|SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549


     _________________


FORM
10-K
|---------------------------------------------------------------------------------------------

|[X]   | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE       | 
|----- | ---------------------------------------------------------- | 
|      | SECURITIES EXCHANGE ACT OF 1934                            | 
|      | For the fiscal year ended December 31, 2002                | 
|      | OR                                                         | 
|[   ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE   | 
|      | SECURITIES EXCHANGE ACT OF 1934                            | 
|      | For the transition period from ____________ to ___________ | 

|Commission File #333-4356


COAST HOTELS AND CASINOS, INC.(Exact name of registrant as specified in its charter)
|----------------------------------------------------------------------------------------------------------------

| | NEVADA                                                        | 88-0345706                           | 
| | ------------------------------------------------------------- | ------------------------------------ | 
| | (State or other jurisdiction ofIncorporation or organization) | (I.R.S. Employer Identification No.) | 

| | 4500 West Tropicana Road, Las Vegas, Nevada | 89103      | 
| | ------------------------------------------- | ---------- | 
| | (Address of principal executive offices)    | (Zip Code) | 

|Registrant's Telephone
Number, Including Area Code: (702) 365-7000


Securities Registered
Pursuant To Section 12(B) of The Act: None


Securities Registered
Pursuant To Section 12(G) of The Act: Common Stock, $ .01 Par Value


(Title of class)


Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes [X] No
[   ]


Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [ ]


Indicate
by check mark whether the Registrant is an Accelerated Filer (as defined in Exchange Act
Rule 12b-2) Yes [ ] No [X]


The
number of shares of the Registrants Common Stock outstanding as of March 31, 2003
was 1,000 shares, none of which was held by non-affiliates of the Registrant.



COAST HOTELS AND
CASINOS, INC.


Table of Contents


Annual Report on Form
10-K


For the Fiscal Year
Ended December 31, 2002
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|        | PART I | PAGE                                               
|------- | ------ | ---------------------------------------------------
|Item 1. |        | Business                                           
|Item 2. |        | Properties                                         
|Item 3. |        | Legal Proceedings                                  
|Item 4. |        | Submission of Matters to a Vote of Security Holders

|         | PART II |                                                                                      
|-------- | ------- | -------------------------------------------------------------------------------------
|Item 5.  |         | Market for Registrant's Common Equity and Related Stockholder Matters                
|Item 6.  |         | Selected Financial Data                                                              
|Item 7.  |         | Management's Discussion and Analysis of Financial Condition and Results of Operations
|Item 7A. |         | Quantitative and Qualitative Disclosures about Market Risk                           
|Item 8.  |         | Financial Statements and Supplementary Data                                          
|Item 9.  |         | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 

|         | PART III |                                                               
|-------- | -------- | --------------------------------------------------------------
|Item 10. |          | Directors and Executive Officers of the Registrant            
|Item 11. |          | Executive Compensation                                        
|Item 12. |          | Security Ownership of Certain Beneficial Owners and Management
|Item 13. |          | Certain Relationships and Related Transactions                
|Item 14. |          | Controls and Procedures                                       

|         | PART IV |                                                                
|-------- | ------- | ---------------------------------------------------------------
|Item 15. |         | Exhibits, Financial Statement Schedules and Reports on Form 8-K

|PART I


Item 1. Business


The Company


Coast
Hotels and Casinos, Inc. (the Company or Coast Hotels) is a Nevada
corporation and a wholly owned subsidiary of Coast Casinos, Inc. (Coast
Casinos). Coast Casinos changed its name from Coast Resorts, Inc. on July 2, 2002.
We own and operate four Las Vegas hotel-casinos:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | The
Orleans Hotel and Casino, which opened in December 1996, is located approximately one and
one-half miles west of the Las Vegas Strip on Tropicana Avenue.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | The
Gold Coast Hotel and Casino, which opened in December 1986, is located approximately one
mile west of the Las Vegas Strip on Flamingo Road.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------

| | o | The
Suncoast Hotel and Casino, which opened in September 2000, is located near Summerlin in
the west end of the Las Vegas valley, approximately nine miles from the Las Vegas Strip.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | The
Barbary Coast Hotel and Casino, which opened in March 1979, is located on the Las Vegas
Strip.
| | - | --------------------------------------------------------------------------------------------------

|The
following chart provides certain information about our properties as of December 31, 2002:
|----------------------------------------------------------------------------------------------

| | Property      | HotelRooms | CasinoSquareFootage | Slots andVideoPoker | GamingTables | 
| | ------------- | ---------- | ------------------- | ------------------- | ------------ | 
| | The Orleans   |            | 1,426               |                     | 135,000      | 
| | Gold Coast    |            | 711                 |                     | 87,000       | 
| | Suncoast      |            | 419                 |                     | 82,000       | 
| | Barbary Coast |            | 197                 |                     | 30,000       | 

|Our principal
executive office is located at 4500 West Tropicana Avenue, Las Vegas, Nevada 89103. The
telephone number is (702) 365-7000.


Business and Marketing
Strategy


Our
business and marketing strategy is to attract gaming customers to our casinos by offering
consistently high quality gaming, hotel, entertainment and dining experiences at
affordable prices. We emphasize attracting and retaining repeat customers. Our primary
target market for The Orleans, the Gold Coast and the Suncoast consists of value-oriented
local middle-market customers who gamble frequently. The Barbary Coasts customer
base is primarily composed of visitors to the Las Vegas area.


While
a significant portion of our customers are local residents, the same factors that appeal
to local residents also appeal to visitors to Las Vegas, including better odds on slot and
video poker machines and lower minimum wager limits on our table games than those
traditionally found at Strip casinos. In addition to the growing local resident market,
Las Vegas is one of the fastest growing entertainment markets in the United States.


1


Item 1. Business
(continued)


Business and Marketing
Strategy (continued)


We
believe that the most important factors in successfully operating our casinos are
convenient locations with easy access, a friendly atmosphere, a value-oriented approach
and high quality restaurants, entertainment and amenities. Additionally, we offer Las
Vegas visitors spacious, well appointed and competitively priced guest rooms.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | Convenient,
Strategic Locations. The Orleans and the Gold Coast are easily accessible and offer
ample parking, providing our customers with convenient alternatives to the congestion on
the Strip. The Suncoast is conveniently located adjacent to the fast-growing Summerlin
master-planned community in suburban west Las Vegas. The Barbary Coast is located on the
corner of the Strip and Flamingo Road.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | Friendly
Atmosphere. A key element of our strategy is to provide patrons with friendly,
personal service that is designed to foster customer loyalty and generate repeat
business. Locals appreciate a friendly, casual gaming environment where employees make
them feel at home.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | Value. We
offer value to our gaming patrons by providing slot and video poker machines with better
odds than those traditionally found at Strip casinos and by providing slot clubs that
reward frequent play. We also offer value in our many restaurants and bars, where patrons
are served their favorite beverages and generous portions of quality food at attractive
prices. For visitors to Las Vegas, we offer quality guest rooms at rates generally lower
than Las Vegas Strip room rates.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | Entertainment,
Movie Theaters and Amenities. We believe we compete effectively with other
locals-oriented casinos by offering amenities and entertainment that our customers demand
and that accentuate the perception of value for our customers. Our properties offer a
number of amenities that generate significant foot traffic through our casinos, including
movie theaters, bowling centers, quality restaurants and a variety of musical
entertainment.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Casino Properties


The Orleans.The Orleans is strategically located on Tropicana Avenue, a short
distance from the Las Vegas Strip and McCarran International Airport. The Orleans provides
an upscale, off-Strip experience in an exciting New Orleans French Quarter-themed
environment.


The
Orleans features an approximately 135,000 square foot casino, including approximately
2,968 slot machines, 64 table games, a keno lounge, a poker parlor and race and sports
books. The Orleans has 1,426 hotel rooms, 18 stadium seating first-run movie
theaters, a 70-lane bowling center, approximately 40,000 square feet of banquet and
meeting facilities, including an approximately 17,000 square foot grand ballroom, six
full-service restaurants and a multi-station buffet, specialty themed bars, a swimming
pool, a barber shop, a beauty salon, a child care facility, a video arcade and
approximately 6,000 parking spaces. The Orleans also includes an 850-seat showroom that
features headliner entertainment and other special events, allowing us to attract more
tourists who would otherwise gamble at Strip casinos. A special events arena that will
seat up to 9,500 patrons is scheduled to open in May 2003. The arena is designed to handle
concerts, trade shows, equestrian events, boxing, ice hockey and other sporting events.


2


Item 1. Business
(continued)


Casino Properties
(continued)


Gold
Coast. The Gold Coast is located on West Flamingo Road approximately one mile west of
the Las Vegas Strip and one-quarter mile west of Interstate 15, the major highway linking
Las Vegas and Southern California. Its strategic location offers easy access from all four
directions in the Las Vegas valley.


The
Gold Coast features an approximately 87,000 square foot casino, including approximately
2,186 slot machines, 52 table games, a keno lounge, a 160-seat race and sports book and a
700-seat bingo parlor. Our eleven-story tower includes 711 hotel rooms and suites, a
swimming pool and fitness center. The Gold Coast also features four full-service
restaurants, a multi-station buffet restaurant, a fast-food restaurant, a snack bar and an
ice cream parlor. Entertainment amenities include a 70-lane bowling center, approximately
16,000 square feet of banquet and meeting facilities, four bars, an entertainment lounge
and a showroom/dance hall with live musical entertainment. Other amenities include a gift
shop, a liquor store, an American Express office, a Western Union office, a beauty salon,
a barber shop, a childcare facility and approximately 3,000 parking spaces.


Suncoast.The
Suncoast serves one of the fastest growing areas of the Las Vegas valley           and is
located on approximately 50 acres in Peccole Ranch, a master-planned           community
adjacent to Summerlin. The Suncoast is strategically located at the
          intersection of Rampart Boulevard and Alta Drive, readily accessible from most
          major points in Las Vegas, including downtown (approximately eight miles) and
          the Strip (approximately nine miles).


The
Suncoast is a Mediterranean-themed facility featuring approximately 82,000 square feet of
casino space, including approximately 2,306 slot machines, 58 table games, a 150-seat race
and sports book and a 600-seat bingo parlor. The Suncoast has 419 spacious hotel rooms and
suites, approximately 25,000 square feet of banquet and meeting facilities, 16
stadium seating movie theaters, four full-service restaurants, a multi-station
buffet restaurant, a 64-lane bowling center, a swimming pool and approximately 6,000
parking spaces.


Barbary
Coast.The Barbary Coast is located at the intersection of Flamingo Road and Las Vegas
Boulevard, one of the busiest intersections on the Strip, along with Caesars Palace,
Ballys Las Vegas and Bellagio. Historically, the Barbary Coast has relied on foot
traffic on the Las Vegas Strip for a significant amount of its revenues. As a result, the
Barbary Coasts primary customer base is visitors to the Las Vegas area. In addition
to its favorable location on the Strip, the Barbary Coast has also benefited from its more
intimate gaming atmosphere, allowing it to develop a loyal base of table games and slot
customers.


The
Barbary Coast features an approximately 30,000 square foot casino, including approximately
610 slot machines, 36 table games, a race and sports book and other amenities. Our
eight-story tower includes 197 spacious rooms and suites. The Barbary Coast is furnished
and decorated in an elegant turn-of-the-century Victorian theme and includes three bars
and three restaurants: Michaels gourmet restaurant, Drais on the Strip (leased
to and operated by a third party) and the Victorian Room.


3


Item 1. Business
(continued)


Gaming Security


Each
of our casinos employs extensive supervision and accounting procedures to control the
handling of cash in their gaming operations. These measures include security personnel,
closed-circuit television observation of critical areas of the casino, locked cash boxes,
independent auditors and observers, strict sign-in and sign-out procedures which ensure,
to the extent practicable, that gaming chips issued by, and returned to, the casino
cashiers cages are accurately accounted for, and procedures for the regular
observation of gaming employees. The accounting departments of each of our casinos, which
employ persons who have no involvement in the gaming operations, review on a daily basis
records compiled by gaming employees pertaining to cash flow and credit extension.
Moreover, regular periodic analysis of the results of our gaming operations, including
analyses of our compliance with the internal control standards established by the Nevada
State Gaming Control Board (the Nevada Board), are performed by us and our
independent auditors to detect significant deviations from industry standards. Based on
the results of these analyses, management believes that its procedures are in compliance
in all material respects with the requirements established by the Nevada Gaming Commission
(the Nevada Commission) and the Nevada Board.


Competition


There
is intense competition among companies in the gaming industry. The Orleans, the Gold Coast
and the Suncoast compete primarily with Las Vegas hotel-casinos and non-hotel gaming
facilities that target local residents. There are several undeveloped properties in the
vicinity of The Orleans, the Gold Coast and the Suncoast on which new gaming facilities
could be built. The construction of new properties and the expansion or enhancement of
existing properties near our hotel-casinos could have a negative impact on our business.


In
contrast to our other casinos, the Barbary Coast competes for customers primarily with the
hotel-casinos located on the Strip. The construction of new properties and the expansion
or enhancement of existing properties on the Strip by competitors could materially
adversely affect business and results of operations of the Barbary Coast.


In
addition, each of our locals-oriented properties competes, to a lesser extent, with all
other casinos and hotels in the Las Vegas area. A number of new hotel-casinos or
expansions have opened in Las Vegas over the last several years, and several others have
been announced. This additional gaming and room capacity may have a negative impact on our
business.


We
also compete with other legalized forms of gaming and gaming operations in other parts of
the state of Nevada and elsewhere. Certain states have recently legalized, and several
other states are currently considering legalizing, casino gaming in designated areas. We
also face competition from casinos located on Native American reservations. We believe
that the development by Native Americans and other casino properties similar to those in
Las Vegas in areas close to Nevada, particularly California and Arizona, could have a
material adverse effect on our business and results of operations. California law permits
limited Las Vegas-style gaming activities to be conducted by California Native American
tribes and several tribes have expanded, opened or plan to open casinos in California. An
increase in gaming in California could have a material adverse effect on our business and
results of operations.


4


Item 1. Business
(continued)


Potential Future
Developments


From
time to time in our ordinary course of business we review proposals for new developments,
joint ventures and other strategic transactions. We cannot assure you that any such new
developments, ventures or transactions will be pursued or, if pursued, will be successful.


