncontemplated under the Agreement will be consummated, or if a transaction isconsummated, it will be on the same or similar terms as currently providedunder the Agreement.

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Uponclosing of the asset sale, we have agreed to lease the casino from the Buyer toconduct gaming operations until the earlier of when the Buyer obtains gamingapprovals necessary to conduct the gaming operations, or June 30, 2008, unlessotherwise extended.

***Critical Accounting Policies andEstimates***

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, 2006 filed with the Commission on April 2,2007.

 

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## **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 thattheir 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 March 31,2007, we had $130.0 million aggregate principal amount of the Notes, slotequipment purchase agreements of $3.4 million carrying an imputed interest rateof 3.327%, and hotel equipment purchase agreements of $0.4 million carryinginterest rates averaging 11.72%.  TheNotes carry a fixed interest rate of 83⁄4 %, provided no events of default haveoccurred.  Since the Notes and equipmentpurchase agreements have fixed interest rates, there is no market riskassociated with these loans other than fair value market risk, which we believeto be insignificant.  We have market riskassociated with funds that may be borrowed on the $15.0 million CreditFacility, due to an interest rate that floats with the LIBOR or primerate.  The term of the Credit Facilitywill mature on March 30,2009.  At March 31, 2007, $2.8 millionwas outstanding under the variable rate Credit Facility, carrying interest at8.985%.  Assuming a 100 basis-pointchange in LIBOR at March 31, 2007 and assuming no change in the fundsborrowed on the $15.0 million Credit Facility, our annual interest costwould change by approximately $28,000.

**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 March 31, 2007.  This evaluationwas done with the participation of our management, including our ChiefExecutive Officer and Chief Financial Officer.

Disclosure controls andprocedures are controls and other procedures that are designed to ensure thatinformation required to be disclosed by us in the reports that we file orsubmit under the Securities Exchange Act of 1934 are recorded, processed,summarized and reported within the time periods specified in the 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, no evaluationof controls can provide absolute assurance that all control issues andinstances of fraud, if any, within us have been detected.  These inherent limitations include therealities that judgments in decision-making can be faulty and that breakdownscan occur because of simple error or mistake. Additionally, controls can becircumvented by the individual acts of some persons, by collusion of two or 

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more people, or bymanagement override of a control. Because the design of a control system is based upon certain assumptionsabout the likelihood of future events, there can be no assurance that anydesign will succeed in achieving its stated goals under all potential futureconditions.  Over time, controls maybecome inadequate because of changes in conditions, or the degree of compliancewith the policies or procedures may deteriorate. Because of the inherentlimitations in a cost-effective control system, misstatements due to error orfraud 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 March 31, 2007, 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 March 31, 2007,that have materially affected, or are reasonably likely to materially affect,our internal controls over financial reporting.

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**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

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

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**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 |   | May 14, 2007 |   |
|                                 | Deborah J. Pierce |   |   |   |
|                                 | *Chief Financial Officer  (Principal Financial and Chief  Accounting Officer)* | * * | * * | * * |
|                                 |   |   |   |   |
|                                 |   |   |   |   |
| **155 East Tropicana Finance Corp.** |
|                                 |   |   |   |   |
|                                 |   |   |   |   |
|                                 |   |   |   |   |
| By:                                  | /s/ Deborah J. Pierce |   | May 14, 2007 |   |
|                                 | Deborah J. Pierce |   |   |   |
|                                 | *Chief Financial Officer  (Principal Financial and Chief   Accounting Officer)* | * * | * * | * * |
|                                      |  |  |  |  |  |  |  |

 

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