Table of Contents

 

 

 

**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**WASHINGTON,D.C. 20549**

 

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**FORM 10-Q**

** **

**(MarkOne)**

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

** **

**For the quarterly period ended March 31, 2009**

** **

**or**

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

** **

**For thetransition period from             to             **

** **

**Commission File Number 333-124924**

 

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

(Exact Name of Registrant as Specified in its Charter)

 

| **NEVADA  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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Indicateby check mark whether the registrant (1) has filed all reports required bySection 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports) and (2) has been subject to such filingrequirements for the past 90 days.    Yes  x    No  o

 

Indicateby check mark whether the registrant has submitted electronically and posted onits corporate Web site, if any, every Interactive Date File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T (232.405 ofthis chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files).  Yes    o    No  o

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer, or a smaller reporting company..  See definition of  “large accelerated filer,” “accelerated filer”and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

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

 

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

 

 

 

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Tableof Contents

 
| **PART I — FINANCIAL INFORMATION** | ** **                                                                                  |
|----------------------------------------------|---------------------------------------------------------------------------------------------|
| ** **                                   | ** **                                                                                  | ** ** |
| **Item 1.**                                  | **Financial Statements**                                                                    | ** ** |
| ** **                                   | ** **                                                                                  | ** ** |
| *** ***                                 | ***155  EAST TROPICANA, LLC (A NEVADA LIMITED-LIABILITY COMPANY)***                         | *** *** |
| *** ***                                 | *** ***                                                                                | *** *** |
| * *                                     | *Condensed  Consolidated Balance Sheets (unaudited)*                                        | *3* |
| * *                                     | *Condensed  Consolidated Statements of Operations (unaudited)*                              | *4* |
| * *                                     | *Condensed  Consolidated Statements of Cash Flows (unaudited)*                              | *5* |
| * *                                     | *Notes to Condensed Consolidated Financial Statements  (unaudited)*                         | *6* |
| * *                                     | * *                                                                                    | * * |
| Item 2.                                      | Management’s  Discussion and Analysis of Financial Condition and Results of Operations | 16 |
|                                         |                                                                                        |   |
| Item 3.                                      | Quantitative  and Qualitative Disclosures About Market Risk                                 | 24 |
|                                         |                                                                                        |   |
| Item 4T.                                     | Controls and  Procedures                                                                    | 25 |
|                                         |                                                                                        |   |
| **PART II — OTHER INFORMATION**    | ** **                                                                                  |
| ** **                                   | ** **                                                                                  | ** ** |
| Item 1.                                      | Legal Proceedings.                                                                          | 27 |
|                                         |                                                                                        |   |
| Item 1A.                                     | Risk Factors.                                                                               | 27 |
|                                         |                                                                                        |   |
| Item 2.                                      | Unregistered  Sales of Equity Securities and Use of Proceeds                                | 27 |
|                                         |                                                                                        |   |
| Item 3.                                      | Defaults Upon  Senior Securities                                                            | 27 |
|                                         |                                                                                        |   |
| Item 4.                                      | Submission of  Matters to a Vote of Security Holders                                        | 27 |
|                                         |                                                                                        |   |
| Item 5.                                      | Other Information                                                                           | 27 |
|                                         |                                                                                        |   |
| Item 6.                                      | Exhibits                                                                                    | 27 |
|                                         |                                                                                        |   |
| **SIGNATURES**                               | **28**                                                                                      |

** **

2

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# **Table of Contents**

 

# **PART I — FINANCIAL INFORMATION**

# ** **

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

## ** **

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

### ** **

### **CONDENSEDCONSOLIDATED BALANCE SHEETS**

 
| ** **                                                                                                            | ** ** | **March 31,** | ** **      | **December 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------|------------|--------------------|-----------------|-----------------------|------------|
| ** **                                                                                                            | ** ** | **2009**           | ** **      | **2008**              | ** ** |
| ** **                                                                                                            | ** ** | **(unaudited)**    | ** **      | ** **            | ** ** |
| **Assets**                                                                                                            |       |               |            |                  |       |
| Current assets:                                                                                                       |       |               |            |                  |       |
| Cash and cash  equivalents                                                                                            |       | $                  |  9,401,492 |                  | $          |  4,980,299 |   |
| Accounts  receivable, net of allowance for doubtful accounts of $230,387 and $105,192  in 2009 and 2008, respectively |       | 780,770            |            | 662,683               |       |
| Inventories                                                                                                           |       | 827,049            |            | 839,643               |       |
| Prepaid expenses                                                                                                      |       | 1,207,799          |            | 1,409,819             |       |
| Total current  assets                                                                                                 |       | 12,217,110         |            | 7,892,444             |       |
| Property and  equipment, net                                                                                          |       | 112,411,520        |            | 111,254,020           |       |
| Other long-term  assets:                                                                                              |       |               |            |                  |       |
| Deferred  financing costs                                                                                             |       | 3,505,186          |            | 3,801,924             |       |
| Intangible assets                                                                                                     |       | 2,982,190          |            | 2,995,168             |       |
| Other assets                                                                                                          |       | 463,696            |            | 483,695               |       |
| Total other  long-term assets                                                                                         |       | 6,951,072          |            | 7,280,787             |       |
| Total assets                                                                                                          |       | $                  | 131,579,702     |                  | $          | 126,427,251 |   |
|                                                                                                                  |       |               |            |                  |       |
| **Liabilities  and Members’ (Deficit) Equity**                                                                   |       |               |            |                  |       |
| Current  liabilities:                                                                                                 |       |               |            |                  |       |
| Accounts payable                                                                                                      |       | $                  | 2,902,546       |                  | $          | 2,794,378 |   |
| Accrued interest  payable                                                                                             |       | 5,687,501          |            | 2,843,750             |       |
| Accrued  liabilities                                                                                                  |       | 1,657,187          |            | 1,475,062             |       |
| Current portion  of long-term debt                                                                                    |       | 145,383,392        |            | 141,362,004           |       |
| Total current  liabilities                                                                                            |       | 155,630,626        |            | 148,475,194           |       |
| Related party  royalties payable                                                                                      |       | 4,523,680          |            | 4,210,567             |       |
| Long-term debt                                                                                                        |       | 1,742,881          |            | —                |       |
| Total  liabilities                                                                                                    |       | 161,897,187        |            | 152,685,761           |       |
|                                                                                                                  |       |               |            |                  |       |
| Commitments and  contingencies                                                                                        |       |               |            |                  |       |
|                                                                                                                  |       |               |            |                  |       |
| Members’  (deficit) equity:                                                                                      |       |               |            |                  |       |
| Membership  interests                                                                                                 |       | 34,333,375         |            | 34,333,375            |       |
| Accumulated  deficit                                                                                                  |       | (64,650,860        | )               | (60,591,885           | )          |
|                                                                                                                  |       | (30,317,485        | )               | (26,258,510           | )          |
| Total  liabilities and members’ (deficit) equity                                                                 |       | $                  | 131,579,702     |                  | $          | 126,427,251 |   |

 

*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 OPERATIONS**

 
| ** **                        | ** ** | **Three Months Ended  March 31,** | ** **       | **Three Months Ended  March 31,** | ** ** |
|-----------------------------------|------------|----------------------------------------|------------------|----------------------------------------|------------|
| ** **                        | ** ** | **2009**                               | ** **       | **2008**                               | ** ** |
| ** **                        | ** ** | **(unaudited)**                        | ** **       | **(unaudited)**                        | ** ** |
| Operating  revenues:              |       |                                   |             |                                   |       |
| Casino                            |       | $                                      |  5,565,194  |                                   | $          |  6,821,160 |   |
| Food, beverage  and entertainment |       | 5,329,168                              |             | 5,669,647                              |       |
| Hotel and other                   |       | 4,006,962                              |             | 5,924,230                              |       |
|                              |       | 14,901,324                             |             | 18,415,037                             |       |
| Less promotional  allowances      |       | (1,559,905                             | )                | (1,895,509                             | )          |
| Net operating  revenues           |       | 13,341,419                             |             | 16,519,528                             |       |
|                              |       |                                   |             |                                   |       |
| Operating  expenses:              |       |                                   |             |                                   |       |
| Casino                            |       | 3,130,471                              |             | 3,430,417                              |       |
| Food, beverage  and entertainment |       | 3,370,190                              |             | 4,054,943                              |       |
| Hotel and other                   |       | 1,723,849                              |             | 1,929,361                              |       |
| General and  administrative       |       | 3,444,776                              |             | 4,146,337                              |       |
| Restructuring  expense            |       | 454,790                                |             | —                                 |       |
| Depreciation and  amortization    |       | 1,631,118                              |             | 1,529,526                              |       |
| Related party  royalties expense  |       | 313,113                                |             | 357,909                                |       |
| Total operating  expenses         |       | 14,068,307                             |             | 15,448,493                             |       |
| Operating (loss)  income          |       | (726,888                               | )                | 1,071,035                              |       |
|                              |       |                                   |             |                                   |       |
| Other income  (expense):          |       |                                   |             |                                   |       |
| Interest income                   |       | 1,365                                  |             | 80,213                                 |       |
| Interest expense                  |       | (3,333,452                             | )                | (3,346,569                             | )          |
| Other income  (expense), net      |       | (3,332,087                             | )                | (3,266,356                             | )          |
| Net loss                          |       | $                                      |  (4,058,975 | )                                      | $          |  (2,195,321 | ) |