Employees


At
December 31, 2002, we had approximately 7,286 employees. We have not experienced any
significant work stoppages and believe our labor relations are good. Approximately 337
employees at the Barbary Coast are covered by a collective bargaining agreement; none of
our other employees are covered by a collective bargaining agreement.


Nevada Regulation and
Licensing


The
ownership and operation of casino gaming facilities in Nevada are subject to (i) the
Nevada Gaming Control Act and the regulations promulgated thereunder (collectively, the
Nevada Act), and (ii) various local regulations. Our gaming operations are
subject to the licensing and regulatory control of the Nevada Commission, the Nevada Board
and the Clark County Liquor and Gaming Licensing Board (the Clark County
Board). The Nevada Commission, the Nevada Board and the Clark County Board are
collectively referred to as the Nevada Gaming Authorities.


The
laws, regulations and supervisory procedures of the Nevada Gaming Authorities are based
upon declarations of public policy which seek to, among other things, (i) prevent unsavory
or unsuitable persons from having any direct or indirect involvement with gaming at any
time or in any capacity, (ii) establish and maintain responsible accounting practices and
procedures, (iii) maintain effective control over the financial practices of licensees,
including establishing minimum procedures for internal fiscal affairs and the safeguarding
of assets and revenues, providing reliable record keeping and requiring the filing of
periodic reports with the Nevada Gaming Authorities, (iv) prevent cheating and fraudulent
practices and (v) provide a source of state and local revenues through taxation and
licensing fees. Changes in such laws, regulations and procedures could have an adverse
effect on our gaming operations.


We
operate the Gold Coast, the Barbary Coast, The Orleans and the Suncoast, and are licensed
by the Nevada Gaming Authorities. The gaming licenses require the periodic payment of fees
and taxes and are not transferable. Coast Casinos is registered with the Nevada Commission
as a publicly traded corporation (a Registered Corporation) and has been found
suitable to own the stock of Coast Hotels. Coast Casinos, as a Registered Corporation, and
Coast Hotels, as a Corporate Licensee, are required periodically to submit detailed
financial and operating reports to the Nevada Commission and furnish any other information
that the Nevada Commission may request. No person may become a stockholder of, or receive
any percentage of the profits from, Coast Hotels without first obtaining licenses and
approvals from the Nevada Gaming Authorities. Coast Hotels and Coast Casinos have obtained
from the Nevada Gaming Authorities the various registrations, approvals, permits and
licenses required in order to engage in gaming activities at its hotel-casinos.


5


Item 1. Business
(continued)


Nevada Regulation and
Licensing (continued)


The
Nevada Gaming Authorities may investigate any individual who has a material relationship
to, or material involvement with, Coast Hotels or Coast Casinos in order to determine
whether such individual is suitable or should be licensed as a business associate of a
Corporate Licensee or a Registered Corporation. Officers, directors and certain key
employees of Coast Hotels must file applications with the Nevada Gaming Authorities and
may be required to be licensed or found suitable by the Nevada Gaming Authorities.
Officers, directors and key employees of Coast Hotels who are actively and directly
involved in gaming activities may be required to be licensed or found suitable by the
Nevada Gaming Authorities. The Nevada Gaming Authorities may deny an application for
licensing for any cause, which they deem reasonable. A finding of suitability is
comparable to licensing, and both require submission of detailed personal and financial
information followed by a thorough investigation. The applicant for licensing or a finding
of suitability must pay all the costs of the investigation. Changes in licensed positions
must be reported to the Nevada Gaming Authorities and, in addition to their authority to
deny an application for a finding of suitability or licensure, the Nevada Gaming
Authorities have jurisdiction to disapprove a change in a corporate position.


If
the Nevada Gaming Authorities were to find an officer, director or key employee of Coast
Hotels or Coast Casinos unsuitable for licensing or unsuitable to continue having a
relationship with Coast Hotels or Coast Casinos, we would have to sever all relationships
with such person. In addition, the Nevada Commission may require the Company and Coast
Casinos to terminate the employment of any person who refuses to file appropriate
applications. Determinations of suitability or of questions pertaining to licensing are
not subject to judicial review in Nevada.


Coast
Hotels and Coast Casinos are required to submit detailed financial and operating reports
to the Nevada Commission. Substantially all material loans, leases, sales of securities
and similar financing transactions by Coast Hotels must be reported to, or approved by,
the Nevada Commission.


If
it were determined that the Nevada Act was violated by Coast Hotels, the gaming licenses
it holds could be limited, conditioned, suspended or revoked, subject to compliance with
certain statutory and regulatory procedures. In addition, Coast Hotels, Coast Casinos and
the persons involved could be subject to substantial fines for each separate violation of
the Nevada Act at the discretion of the Nevada Commission. Further, a supervisor could be
appointed by the Nevada Commission to operate our gaming properties and, under certain
circumstances, earnings generated during the supervisors appointment (except for the
reasonable rental value of our gaming properties) could be forfeited to the State of
Nevada. Limitation, conditioning or suspension of any gaming license or the appointment of
a supervisor could (and revocation of any gaming license would) materially adversely
affect the Companys gaming operations.


Any
beneficial holder of a Registered Corporations voting securities, regardless of the
number of shares owned, may be required to file an application, be investigated, and have
his suitability as a beneficial holder of a Registered Corporations voting
securities determined if the Nevada Commission has reason to believe that such ownership
would otherwise be inconsistent with the declared policies of the State of Nevada. The
applicant must pay all costs of investigation incurred by the Nevada Gaming Authorities in
conducting any such investigation.


6


Item 1. Business
(continued)


Nevada Regulation and
Licensing (continued)


The
Nevada Act requires any person who acquires beneficial ownership of more than 5% of a
Registered Corporations voting securities to report the acquisition to the Nevada
Commission. The Nevada Act requires that beneficial owners of more than 10% of a
Registered Corporations voting securities apply to the Nevada Commission for a
finding of suitability within 30 days after the Chairman of the Nevada Board mails the
written notice requiring such filing. Under certain circumstances, an institutional
investor, as defined in the Nevada Act, which acquires more than 10%, but not more
than 15% of a Registered Corporations voting securities may apply to the Nevada
Commission for a waiver of such finding of suitability if such institutional investor
holds the voting securities for investment purposes only. An institutional investor will
not be deemed to hold voting securities for investment purposes unless the voting
securities were acquired and are held in the ordinary course of business as an
institutional investor and not for the purpose of causing, directly or indirectly, the
election of a majority of the members of the board of directors of a Registered
Corporation, any change in a Registered Corporations corporate charter, bylaws,
management, policies or operations, or any of its gaming affiliates, or any other action
which the Nevada Commission finds to be inconsistent with holding the Registered
Corporations voting securities for investment purposes only. Activities which are
not deemed to be inconsistent with holding voting securities for investment purposes only
include: (i) voting on all matters voted on by stockholders; (ii) making financial and
other inquiries of management of the type normally made by securities analysts for
informational purposes and not to cause a change in its management policies or operations;
and (iii) such other activities as the Nevada Commission may determine to be consistent
with such investment intent. If the beneficial holder of voting securities who must be
found suitable is a corporation, partnership or trust, it must submit detailed business
and financial information including a list of beneficial owners. The applicant is required
to pay all costs of investigation


Any
person who fails or refuses to apply for a finding of suitability or a license within 30
days after being ordered to do so by the Nevada Commission or the Chairman of the Nevada
Board, may be found unsuitable. The same restrictions apply to a record owner if the
owner, after request, fails to identify the beneficial owner. Any stockholder found
unsuitable and who holds, directly or indirectly, any beneficial ownership of the voting
securities of a Registered Corporation beyond such period of time as may be prescribed by
the Nevada Commission may be guilty of a criminal offense. Coast Hotels is subject to
disciplinary action if, after it receives notice that a person is unsuitable to be a
stockholder or to have any other relationship with Coast Hotels or Coast Casinos, we (i)
pay that person any dividend or interest upon voting securities of our company, (ii) allow
that person to exercise, directly or indirectly, any voting right conferred through
securities held by that person, (iii) pay remuneration in any form to that person for
services rendered or otherwise, or (iv) fail to pursue all lawful efforts to require such
unsuitable person to relinquish his voting securities, including, if necessary, the
immediate purchase of such voting securities for cash at fair market value.


The
Nevada Commission may, at its discretion, require the holder of any debt security of a
Corporate Licensee or a Registered Corporation to file applications, be investigated and
be found suitable to own the debt security. If the Nevada Commission determines that a
person is unsuitable to own such security, then pursuant to the Nevada Act, the Corporate
Licensee or the Registered Corporation can be sanctioned, including the loss of its
licenses, if without the prior approval of the Nevada Commission, it: (i) pays to the
unsuitable person any dividend, interest or any distribution whatsoever; (ii) recognizes
any voting right by such unsuitable person in connection with such securities; (iii) pays
the unsuitable person remuneration in any form; or (iv) makes any payment to the
unsuitable person by way of principal, redemption, conversion, exchange, liquidation or
similar transaction.


7


Item 1. Business
(continued)


Nevada Regulation and
Licensing (continued)


Coast
Hotels is required to maintain a current stock ledger in Nevada, which may be examined by
the Nevada Gaming Authorities at any time. If any securities are held in trust by an agent
or by a nominee, the record holder may be required to disclose the identity of the
beneficial owner to the Nevada Gaming Authorities. A failure to make such disclosure may
be grounds for finding the record holder unsuitable. Coast Hotels is also required to
render maximum assistance in determining the identity of the beneficial owner. The Nevada
Commission has the power to require our stock certificates to bear a legend indicating
that the securities are subject to the Nevada Act.


Licensed
Corporations and Registered Corporations such as Coast Hotels and Coast Casinos may not
make public offering of their securities without the prior approval of the Nevada
Commission if the securities or proceeds therefrom are intended to be used to construct,
acquire or finance gaming facilities in Nevada, or to require or extend obligations
incurred for such purposes. The Nevada Commission has previously granted exemptions from
this prior approval process for certain public offerings by Coast Hotels and Coast
Casinos. Approval of a public offering, if given, will not constitute a finding,
recommendation or approval by the Nevada Commission or the Nevada Board as to the accuracy
or adequacy of the prospectus or the investment merits of the securities. Any
representation to the contrary is unlawful.


Changes
in control of a Registered Corporation through merger, consolidation, stock or asset
acquisitions, management or consulting agreements, or any act or conduct by a person
whereby he obtains control, may not occur without the prior approval of the Nevada
Commission. Entities seeking to acquire control of a Registered Corporation must satisfy
the Nevada Board and Nevada Commission with respect to a variety of stringent standards
prior to assuming control of such Registered Corporation. The Nevada Commission may also
require controlling stockholders, officers, directors and other persons having a material
relationship or involvement with the entity proposing to acquire control, to be
investigated and licensed as a part of the approval process relating to the transaction.


The
Nevada legislature has declared that some corporate acquisitions opposed by management,
repurchases of voting securities and corporate defense tactics affecting Licensed
Corporations, and Registered Corporations that are affiliated with those operations, may
be injurious to stable and productive corporate gaming. The Nevada Commission has
established a regulatory scheme to ameliorate the potentially adverse effects of these
business practices upon Nevadas gaming industry and to further Nevadas policy
to: (i) assure the financial stability of corporate gaming operators and their affiliates;
(ii) preserve the beneficial aspects of conducting business in the corporate form; and
(iii) promote a neutral environment for the orderly governance of corporate affairs.
Approvals are, in certain circumstances, required from the Nevada Commission before a
Registered Corporation can make exceptional repurchases of voting securities above the
current market price thereof and before a corporate acquisition opposed by management can
be consummated. The Nevada Act also requires prior approval of a plan of recapitalization
proposed by a Registered Corporations Board of Directors in response to a tender
offer made directly to the Registered Corporations stockholders for the purposes of
acquiring control of the Registered Corporation.


License
fees and taxes, computed in various ways depending on the type of gaming or activity
involved, are payable to the State of Nevada and to the counties and cities in which the
Nevada licensees respective operations are conducted. Depending upon the particular
fee or tax involved, these fees and taxes are payable monthly, quarterly or annually and
are based upon either: (i) a percentage of the gross revenues received; (ii) the number of
gaming devices operated; or (iii) the number of table games operated. A casino
entertainment tax is also paid by casino operations where entertainment is furnished in
connection with the selling of food or refreshments.


8


Item 1. Business
(continued)


Nevada Regulation and
Licensing (continued)


Any
person who is licensed, required to be licensed, registered, required to be registered, or
is under common control with such persons (collectively, Licensees), and who
proposes to become involved in a gaming venture outside of Nevada is required to deposit
with the Nevada Board, and thereafter maintain, a revolving fund in the amount of $10,000
to pay the expenses of investigation of the Nevada Board of their participation in such
foreign gaming. The revolving fund is subject to increase or decrease at the discretion of
the Nevada Commission.


Thereafter,
Licensees are required to comply with certain reporting requirements imposed by the Nevada
Act. Licensees are also subject to disciplinary action by the Nevada Commission if they
knowingly violate any laws of the foreign jurisdiction pertaining to the foreign gaming
operation, fail to conduct the foreign gaming operation in accordance with the standards
of honesty and integrity required of Nevada gaming operations, engage in activities that
are harmful to the State of Nevada or its ability to collect gaming taxes and fees, or
employ a person in the foreign operation who has been denied a license or finding of
suitability in Nevada on the grounds of personal unsuitability.


Coast
Hotels may pursue development opportunities in other jurisdictions and expects that if it
does so it will be subject to similar rigorous regulatory standards in each other
jurisdiction in which it seeks to conduct gaming operations. There can be no assurance
that regulations adopted, permits required or taxes imposed, by other jurisdictions will
permit profitable operations by Coast Hotels in those jurisdictions.