 

*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** | ** ** | **Three Months Ended** | ** ** |
|----------------------------------------------------------------------------------|------------|----------------------------------|------------|----------------------------------|------------|
| ** **                                                                       | ** ** | **March 31,**               | ** ** | **March 31,**               | ** ** |
| ** **                                                                       | ** ** | **2009**                         | ** ** | **2008**                         | ** ** |
| ** **                                                                       | ** ** | **(unaudited)**                  | ** ** | **(unaudited)**                  | ** ** |
| **Cash  Flow From Operating Activities**                                         |       |                             |       |                             |       |
| Net loss                                                                         |       | $                                | (4,058,975 | )                                | $          | (2,195,321 | ) |
| Adjustments to  reconcile net loss to net cash provided by operating activities: |       |                             |       |                             |       |
| Depreciation and  amortization                                                   |       | 1,631,118                        |       | 1,529,526                        |       |
| Amortization of  debt issuance costs                                             |       | 296,738                          |       | 348,865                          |       |
| Amortization of  intangible asset                                                |       | 12,978                           |       | 12,978                           |       |
| Changes in  assets and liabilities:                                              |       |                             |       |                             |       |
| Accounts  receivable                                                             |       | (118,087                         | )          | (13,220                          | )          |
| Inventories                                                                      |       | 12,594                           |       | 93,564                           |       |
| Prepaid expenses                                                                 |       | 202,020                          |       | 10,074                           |       |
| Accounts payable                                                                 |       | 108,168                          |       | 846,391                          |       |
| Accrued interest  payable                                                        |       | 2,843,751                        |       | 2,843,750                        |       |
| Accrued  liabilities                                                             |       | 182,125                          |       | 520,960                          |       |
| Related party  royalties payable                                                 |       | 313,113                          |       | 357,909                          |       |
| Net cash  provided by operating activities                                       |       | 1,425,543                        |       | 4,355,476                        |       |
|                                                                             |       |                             |       |                             |       |
| **Cash  Flow From Investing Activities**                                         |       |                             |       |                             |       |
| Capital  expenditures                                                            |       | (261,397                         | )          | (146,690                         | )          |
| Change in other  assets                                                          |       | 19,999                           |       | (28,000                          | )          |
| Net cash used in  investing activities                                           |       | (241,398                         | )          | (174,690                         | )          |
|                                                                             |       |                             |       |                             |       |
| **Cash  Flow From Financing Activities**                                         |       |                             |       |                             |       |
| Proceeds from  issuance of long-term debt                                        |       | 3,409,427                        |       | 130,390                          |       |
| Principal  payments on equipment purchase agreements                             |       | (172,379                         | )          | (514,533                         | )          |
| Purchase deposit  and extension payments                                         |       | —                           |       | 1,500,000                        |       |
| Net cash  provided by financing activities                                       |       | 3,237,048                        |       | 1,115,857                        |       |
|                                                                             |       |                             |       |                             |       |
| Increase in cash  and cash equivalents                                           |       | 4,421,193                        |       | 5,296,643                        |       |
| Cash and cash  equivalents, beginning of period                                  |       | 4,980,299                        |       | 5,861,991                        |       |
| Cash and cash  equivalents, end of period                                        |       | $                                | 9,401,492  |                             | $          | 11,158,634 |   |
|                                                                             |       |                             |       |                             |       |
| **Supplemental  disclosure of cash flow information**                            |       |                             |       |                             |       |
| Cash paid for  interest, net of capitalized interest                             |       | $                                | 489,701    |                             | $          | 502,819 |   |
|                                                                             |       |                             |       |                             |       |
| Assets acquired  through equipment purchase agreements                           |       | $                                | 2,527,221  |                             | $          | — |   |

 

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

 

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

 

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

### ** **

**March 31, 2009**

 

**1.  Organization and 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.  Upon acquisition, the property was renovatedwith a “Hooters” entertainment concept and theme and the Hôtel San Rémoproperty 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 interestsare held two-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 EW CommonLLC carries with it a priority return of four percent on the contributionannually.  The payment of this priorityreturn is subject to meeting certain financial covenants associated with theCompany’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 39 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 from November 1988until the Company’s acquisition of the Hôtel San Rémo in August 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 Consolidated Financial Statements (unaudited)(continued)**

### ** **

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

 

TheHooters Casino Hotel currently features a casino floor with 616 slot and videopoker machines, 27 table games, 696 newly renovated hotel rooms including 17suites, a tropical pool area, retail outlets, a day spa, and dining andentertainment options which include a Hooters restaurant, Dan Marino’srestaurant, a sports bar, several bars and Night Owl Showroom. The renovationsincluded a redesign of the main entrance, a renovation and expansion of thecasino and restaurant areas, a remodel of the hotel rooms and a renovation andexpansion of the pool area.

 

Significantinter-company transactions between the Company and its wholly owned subsidiaryhave been eliminated in consolidation.

 

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 2008 annual consolidated financial statementsand notes thereto included in the Company’s Annual Report on Form 10-K forthe year ended December 31, 2008.

 

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, 2009 and the results of its operations for the three monthperiods ended March 31, 2009 and 2008. The results of operations for such periods are not necessarilyindicative of the results to be expected for the full year.

 

**2.  Liquidity and Financial Position**

 

TheCompany has significant indebtedness and financial commitments in 2009.  In the first quarter of 2009 the Companyborrowed an additional $3.4 million under the Credit Facility and $2.5 millionin slot equipment financing and has $147.1 million in debt at March 31, 2009.  Currently, the Credit Facility is fullyextended and the Company has no additional availability to borrow against theCredit Facility.  The Company has noother additional sources of borrowing available, except for certain equipmentfinancing as allowed under our Notes and Credit Facility.

 

Inaddition to commitments under contractual agreements (see “ContractualObligations”), the Company’s financial commitments and estimated capitalexpenditures for the remainder of 2009, as of March 31, 2009, totalapproximately $13.6 million.  Thesefinancial commitments for 2009 consist of contractual maturities of long-termdebt totaling $0.6 million, interest payments on long-term debt, estimated at$12.3 million, and $0.7 million of estimated capital expenditures.  To fund its anticipated

 

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

 

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

### ** **

**2.  Liquidity and Financial Position (continued)**

 

2009financial commitments, the Company has limited equipment financing and its operatingcash flow.  The Company’s currentexpectations for 2009 indicate that operating cash flow will be lower than in2008.  During the first quarter of 2009,the Company generated $1.9 million in cash from operating activities beforededucting cash paid for interest.  Forthe year ended December 31, 2008, the Company generated approximately $7.4million in cash from operating activities, excluding income from forfeitedpurchase deposit and extension fees related to the cancelled sale to Hedwigsand before deducting cash paid for interest, which commitments are included inthe list above.

 

Thefollowing is a reconciliation of “net cash provided by operating activities” asshown on the Condensed Consolidated Statements of Cash Flows to “cash fromoperating activities:”

 
| ** **                                 | ** ** | **Three months ended** | ** ** | **Three months ended** | ** ** | **Year Ended**        | ** ** |
|--------------------------------------------|------------|------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                 | ** ** | **March 31, 2009**     | ** ** | **March 31, 2008**     | ** ** | **December 31, 2008** | ** ** |
|                                       |       |                   |       |                   |       |                  |       |
| Net cash  provided by operating activities |       | $                      | 1,425,542  |                   | $          | 4,355,476             |       | $ | 704,360 |   |
| Add back:                                  |       |                   |       |                   |       |                  |       |
| Cash paid for interest                     |       | 489,701                |       | 502,819                |       | 12,155,204            |       |
| Forfeited  purchase deposit income         |       |                   |       |                   |       | (5,500,000            | )          |
| Cash from  operating activities            |       | $                      | 1,915,243  |                   | $          | 4,858,295             |       | $ | 7,359,564 |   |

 

Basedon anticipated future operations, the Company does not believe that cash onhand and expected cash flows will be adequate to meet the anticipatedoperational expenses, debt service on equipment leases and Credit Facility,capital expenses and scheduled payments of interest on the Notes.  The Company was unable to make the interestpayment on the Notes due April 1, 2009 or within the 30 day graceperiod.  The note holders could declare adefault as provided under the indenture governing the Notes.   The Company has received a Notice of Defaultand Reservation of Rights letter (the “Default Letter”) from the lenders underthe Credit Facility.  The Default Letterstates that (i) an event of default exists under the Credit Facility as aresult of the Company’s failure to obtain control agreements for one or moredeposit accounts established and maintained by us, (ii) as a result of theevent of default, the lenders are under no further obligation to extend furthercredit under the Credit Facility, (iii) the lenders will continue toevaluate its response to the event of default, and (iv) the rate ofinterest under the Credit Facility will not be increased until furthernotice.  The lenders have subsequentlyinformed the Company that (i) pursuant to the terms of the CreditFacility, the Company no longer has an option of paying the LIBOR interestrate, but must pay the Wells Fargo prime rate

 

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

 

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

### ** **

**2.  Liquidity and Financial Position (continued)**

 

and(ii) as of May 1, 2009, the rate of interest under the CreditFacility will be increased to the default rate, which is equal to twopercentage points above the per annum rate otherwise applicable under theCredit Facility.  The lenders have notelected to accelerate the indebtedness under the Credit Facility.  The Company has entered into discussions withthe note holders and the Credit Facility lenders to attempt to negotiateforbearance agreements pursuant to which they would agree not to exercise, fora specified period of time,  theirremedies under the indenture or the Credit Facility.  The Company has engaged a financial advisorto assist  with its evaluation offinancial and strategic alternatives, which may include a recapitalization,refinancing, restructuring or reorganization of its obligations or a sale ofsome or all of its business.  The Companyand its advisors are actively working toward such a transaction.  The Company cannot be assured that it will besuccessful in negotiating forbearance with the note holders or Credit Facilitylender or in undertaking any such alternative in the near term.

 

If the Company isnot successful in obtaining a forbearance or entering into a transaction toaddress itsliquidity and capital structure, the note holders have the ability toaccelerate repayment of all amounts outstanding under the indenture ($135.7million at March 31, 2009) and the Credit Facility lenders have the ability toaccelerate repayment of all amounts outstanding under the Credit Facility($14.5 million at March 31, 2009, plus an irrevocable letter of credit for $0.5million at March 31, 2009 ).  If eitherthe Notes indebtedness or the Credit Facility indebtedness were to beaccelerated, the Company would be required to refinance or restructure thepayments on that debt.  The Companycannot be assured that it will be successful in completing a refinancing orrestructuring.  If the Company is unableto do so, it may determine to seek protection under Chapter 11 of the U.S.Bankruptcy Code.

 

The conditions and events described above raise a substantial doubtabout the Company’s ability to continue as a going concern.  The Company has classified most of its debtat March 31, 2009 and all debt at December 31, 2008 as a currentliability on the balance sheet.  Theaccompanying condensed consolidated financial statements do not include alladjustments to reflect the possible future effects on the recoverability andclassification of assets or the amounts and classifications of liabilities thatmay result should the Company be unable to continue as a going concern.

 

**3.  Summaryof Significant Accounting Principles**

 

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

 

*Recently Issued Accounting Pronouncements.*

 

In April 2009, the Financial Accounting StandardsBoard (“FASB”) issued Staff Position No. 157-4, *DeterminingFair Value When the Volume and Level of Activity for the Asset or LiabilityHave Significantly Decreased and Identifying Transactions That Are Not Orderly*(“FSP 157-4”). FSP 157-4 provides additional guidance for estimating fair valuein accordance with FASB Statement No. 157, “Fair Value Measurements”, when thevolume and level of activity for the asset or liability have significantly decreased.FSP 157-4 also includes guidance on how to identify circumstances that indicatethat a transaction is not orderly and emphasizes that even if there has been asignificant decrease in the volume and level of activity for the asset orliability and regardless of the valuation techniques used, the objective of afair value measurement remains the same. FSP 157-4 is effective for interim andannual reporting periods ending after June 15, 2009, and is to be appliedprospectively. The Company anticipates that adoption will have no materialimpact on its consolidated financial statements. 

 

In April 2009, the FASB issued Staff Position No.115-2 and 124-2, *Recognition and Presentation ofOther-Than-Temporary Impairments* (“FSP 115-2 and l24-2”). FSP 115-2and 124-2 provides new guidance on the recognition of other-than-temporaryimpairments of investments in debt securities and provides new presentation anddisclosure requirements for other-than-temporary impairments of investments indebt and equity securities. FSP 115-2 and 124-2 is effective for interim andannual reporting periods ending after June 15, 2009. The Company anticipatesthat adoption will have no material impact on its consolidated financialstatements. 

 

In April, 2009, the FASB issued Staff Position No.107-1 and APE 28-1, *Interim Disclosures aboutFair Value of Financial Instruments* (“FSP 107-1 and APR 28-1”). FSP107-1 and APR 28-1 amends FASB Statement of Financial Accounting Standards No.107, “Disclosures about Fair Value of Financial Instruments”, to requiredisclosures about fair value of financial instruments in interim reportingperiods. Such disclosures were previously required only in annual financialstatements. FSP 107-1 and APB 28-1 also amends Accounting Principles Board OpinionNo. 28, “Interim Financial Reporting”, to require those disclosures insummarized financial information at interim reporting periods. FSP 107-1 and APB28-1 is effective for interim and annual reporting periods ending after June15, 2009. The Company anticipates that adoption will have no material impact onits consolidated financial statements. 

 

In December 2008,the FASB issued FASB Staff Position (“FSP”) FAS 140-4 and FIN 46(R)-8,Disclosures by Public Entities (Enterprises) about Transfers of FinancialAssets and Interests in Variable Interest Entities. This FASB FSP amends SFAS No. 140,*Accounting for Transfers and Servicing of**FinancialAssets*

 

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* *

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

 

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

### ** **

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

 

*and Extinguishments of Liabilities*, to require public entities to provideadditional disclosures about transfers of financial assets. It also amends FASBInterpretation No. 46 (R), *Consolidationof Variable Interest Entities*, to require public enterprises,including sponsors that have a variable interest in a variable interest entity,to provide additional disclosures about their involvement with variableinterest entities. Additionally, this FSP requires certain disclosures to beprovided by a public enterprise that is (a) a sponsor of a qualifyingspecial purpose entity (“SPE”) that holds a variable interest in the qualifyingSPE but was not the transferor of financial assets to the qualifying SPE, and (b) aservicer of a qualifying SPE that holds a significant variable interest in thequalifying SPE but was not the transferor of financial assets to the qualifyingSPE. The disclosures required by this FSP are intended to provide greatertransparency to financial statement users about a transferor’s continuinginvolvement with transferred financial assets and an enterprise’s involvementwith variable interest entities and qualifying SPEs. This FSP is effective forthe first reporting period ending after December 15, 2008, and shall applyfor each annual and interim reporting period thereafter.  The Company adopted this FSP and it did nothave an impact on our consolidated financial statements.

 

In**June 2008, the FASB issued FSP No. EITF03-6-1, *Determining Whether InstrumentsGranted In Share-Based Payment Transactions Are Participating Securities*.This FSP concludes that those unvested share-based payment awards that containnon-forfeitable rights to dividends or dividend equivalents, whether paid orunpaid, are participating securities and must be included in the computation ofboth basic and diluted earnings per share (the two-class method). This FSP iseffective during the three months ending March 31, 2009 and is to beapplied on a retrospective basis to all periods presented. The issue iseffective for financial statements issued for fiscal years and interim periodswithin those fiscal years beginning January 1, 2009. The Company adopted FSPNo. EITF 03-6-1 and it did not have an impact on our consolidatedfinancial statements.

 

InMay 2008, the FASB issued SFAS No.162, *Hierarchyof Generally Accepted Accounting Principles* (“SFAS 162”). Thisstatement is intended to improve financial reporting by identifying aconsistent framework, or hierarchy, for selecting accounting principles to beused in preparing financial statements of nongovernmental entities that arepresented in conformity with GAAP. This statement was effective November 15,2008*.* We currently adhere to thehierarchy of GAAP as presented in SFAS 162, and the adoption did not have amaterial impact on our consolidated financial statements.

 

InApril 2008, the FASB issued FSP No. FAS 142-3, *Determination of the Useful Life of Intangible Assets*(“FSP 142-3”). FSP 142-3 amends the factors that should be considered indeveloping renewal or extension assumptions used to determine the useful lifeof a recognized intangible asset under SFAS No. 142, *Goodwill and Other Intangible Assets*, andrequires enhanced related disclosures. FSP 142-3 must be applied prospectively to all intangible assetsacquired as of and subsequent to fiscal years beginning after December 15,2008.  The Company adopted FAS 142-3 andit did not have an impact on our consolidated financial statements.