Certain Forward-Looking
Statements


This
Form 10-K includes forward-looking statements within the meaning of the
securities laws. All statements regarding our expected financial position, business
strategies and financing plans under the headings Managements Discussion and
Analysis of Financial Condition and Results of Operations, Business and
elsewhere in this Form 10-K are forward-looking statements. In addition, in those and
other portions of this Form 10-K, the words anticipates, believes,
estimates, seeks, expects, plans,
intends and similar expressions, as they relate to Coast Hotels or its
management, are intended to identify forward-looking statements. Although we believe that
the expectations reflected in such forward-looking statements are reasonable, and have
based these expectations on our beliefs as well as assumptions we have made, such
expectations may prove to be incorrect. Important factors that could cause actual results
to differ materially from such expectations are disclosed in this Form 10-K, including,
without limitation, the following factors:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | increased
competition, both in Nevada and other states, including increased competition from
California Native American gaming;
| | - | -------------------------------------------------------------------------------------------------------------------------------

| | o | dependence
on the Las Vegas area and Southern California for a majority of our customers;
| | - | -----------------------------------------------------------------------------------------

| | o | substantial
leverage and uncertainty that we will be able to service our debt;
| | - | ------------------------------------------------------------------------------

| | o | uncertainties
 associated  with  construction  projects,  including the related  disruption  of
operations  and the           availability of financing, if necessary;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | changes
 in laws or  regulations,  third  party  relations  and  approvals,  decisions  of
courts,  regulators  and           governmental bodies;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------

|9


Item 1. Business
(continued)


Certain Forward-Looking
Statements (continued)
|---------------------------------------------------------------------------------

| | o | uncertainties
related to the economy;
| | - | -------------------------------------

| | o | uncertainties
related to the effects of possible future terrorist activities; and
| | - | ---------------------------------------------------------------------------------

| | o | uncertainties
related to the effects of the war with Iraq.
| | - | ----------------------------------------------------------

|All
subsequent written and oral forward-looking statements attributable to us or to persons
acting on our behalf are expressly qualified in their entirety by our cautionary
statements. The forward-looking statements included are made only as of the date of this
Form 10-K. We do not intend, and undertake no obligation, to update these forward-looking
statements.


Item 2. Properties


The
Orleans occupies a portion of an approximately 80-acre site located on West Tropicana
Avenue, approximately one mile south of the Gold Coast. We lease the real property under a
ground lease entered into by Coast Hotels and the Tiberti Company, a Nevada general
partnership of which J. Tito Tiberti, a stockholder and director of Coast Casinos and a
director of Coast Hotels, is managing partner. The lease had an effective commencement
date of October 1, 1995, an initial term of 50 years, and includes an option, exercisable
by us, to extend the initial term for an additional 25 years. The lease provides for
monthly rental payments of $200,000 per month through February 2002, $225,000 per month
during the 48-month period thereafter, and $250,000 per month during the 60-month period
thereafter. In March 2011, annual rental payments will increase on a compounding basis at
a rate of 3.0% per annum. In addition, we have been granted an option to purchase the real
property during the two-year period commencing in February 2016. The lease provides that
the purchase price will be the fair market value of the real property at the time we
exercise the option, provided that the purchase price will not be less than 10 times, nor
more than 12 times, annual rent at such time.


We
own the approximately 26 acres that the Gold Coast occupies on West Flamingo Road. We also
own an 8.33-acre site across the street from the Gold Coast that contains an approximately
100,000 square foot warehouse. We use the warehouse primarily as a storage facility.


The
Suncoast is located in the west end of the Las Vegas valley and occupies an approximately
50-acre site that we lease pursuant to a Ground Lease Agreement dated as of October 28,
1994. The initial term of the lease expires on December 31, 2055. The lease contains three
options, exercisable by us, to extend the term of the lease for 10 years each. The lease
provided for monthly rental payments of $166,667 for the year ended December 31, 1995.
Thereafter, the monthly rent increases by the amount of $5,000 in January of each year.
The landlord has the option to require us to purchase the property at the end of 2014,
2015, 2016, 2017 and 2018, at the fair market value of the real property at the time the
landlord exercises the option, provided that the purchase price will not be less than 10
times nor more than 15 times the annual rent at such time. Based on the terms of the
lease, the potential purchase price commitment ranges from approximately $31.0 million to
approximately $51.0 million in the years 2014 through 2018. We have a right of first
refusal in the event the landlord desires to sell the property at any time during the
lease term.


10


Item 2. Properties
(continued)


The Barbary
Coast occupies approximately 1.8 acres at the intersection of Flamingo Road and the Strip
that we lease pursuant to a lease dated May 1, 1993. The lease provides for rental
payments of $175,000 per year during the initial term of the lease that expires on May 1,
2003. We have exercised the first of two 30-year options, with rental payments increasing
to $190,000 per year during the first ten years of the renewal period. We have an option
to purchase the leased property at any time during the six month period prior to the
expiration of the initial term of the lease, provided that certain conditions are met, at
a purchase price equal to the greater of $3.5 million or the then appraised value of the
real property. Should the landlord desire to sell the real property during the initial
term of the lease, we have a right of first refusal. We also own approximately 2.5
additional acres of real property located adjacent to the Barbary Coast that we use for
valet parking and as a parking lot for our employees. We purchased the land (which we
previously leased) for $18.1 million on January 17, 2003.


In
the fourth quarter of 2001 and the first quarter of 2002, we purchased land totaling
approximately 60 acres for possible future development. The land is located in a gaming
enterprise district on Las Vegas Boulevard South, adjacent to Interstate 15 and
approximately 6 miles south of Tropicana Avenue. Subject to market conditions,
availability of financing and receipt of required governmental approvals, we intend to
develop a hotel-casino on the site. We are currently in the conceptual stage of the
project and have not developed any plans, but anticipate beginning construction of the
hotel-casino in the second quarter of 2004 and opening in the second half of 2005. There
is no guarantee that we will actually develop the project.


Item 3. Legal Proceedings


We
are currently, and are from time to time, involved in litigation arising in the ordinary
course of our business. We are currently subject to lawsuits in which the plaintiffs have
sought punitive damages. We intend to continue to defend the lawsuits vigorously. We do
not believe that such litigation, including the foregoing proceedings, will, individually
or in the aggregate, have a material adverse effect on our financial position, results of
operations or cash flows.


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


No
matters were submitted to our shareholder during the quarter ended December 31, 2002.


11


PART II


Item 5. Market for
Registrants Common Equity and Related Stockholder Matters


We
are a wholly owned subsidiary of Coast Casinos. None of our equity securities are publicly
traded.


Item 6. Selected
Financial Data


The
following Selected Financial Data should be read in conjunction with
Managements Discussion and Analysis of Financial Condition and Results of
Operations and the financial statements and notes thereto included elsewhere in this
Form 10-K. The balance sheet and statements of operations data as of and for each of the
five years in the period ended December 31, 2002 are derived from our audited financial
statements. Our financial statements as of December 31, 2001 and 2002 and for each of the
three years in the period ended December 31, 2002 are included in this report on Form
10-K. The historical results are not necessarily indicative of the results of operations
to be expected in the future.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                      | Year Ended December 31,
|------------------------------------- | -----------------------
|
|
|                                      |                        
|STATEMENTS OF OPERATIONS DATA:        | (dollars in thousands) 
|Net revenues                          |                        
|Departmental operating expenses (1)   |                        
|General and administrative expenses   |                        
|Land leases                           |                        
|Deferred rent                         |                        
|Depreciation and amortization         |                        
|Pre-opening expenses(2)               |                        
|                                      |                        
|Operating income                      |                        
|Interest expense, net(3)              |                        
|Other income (expense)                |                        
|                                      |                        
|Income before income taxes and        |                        
|extraordinary item                    |                        
|Provision for income taxes            |                        
|                                      |                        
|Income before extraordinary item      |                        
|Extraordinary item - loss on early    |                        
|retirement of debt, net of applicable |                        
|income tax benefit ($14,543) (4)      |                        
|                                      |                        
|Net income (loss)                     |                        
|                                      |                        

|_________________


See Footnotes to Selected
Financial Data.


12


Item 6. Selected
Financial Data (continued)
|----------------------------------------------------------------------------------------------------------------

|                          | As of December 31,    
|------------------------- | ----------------------
|
|BALANCE SHEET DATA:       | (dollars in thousands)
|Cash and cash equivalents |                       
|Total assets              |                       
|Total debt                |                       
|Stockholder's equity      |                       

_________________

See Footnotes to Selected
Financial Data.

# Footnotes to Selected
Financial Data

| | (1) | Includes
casino, food and beverage, hotel and other expenses.
| | --- | -------------------------------------------------------------

| | (2) | Relates
to the Suncoast, which opened September 2000.
| | --- | -----------------------------------------------------

| | (3) | Includes
interest income of (dollars in thousands) $695 (1998), $450 (1999),
                    $470 (2000), $405 (2001) and $58 (2002) and capitalized interest of
$58 (1998),                     $612 (1999), $4,511 (2000), $1,048 (2001) and $2,950
(2002).
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | In
connection with the repurchase of certain debt, we incurred repurchase
                    premiums of $31.0 million. The repurchase premiums and the write-offs
of                     unamortized debt issuance costs and original issue discount
resulted in an                     extraordinary loss of $27.0 million in 1999, net of
the applicable income tax                     benefit of $14.5 million. In April 2002,
the Financial Accounting Standards                     Board issued Statement No. 145 (SFAS
145) Rescission of FASB                     Statements Nos. 4, 44 and 64 and
Amendment of FASB Statement No. 13. SFAS                     145 addresses the
presentation for losses on early retirements of debt in the                     statement
of operations. Upon adoption of SFAS 145, we might not be allowed to
                    present losses on early retirements of debt as an extraordinary item.
                    Additionally, prior period extraordinary losses may be required to be
                    reclassified to conform to this new presentation.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|13


Item 7. Managements
Discussion and Analysis of Financial Condition and Results of Operations


Critical Accounting Policies
and Estimates


We
have identified the following critical accounting policies that affect our more
significant judgments and estimates used in the preparation of our financial statements.
The preparation of our financial statements in conformity with accounting principles
generally accepted in the United States of America requires that we make estimates and
judgments that affect the reported amounts of assets and liabilities, revenues and
expenses, and related disclosures of contingent assets and liabilities. On an on-going
basis, we evaluate those estimates, including those related to asset impairment, accruals
for slot marketing points, self-insurance, compensation and related benefits, revenue
recognition, allowance for doubtful accounts, contingencies and litigation. These
estimates are based on the information that is currently available to us and on various
other assumptions that we believe to be reasonable under the circumstances. Actual results
could vary from those estimates under different assumptions or conditions.


We
believe that the following critical accounting policies affect significant judgments and
estimates used in the preparation of our financial statements:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | We
recognize revenue as net wins and losses occur in our casinos, upon the occupancy of our
hotel rooms, upon the delivery of food, beverage and other services, and upon performance
for entertainment revenue. Wagers received on all sporting events are recorded as a
liability until the final outcome of the event when the payoffs, if any, can be
determined. Effective January 1, 2001, we adopted Emerging Issues Task Force Issue 00-22
(the Issue), which requires that cash discounts and certain other cash
incentives related to gaming play be recorded as a reduction to gross casino revenues.
The Issue requires that prior periods be restated. We previously recorded incentives as
an operating expense and have reclassified prior period amounts.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | We
maintain an allowance for doubtful accounts for estimated losses resulting from the
inability of our customers to make required payments, which results in bad debt expense.
We determine the adequacy of this allowance by continually evaluating individual customer
receivables, considering the customers financial condition, credit history and
current economic conditions. If the financial condition of customers were to deteriorate,
resulting in an impairment of their ability to make payments, additional allowances may
be required.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | We
maintain accruals for health and workers compensation self-insurance and slot club point
redemption, which are classified as accrued liabilities in the balance sheets. We
determine the adequacy of these accruals by periodically evaluating the historical
experience and projected trends related to these accruals. If such information indicates
that the accruals are overstated or understated, we will adjust the assumptions utilized
in the methodologies and reduce or provide for additional accruals as appropriate.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | We
are subject to various claims and legal actions in the ordinary course of business. Some
of these matters include personal injuries to customers and damage to customerspersonal
assets. We estimate guest claims and accrue for such liability based on historical
experience in accrued liabilities in the balance sheets.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|14


Item 7. Managements
Discussion and Analysis of Financial Condition and Results of Operations(continued)


Critical Accounting
Policies and Estimates (continued)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | At
December 31, 2002, we had net property and equipment of $712.2 million, representing 90%
of our total assets. We depreciate the property and equipment on a straight-line basis
over their estimated useful lives. The estimated useful lives are based on the nature of
the assets as well as our current operating strategy. Future events, such as property
expansions, property developments, new competition and new regulations, could result in a
change in the manner in which we are using certain assets, requiring a change in the
estimated useful lives of such assets. In assessing the recoverability of the carrying
value of property and equipment, if events and circumstances warrant such an assessment,
we must make assumptions regarding estimated future cash flows and other factors. If
these estimates or the related assumptions change, we may be required to record an
impairment loss for these assets. Such an impairment loss would be recognized as a
non-cash component of operating income.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | We
have entered into lease agreements where the rental payments increase on an annual basis.
We recognize the related rent expense on the straight-line method over the term of the
agreements. Deferred rent is recorded to reflect the excess of rent expense over cash
payments since the inception of the leases.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Results of Operations


The
following table sets forth, for the periods indicated, certain financial information
regarding the results of our operations:
|---------------------------------------------------------------------------------------------------------------------------------------------------------

|                                      | Year Ended December 31,
|------------------------------------- | -----------------------
|
|                                      | (dollars in thousands) 
|Net operating revenues                |                        
|Operating expenses                    |                        
|                                      |                        
|Operating income                      |                        
|                                      |                        
|Net income                            |                        
|                                      |                        
|Cash provided by operating activities |                        
|                                      |                        
|Cash used in investing activities     |                        
|                                      |                        
|Cash provided by financing activities |                        
|                                      |                        

|15


Item 7.
Managements Discussion and Analysis of Financial Condition and Results of Operations(continued)


Fiscal 2002 Compared to
2001


In
the year ended December 31, 2002, revenues increased but net income decreased as we faced
many challenges including a weakened economy, construction disruption, increased
competition and a continued slowdown in tourist visitation to Las Vegas as a result of the
events of September 11, 2001. Most of the increase in revenues was from the continued
growth at our newest hotel-casino, the Suncoast, but revenues also increased slightly at
the Gold Coast and Barbary Coast. Revenues were lower at The Orleans for the year, but
increased by 10.8% in the fourth quarter as we began to see the positive effects of the
586 new rooms opened in August 2002 and a decrease in construction disruption as the
two-year expansion project neared completion.


Operating
income for the year ended December 31, 2002 was lower by $8.2 million, primarily due to an
increase in general and administrative expenses and depreciation. Net income was $31.7
million in 2002 compared to $36.5 million in 2001, a decrease of 13.0%.