 

InMarch 2008, the FASB issued SFAS No. 161, *Disclosures about Derivative Instruments and Hedging Activities — AnAmendment of FASB Statement No. 133* (“SFAS 161”). SFAS 161requires

 

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

### ** **

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

### ** **

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

 

enhancedqualitative disclosures about objectives and strategies for using derivatives,quantitative disclosures about fair value amounts of gains and losses onderivative instruments, and disclosures about credit-risk-related contingentfeatures in derivative agreements. SFAS 161 is effective for financialstatements issued for fiscal years and interim periods beginning after November 15,2008. The adoption of SFAS 161 did not have a material impact on ourconsolidated financial statements.

 

InFebruary 2008, the FASB issued FASB Staff Position No. FAS 157-2, *Effective Date of FASB Statement No. 157*,which defers the effective date of SFAS No. 157, *Fair Value Measurements*, (“SFAS 157”) tofiscal years beginning after November 15, 2008 for nonfinancial assets andnonfinancial liabilities, except for items that are recognized or disclosed atfair value in the financial statements on a recurring basis.  The Company adopted SFAS 157 and it did nothave an impact on our consolidated financial statements.

 

InDecember 2007, the FASB issued SFAS No. 160, *Noncontrolling Interests in Consolidated FinancialStatements — An Amendment of ARB No. 51* (“SFAS 160”). SFAS 160establishes new accounting and reporting standards for the noncontrollinginterest in a subsidiary and for the deconsolidation of a subsidiary.Specifically, this statement requires the recognition of a noncontrollinginterest (minority interest) as equity in the consolidated financial statementsand separate from the parent’s equity. The amount of net income attributable tothe noncontrolling interest will be included in consolidated net income on the faceof the income statement. SFAS 160 clarifies that changes in a parent’sownership in a subsidiary that do not result in deconsolidation are equitytransactions if the parent retains its controlling financial interest. Inaddition, this statement requires that a parent recognize a gain or loss in netincome when a subsidiary is deconsolidated. Such gain or loss will be measuredusing the fair value of the noncontrolling equity investment on thedeconsolidation date. SFAS 160 also includes expanded disclosure requirementsregarding the interests of the parent and its noncontrolling interest. SFAS No. 160is effective for fiscal years, and interim periods within those fiscal years,beginning on or after December 15, 2008. The Company adopted SFAS 160 andit did not have an impact on our consolidated financial statements.

 

In February 2007, theFASB issued SFAS No. 159, *The Fair Value Option forFinancial Assets**and Financial Liabilities*.SFAS 159 permits entities to choose to measure many financial instrumentsand certain other items at fair value. The objective of the guidance is toimprove financial reporting by providing entities with the opportunity tomitigate volatility in reported earnings caused by measuring related assets andliabilities differently without having to apply complex hedge accountingprovisions.  SFAS 159 is effective as ofthe beginning of the first fiscal year after November 15, 2007, providedthe provisions of SFAS 157 are also applied. The Company adopted the provisions of SFAS No. 159, but chose notto elect the fair value option for eligible items that existed at January 1,2008. Accordingly, the Company’s adoption of SFAS No. 159 did not have amaterial impact on its financial position, results of operations or cash flows.

 

In December 2007, FASB issued SFAS No. 141R, “*Business Combinations*”. Under SFAS 141R, an acquiring entity will be required to recognize allthe assets acquired and liabilities assumed in a

 

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

 

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

### ** **

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

 

transactionat the acquisition-date fair value, with limited exceptions, replacing SFAS 141’scost****allocation process.  SFAS 141R also includes a substantial numberof new disclosure requirements.  SFAS141R is to be applied prospectively to business combinations for which theacquisition date is on or after the beginning of the first annual reportingperiod beginning on or after December 15, 2008.  We adopted SFAS 141R in the first quarter of2009.  The impact on our accounting forfuture business combinations will be dependent upon acquisitions that are madein the future.

 

InSeptember 2006, the FASB issued SFAS No. 157, Fair ValueMeasurements, which defines fair value, establishes a framework for measuringfair value in GAAP, and expands disclosures about fair value measurements.  SFAS 157 does not require any new fair valuemeasurements, but provides guidance on how to measure fair value by providing afair value hierarchy used to classify the source of the information.  SFAS 157 is effective for financialstatements issued for fiscal years beginning after November 15, 2007 andinterim periods within these fiscal years. In February 2008, FASB issued FASB Staff Position FAS 157-2, whichdefers the effective date of SFAS 157 to fiscal years beginning after November 15,2008, and interim periods within those fiscal years, for nonfinancial assetsand nonfinancial liabilities that are recognized or disclosed at fair value inan entity’s financial statements on a recurring basis.   As such, the Company partially adopted theprovisions of SFAS No. 157 effective January 1, 2008, without anymaterial impact to the Company’s financial position, results of operations orcash flows. The Company adopted the remaining provisions of SFAS No. 157beginning in 2009; however, this adoption does not have a material impact onits financial position, results of operations or cash flows.

 

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

** **

**4.   Debt**

** **

Debt consists of the following:

 
| ** **                          | ** ** | **March 31,** | ** **  | **December 31,** | ** ** |
|-------------------------------------|------------|--------------------|-------------|-----------------------|------------|
| ** **                          | ** ** | **2009**           | ** **  | **2008**              | ** ** |
| 8.75% Senior  secured notes (1)     |       | $                  | 130,000,000 |                  | $          | 130,000,000 |   |
| Senior secured  credit facility (2) |       | 14,489,204         |        | 11,079,776            |       |
| Equipment  purchase agreements (3)  |       | 2,637,070          |        | 282,228               |       |
| Total debt                          |       | $                  | 147,126,274 |                  | $          | 141,362,004 |   |

 

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**155 EAST TROPICANA, LLC**

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

 

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

### ** **

**4.  Debt (continued)**

 

----

(1)          $130.0 millionaggregate principal amount of 8.75% Senior Secured Notes (the “Notes”) issuedon March 29, 2005 and due in 2012. The  interest payment of $5.7million due April 1, 2009 on the Notes was not paid by that date or withinthe 30 day grace period.  The Notes arecurrently in default and the Note holders have the ability to accelerate repayment of allamounts outstanding under the indenture ($135.7 million in principal andinterest at March 31, 2009)

 

(2)          Outstanding drawsagainst the Senior Secured Credit Facility as of March 31, 2009 and December 31,2008 and due on September 30, 2011. As of March 31, 2009, the Credit Facility carried an interest rateof 5.24% per annum. The Credit facility is currently in default and the Noteholders have the ability to accelerate repayment of all amounts outstanding under thecredit agreement ($14.5 million in principal at March 31, 2009).  TheCompany has received a Notice of Default and Reservation of Rights letter (the “DefaultLetter”) from the lenders under the Credit Facility.  The lenders have not elected to acceleratethe indebtedness under the Credit Facility. The lenders have informed the Company that (i) pursuant to theterms of the Credit Facility, the Company no longer has an option of paying theLIBOR interest rate, but must pay the Wells Fargo prime rate and (ii) asof May 1, 2009, the rate of interest under the Credit Facility increasedto the default rate, which is equal to two percentage points above the perannum rate otherwise applicable under the Credit Facility.  Interestpayments on the Credit Facility are current.

 

(3)          During the firstquarter 2009, the Company entered into a $2.5 million equipment purchaseagreement with IGT for a new slot system. The monthly payments are $78,000 per month for 36 months and the Companyis current with payments.  Principalpayments of $850,000 are due in the next year on equipment purchase agreements.

** **

**5.  RelatedParty Transactions**

** **

**Royalties Expense**

 

Pursuant to agreements related to the use of certain trademarks, theCompany must pay fees and royalties to related parties. A fee equal to 3% ofall net profits earned from gaming activities is payable to Hooters GamingCorporation, a consent fee equal to 6% of net revenues generated by the DanMarino’s Restaurant and “13” Martini Bar (which closed in 2007) is payable toLags Ventures, Inc. and a fee of 4% of cash sales from the Hooters brandedrestaurant, and 3% of the gross sales with any merchandise with a Hooters logo,is payable to Las Vegas Wings, Inc.  The total fees accrued at March 31,2009 for Hooters Gaming Corporation, Lags Venture, Inc. and Las VegasWings, Inc. were $2.4 million, $0.8 million, and

 

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

### ** **

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

### ** **

**5.  RelatedParty Transactions (continued)**

** **

$1.3million, respectively.  The Company beganaccruing these fees when the Hooters Casino Hotel opened on February 3,2006.  The payment of these royalty feesis restricted under the indenture governing the Notes.