Casino.Casino
revenues were $406.2 million in 2002 compared to $387.5 million in           2001, an
increase of $18.7 million (4.8%) primarily due to a 15.2% increase at           the
Suncoast as we continued to attract customers from the growing market in the
          Summerlin area of western Las Vegas. Casino revenues at the Gold Coast
increased           2.2% for the year, but were down 3.4% in the fourth quarter due, in
part, to           construction disruption from the new parking garage. The main section
of the           garage was completed in December 2002, eliminating most of the
construction           barriers to customer traffic flow. Casino revenues at the Barbary
Coast were up           5.0% in 2002, primarily from an increase in table games wagering
volume. The           Barbary Coast table games win percentage also improved compared to
the           lower-than-expected win percentage in 2001. Casino revenues at The Orleans
were           down 3.0% in the year ended December 31, 2002, but were 6.0% higher in the
          fourth quarter due, in part, to an increase in tourist customers because of the
          586 new hotel rooms opened in August.


Casino
expenses were $182.1 million in 2002 compared to $174.2 million in 2001, an increase of
4.5%. The increase was primarily due to increased salaries at the recently expanded Gold
Coast and The Orleans, as well as to increased promotional expenses at the Suncoast.


Food
and Beverage. Gross food and beverage revenues were $112.8 million in 2002 compared to
$106.9 million in 2001, an increase of 5.5%. The increase was primarily due to a 12.5%
increase at the Suncoast, in line with the continued increase in customer volume, and an
increase of 7.6% at the Gold Coast due to the greater number of meals served in its larger
new buffet, opened in December 2001. Food and beverage revenues at The Orleans and the
Barbary Coast in 2002 were relatively flat compared to 2001.


Food
and beverage expenses were $83.9 million in 2002 compared to $77.8 million in 2001, an
increase of 7.8% due primarily to the larger new buffet that opened at the Gold Coast in
December 2001. Costs in the Gold Coast buffet increased in 2002 due to higher staffing
levels and more elaborate food offerings than in the old buffet.


16


Item 7. Managements
Discussion and Analysis of Financial Condition and Results of Operations(continued)



Fiscal 2002 Compared to
2001 (continued)
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Hotel.Gross
hotel room revenues were $41.8 million in 2002 compared to $38.4           million in
2001, an increase of 8.7%, primarily due to increases at the Suncoast           and The
Orleans because of an increased number of rooms at those properties. The
          Suncoast added 216 rooms in August 2001 and The Orleans added 586 new rooms in
          August 2002. Despite a lower occupancy percentage at those two properties, the
          total number of occupied rooms increased in the year, contributing to the
          increase in revenues. 2002 average room rates were lower by approximately 4.4%
          than in 2001 due to pressures from reduced rates at the larger Strip          hotels
as they attempted to increase tourist traffic that had diminished because           of
September 11, 2001 events and a weakened economy. Slightly lower room rates           and
occupancy rates contributed to lower hotel revenues at the Gold Coast and
          Barbary Coast in 2002.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Hotel
expenses were $17.3 million in 2002 compared to $15.1 million in 2001, an increase of
15.0%. Gold Coast and Barbary Coast expenses were relatively flat compared to the prior
year, but expenses at The Orleans and the Suncoast increased 24.9% and 34.5%,
respectively, due to the increased number of rooms at those properties.


Other.Other
revenues are derived primarily from bowling, retail, entertainment and           leased
facilities. In the year ended December 31, 2002, other revenues were           $39.7
million compared to $36.7 million in 2001. The increase of 8.1% was due
          primarily to a 21.8% increase at the Suncoast, where retail sales and showroom
          revenue were up 30.5% and 78.5%, respectively, because of increased customer
          volume. Gold Coast other revenues also increased by 5.9% due to the relocation
          of retail facilities to a high-traffic-area near the hotel front desk. Other
          revenues at The Orleans were relatively flat compared to the prior year, but
          Barbary Coast other revenues were 17.3% higher due to a one year lease of space
          to a third party.


Other
expenses were $29.4 million in 2002 compared to $27.9 million in 2001, an increase of
5.3%, in line with the increase in other revenues. Other expenses at the Barbary Coast and
The Orleans were relatively flat compared to the prior year, but Gold Coast other expenses
increased by 7.7% and Suncoast other expenses increased by 15.4%.


General
and Administrative.General and administrative expenses were $104.2 million in 2002
compared to $91.5 million in 2001, an increase of 13.9%, primarily due to increases in
payroll and related costs, utilities expenses, property taxes and insurance costs.


Payroll
and related costs increased by $5.3 million (10.3%), affected by increased staffing levels
at The Orleans and the Gold Coast due to the recent expansions at those properties, as
well as third quarter 2002 pay raises and higher health insurance costs. Utilities
expenses were $15.2 million in 2002 compared to $13.6 million in 2001, an increase of
11.4% primarily due to recently completed expansions at The Orleans and the Gold Coast and
higher utility rates. Property taxes were $5.7 million in 2002 compared to $4.7 million in
2001, an increase of 21.8% primarily because of the expansions. General insurance costs
were $2.4 million in 2002 compared to $1.3 million in 2001, an increase of 76.4% because
of increased premiums after the terrorist activities of September 11, 2001.


Depreciation
and Amortization.Depreciation and amortization expense was $41.6 million in 2002
compared to $36.5 million in 2001, an increase of 13.8% due to the depreciation of
remodeling expenditures and equipment purchases at the Gold Coast and The Orleans.
Depreciation expense at the Suncoast increased by 6.9% due to the opening of new hotel
rooms in August 2001 and the addition of slot machines during 2002.


17


Item 7. Managements
Discussion and Analysis of Financial Condition and Results of Operations(continued)


Fiscal 2002 Compared to
2001 (continued)


Other
Income (Expenses).Interest expense was $33.2 million in 2002 compared to $30.6
million in 2001, an increase of 8.3%, primarily due to higher aggregate indebtedness
related to financing of various expansion projects at the Gold Coast and The Orleans.
Interest expense was offset by approximately $1.7 million of interest earned on an
interest rate swap agreement that was entered into in April 2002 and terminated in July
2002. Capitalized interest was $3.0 million in 2002 compared to $1.0 million in 2001 due
to the advanced stages of completion of the expansion projects at The Orleans, including
the new room tower opened in August and the arena that is expected to open in May 2003.
Other income (expense) was $425,000 in 2002, including a loss on the disposal or
abandonment of fixed assets of $2.3 million offset by a gain of $2.7 million on the
interest rate swap agreement that was terminated in July 2002. Other expense of $1.8
million in 2001 was a loss on disposal of equipment.


Fiscal 2001 Compared to
2000


Net
revenues and operating income increased in the year ended December 31, 2001 due primarily
to the strong performance of the Suncoast, which opened in September 2000. Construction
disruption at the Gold Coast and The Orleans, a slowdown in tourist visitation to Las
Vegas after the September 11, 2001 terrorist attacks, recessionary economic trends and
competition from new locals-oriented hotel-casinos resulted in decreases in revenues and
operating income at The Orleans, the Gold Coast and the Barbary Coast. Net revenues in
2001 were $518.0 million compared to $408.9 million in 2000, an increase of 26.7%.
Operating income was $86.3 million in 2001 compared to $64.3 million in 2000, an increase
of 34.3%. Operating expenses increased by 25.3%, primarily as a result of the full year of
operations at the Suncoast compared to only three and one-half months of Suncoast
operations in 2000. Net income in 2001 increased 35.4% to $36.5 million compared to $27.0
million in 2000 due to the full-year results of the Suncoast.


Casino.Casino
revenues were $387.5 million in 2001, an increase of 29.9% over 2000           casino
revenues of $298.4 million. The increase was primarily due to the first           full
year of operations of the Suncoast. Construction disruption during a           remodeling
project contributed to a 2.7% decline in gaming revenues at the Gold           Coast and
the general slowdown in tourism after September 11 contributed to flat           casino
revenues at The Orleans and a 2.8% decline at the Barbary Coast. Casino
          expenses increased by 27.0% primarily because of the Suncoast, resulting in a
          casino operating margin of 55.0% in 2001 compared to 54.0% in 2000.


Food
and Beverage. For the year ended December 31, 2001, gross food and beverage revenues
were $106.9 million, an increase of $22.1 million (26.1%) over 2000 revenues of $84.8
million, primarily due to the full year of operations at the Suncoast, which was only open
for three and one-half months in 2000. Food and beverage expenses increased $15.7 million
(25.3%), in line with the increase in revenues.


Hotel.                 Gross
hotel room revenues were $38.4 million in 2001, an increase of $4.7           million
(14.0%) over 2000 room revenues of $33.7 million. The increase was due           to a
full year of operations of the Suncoast, which was only open for three and
          one-half months in 2000, and the expansion of available rooms at the Suncoast
in           September 2001 from 232 to 419. This more than offset a decline in occupancy
at           all four properties after the terrorist attacks on September 11. The average
          daily room rate increased to $59.05 in 2001 from $58.56 in 2000 due to the
          higher room rates achieved by the Suncoast and increases at both The Orleans
and           Gold Coast. Guest room occupancy levels declined from 93.0% in 2000 to
89.0% in           2001 as a result of the events of September 11 and generally lower
occupancy           levels at the Gold Coast. Hotel expenses increased 9.3%, primarily
due to the           full year of Suncoast operations.


18


Item 7. Managements
Discussion and Analysis of Financial Condition and Results of Operations(continued)


Fiscal 2001 Compared to
2000 (continued)


Other.                 Other
revenues increased 17.8% in 2001 to $36.7 million compared to $31.2           million in
2000, due to the full year of operations at the Suncoast. Costs           related to the
other revenues increased by 12.9% for the same reason.


General
and Administrative. General and administrative expenses were $91.5 million in 2001
compared to $69.4 million in 2000, an increase of 31.9% due primarily to the full year of
operations at the Suncoast. General and administrative expenses at the other properties
increased $5.2 million or 8.8% partly due to increased utility costs of $2.4 million.


Pre-opening,
Rent and Depreciation. There were no pre-opening expenses in 2001 compared to $6.2
million in 2000 due to the opening of the Suncoast in September 2000. Land lease expense
and the related deferred rent expense were both higher in 2001 because the rent on the
Suncoast land was capitalized during construction until it opened on September 12, 2000.
Depreciation and amortization expense was higher in 2001 due primarily to a full year of
operations at the Suncoast.


Other
Expenses.Other expenses were $31.0 million in 2001, an increase of 34.6% over 2000
other expenses of $23.0 million, due primarily to higher average debt levels and lower
capitalized interest in 2001.


Aggregate Indebtedness
and Fixed Payment Obligations


Our
total long-term indebtedness (including current maturities) and fixed payment obligations
on the land leases are summarized by year below:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                           | 2003                   | 2004 | 2005 | 2006   | 2007 | Thereafter | Total  
|-------------------------- | ---------------------- | ---- | ---- | ------ | ---- | ---------- | -------
|                           |                        |      |      |        |      |            |        
|Long-Term Indebtedness:    | (dollars in thousands) |     
|Senior subordinated notes  |                        |      | $    | --     |      | $          | --     
|Bank credit facility(1)    |                        |      |      | 17,000 |      |            | 119,000
|Other                      |                        |      |      | 162    |      |            | 177    
|                           |                        |      |     
|Fixed Payment Obligations  |                        |      |     
|for Land Leases:           |                        |     
|Barbary Coast - land lease |                        |      |      | 185    |      |            | 190    
|The Orleans - land lease   |                        |      |      | 2,700  |      |            | 2,700  
|Suncoast - land lease      |                        |      |      | 2,480  |      |            | 2,540  
|                           |                        |      |      |        |      |            |        
|Total Indebtedness and     |                        |     
|Fixed Payment Obligations  |                        |      | $    | 22,527 |      | $          | 124,607
|                           |                        |      |      |        |      |            |        

|_________________
|-----------------

| | (1) | The
terms of the senior secured credit facility provide that the availability
                    will be reduced on a quarterly basis. See Liquidity and Capital
                    Resources.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|During
the year ended December 31, 2002 we made principal payments of $8.0 million net of
borrowings on the senior secured credit facility and $150,000 in principal payments on
other long-term debt. We have debt service payments due aggregating $17.2 million in 2003.


We
also have fixed payment obligations due during 2003 of $5.4 million. The total remaining
fixed payment obligations under leases is $427.0 million. The fixed payment obligations
represent payments due under operating lease agreements primarily for land on which three
of our properties are located.


19


Item 7. Managements
Discussion and Analysis of Financial Condition and Results of Operations(continued)


Aggregate Indebtedness
and Fixed Payment Obligations (continued)


The
Orleans occupies a portion of an approximately 80-acre site located on West Tropicana
Avenue, approximately one mile south of the Gold Coast. We lease the real property under a
ground lease entered into by Coast Hotels and the Tiberti Company, a Nevada general
partnership of which J. Tito Tiberti, a director of both Coast Hotels and Coast Casinos,
is managing partner. The lease had an effective commencement date of October 1, 1995, an
initial term of 50 years, and includes an option, exercisable by us, to extend the initial
term for an additional 25 years. The lease provides for monthly rental payments of
$200,000 per month through February 2002, $225,000 per month during the 48-month period
thereafter, and $250,000 per month during the 60-month period thereafter. In March 2011,
annual rental payments will increase on a compounding basis at a rate of 3.0% per annum.
In addition, we have been granted an option to purchase the real property during the
two-year period commencing in February 2016. The lease provides that the purchase price
will be the fair market value of the real property at the time we exercise the option,
provided that the purchase price will not be less than 10 times, nor more than 12 times,
annual rent at such time.


The
Suncoast is located in the west end of the Las Vegas valley and occupies an approximately
50-acre site that we lease pursuant to a Ground Lease Agreement dated as of October 28,
1994. The initial term of the lease expires on December 31, 2055. The lease contains three
options, exercisable by us, to extend the term of the lease for 10 years each. The lease
provided for monthly rental payments of $166,667 for the year ended December 31, 1995.
Thereafter, the monthly rent increases by the amount of $5,000 in January of each year.
The landlord has the option to require us to purchase the property at the end of 2014,
2015, 2016, 2017 and 2018, at the fair market value of the real property at the time the
landlord exercises the option, provided that the purchase price will not be less than 10
times nor more than 15 times the annual rent at such time. Based on the terms of the
lease, the potential purchase price commitment ranges from approximately $31.0 million to
approximately $51.0 million in the years 2014 through 2018. We have a right of first
refusal in the event the landlord desires to sell the property at any time during the
lease term.


The
Barbary Coast occupies approximately 1.8 acres at the intersection of Flamingo Road and
the Strip that we lease pursuant to a lease dated May 1, 1993. The lease provides for
rental payments of $175,000 per year during the initial term of the lease that expires on
May 1, 2003. We have exercised the first of two 30-year options, with rental payments
increasing to $190,000 per year during the first ten years of the renewal period. We have
an option to purchase the leased property at any time during the six month period prior to
the expiration of the initial term of the lease, provided that certain conditions are met,
at a purchase price equal to the greater of $3.5 million or the then appraised value of
the real property. Should the landlord desire to sell the real property during the initial
term of the lease, we have a right of first refusal. See also Item 2
Properties for a discussion of our properties.


20


Item 7. Managements
Discussion and Analysis of Financial Condition and Results of Operations(continued)


Liquidity and Capital
Resources


Our
principal sources of liquidity have consisted of cash provided by operating activities and
debt financing. Cash provided by operating activities was $97.8 million in the year ended
December 31, 2002, compared to $84.7 million in 2001 and $69.9 million in 2000.


Cash
used in investing activities in each of the years ended December 31, 2000, 2001 and 2002
was primarily for capital expenditures. During 2002, cash used for capital expenditures
was $199.5 million, including $34.1 million for construction accounts payable at December
31, 2001. $156.3 million was used in the expansion and remodeling projects at the Gold
Coast and The Orleans. $15.8 million was used to purchase a 1996 Bombardier CRJ200 jet
aircraft for $17.8 million, including the trade-in of our 1980 Hawker-Siddely jet aircraft
valued, net of accumulated depreciation, at $2.0 million. The remaining $27.4 million was
used for maintenance capital expenditures. Cash used in investing activities in 2001 and
2000 was $101.7 million and $176.9 million, respectively.


Cash
provided by financing activities was $94.3 million in 2002 primarily from borrowings under
our senior secured credit facility and the issuance in March 2002 of $100.0 million
principal amount of senior subordinated notes, offset by the net proceeds from the notes
of $103.2 million which were used to repay borrowings under the credit facility. In 2001,
cash provided by financing activities was $16.8 million. Proceeds from the issuance in
February 2001 of $50.0 million principal amount of senior subordinated notes and from
borrowings under our senior secured credit facility were partially offset by reductions of
amounts outstanding under the credit facility with cash flows from operations and
approximately $49.1 million of net proceeds from the senior subordinated notes issuance.
Cash provided by financing activities was $111.9 million in 2000, primarily from
borrowings under our senior secured credit facility.


In
March 1999, we issued $175.0 million principal amount of 9.5% senior subordinated notes
due in 2009 with interest payable on April 1 and October 1 beginning October 1, 1999 and
entered into a $75.0 million senior secured credit facility due 2004 to facilitate a
refinancing. Availability under the credit facility was increased to $200.0 million in
September 1999, subject to automatic reductions in availability from September 2001
through June 2004, as described below. Coast Casinos is a guarantor of the indebtedness
under both of these debt agreements. Borrowings under the credit facility bear interest,
selected monthly at our option, at a premium over the one-, two-, three- or six-month
London Interbank Offered Rate (LIBOR). The premium varies depending on a
certain financial ratio and can vary between 125 and 250 basis points. As of December 31,
2002, the premium over LIBOR was 2.0% (200 basis points) and the interest rate was 3.40%.
For the year ended December 31, 2002, the weighted average interest rate for the senior
secured credit facility was 3.63%. We incur a commitment fee, payable quarterly in
arrears, on the unused portion of the credit facility. This variable fee is currently at
the maximum rate of 0.5% per annum times the average unused portion of the facility.


On
February 2, 2001, we issued $50.0 million additional principal amount of senior
subordinated notes. The net proceeds of approximately $49.1 million were used to reduce
borrowings under our senior secured credit facility. On March 19, 2002, we issued $100.0
million additional principal amount of our senior subordinated notes. The notes were
issued at a premium and the net proceeds of $103.2 million were used to reduce borrowings
under our senior secured credit facility. The notes that were issued in 2001 and 2002 were
issued under the same indenture and have the same terms, interest rate and maturity date
as our original $175.0 million principal amount of senior subordinated notes issued in
1999.


21


Item 7. Managements
Discussion and Analysis of Financial Condition and Results of Operations(continued)


Liquidity and Capital
Resources (continued)


The
availability under the senior secured credit facility has been reduced quarterly since
September 30, 2001. On December 31, 2002, total availability was reduced to $159.0 million
with additional quarterly reductions in availability of $8.5 million on each of March 31,
2003 and June 30, 2003 and of $11.5 million on each of September 30, 2003, December 31,
2003, March 31, 2004 and June 30, 2004. Advances under the facility may be used for
working capital, general corporate purposes, and certain improvements to our existing
properties. As of December 31, 2002, we had $136.0 million outstanding under the senior
secured credit facility with $23.0 million of availability remaining.


The
loan agreement governing the senior secured credit facility contains covenants that, among
other things, limit the ability of Coast Hotels to pay dividends or make advances to Coast
Casinos, to make certain capital expenditures, to repay certain existing indebtedness, to
incur additional indebtedness or to sell material assets. Additionally, the loan agreement
requires that we maintain certain financial ratios with respect to its leverage and fixed
charge coverage. We are also subject to certain covenants associated with the indenture
governing our senior subordinated notes, including, in part, limitations on certain
restricted payments, the incurrence of additional indebtedness and asset sales. At
December 31, 2002, we were in compliance with all covenants and required ratios.


The
senior secured credit facility was amended in December 2001, March 2002, January 2003 and
February 2003 to increase the limitations on certain capital expenditures, to allow for
additional secured indebtedness and to allow for up to $20.0 million in unsecured
indebtedness. The unsecured indebtedness will provide additional liquidity for a period of
up to three months, during which time we will seek to amend and/or refinance the facility.


In
February 2003, we borrowed $18.0 million under a secured loan agreement, collateralized by
our Bombardier aircraft. The proceeds were used to reduce borrowings under the senior
secured credit facility. The loan bears interest at a premium of 2.25% over the 30-day
LIBOR rate, which is adjusted monthly. Payments of interest only are required during the
first twelve months. Commencing on March 28, 2004, we will be required to make monthly
payments of principal of $120,000 plus interest on the unpaid balance. A balloon payment
of the remaining principal balance is due in February 2009.


On
March 28, 2003, we entered into an unsecured $20.0 million revolving bridge line of credit
(bridge facility) with a participant in our senior secured credit facility.
Borrowings under the bridge facility bear interest at a premium of 3.5% over one-, two-,
three-week or one month LIBOR. The bridge facility expires on June 26, 2003.


As
of March 28, 2003, we had $134.0 million outstanding under the senior secured credit
facility and no outstanding borrowings under the bridge facility. We anticipate amending
or replacing our senior secured credit facility in the second quarter of 2003 so that
borrowings under the facility, in conjunction with existing cash balances and anticipated
cash flow from operations will provide sufficient resources to meet our debt and lease
payment obligations, operating needs and budgeted capital expenditure requirements at our
hotel-casino properties for at least the next twelve months. If we are unable to amend or
replace our credit facility, we may have to limit our future capital expenditures.


22


Item 7. Managements
Discussion and Analysis of Financial Condition and Results of Operations(continued)


Construction Projects


In
January 2001, we commenced an expansion of The Orleans. The expansion project included a
special-events arena, a 586-room hotel tower, a 2,600-car parking garage, six additional
movie theaters, two restaurants, an Irish pub and approximately 40,000 square feet of new
gaming area and public space. Through December 31, 2002, we had completed all but the
arena and had spent $143.7 million. We expect to open the arena in May 2003 with
additional project expenditures of approximately $20.2 million.


In
the fourth quarter of 2000, we commenced an expansion and remodel of the Gold Coast. The
project included a new, expanded buffet restaurant, a sports bar, an Asian-themed
restaurant, an Italian restaurant, 10,000 square feet of additional meeting space, an
additional approximately 20,000 square feet of slot and table games area, a new bingo
room, an expanded porte-cochere and a parking garage. Through December 31, 2002, we had
spent $68.9 million and had completed substantially all of the project except a portion of
the parking garage. The garage was completed in the first quarter of 2003 with additional
project expenditures of approximately $7.1 million.


In
the ordinary course of operating our hotel-casinos, it is necessary to upgrade or replace
fixtures and equipment and to make improvements that will extend the life of our physical
plants. We anticipate that these maintenance capital expenditures will total approximately
$26.0 million in 2003.


A
key element of our business strategy is the expansion or renovation of our existing
properties as described above. The completion of these projects is subject to certain
risks, including but not limited to:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | general
construction risks, including cost overruns, shortages of materials or skilled labor,
labor disputes, unforeseen environmental or engineering problems, work stoppages, fire
and other natural disasters, construction scheduling problems and weather interference;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | change
orders and plan or specification modifications;
| | - | ------------------------------------------------------

| | o | changes
and concessions required by governmental or regulatory authorities;
| | - | ---------------------------------------------------------------------------

| | o | delays
in obtaining or inability to obtain all required licenses, permits and authorizations; and
| | - | -------------------------------------------------------------------------------------------------

| | o | disruption
of our operations at our hotel-casinos by construction activities.
| | - | -----------------------------------------------------------------------------

|Other Matters


In
August 2001, the Financial Accounting Standards Board issued Statement No. 143 (SFAS
143), Accounting for Obligations Associated with the Retirement of Long-Lived
Assets. The objectives of SFAS 143 are to establish accounting standards for the
recognition and measurement of an asset retirement obligation and its associated asset
retirement cost. SFAS 143 is effective for fiscal years beginning after June 15, 2002.


In
April 2002, the Financial Accounting Standards Board issued Statement No. 145 (SFAS
145) Rescission of FASB Statements Nos. 4, 44 and 64 and Amendment of FASB
Statement No. 13. SFAS 145 addresses the presentation for losses on early
retirements of debt in the statement of operations. Upon adoption of SFAS 145, we might
not be allowed to present losses on early retirements of debt as an extraordinary item.
Additionally, prior period extraordinary losses may be required to be reclassified to
conform to this new presentation.


23


Item 7. Managements
Discussion and Analysis of Financial Condition and Results of Operations(continued)


Other Matters (continued)


In
June 2002, the Financial Accounting Standards Board issued Statement No. 146 (SFAS
146) Accounting for Costs Associated with Exit or Disposal Activities.
The provisions of SFAS 146 become effective for exit or disposal activities commenced
subsequent to December 31, 2002.


We
do not expect that the adoptions of SFAS 143, 145, and 146 will have a material impact on
our financial position, results of operations or cash flows.


In
December 2002, the Financial Accounting Standards Board issued Statement No. 148
(SFAS 148) Accounting for Stock-Based Compensation. The provisions
of SFAS 148 became effective December 15, 2002. We adopted the disclosure requirements of
SFAS 148, and there was no impact on our financial position, results of operations or cash
flows.


In
November 2002, the Financial Accounting Standards Board issued FASB Interpretation No. 45
(FIN 45), Guarantors Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others. This
interpretation elaborates on the disclosures to be made by a guarantor in its interim and
annual financial statements about its obligations under certain guarantees that it has
issued. It also clarifies (for guarantees issued after January 1, 2003) that a guarantor
is required to recognize, at the inception of a guarantee, a liability for the fair value
of the obligations undertaken in issuing the guarantee. At December 31, 2002, we do not
have any outstanding guarantees and accordingly do not expect the adoption of FIN 45 to
have a material impact on our financial position, results of operations or cash flows.


In
January 2003, the Financial Accounting Standards Board issued FASB Interpretation No. 46
(FIN 46), Consolidation of Variable Interest Entities. This
interpretation addresses the requirements for business enterprises to consolidate related
entities in which they are determined to be the primary economic beneficiary as a result
of their variable economic interests. The interpretation is intended to provide guidance
in judging multiple economic interests in an entity and in determining the primary
beneficiary. The interpretation outlines disclosure requirements for VIEs created after
January 31, 2003. We have reviewed our major relationships and our overall economic
interests with other companies consisting of related parties, companies in which we have
an equity position, and other suppliers to determine the extent of our variable economic
interest in these parties. We believe we have appropriately reported the economic impact
and our share of risks of our commercial relationships.


Impact of Inflation and
Other Economic Factors


Absent
changes in competitive and economic conditions or in specific prices affecting the
industry, we do not expect that inflation will have a significant impact on our
operations. Changes in specific prices, such as fuel and transportation prices, relative
to the general rate of inflation may have a material adverse effect on the hotel and
casino industry. We depend upon Las Vegas and Southern California for a majority of our
customers. Any economic downturn in those areas could materially adversely affect our
business and results of operations and our ability to pay interest and principal on our
debt.


24


Item 7. Managements
Discussion and Analysis of Financial Condition and Results of Operations(continued)


Regulation and Taxes


We
are subject to extensive regulation by the Nevada Gaming Authorities. Changes in
applicable laws or regulations could have a significant impact on our operations.


The
gaming industry represents a significant source of tax revenues, particularly to the State
of Nevada and its counties and municipalities. From time to time, various state and
federal legislators and officials have proposed changes in tax law, or in the
administration of such law, affecting the gaming industry. Proposals in recent years that
have not been enacted included a federal gaming tax and increases in state or local taxes.


We
believe that our recorded tax balances are adequate. However, it is not possible to
determine with certainty the likelihood of possible changes in tax law or in the
administration of such law. Such changes, if adopted, could have a material adverse effect
on our operating results.


Item 7A. Quantitative
and Qualitative Disclosures about Market Risk



Market Risk


Market risk
is the risk of loss arising from adverse changes in market rates and prices, such as
interest rates, foreign currency exchange rates and commodity prices. Our primary exposure
to market risk is interest rate risk associated with our long-term debt. We attempt to
limit our exposure to interest rate risk by managing the mix of our long-term fixed-rate
borrowings and short-term borrowings under our revolving bank credit facility. Assuming
that the amount of our variable rate debt remained constant at $136.0 million during the
next twelve months, a hypothetical 1% increase in our variable interest rate would
increase our interest expense by $1.4 million. On April 2, 2002, we entered into an
interest rate swap agreement with a member of our bank group wherein $100.0 million
notional amount of our fixed rate debt was converted to a floating rate. In July 2002 we
terminated the swap agreement. (See Managements Discussion and Analysis of
Financial Condition and Results of Operation  Liquidity and Capital
Resources.) As of December 31, 2002, we did not have any investments in derivative-
or foreign currency-based financial instruments.