 

**Provident Advertising &Marketing, Inc.**

 

Themajority shareholder of Provident Advertising & Marketing, Inc. (“Provident”)is Edward C. Droste, a member of the Company’s management board and an indirectbeneficial owner of 3.96% of the Company’s membership interests.  Provident was engaged by the Company toprovide services related to the planning and development of an initialadvertising and marketing plan and for the continued development and implementationof a strategic marketing plan for the Hooters Casino Hotel.  Provident continues to be involved as theCompany’s advertising firm.  In addition,the Company purchases Hooters logo items from Provident for uniforms and forresale in the Company’s gift shops.  Theamounts paid to Provident during the quarters ended March 31, 2009 and2008 totaled $0.4 million and $0.3 million, respectively.

 

***6.  Commitments and Contingencies***

*** ***

***Litigation***

*** ***

From time to time, the Company is a party tovarious claims 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 $4.8 million at March 31,2009.

 

**Hooters of America Royalty Payments**

 

Beginning on February 3, 2006, the Company was required to pay theowner of the Hooters trademark, Hooters of America, a royalty fee equal to 2%of all net revenues of the hotel and casino (excluding the Dan Marino’sRestaurant and “13” Martini Bar) and 1% of revenues from the Pete and Shorty’sTavern less miscellaneous expenses.  Thetotal fees paid to Hooters of America were $0.2 million and $0.3 million forthe quarters ended March 31, 2009 and 2008, respectively.  These fees are included in general andadministrative expenses on the accompanying condensed consolidated statementsof operations.

 

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

 

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

### ** **

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

*** ***

**Preferred Return**

 

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, 2009, $3.1 millionrelating to the preferred account has accumulated, but has not been paid.  As the Company’s coverage ratio of EBITDA tofixed charges did not meet this defined ratio, no liability has been recordedin the accompanying consolidated financial statements at March 31, 2009and December 31, 2008.

*** ***

***7. Purchase Agreement***

*** ***

During2007, the Company entered into a definitive Asset Purchase Agreement withHedwigs Las Vegas Top Tier, LLC (“Hedwigs”), an affiliate of the investmentgroup led by NTH Advisory Group, LLC, and subsequently entered into a first,second and third amendment to the Asset Purchase Agreement (collectively, the “PurchaseAgreement”). In connection with the third amendment to the Purchase Agreement,Hedwigs was required to make a $0.5 million payment to the Company on or beforeJune 6, 2008 or the Purchase Agreement automatically terminated. Hedwigsdid not make the payment. Accordingly, the Purchase Agreement terminated on June 6,2008.

 

Underthe terms of the Purchase Agreement, Hedwigs offered to purchase substantiallyall of the assets of the Company for a purchase price of $98.0 million in cash,the payment of certain accrued royalties, and the assumption of certainoutstanding liabilities of the Company. The Purchase Agreement also providedthat Hedwigs would be responsible for the Company’s $130.0 million in principalamount of 8 3⁄4% Senior Secured Notes due 2012. In connection with the PurchaseAgreement, Hedwigs paid a total of $5.5 million in deposits and extension feesto the Company, which were non-refundable and were fully earned on the dates ofpayment.  The deposits and extension feeswere taken to income in June 2008.

 

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## **Item 2.  Management’s Discussionand Analysis of Financial Condition and Results of Operations.**

## ** **

The following discussion and analysis should be readtogether with our unaudited condensed consolidated financial statements and theaccompanying notes.  This discussioncontains forward-looking statements, within the meaning of Section 27A ofSecurities Act of 1933, as amended, Section 21E of the Securities ExchangeAct of 1934, as amended, and the Private Securities Litigation Reform Act of1995, including statements regarding our expected financial position, businessand financing plans.  Some of theforward-looking statements can be identified by the use of forward-looking termsuch as “believes,” “expects,” “may,” “will,” “should,” “could,” “seek,” “intends,”“plans,” “estimates,” “anticipates,” or other comparable terms.  Forward-looking statements involve inherentrisks and uncertainties which could cause actual results to differ materiallyfrom those in the forward-looking statement, including those discussed hereinand elsewhere in our Annual Report on Form 10-K filed with the Securitiesand Exchange Commission (“Commission”), on March 31, 2009, particularlyunder the heading “Risk Factors.”  Wecaution readers not to place undue reliance upon any such forward-lookingstatements, which speak only as of the date made.

 

**ExecutiveOverview**

 

***Liquidity and Financial Position***

 

Wehave significant indebtedness and financial commitments in 2009.  We have $147.1 million in debt as of March31, 2009.  In the first quarter of 2009we borrowed an additional $3.4 million on our Credit Facility and $2.5 millionin slot equipment financing and currently, the Credit Facility is fullyextended and we have no additional availability to borrow against the CreditFacility.

 

Wehave no other additional sources of borrowing available, except for certainequipment financing as allowed under our Notes and Credit Facility.

 

Inaddition to commitments under contractual agreements (see “ContractualObligations”), our financial commitments and estimated capital expenditures forthe remainder of  2009 (as of March 31,2009) totals approximately $13.6 million. These financial commitments for the remainder of 2009 consist ofcontractual maturities of long-term debt totaling $0.6 million, interestpayments on long-term debt, estimated at $12.3 million, and $0.7 million ofestimated capital expenditures.  To fundour anticipated 2009 financial commitments we have the following sources offunds for the remainder of 2009: (1) limited equipment financing and (2) operatingcash flow.  Our current expectations for2009 indicate that operating cash flow will be lower than in 2008.  For the first quarter of 2009, we generated$1.9 million in cash from operations, before deducting cash paid forinterest.  In 2008, we generatedapproximately $7.4 million in cash from operating activities excluding incomefrom forfeited purchase deposit and extension fees related to the cancelledsale to Hedwigs and before deducting cash paid for interest, which commitmentsare included in the list above.

 

Basedon our anticipated future operations, we do not believe that cash on hand andexpected cash flows will be adequate to meet our anticipated operationalexpenses, debt service on equipment leases and Credit Facility, capitalexpenses, and scheduled payments of interest on our Notes.  We were unable to make the interest paymenton the Notes due April 1, 2009 or within the 30 day grace period.  We received a Notice of Default andReservation of Rights letter (the “Default Letter”) from the lenders under the CreditFacility.  The Default Letter stated that(i) an event of default exists under the 

 

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CreditFacility as a result of our failure to obtain control agreements for one ormore deposit accounts established and maintained by us, (ii) as a resultof the event of default, the lenders are under no further obligation to extendfurther credit under the Credit Facility, (iii) the lenders will continueto evaluate their response to the event of default, and (iv) the rate ofinterest under the Credit Facility would not be increased until further notice.  The lenders subsequently informed us that (i) pursuantto the terms of the Credit Facility, we no longer have the option of paying theLIBOR interest rate, but must pay the Wells Fargo prime rate, and (ii) asof May 1, 2009 the rate of interest under the Credit Facility wasincreased to the default rate, which is equal to two percentage points abovethe per annum rate otherwise applicable under the Credit Facility.  The lenders have not elected to acceleratethe indebtedness under the Credit Facility. We have entered into discussions with the note holders and the CreditFacility lender to attempt to negotiate forbearance agreements pursuant towhich they would agree not to exercise, for a specified period of time, theirremedies under the indenture or the Credit Facility.  We have engaged Jefferies & Company, Inc.as our financial advisor to assist us with our evaluation of financial andstrategic alternatives, which may include a recapitalization, refinancing,restructuring or reorganization of our obligations or a sale of some or all ofour business.  We and our advisors areactively working toward such a transaction. We cannot assure you that we will be successful in negotiating aforbearance with the note holders or Credit Facility lender or in undertakingany financial or strategic alternative in the near term.

 

Ifwe are not successful in obtaining a forbearance or entering into a transactionto address our liquidity and capital structure, the note holders have theability to accelerate repayment of all amounts outstanding under the indenture($135.7 million at March 31, 2009) and the Credit Facility lenders havethe ability to accelerate repayment of all amounts outstanding under the CreditFacility ($14.5 million at March 31, 2009).  If either the Notes indebtedness or theCredit Facility indebtedness were to be accelerated upon a default, we would berequired to refinance or restructure the payments on that debt.  We cannot assure you that we would besuccessful in completing a refinancing or restructuring.  If we are unable to do so, we may be requiredto seek protection under Chapter 11 of the U.S. Bankruptcy Code.

 

Theconditions and events described above raise a substantial doubt about ourability to continue as a going concern. We have classified most of the debt at March 31, 2009 and all debtat December 31, 2008 as current in the accompanying financial statements,but they do not include all adjustments to reflect the possible future effectson the recoverability and classification of assets or the amounts andclassifications of liabilities that may result should we be unable to continueas a going concern.

 

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

 

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

 

FloridaHooters LLC is a joint venture between Hooters Gaming LLC and Lags Ventures,LLC. The owners of Hooters Gaming LLC, which include most of the originalfounders of the Hooters brand, hold licenses to sell wholesale foods andcalendars and to operate hotel casinos in Nevada and Hooters restaurants inTampa Bay, Florida, Chicago, Illinois, and downtown Manhattan in New York. Lags

 

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Ventures,LLC is owned by a holder of the license rights to certain Hooters restaurantsin South Florida and the State of Nevada. Pursuant to these license rights, theowners of Florida Hooters LLC operate 39 Hooters restaurants, publish Hooterscalendars, and operate a Hooters foods business. The owner of Lags Ventures,LLC is also the founder of the Dan Marino concept restaurants and owns andoperates 2 Dan Marino concept restaurants.

 

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

 

Ouraffiliates have granted us assignments of certain license agreements pertainingto the use of the Hooters brand as well as the Dan Marino, “13” Martini Bar andPete & Shorty’s concept restaurants, which will allow us to operatethe Hooters Casino Hotel. The original founders of the Hooters brand sold thetrademark rights (excluding certain rights they retained for themselves) toHooters of America in 2001. As a result, Hooters of America is the trademarkowner of the Hooters brand and the operator and franchisor of Hootersrestaurants. Pursuant to the Hooters license assignment, we are required to payHooters of America a royalty fee, which totaled approximately $1.1 million forthe year ending December 31, 2008. Aside from the abovementioned royaltyfee, we are not otherwise affiliated with Hooters of America.

 

On March 29, 2005, we issued $130.0 million aggregateprincipal amount of 83⁄4% Senior Secured Notes due 2012, or the old notes, in aprivate placement. The old notes were subsequently exchanged with new notes (“Notes”),registered under the Securities Act of 1933 on Form S-4. Interest paymentson the Notes are due semi-annually, on each April 1 and October 1. Weused the proceeds from the offering to refinance existing indebtedness, andused the remaining proceeds (together with cash from operations and proceedsfrom equipment financing) to renovate the hotel casino and to provide workingcapital.

 

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

 

Wealso entered into a $15.0 million senior secured credit facility (“CreditFacility”) concurrently with the offering. At December 31, 2008, $11.1million was outstanding on the Credit Facility. As of March 31, 2009, $14.5 million was outstanding on the CreditFacility, which, together with a letter of credit in the amount of $0.5million, represents all of the funds available under the Credit Facility.

 

***Results of Operations***

 

We generate hotel, casino, food and beverage,entertainment and retail revenues at the hotel casino property.  During the quarter ended March 31, 2009,approximately 37.3% of the gross revenue was derived from the casino, 35.7%from food and beverage, and 27.0% from hotel and other.

 

Casinorevenue is derived primarily from patrons wagering on slot machines, tablegames and other gaming activities.  Tablegames include blackjack, craps, roulette, and specialty games.  Casino revenue is defined as the win fromgaming activities, computed as the difference between gaming wins and losses,not the total amount wagered.  “Tablegame drop” and “slot handle” are casino industry

 

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specificterms used to identify the amount wagered by patrons for a casino table game orslot machine, respectively.  “Table gamehold” and “slot hold” represent the percentage of the total amount wagered bythe patron that the casino has won.  Holdis derived by dividing the amount won by the casino (“table game win” and “slotwin”) by the amount wagered by the patron. Casino revenue is recognized at the end of each gaming day.

 

Casinorevenues vary from time to time due to general economic conditions, table gamehold, slot hold, and occupancy percentages at the Hooters Casino Hotel andother hotels in Las Vegas.  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 conditions andcompetition.

 

Room revenueis derived from rooms and suites rented to guests.  “Average daily rate” is an industry specificterm used to define the average amount of revenue per rented room per day.  “Occupancy percentage” defines the totalpercentage of rooms occupied, and is computed by dividing the number of roomsoccupied by the total number of rooms available.  Room revenue is recognized at the timethe room is provided to the guest.

 

Foodand beverage revenues are derived from food and beverage sales in the foodoutlets of the hotel casino, including restaurants, room service andbanquets.  Food and beverage revenue isrecognized at the time food and/or beverage is provided to the guest.  “Covers” are the number of patrons served ina food outlet.  “Average check” is theaverage amount of food and beverage revenue charged to patrons on theirrestaurant checks.

 

Thefollowing table summarizes the results of operations of 155, doing business asthe Hooters Casino Hotel, for the quarters ended March 31, 2009 and 2008(in thousands, except for percentages):

 

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| ** **                                 | ** ** | **Quarter Ended**  | ** ** | **Quarter Ended** | ** ** | **%**                     | ** ** |
|--------------------------------------------|------------|-------------------------|------------|------------------------|------------|---------------------------|------------|
| ** **                                 | ** ** | **March 31,**      | ** ** | **March 31,**     | ** ** | **Change**                | ** ** |
| ** **                                 | ** ** | **2009**                | ** ** | **2008**               | ** ** | **2009 - 2008** | ** ** |
| ** **                                 | ** ** | **(in thousands)** | ** ** | ** **             | ** ** |
| Casino revenues                            |       | $                       | 5,565      |                   | $          | 6,821                     |       | -18.4 | % |
| Casino expenses                            |       | 3,130                   |       | 3,430                  |       | -8.7                      | %          |
| Profit margin                              |       | 43.7                    | %          | 49.7                   | %          |                      |       |
|                                       |       |                    |       |                   |       |                      |       |
| Food, beverage  and entertainment revenues |       | $                       | 5,329      |                   | $          | 5,670                     |       | -6.0 | % |
| Food, beverage  and entertainment expenses |       | 3,370                   |       | 4,055                  |       | -16.9                     | %          |
| Profit margin                              |       | 36.8                    | %          | 28.5                   | %          |                      |       |
|                                       |       |                    |       |                   |       |                      |       |
| Hotel and other  revenues                  |       | $                       | 4,007      |                   | $          | 5,924                     |       | -32.4 | % |
| Hotel and other  expenses                  |       | 1,724                   |       | 1,929                  |       | -10.6                     | %          |
| Profit margin                              |       | 57.0                    | %          | 67.4                   | %          |                      |       |
|                                       |       |                    |       |                   |       |                      |       |
| Promotional  allowances                    |       | $                       | 1,560      |                   | $          | 1,896                     |       | -17.7 | % |
| Percent of gross  revenues                 |       | 10.5                    | %          | 10.3                   | %          |                      |       |
|                                       |       |                    |       |                   |       |                      |       |
| General and  administrative expenses       |       | $                       | 3,445      |                   | $          | 4,146                     |       | -16.9 | % |
| Percent of net  revenues                   |       | 25.8                    | %          | 25.1                   | %          |                      |       |
|                                       |       |                    |       |                   |       |                      |       |
| Restructuring  expense                     |       | $                       | 455        |                   | $          | —                    |       |   |   |
| Percent of net  revenues                   |       | 3.4                     | %          |                   |       |                      |       |

 

Thefollowing discussion presents an analysis of the hotel casino’s results ofoperations for the quarters ended March 31, 2009 and 2008.

 

***Comparison of Quarter Ended March 31, 2009 with the Quarter Ended March 31,2008***

 

The current state of the economy has negativelyimpacted our results of operations in the first quarter of 2009 and we expectthat impact to continue in 2009.  Becausewe are in the hospitality and recreation business, which is largely dependanton discretionary spending, we believe that the weak housing market, increasesin unemployment, decreases in air flights to Las Vegas, decreases in the valueof stock and other investments and the general tightening of spending onbusiness travel have all affected visitations to Las Vegas and the spendingbudget of our customers.

 

During the first quarter of 2009, there weredecreases in visitor volumes to Las Vegas and in customer spending, includingconvention participants.  Because ofthese economic conditions, we have continued to focus on managing costs.  For 2009 we froze management salaries, aremanaging staffing levels, will not make matching contributions to the 401(k) planand will continue to eliminate other operating expenses where possible.

 

Net loss of $4.1 million was generated for thequarter ended March 31, 2009 compared to a net loss of $2.2 million forthe same quarter in 2008.  The $1.9million increase in net loss was due largely to the $3.2 million decline in netrevenues, offset partially by operating cost savings.

 

Net operating revenues for the quarter ended March 31,2009 were $13.3 million, a decrease of $3.2 million, or 19.2%, from $16.5million of net operating revenues generated during the same period in

 

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the previous year.  The declinein net revenue, as previously stated, was substantially impacted by the declineof $1.5 million in hotel revenue caused by falling room rates.  Other Las Vegas casino/hotel market leadersannounced they discounted room rates during the first quarter of 2009 toattract visitation in the current soft economy and expect the trend to continuefor the foreseeable future.