25


Item 7A. Quantitative
and Qualitative Disclosures about Market Risk (continued)



Market Risk (continued)


The
table below provides information about our financial instruments that are sensitive to
changes in interest rates. For debt obligations, the table presents notional amounts and
weighted average interest rates by contractual maturity dates for the twelve-month period
ended December 31,:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                         | 2003                   |  | 2004 |        | 2005 |   | 2006 |  | 2007 |    | Thereafter |   | Total |  | Fair  Value(1) |   
|------------------------ | ---------------------- |  | ---- | ------ | ---- | - | ---- |  | ---- | -- | ---------- | - | ----- |  | -------------- | --
|
|LIABILITIES              | (dollars in thousands) | 
|Short-term debt          |                        | 
|Fixed rate               |                        |  | $    | 162    |      | $ | --   |  | $    | -- |            | $ | --    |  | $              | --
|Average interest rate(2) |                        |  |      | 9.50   | %    |   | --   |  |      | -- |            |   | --    |  |                | --
|Variable rate            |                        |  | $    | 17,000 |      | $ | --   |  | $    | -- |            | $ | --    |  | $              | --
|Average interest rate(2) |                        |  |      | 3.40   | %    |   | --   |  |      | -- |            |   | --    |  |                | --

|Long-term debt           |  | 
|------------------------ |  | 
|Fixed rate               |  | 
|Average interest rate(2) |  | 
|Variable rate            |  | 
|Average interest rate(2) |  | 

|
|

| | (1) | The
fair values are based on the borrowing rate currently available for debt
          instruments with similar terms and maturities, and market quotes of our
publicly           traded debt.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Based
upon contractual interest rates for fixed indebtedness or the LIBOR rate           plus a
premium of 2% at December 31, 2002 for variable rate indebtedness.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | See
also Item 7 Managements Discussion and Analysis of Financial Condition
and Results of Operations Liquidity and Capital Resources and see Item
15  Exhibits, Financial Statement Schedules and Reports on Form 8-K  Financial
Statements Index  Notes to Financial Statements  Note 6  Long-Term Debt.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Item 8. Financial
Statements and Supplementary Data


The
report of independent accountants, financial statements and financial statement schedule
listed in the accompanying index are filed as part of this report. See Item 15
 Exhibits, Financial Statement Schedules and Reports on Form 8-K  Financial
Statements, Financial Statement Schedules, and Exhibits.


Item 9. Changes in and
Disagreements with Accountants on Accounting and Financial Disclosure


None.


26


PART III


Item 10. Directors and Executive
Officers of the Registrant


The
following table sets forth the names and ages of the directors and executive officers of
Coast Hotels and their respective positions as of December 31, 2002.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Name                |  | Age |  | Position(s) Held                                                          | 
|------------------- |  | --- |  | ------------------------------------------------------------------------- | 
|
|Michael J. Gaughan  |  | 59  |  | Director, Chairman of the Board and Chief Executive Officer               | 
|Harlan D. Braaten   |  | 52  |  | Director, President and Chief Operating Officer                           | 
|Jerry Herbst        |  | 64  |  | Director, Vice President, Treasurer and Assistant Secretary               | 
|J. Tito Tiberti     |  | 57  |  | Director, Vice President and Secretary                                    | 
|Gage Parrish        |  | 49  |  | Director, Vice President, Chief Financial Officer and Assistant Secretary | 
|Franklin Toti       |  | 64  |  | Director, Vice President of Casino Operations                             | 
|F. Michael Corrigan |  | 66  |  | Director                                                                  | 
|Charles Silverman   |  | 70  |  | Director                                                                  | 
|Joseph A. Blasco    |  | 59  |  | Director                                                                  | 
|Thomas V. Girardi   |  | 63  |  | Director                                                                  | 
|Peter M. Thomas     |  | 52  |  | Director                                                                  | 
|Clyde T. Turner     |  | 65  |  | Director                                                                  | 

|Michael
J. Gaughan. Mr. Gaughan has been a director of Coast Hotels since its formation in
September 1995 and is the Chairman of the Board and Chief Executive Officer of Coast
Hotels. His current term as a director expires in 2003. He is also a director and Chairman
of the Board and Chief Executive Officer of Coast Casinos, Inc. Mr. Gaughan was a general
partner of the Barbary Coast Partnership from its inception in 1979 until January 1, 1996,
the effective date of the reorganization in which the Barbary Coast Partnership and the
Gold Coast Partnership consolidated with Coast Casinos and Coast Hotels (the
Reorganization). Mr. Gaughan served as the managing general partner of the
Gold Coast Partnership from its inception in December 1986 until the effective date of the
Reorganization. Mr. Gaughan and Mr. Herbst were the sole stockholders of Gaughan-Herbst,
Inc., which was the sole corporate general partner of the Gold Coast Partnership prior to
the Reorganization. Mr. Gaughan has been involved in the gaming industry since 1960 and
has been licensed as a casino operator since 1967.


27


Item 10. Directors and
Executive Officers of the Registrant (continued)


Harlan
D. Braaten. Mr. Braaten joined Coast Hotels as the President, Chief Financial Officer
and a director in October 1995, and was appointed Chief Operating Officer in February
1996. His current term as a director expires in 2003. Mr. Braaten is also the President
and Chief Operating Officer of Coast Casinos. Prior to joining Coast Hotels, Mr. Braaten
was employed in various capacities, including the general manager and, most recently,
senior vice president, treasurer and chief financial officer of Rio Hotel and Casino, Inc.
in Las Vegas. From March 1989 to February 1991, Mr. Braaten was vice president, finance of
MGM/Marina Hotel and Casino in Las Vegas, Nevada. Prior thereto, from November 1983 to
March 1989, Mr. Braaten was property controller for Harrahs in Reno, Nevada. Mr.
Braaten has over 24 years of experience in the Nevada gaming industry.


Jerry
Herbst. Mr. Herbst has been a director, Treasurer and Assistant Secretary of Coast
Hotels since its formation in September 1995. His current term as a director expires in
2003. Mr. Herbst has been the president of Terrible Herbst Oil Company, an owner and
operator of gas stations and car washes, since 1959. Mr. Herbst and Mr. Gaughan were the
sole stockholders of Gaughan-Herbst, Inc., which was the sole corporate general partner of
the Gold Coast Partnership prior to the formation of Coast Hotels. Mr. Herbst has served
as a member of the board of directors of Nevada Power Company since 1990 and of Edelbrock
Corporation since 1994.


J.           Tito
Tiberti. Mr. Tiberti has been a director and Secretary of Coast Hotels
          since its formation in September 1995. His current term as a director expires
in           2003. He is also a director and Secretary of Coast Casinos. Mr. Tiberti is
the           president, a director and a stockholder of, and together with his immediate
          family, controls Tiberti Construction, a construction company that served as
the           general contractor for the construction of The Orleans, the Gold Coast and
the           Suncoast. He has also served as managing general partner of The Tiberti
Company,           a real estate rental and development company, since 1971. The Tiberti
Company is           the lessor of the real property site for The Orleans. Mr. Tiberti
has been           involved in the gaming industry for 24 years and was a general partner
of the           Barbary Coast Partnership prior to the formation of Coast Hotels.


Gage
Parrish. Mr. Parrish was named Vice President, Finance, Assistant Secretary and a
director of Coast Hotels in October 1995 and was promoted to Chief Financial Officer in
February 1996. His current term as a director expires in 2003. Since 1986, he had been the
Controller and Chief Financial Officer of the Gold Coast Partnership prior to the
formation of Coast Hotels. From 1981 to 1986, Mr. Parrish served as Assistant Controller
of the Barbary Coast Partnership. Mr. Parrish is a certified public accountant and has
approximately 24 years of experience in the gaming industry.


Franklin
Toti.Mr. Toti has been a director of Coast Hotels since October 5, 1998. His current
term expires in 2003. He has been Vice President of Casino Operations for Coast Hotels
since January 1, 1996. Mr. Toti was a general partner and Casino Manager of the Barbary
Coast Partnership from its inception in 1979 until January 1, 1996, the effective date of
the Reorganization. Mr. Toti has 42 years of experience in the gaming industry.


F. Michael
Corrigan. Mr. Corrigan was elected as a director of Coast Hotels           effective
as of March 1, 1996. His current term as a director expires in 2003.           Since July
1989, Mr. Corrigan has served as the chief executive officer of           Corrigan
Investments, Inc., which owns and manages real estate in Nevada and           Arizona. In
addition, Mr. Corrigan is the Chief Executive Officer of Corstan,           Inc., a
mortgage banking company, and was previously the owner, President and           Chief
Operating Officer of Stanwell Mortgage, a Las Vegas mortgage company.


28


Item 10. Directors and
Executive Officers of the Registrant (continued)


Charles
Silverman. Mr. Silverman was elected as a director of Coast Hotels effective as of
March 1, 1996. His current term as a director expires in 2003. Mr. Silverman is the
President and sole stockholder of Yates-Silverman, Inc., which specializes in developing
theme-oriented interiors and exteriors and is a leading designer of hotels and casinos.
Completed projects of Yates-Silverman, Inc. include New York-New York, Excalibur, Circus
Circus, Luxor, the Trump Taj Mahal, Trump Castle and Atlantic City Showboat.
Yates-Silverman, Inc. also served as the primary designer for The Orleans and the
Suncoast. Mr. Silverman has served as the president of Yates-Silverman, Inc. since its
inception in 1971.


Joseph
A. Blasco. Mr. Blasco was elected as a director of Coast Hotels effective as of
December 16, 1996. His current term as a director expires in 2003. Since 1984, Mr. Blasco
has been a partner in the real estate development partnership that developed the Spanish
Trail community in Las Vegas, a project that includes over 1,200 homes, a 27-hole golf
course and a country club. Mr. Blasco is currently the managing General Partner of United
Realty Investments, a real estate development and management company in Las Vegas. He is
also general partner in two real estate development partnerships, Summer Trail LLC and
Trop-Edmond Ltd.


Thomas
V. Girardi.Mr. Girardi was elected as a director of Coast Hotels effective as of
August 12, 2002. His current term as a director expires in 2003. A member of the American
Bar Association, Mr. Girardi is a partner in the Los Angeles law firm, Girardi and Keese.
Mr. Girardi sits on the board of directors of the International Academy of Trial Lawyers
and is a past president of the American Board of Trial Advocates.


Peter
M. Thomas.Mr. Thomas was elected as a director of Coast Hotels effective as of August
12, 2002. His current term as a director expires in 2003. Mr. Thomas previously served as
President and Chief Operating Officer of Bank of America, Nevada and, prior to the
acquisition of Valley Capital Corporation by Bank of America, the President and Chief
Operating Officer of Valley Bank of Nevada. Mr. Thomas is Chairman of the Las Vegas
Metropolitan Police Department Committee on Fiscal Affairs, a member of Nevada Commission
on Economic Development, a member of the UNLV Foundation Board of Trustees and an
executive committee member of the Nevada Development Authority.


Clyde
T. Turner.Mr. Turner was elected as a director of Coast Hotels effective as of August
12, 2002. His current term as a director expires in 2003. Mr. Turner is Chairman and Chief
Executive Officer of Turner Investments, Ltd. and a number of special purpose real estate
development companies known as the Spectrum Companies. Mr. Turner is a former member of
the Nevada Gaming Commission. His previous positions in the gaming industry include
Chairman and Chief Executive Officer of Circus Circus Enterprises, Inc. (now Mandalay Bay
Group), Executive Vice President and Chief Financial Officer and member of the Board of
Golden Nugget, Inc./Mirage Resorts, Inc., and a Director and Executive Committee member of
the American Gaming Association.


Directors
of Coast Hotels who are also employees of Coast Hotels or Coast Casinos receive no
compensation for service on the Board of Directors or its committees. All other directors
receive an annual directors fee of $24,000, payable quarterly in arrears, and a fee
of $1,000 per committee meeting. Directors may also be reimbursed for out-of-pocket
expenses incurred in connection with attending Board of Director or committee meetings.


29


Item 10. Directors and
Executive Officers of the Registrant (continued)


Compliance with Section
16(a) of the Securities Exchange Act of 1934


Rules
adopted by the SEC under Section 16(a) of the Securities Exchange Act of 1934 (the
Exchange Act) require the Companys officers and directors, and persons
who own more than ten percent of the issued and outstanding shares of the Companys
equity securities, to file reports of their ownership, and changes in ownership, of such
securities with the SEC on SEC Forms 3, 4 or 5, as appropriate. Such persons are required
by the SECs regulations to furnish the Company with copies of all forms they file
pursuant to Section 16(a).


Based
solely upon a review of Forms 3, 4 and 5 and amendments thereto furnished to the Company
during its most recent fiscal year, and any written representations provided to it, the
Company believes that, except as noted below, each of the officers, directors, and owners
of more than 10% of the outstanding Common Stock of the Company are in compliance with
Section 16(a) of the Securities Exchange Act of 1934 for the year 2002.


During the 2002 year,  (i) Mr.  Tiberti  filed one Form 4 for a transaction  that occurred in 2001;  (ii) Mr.
Gaughan  filed a Form 4 for a  transaction  that  occurred  in 2001,  and  (iii)  Mr.  Herbst  filed a Form 4 for a
transaction  that occurred in 1999.  Mr.  Tiberti also filed a Form 4 during the 2001 year for a  transaction  that
occurred in 2000 and will file during the 2003 year two Forms 4 for  transactions  that  occurred in 1996 and 1999.
Each of Mr. Tiberti's Forms 4 have reported three transactions.