 

Promotional allowances (which are subtracted fromrevenues) decreased from $1.9 million to $1.6 million, largely due to adecrease in room and entertainment complimentaries.

 

Operating expenses (which included $0.5 million inrestructuring costs) were $14.1 million for the quarter ended March 31,2009, a decrease of $1.3 million, or 8.9%, from $15.4 million during the sameperiod in the previous year.  Thisdecrease in operating expenses was the result of an intense program of costreductions.  Property wide payroll was analyzedand payroll, payroll taxes and benefits were reduced by $0.7 million.Additionally, other operating expenses were evaluated and trimmed whereappropriate. This trend of reduced expenses is expected to continue into futurequarters and help us offset the decline in net revenues.

 

Casino revenues decreased by $1.2 million, or 18.4%to $5.6 million for the quarter ended March 31, 2009, compared to $6.8million for the quarter ended March 31, 2008.   Our decline in casino revenue was consistentwith the 16.9% decline  in gaming revenuefor the three months ended March 31, 2009 for all casinos on the Las VegasStrip as reported by the Nevada State Gaming Control Board.

 

Tablegames revenue was $1.9 million in the first quarter of 2009, a decrease of $0.5million, or 20.7%, compared to the table games revenue of $2.4 million from theprior year’s quarter. Table game drop decreased by $3.3 million, or 22.2%, to$11.4 million for the quarter ended March 31, 2009 compared to the $14.7million for the quarter ended March 31, 2008. The decrease in table gamedrop was partially offset by an increase in the table game hold percentage from16.4% in 2008 to 16.7% in 2009.  Thetable games generated an average win per table of $850 per day for the quarterended March 31, 2009 as compared to $855 per day for the quarter ended March 31,2008.  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 $12 to$36 million was $733 for the quarter ended March 31, 2009.

 

Slotrevenue of $3.5 million for the quarter ended March 31, 2009 was adecrease of 16.7% compared to $4.2 million in the same period in 2008.  The average win per machine per day was $64for the quarter ended March 31, 2009 as compared to $74 for the quarterended March 31, 2008.  According tothe Gaming Revenue Reports published by the Nevada State Gaming Control Board,the average win per machine per day for Las Vegas Strip casinos with annualgaming revenue of $12 to $36 million was $71 for the quarter ended March 31,2009.  We continued our marketing effortsto increase slot play through targeted slot marketing programs aimed atattracting a flow of customers to the casino floor, but we were unable tooffset the effects of the slowing Las Vegas and global economy.

 

Casinoexpenses, which included casino operational expenses and casino marketing,decreased by 8.6%  or $0.3 million to$3.1 million for the quarter ended March 31, 2009 compared to $3.4 millionfor the quarter ended March 31, 2008, largely due to decreases in the costof complimentaries and payroll expense. The profit margin for casino operationsdecreased to 43.7% during the quarter ended March 31,

 

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2009,compared to 49.7% during the quarter ended March 31, 2008.

 

Food,beverage and entertainment revenue was $5.3 million for the quarter ended March 31,2009 as compared to $5.7 million for 2008, a decrease of $0.4 million, or 6.0%.Food and beverage revenue declined due to a general decline in spending byguests. Entertainment revenue declined $0.1 million, or 22.9%, due to the closingof the Bobby Slayton Show on March 8, 2009.

 

Food,beverage and entertainment expenses decreased to $3.4 million during thequarter ended March 31, 2009 from $4.1 million during the quarter ended March 31,2008, a decrease of $0.7 million, or 16.9%.  The savings in food, beverage andentertainment expenses were facilitated by increased efficiencies in payrolland a decrease in cost of sales related to the decreased volume.

 

Hoteland other revenue (which includes hotel room revenue, retail, spa and othermiscellaneous revenue) decreased by $1.9 million, or 32.4%, to $4.0 million forthe quarter ended March 31, 2009, from $5.9 million for the quarter ended March 31,2008. Room revenue was $2.9 million for the quarter ended March 31,2009 compared to $4.4 million in 2008. Average daily room rates decreased by 35% from $80 for the quarter endedMarch 31, 2008 to $52 for the quarter ended March 31, 2009, andoccupancy rates decreased from 87.9% for the period from quarter ended March 31,2008 to 82.8% for the quarter ended March 31, 2009.

 

Salesfrom our retail outlets decreased by $0.2 million or 16.5%

 

Hotel and other expenses decreased by $0.2 million,or 10.7%, from $1.9 million during the quarter ended March 31, 2008 to$1.7 million during the quarter ended March 31, 2009, largely due tosavings in payroll.

 

Generaland administrative expense includes costs associated with advertising,marketing, information technology, finance, accounting, and propertyoperations.  General and administrativeexpense decreased $0.7 million to $3.4 million for the quarter ended March 31,2009 compared to $4.1 million for the quarter ended March 31, 2008.  The decrease in expenses is due to decreasesin payroll, advertising, legal fees and various other administrative costs.

 

Restructuringcosts related to expenses associated with financial advisory services andrelated legal expenses for the quarter ended March 31, 2009 were $0.5million.  These costs are expected tocontinue in future months until our recapitalization, refinancing,restructuring or reorganization of our obligations or a sale of some or all ofour business assets is completed.

 

Depreciationand amortization expense of $1.6 million for the quarter ended March 31,2009 increased by $0.1 million from $1.5 million for the quarter ended March 31,2008.

 

Beginningon February 3, 2006, we incurred related party royalty fees pursuant toagreements with Hooters Gaming Corporation, Lags Ventures, Inc., and LasVegas Wings, Inc.  These relatedparty royalties expenses remained flat at $0.3 million for the quarters ended March 31,2009 and 2008.  The payment of therelated 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 

 

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paymentsof the royalty fees are further limited to the sum of 2% of revenue and 3% ofEBITDA, as defined in the indenture.

 

Interestincome was approximately $1,365 for the quarter ended March 31, 2009,compared to $80,213 for the quarter ended March 31, 2008. The decrease isassociated with decreased interest rates and cash investments in 2009.

 

Interestexpense remained constant at $3.3 million for the quarter ended March 31,2009 and 2008, with the modest increase in debt at March 31, 2009 offsetby a decrease in interest rates.

 

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 condensedconsolidated financial statements. Taxable income or loss will be included in the income tax returns of themembers.

 

***Contractual Obligations***

 

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

 
| ** **                         | ** ** | **Payments Due By Year** | ** ** |
|------------------------------------|------------|-----------------------------------------|------------|
| ** **                         | ** ** | ** **                              | ** ** | **Less than** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                         | ** ** | **Total**                               | ** ** | **1 year** | ** ** | **1-3 years** | ** ** | **4-5 years** | ** ** | **Thereafter** | ** ** |
| ** **                         | ** ** | **(dollars in thousands)**    | ** ** |
| Long-term debt  (1)                |       | $                                       | 144,489    |   | $ | — |   | $ | 144,489 |   | $ | — |   | — |   |
| Equipment  purchase agreements (2) |       | 2,637                                   |       | 850 |   | 1,787 |   | — |   | — |   |
| Operating  contracts (3)           |       | 4,795                                   |       | 3,508 |   | 1,283 |   | 4 |   | — |   |
| Total                              |       | $                                       | 151,921    |   | $ | 4,358 |   | $ | 147,559 |   | $ | 4 |   | $ | — |   |
|                                    |            |                                         |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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(1)          The long-term debt represents the $14.5 million in outstanding drawsagainst the Credit Facility as of March 31, 2009 due in September 2011,and the $130.0 million Notes issued on March 29, 2005 and due in2012.  The Company is in default on bothof these facilities.  The repayment dateshave not been adjusted for potential acceleration under the default provisions.

 

(2)          We entered into various equipment purchase agreements in connectionwith the renovation and rebranding of the Hooters Casino Hotel.  On the first quarter of 2009 we entered intoan equipment purchase agreement for $2.5 million in slot system equipment.

 

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

 

***Liquidity and Capital Resources***

 

For additional discussion of our liquidity andcapital resources, please see “Liquidity and Financial Position” discussionpresented in the Executive Overview at the beginning of Item 2, “ManagementDiscussion and Analysis of Financial Condition and Results of Operations” andNote 2 to the accompanying consolidated financial statements.

 

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For the quarter ended March 31, 2009, $1.4million of cash was provided by operating activities and we used $0.3 millionof cash in investing activities due to capital expenditures.

 

Forthe quarter ended March 31, 2009, $3.2 million of cash was provided byfinancing activities, as a result of borrowings against the Credit Facility,which is now fully extended.