Item 11. Executive
Compensation


The following
table sets forth all compensation earned by or paid by Coast Hotels during 2000, 2001 and
2002 to each executive officer (the Named Executive Officers) whose
compensation exceeded $100,000 in all capacities in which they served.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Summary Compensation Table              | 
| | --------------------------------------- | 
|
|
|
| | Michael J. Gaughan                      | 
| | Chairman of the Board and Chief         | 
| | Executive Officer of Coast Hotels       | 
| | Harlan D. Braaten                       | 
| | President and Chief Operating           | 
| | Officer of Coast Hotels                 | 
| | Gage Parrish                            | 
| | Vice President, Chief Financial Officer | 
| | and Asst. Secretary of  Coast Hotels    | 

|_________________
|-----------------

| | (1) | The
amounts reflect matching contributions paid to our 401(k) Profit Sharing           Plan
and Trust.
| | --- | ------------------------------------------------------------------------------------------------------

|30


Item 11. Executive
Compensation (continued)


Stock Options


Mr.           Braaten
was granted options to purchase 30,415 shares of Coast Casinos, Inc.           common
stock for $100 per share. The options vested in one-third increments on           January
1, 1999, January 1, 2000 and January 1, 2001 and expire on December 31,           2008.


Mr.           Parrish
was granted options to purchase 5,000 shares of Coast Casinos, Inc.           common
stock for $100 per share. The options vested in one-third increments on           June
14, 1999, June 14, 2000 and June 14, 2001 and expire on June 13, 2009.


Item 12. Security
Ownership of Certain Beneficial Owners and Management


All
of our outstanding capital stock is owned by our parent company, Coast Casinos, Inc.


Item 13. Certain
Relationships and Related Transactions


We
maintain numerous racetrack dissemination contracts with Las Vegas Dissemination Company,
Inc. (LVDC). Michael J. Gaughans son, John Gaughan, is the president and
sole stockholder of LVDC. LVDC has been granted a license by the Nevada Gaming Authorities
to disseminate live racing for those events and tracks for which it enters contracts and
has been granted the exclusive right to disseminate all pari-mutuel services and race wire
services to Nevada casinos. Under these dissemination contracts, we pay to LVDC between 3%
and 5% of the wagers we accept for races held at the racetracks covered by the respective
contracts. We also pay to LVDC a monthly fee for race wire services. Additionally, we have
an agreement with LVDC to rent software and monitors to enable race book patrons to access
information from their seating area. For the fiscal year ended December 31, 2002, we
incurred expenses to LVDC of approximately $947,000. The terms on which the dissemination
services are provided are regulated by the Nevada Gaming Authorities.


J.A.
Tiberti Construction Company  (Tiberti Construction) served as the
          general contractor for the expansion of the Gold Coast and The Orleans and
          miscellaneous construction projects at the Suncoast. J. Tito Tiberti owns
          approximately 6.2% of the outstanding common stock of Coast Casinos, and is a
          director and Secretary of Coast Hotels and Coast Casinos. Mr. Tiberti is the
          president, a director and stockholder of, and together with his immediate
family           members, controls Tiberti Construction.


For
the fiscal year ended December 31, 2002, we incurred expenses to Tiberti Construction of
approximately $120.8 million. At December 31, 2002, we had construction accounts payable
to Tiberti Construction of approximately $12.1 million.


In
1995, we entered into a long-term ground lease with the Tiberti Company, a Nevada general
partnership, with respect to the real property on which The Orleans is located. Mr.
Tiberti, a director of Coast Hotels and a director and stockholder of Coast Casinos, is
the managing partner of the Tiberti Company. During the year ended December 31, 2002, we
incurred rental expenses to the Tiberti Company of $4.5 million, of which $2.7 million was
paid. Deferred rent payable to the Tiberti Company was $15.4 million as of December 31,
2002.


31


Item 13. Certain
Relationships and Related Transactions (continued)


Until
October 2002, Michael J. Gaughan and Franklin Toti (along with the Leo Lewis Trust) were
owners of LGT Advertising, which served as our advertising agency. Effective November 1,
2002, we purchased the partnership interests of LGT Advertising from Messrs. Gaughan, Toti
and the Leo Lewis Trust, for the sum of $1,000. Prior to the November 2002 acquisition,
LGT Advertising provided advertising design services and purchases advertising for our
casinos from third parties and passed any discounts directly through to us. LGT
Advertising received no compensation or profit for such activities, and invoiced us for
actual costs incurred. LGT Advertising used our facilities and employees in rendering its
services, but did not pay any compensation to us for such use. Messrs. Gaughan and Toti
received no compensation from LGT Advertising. Advertising expenses to LGT Advertising
were approximately $5.9 million for the fiscal year ended December 31, 2002.


LGT
Advertising provides advertising and design services to Casino Queen, Inc., which operates
the Casino Queen riverboat casino and hotel facility in East St. Louis, Illinois. Michael
Gaughan owns 15% and Frank Toti owns 5% percent of the shares of stock in Casino Queen,
Inc. Mr. Gaughan also serves as a director for Casino Queen, Inc. LGT renders its services
to Casino Queen, Inc. on the same terms as would be offered to an unaffiliated third
party. In November and December 2002, we received $13,000 in payments from Casino Queen,
Inc.


We
have purchased certain of our equipment for our operations from RJ & S Inc., a Nevada
corporation (RJS) that is owned by Michael J. Gaughans father, Jackie
Gaughan, and Steven Delmont, our manager of food operations. Pursuant to the terms of our
agreement with RJS, RJS purchases certain restaurant equipment and supplies and invoices
us only for the actual amounts billed to RJS, plus applicable sales tax. Provisions of the
agreement prohibit RJS employees, officers and shareholders from receiving any discounts,
rebates, payments or gifts with respect to the equipment and supplies. For the fiscal year
ended December 31, 2002, we made purchases from RJS totaling approximately $2.2 million.


Michael
J. Gaughan is the majority partner of Nevada Wallboards, a Nevada general partnership
(Nevada Wallboards), which prints wallboards and parlay cards for use in our
race and sports books. For the fiscal year ended December 31, 2002, we incurred expenses
to Nevada Wallboards of approximately $272,000.


Charles
Silverman, a director of Coast Hotels and Coast Casinos, is the president of
Yates-Silverman, Inc., which served as the designer of The Orleans, the Suncoast and
various expansion projects at The Orleans, the Suncoast and the Gold Coast during 2001 and
2002. For the fiscal year ended December 31, 2002 we incurred expenses to Yates-Silverman
of $440,000.


Coast
Hotels promotes The Orleans by advertising on NASCAR vehicles operated by Orleans Motor
Sports, Inc. In 2002, we entered into an agreement with Orleans Motor Sports, Inc. to
place the logo of The Orleans on a truck racing in NASCARs Craftsman Truck Series,
on transportation vehicles utilized by Orleans Motor Sports, Inc. and on any other
vehicles raced by Orleans Motor Sports, Inc. in NASCAR races. Michael J. Gaughan is the
sole owner of Orleans Motor Sports, Inc. Brendan Gaughan, the main driver employed by
Orleans Motor Sports, Inc., is the son of Michael J. Gaughan. For the fiscal year ended
December 31, 2002 we paid $480,000 to Orleans Motor Sports, Inc. pursuant to a sponsorship
agreement.


32


Item 13. Certain
Relationships and Related Transactions (continued)


Michael
J. Gaughan Jr., the son of Michael J. Gaughan, and David Ross, the general manager of the
Suncoast, are owners of Coast Vacations, Inc., a travel agency operating under the name
Las Vegas Vacations (LVV) that markets our hotel-casino properties to
residents of Vancouver, Canada. We have agreed to pay LVV approximately $10,000 per month
to promote our hotel-casinos subject to certain conditions designed to assure that LVV is
utilizing such funds in a productive manner and for purposes that benefit our company.
During the fiscal years ended December 31, 2000, 2001 and 2002, we paid $115,000, $91,000
and $120,000, respectively, to LVV.


Michael
J. Gaughan, Jr. is the general manager of the Barbary Coast. For the fiscal years ended
December 31, 2000, 2001 and 2002, he received total salaries and bonuses in the amounts of
$97,000, $135,000 and $162,000, respectively.


We
operate a satellite sports book at the Plaza Hotel and Casino (Plaza), a
hotel-casino in Las Vegas that is primarily owned by Jackie Gaughan, Michael J.
Gaughans father. We combine the sports book wagers generated at the Plaza with
wagers accepted at our other sports books. The Plaza is allocated a pro-rata share of the
net sports book winnings or losses, based on the percentage of wagers placed at the Plaza
compared to the combined wagers placed at all our sports books. Such winnings or losses
are netted against the direct and indirect costs of operating the sports book at the Plaza
including, but not limited to, labor costs, advertising costs, printing costs and state
and federal taxes. The Plaza keeps its winnings and reimburses us for the above noted
costs. For the fiscal years ended December 31, 2000, 2001 and 2002, we received $311,000,
$557,000 and $979,000, respectively, in reimbursements from the Plaza.


Item 14. Controls and
Procedures


We
maintain disclosure controls and procedures that are designed to ensure that information
required to be disclosed in our Exchange Act reports is recorded, processed, summarized
and reported within the time periods specified in the SECs rules and forms, and that
such information is accumulated and communicated to management, including our Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure. Management necessarily applied its judgment in assessing
the costs and benefits of such controls and procedures which, by their nature, can provide
only reasonable assurance regarding managements control objectives.


Within
90 days prior to the filing date of this report, we carried out an evaluation, under the
supervision and with the participation of management, including our Chief Executive
Officer along with our Chief Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-14
and 15d-14(c). Based upon the foregoing, our Chief Executive Officer along with our Chief
Financial Officer concluded that our disclosure controls and procedures are effective.
There have been no significant changes in our internal controls or in other factors, which
could significantly affect internal controls subsequent to the date we carried out our
evaluation. Additionally, no significant deficiencies or material weaknesses in such
internal controls requiring corrective actions were identified.


33


PART IV


ITEM 15. Exhibits,
Financial Statement Schedules and Reports on Form 8-K


     (a)    
          Financial Statements, Financial Statement Schedules and Exhibits
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|   |  | PAGE
|-- |  | ----
|
|1. |  |     
|2. |  |     
|   |  |     

|34


Item 15. Exhibits,
Financial Statement Schedules and Reports on Form 8-K (continued)


Exhibit Index
|---------------------------------------------------------------------------------------------------------

|ExhibitNumber |  | Description of Exhibit
|------------- |  | ----------------------
|

|3.1 |  | Amended
 Articles of  Incorporation of Coast Hotels and Casinos,          Inc. (5)
|--- |  | ----------------------------------------------------------------------------------

|3.2 |  | First
Amended Bylaws of Coast Hotels and Casinos, Inc. (5)
|--- |  | ----------------------------------------------------------

|3.3 |  | Articles
of Incorporation of Coast Resorts, Inc. (1)
|--- |  | ----------------------------------------------------

|3.4 |  | First
Amended Bylaws of Coast Resorts, Inc. (1)
|--- |  | -----------------------------------------------

|4.1 |  | Indenture
 dated as of March 23,  1999  among  Coast  Hotels and Casinos,          Inc., as issuer
of 9-1/2% Senior Subordinated Notes due 2009, Coast Resorts, Inc., as          guarantor,
and Firstar Bank of Minnesota, N.A., as trustee (8)
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.2 |  | First
 Supplemental  Indenture  dated  as of  November 20,  2000          among Coast Hotels
and Casinos,  Inc., as issuer, Coast Resorts,          Inc.,  as  guarantor,  and Firstar
Bank of  Minnesota,  N.A., as          trustee (11)
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.3 |  | Second
 Supplemental  Indenture  dated as of  February 2,  2001,          among Coast Hotels and
Casinos,  Inc., as issuer, Coast Resorts,          Inc.,  as  guarantor,  and Firstar
Bank of  Minnesota,  N.A., as          trustee (11)
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.4 |  | Third
 Supplemental  Indenture dated as of March 19, 2002, among          Coast Hotels and
Casinos,  Inc., as issuer, Coast Resorts, Inc.,          as guarantor, and U.S. Bank,
N.A., as trustee (12)
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.5 |  | Form
of 9-1/2% Note (included in Exhibit 4.1) (10)
|--- |  | --------------------------------------------------

|10.1 |  | Tax
Sharing  Agreement dated as of January 30, 1996 by and among          Coast Resorts,
 Inc., Coast Hotels and Casinos,  Inc., and Coast          West, Inc. (4)
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.2 |  | Ground
Lease dated as of October 1, 1995, between The Tiberti Company, a Nevada general
         partnership, and Coast Hotels and Casinos, Inc. (as successor of Gold Coast
Hotel and          Casino, a Nevada limited partnership) (3)
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.3 |  | Lease
Agreement dated May 1, 1992, by and between Empey Enterprises, a Nevada general
         partnership, as lessor, and the Barbary Coast Hotel & Casino, a Nevada
general          partnership, as lessee (1)
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.4 |  | Ground
Lease Agreement dated October 28, 1994 by and among 21 Stars, Ltd., a Nevada
        limited liability company, as landlord, Barbary Coast Hotel & Casino, a
Nevada general         partnership, as tenant, Wanda Peccole, as successor trustee of the
Peccole 1982 Trust         dated February 15, 1982 (Trust), and The William Peter
and Wanda Ruth Peccole Family         Limited Partnership, a Nevada limited partnership (Partnership),
and, together         with Trust, as owner, as amended (1)
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.5 |  | Form
 of  Subordination   Agreement  between  Coast  Hotels  and         Casinos,  Inc. and
certain  former Gold Coast  partners  holding         Subordinated Notes (4)
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.6 |  | Lease
dated as of November 1, 1982, by and between Nevada Power Company, a Nevada
        Corporation as landlord, and Barbary Coast Hotel and Casino, a Nevada general
partnership(1)
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.7 |  | Leasehold
Deed of Trust, Assignment of Rents and Security Agreement dated February 13,
        1991, by and between the Barbary Coast Hotel and Casino, a Nevada general
partnership,         First American Title Company of Nevada, and Exber, Inc., a Nevada
corporation (1)
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.8 |  | Amended
and Restated Loan Agreement dated as of September 16, 1999 among Coast Hotels
         and Casinos, Inc. as Borrower, the Lenders referred to therein, and Bank of
America          National Trust and Savings Association as Administrative Agent (9)
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.9 |  | Security
 Agreement  dated as of March 18,  1999 by Coast Hotels          and Casinos,  Inc. in
favor of Bank of American  National  Trust          and Savings Association as
Administrative Agent (10)
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|35


Item 15. Exhibits, Financial
Statement Schedules and Reports on Form 8-K (continued)