 

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

 

Our Credit Facility is a revolving creditfacility of $15.0 million.   As of March 31,2009, we had outstanding draws of $14.5 million. An additional $0.5 million ofthe Credit Facility is not available due to an outstanding letter of creditpreviously issued.  Currently, the CreditFacility is fully extended and we have no additional availability to borrowagainst the Credit Facility.  Alloutstanding principal and interest under the Credit Facility is due and payableon September 30, 2011, unless accelerated under the defaultprovisions.  Due to the default under theNotes indenture and the Credit Facility, we have classified the amount dueunder the Credit Facility and Notes and some equipment purchase debt, totaling$145.4 million, as a current liability at March 31, 2009.  As discussed earlier in the ExecutiveOverview at the beginning of Item 2, “Management Discussion and Analysis ofFinancial Condition and Results of Operations” and Note 2 to the accompanyingconsolidated financial statements, we are in default under both the indentureand the Credit Facility and we have entered into discussions with the noteholders and the Credit Facility lender to attempt to negotiate forbearanceagreements pursuant to which they would agree not to exercise, for a specifiedperiod of time, their remedies under the indenture or the Credit Facility.  We cannot assure you that we will besuccessful in negotiating a forbearance with the note holders or CreditFacility lender or in undertaking any financial or strategic alternative in thenear term.

 

AtMarch 31, 2009, we had cash and cash equivalents of approximately $9.4million.

 

***Critical AccountingPolicies and Estimates***

 

A description of critical accounting policies and estimates is includedin the management discussion and analysis included in our Annual Report on Form 10-Kfor the year ended December 31, 2008, filed with the Commission on March 31,2009.

 

## **Item 3.  Quantitative and QualitativeDisclosures About Market Risk.**

## ** **

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

 

Marketrisk is risk of loss arising from changes in market rates and prices, such asinterest rates, foreign currency exchange rates and commodity prices.  At March 31, 2009, we had $130.0 millionaggregate principal amount of the Notes, slot equipment purchase agreements of$2.5 million carrying an  interest rateof 7.0%, and hotel equipment purchase agreements of $0.1 million carryinginterest rates averaging 11.72%.   The Notescarry a fixed interest rate of 8.75 %. Since the Notes and equipment purchase agreements have fixed interestrates, there is no market risk associated with these loans other than fairvalue market risk, which we believe to be insignificant.  We have market risk associated with fundsthat may be borrowed on the $15.0 million Credit Facility, due to aninterest rate that floats with the

 

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LIBORor prime rate.  The term of the CreditFacilitywill mature on September 30,2011.  At March 31, 2009, $14.5million was outstanding under the variable rate Credit Facility, carryinginterest at 5.27%.  Assuming a 100basis-point change in LIBOR at March 31, 2009 and assuming no change inthe funds borrowed on the $15.0 million Credit Facility, our annual interestcost would change by approximately $145,000. We have received a Notice of Default and Reservation of Rights letter(the “Default Letter”) from the lenders under the Credit Facility that statesthat an event of default exists.  Thelenders have informed us that (i) pursuant to the terms of the CreditFacility, we no longer have the option of paying the LIBOR interest rate, butmust pay the Wells Fargo prime rate and (ii)  as of May 1, 2009 therate of interest under the Credit Facility will be increased to the defaultrate, which is equal to two percentage points above the per annum rateotherwise applicable under the Credit Facility. Under the default provisions, the interest rate is prime rate plus four (4) percentagepoints.  At March 31, 2009, thedefault interest rate based on  primerate would have been 7.25%, an increase of 1.98% in interest rate compared to the actual rate paid of 5.27%.  On a proforma basis, the increase in  the annual interest cost under the new rateand assuming no change in the funds borrowed on the $15 million CreditFacility, would be $287,000.

 

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

 

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

## ** **

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

## ** **

We evaluated the effectiveness of our disclosure controls andprocedures as for the three months ended March 31, 2009.  This evaluation was done with theparticipation of our management, including our Chief Executive Officer andChief Financial Officer.

 

Disclosure controls and procedures are controls and other proceduresthat are designed to ensure that information required to be disclosed by us inthe reports that we file or submit under the Securities Exchange Act of 1934are recorded, processed, summarized and reported within the time periodsspecified in the Commission’s rules and forms.  Disclosure controls and procedures include,without limitation, controls and procedures designed to ensure that informationrequired to be disclosed by us in the reports that we file under the SecuritiesExchange Act of 1934 is accumulated and communicated to our manager, asappropriate to allow timely decisions regarding required disclosure.

 

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

## ** **

Our management does not expect that our disclosure controls andprocedures or our internal controls over financial reporting will prevent allerror and all fraud.  A control system, nomatter how well conceived and operated, can provide only reasonable, but notabsolute, assurance that the objectives of a control system are met.  Further, any control system reflectslimitations on resources, and the benefits of a control system must beconsidered relative to its costs. Because of the inherent limitations in all control systems, noevaluation of controls can provide absolute assurance that all control issuesand instances of fraud, if any, within us have been detected.  These inherent limitations include therealities that judgments in decision-making can be faulty and that breakdownscan occur because of simple error or mistake. Additionally, controls can becircumvented by the individual acts of some persons, by collusion of two or morepeople, or by management override of a control. Because the design of a control system is based

 

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upon certain assumptions about the likelihood of future events, therecan be no assurance that any design will succeed in achieving its stated goalsunder 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 ChiefFinancial Officer have evaluated our disclosure controls and procedures (asdefined in the Securities Exchange Act of 1934 Rules 13a-15(e) and15d-15(e)) as of March 31, 2009, and have concluded that they are effectiveto timely alert them to material information relating to us required to beincluded in the reports that we file or submit under the Securities ExchangeAct of 1934.

 

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

## ** **

Therewere no changes in our internal controls over financial reporting that occurredduring our last fiscal quarter, *i.e.*,the quarter ended March 31, 2009, that have materially affected, or arereasonably likely to materially affect, our internal controls over financialreporting.

 

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# **Table of Contents**

 

# **PART II — OTHER INFORMATION**

# ** **

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

## ** **

None.

 

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

## ** **

None.

 

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

## ** **

None.

 

## **Item 3.  Defaults Upon SeniorSecurities.**

## ** **

Asof the date of this Form 10-Q, we were in default under our Notesindenture and our Credit Facility.  Wedid not pay the interest due to our noteholders under our Notes indenturewithin 30 days of the interest payment date on April 1, 2009.  We did not enter into control agreements forone or more deposit accounts established and maintained by us for the benefitof the lenders under the Credit Facility. For a more detailed discussion of our evaluation of financing andstrategic alternatives, refer to our discussion under Part 1, FinancialInformation, Item 2 — Management’s Discussion and Analysis of FinancialConditions and Results of Operations, “Liquidity and Financial Position” or “Liquidityand Capital Resources”.

 

## **Item 4.  Submission of Matters toa Vote of Security Holders.**

## ** **

None.

## ** **

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

## ** **

None.

 

## **Item 6.  Exhibits.**

## ** **

Exhibits:

 
| 31.1   |   | Certification  pursuant to §302 of the Sarbanes-Oxley Act of 2002, Deborah J. Pierce* |
|--------|--------|--------------------------------------------------------------------------------------------|
|   |   |                                                                                       |
| 31.2   |   | Certification  pursuant to §302 of the Sarbanes-Oxley Act of 2002, Neil G. Kiefer*    |
|   |   |                                                                                       |
| 32.1   |   | Certification  pursuant to §906 of the Sarbanes-Oxley Act of 2002, Deborah J. Pierce* |
|   |   |                                                                                       |
| 32.2   |   | Certification  pursuant to §906 of the Sarbanes-Oxley Act of 2002, Neil G. Kiefer*    |

 

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*Filedherewith

 

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# **SIGNATURES**

# ** **

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

 
| **155 EAST TROPICANA, LLC**           |                                                                           |
|---------------------------------------|--------------------------------------------------------------------------------|
|                                  |                                                                           |
|                                  |                                                                           |
| By:                                   | /s/ Deborah J. Pierce                                                          |   | May 15, 2009 |
|                                  |                                                                           |   |
|                                  | Deborah J. Pierce                                                              |   |
|                                  | *Chief Financial Officer  (Principal Financial and Chief  Accounting Officer)* | * * |
|                                  | * *                                                                       | * * |
|                                  | * *                                                                       | * * |
| **155 EAST TROPICANA  FINANCE CORP.** |                                                                           |
|                                  |                                                                           |
|                                  |                                                                           |
| By:                                   | /s/ Deborah J. Pierce                                                          |   | May 15, 2009 |
|                                  |                                                                           |   |
|                                  | Deborah J. Pierce                                                              |   |
|                                  | *Chief Financial Officer  (Principal Financial and Chief  Accounting Officer)* | * * |

 

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