Exhibit Index
(continued)
|----------------------------------------------------------------------------------------------------------------------

|10.10 |  | Security
Agreement dated as of March 18,  1999 by Coast Resorts,          Inc.  in favor of Bank
of  America  National  Trust and  Savings          Association as Administrative Agent
(10)
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.11 |  | Pledge
 Agreement  dated as of September  1999 by Coast Resorts,          Inc.  in favor of Bank
of  America  National  Trust and  Savings          Association as Administrative Agent
(10)
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.12 |  | Leasehold
Deed of Trust,  Assignment of Rents and Fixture Filing          dated as of March 18,
 1999 by Coast Hotels and Casinos, Inc. in          favor of Bank of America National
Trust and Savings  Association          as Administrative Agent (The Orleans Hotel and
Casino) (10)
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.13 |  | Leasehold
Deed of Trust,  Assignment of Rents and Fixture Filing          dated as of March 18,
 1999 by Coast Hotels and Casinos, Inc. in          favor of Bank of America National
Trust and Savings  Association          as Administrative Agent (The Gold Coast Hotel and
Casino) (10)
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.14 |  | Leasehold
Deed of Trust,  Assignment of Rents and Fixture Filing          dated as of March 18,
 1999 by Coast Hotels and Casinos, Inc. in          favor of Bank of America National
Trust and Savings  Association          as Administrative Agent (The Suncoast)(10)
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.15 |  | Guaranty
dated  March 18,  1999 by Coast Resorts,  Inc. in favor          of Bank of America
 National  Trust and Savings  Association  as          Administrative Agent.(10)
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.16 |  | Trademark
 Security  Interest  Assignment  dated as of March 18,          1999 by Coast Hotels and
Casinos,  Inc. and Coast Resorts,  Inc.          in  favor  of  Bank  of  America
  National  Trust  and  Savings          Association as Administrative Agent (10)
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.18 |  | Registration
 Rights Agreement dated as of March 19, 2002, among          Coast Hotels and Casinos,
 Inc. as issuer, Coast Resorts,  Inc.,          as  guarantor,   and  Banc  of  America
  Securities,   LLC,  as          Representative of the Placement Agents (12)
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.20 |  | Placement
 Agreement  dated as of March 11,  2002,  by and among          Coast Hotels and Casinos,
 Inc.,  Coast Resorts,  Inc.,  Banc of          America  Securities  LLC and Morgan
 Stanley & Co.  Incorporated          (12)
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.21 |  | Amendment
 No. 1 to the  Amended  and  Restated  Loan  Agreement          dated as of December 1,
2001.
|----- |  | -------------------------------------------------------------------------------------------------------

|10.22 |  | Amendment
 No. 2 to the  Amended  and  Restated  Loan  Agreement          dated as of March 8, 2002.
|----- |  | ----------------------------------------------------------------------------------------------------

|10.23 |  | Property
 Purchase  Agreement  dated  October 26,  2001  between          South Las Vegas,  LLC,
 Greenpark  Group,  LLC, Coast Hotels and          Casinos,  Inc.,  United  Title of
Nevada,  Inc.,  and CB Richard          Ellis, Inc.
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.24 |  | Amendment
 No.  1 to the  Property  Purchase  Agreement  between          South Las Vegas,  LLC,
 Greenpark  Group,  LLC, Coast Hotels and          Casinos,  Inc.,  United  Title of
Nevada,  Inc.,  and CB Richard          Ellis, Inc. dated as of May 15, 2002.
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.25 |  | Amendment
No. 3 to the Amended and Restated Loan Agreementdated as of January 10, 2003.
|----- |  | ---------------------------------------------------------------------------------------

|10.26 |  | Property
Purchase Agreement dated January 13, 2003 between Nevada Power Co. and Coast Hotels and
       Casinos, Inc.
|----- |  | ---------------------------------------------------------------------------------------------------------------------

|10.27 |  | Amendment
No. 4 to the Amended and Restated Loan Agreementdated as of February 26, 2003.
|----- |  | ----------------------------------------------------------------------------------------

|10.28 |  | Security Agreement
 dated as of February 26, 2003 by Coast Hotels and Casinos, Inc.
in favor of CIT Aircraft Group.
|----- |  | -------------------------------------------------------------------------------------------------------------------

|10.29 |  | Negotiable
Promissory Note dated as of February 26, 2003 by Coast Hotels and Casinos, Inc.
in favor of CIT Aircraft Group.
|----- |  | --------------------------------------------------------------------------------------------------------------------------

|10.30 |  | Bridge
 Loan  Agreement  dated March 28,  2003  between  Bank of          America, N.A. and
Coast Hotels and Casinos, Inc.
|----- |  | --------------------------------------------------------------------------------------------------------------------------

|10.31 |  | Bridge
 Loan  Guaranty  dated  March 28,  2003  between  Bank of          America, N.A. and
Coast Hotels and Casinos, Inc.
|----- |  | --------------------------------------------------------------------------------------------------------------------------

|36


Item 15. Exhibits, Financial
Statement Schedules and Reports on Form 8-K (continued)


Exhibit Index
(continued)
|---------------------------------------------------------------------------------------------------------------------

|99.1 |  | Certifications
of the Chief Executive Officer and Chief Financial Officer pursuant to        § 906
of the Sarbanes-Oxley Act of 2002.
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------

|
|

| | (1) | Previously
filed with the Securities and Exchange Commission as an exhibit to           Coast
Resorts, Inc.s General Form for Registration of Securities on Form           10 and
incorporated herein by reference.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Previously
filed with the Securities and Exchange Commission as an exhibit to           Coast
Resorts, Inc.s Amendment No. 1 to General Form for Registration of
          Securities on Form 10 and incorporated herein by reference.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | Previously
filed with the Securities and Exchange Commission as an exhibit to           Coast
Resorts, Inc.s Amendment No. 2 to General Form for Registration of
          Securities on Form 10 and incorporated herein by reference.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | Previously
filed with the Securities and Exchange Commission as an exhibit to           Coast
Resorts, Inc.s Annual Report on Form 10-K for the period ended           December
31, 1995 and incorporated herein by reference.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (5) | Previously
filed with the Securities and Exchange Commission as an exhibit to           Coast
Resorts, Inc.s Registration Statement on Form S-4 filed May 2, 1996           and
incorporated herein by reference.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (6) | Previously
filed with the Securities and Exchange Commission as an exhibit to           Coast
Resorts, Inc.s Annual Report on Form 10-K for the period ended           December
31, 1997 and incorporated herein by reference.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (7) | Previously
filed with the Securities and Exchange Commission as an exhibit to           Coast
Resorts, Inc.s Annual Report on Form 10-K for the period ended           December
31, 1998 and incorporated herein by reference.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (8) | Previously
filed with the Securities and Exchange Commission as an exhibit to           Coast Hotels
and Casinos, Inc.s Registration Statement on Form S-4           (File no. 333-79657)
dated May 28, 1999 and incorporated herein by           reference.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (9) | Previously
filed with the Securities and Exchange Commission as an exhibit to           Coast
Resorts, Inc.s Quarterly Report on Form 10-Q for the quarter           ended
September 30, 1999 and incorporated herein by reference.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (10) | Previously filed
with the Securities and Exchange Commission as an exhibit to Coast Hotels and Casinos,
Inc.s Annual Report on Form 10-K for the period ended December 31, 1999 and
incorporated herein by reference.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (11) | Previously
filed with the Securities and Exchange Commission as an exhibit to Coast Hotels and
Casinos, Inc.s Registration Statement on Form S-4 (File no. 333-55170)
dated February 7, 2001 and incorporated herein by reference.
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (12) | Previously
filed with the Securities and Exchange Commission as an exhibit to Coast Hotels and
Casinos, Inc.s Form 8-K (File no. 333-04356) dated March 21, 2002 and
incorporated herein by reference.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | Reports
on Form 8-K
| | --- | -------------------

| | On
January 28, 2003, the Company filed a Form 8-K under Item 5, Other Events, with respect to
Harlan Braaten, the Companys President and Chief Operating Officer, speaking at the
2003 JP Morgan Annual High Yield Conference in New Orleans and the availability of
selected slides from his presentation on the Companys website, www.coastcasinos.com.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
March 21, 2003, the Company filed a Form 8-K under Item 5, Other Events, with respect to
Harlan Braaten, the Companys President and Chief Operating Officer, speaking at the
2003 Lehman Brothers High Yield Bond and Syndicated Loan Conference in Orlando and the
availability of selected slides from his presentation on the Companys website,
www.coastcasinos.com.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|37


SIGNATURES


Pursuant
to the requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Las Vegas, State of Nevada,
on March 31, 2003.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | COAST HOTELS AND CASINOS, INC.
| | ------------------------------
| | By:                           
| |                               

|Pursuant
to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form
10-K has been signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Signature                                   |  | Title                                                                                                   |  | Date          
|------------------------------------------- |  | ------------------------------------------------------------------------------------------------------- |  | --------------
|
|/s/  MICHAEL J. GAUGHANMichael J. Gaughan   |  | Chairman of the Board of Directors andChief Executive Officer (PrincipalExecutive Officer) and Director |  | March 31, 2003
|/s/  GAGE PARRISHGage Parrish               |  | Director and Chief  Financial Officer(Principal Financial and Accounting Officer)                       |  | March 31, 2003
|/s/  HARLAN D. BRAATENHarlan D. Braaten     |  | Director                                                                                                |  | March 31, 2003
|/s/  JERRY HERBSTJerry Herbst               |  | Director                                                                                                |  | March 31, 2003
|/s/  J. TITO TIBERTIJ. Tito Tiberti         |  | Director                                                                                                |  | March 31, 2003
|/s/  CHARLES SILVERMANCharles Silverman     |  | Director                                                                                                |  | March 31, 2003
|/s/  F. MICHAEL CORRIGANF. Michael Corrigan |  | Director                                                                                                |  | March 31, 2003
|/s/  JOSEPH A. BLASCOJoseph A. Blasco       |  | Director                                                                                                |  | March 31, 2003
|/s/  FRANKLIN TOTIFranklin Toti             |  | Director                                                                                                |  | March 31, 2003
|/s/  THOMAS V. GIRARDIThomas V. Girardi     |  | Director                                                                                                |  | March 31, 2003
|/s/  PETER M.THOMASPeter M. Thomas          |  | Director                                                                                                |  | March 31, 2003
|/s/  CLYDE T. TURNERClyde T. Turner         |  | Director                                                                                                |  | March 31, 2003

|38



CERTIFICATION


I, Michael J. Gaughan, certify that:
|----------------------------------------------------------

|1. |  | I have reviewed this annual report on Form 10-K of Coast Hotels and Casinos,
                    Inc.;
|-- |  | ------------------------------------------------------------------------------------------------------

|2. |  | Based on my knowledge, this annual report does not contain any untrue statement
                    of a material fact or omit to state a material fact necessary to make the
                    statements made, in light of the circumstances under which such statements were
                    made, not misleading with respect to the period covered by this annual report;
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. |  | Based on my knowledge, the financial statements, and other financial information
                    included in this annual report, fairly present in all material respects the
                    financial condition, results of operations and cash flows of the registrant as
                    of, and for, the periods presented in this annual report;
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. |  | The registrants other certifying officer and I are responsible for
                    establishing and maintaining disclosure controls and procedures (as defined in
                    Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  |  | a. | designed
such disclosure controls and procedures to ensure that material
                    information relating to the registrant, including its consolidated
subsidiaries,                     is made known to us by others within those entities,
particularly during the                     period in which this annual report is being
prepared;
| |  |  |  | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  |  | b. | evaluated
the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date
of this annual report (the Evaluation Date); and
| |  |  |  | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  |  | c. | presented
in this annual report our conclusions about the effectiveness of the
                    disclosure controls and procedures based on our evaluation as of the
Evaluation                     Date;
| |  |  |  | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. |  | The registrants other certifying officer and I have disclosed, based on
                    our most recent evaluation, to the registrants auditors and the audit
                    committee of registrants board of directors (or persons performing the
                    equivalent function):
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  |  | a. | all
significant deficiencies in the design or operation of internal controls
                    which could adversely affect the registrants ability to record,
process,                     summarize and report financial data and have identified for
the                     registrants auditors any material weaknesses in internal
controls; and
| |  |  |  | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  |  | b. | any
fraud, whether or not material, that involves management or other employees
                    who have a significant role in the registrants internal
controls; and
| |  |  |  | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|6. |  | The registrants other certifying officer and I have indicated in this
                    annual report whether or not there were significant changes in internal controls
                    or in other factors that could significantly affect internal controls subsequent
                    to the date of our most recent evaluation, including any corrective actions with
                    regard to significant deficiencies and material weaknesses.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                             | 
|------------------------------------------------------------------------------------------------------------ | 
|Date: March 31, 2003/s/ Michael J. GaughanMichael J. GaughanChairman of the Board andChief Executive Officer | 

|39



CERTIFICATION



I, Gage Parrish, certify
that:
|-----------------------------------------------------

|1. |  | I have reviewed this annual report on Form 10-K of Coast Hotels and Casinos,
                    Inc.;
|-- |  | ------------------------------------------------------------------------------------------------------

|2. |  | Based on my knowledge, this annual report does not contain any untrue statement
                    of a material fact or omit to state a material fact necessary to make the
                    statements made, in light of the circumstances under which such statements were
                    made, not misleading with respect to the period covered by this annual report;
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. |  | Based on my knowledge, the financial statements, and other financial information
                    included in this annual report, fairly present in all material respects the
                    financial condition, results of operations and cash flows of the registrant as
                    of, and for, the periods presented in this annual report;
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. |  | The registrants other certifying officer and I are responsible for
                    establishing and maintaining disclosure controls and procedures (as defined in
                    Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  |  | a. | designed
such disclosure controls and procedures to ensure that material
                    information relating to the registrant, including its consolidated
subsidiaries,                     is made known to us by others within those entities,
particularly during the                     period in which this annual report is being
prepared;
| |  |  |  | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  |  | b. | evaluated
the effectiveness of the registrants disclosure controls and
                    procedures as of a date within 90 days prior to the filing date
of this                     annual report (the Evaluation Date); and
| |  |  |  | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  |  | c. | presented
in this annual report our conclusions about the effectiveness of the
                    disclosure controls and procedures based on our evaluation as of the
Evaluation                     Date;
| |  |  |  | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. |  | The registrants other certifying officer and I have disclosed, based on
                    our most recent evaluation, to the registrants auditors and the audit
                    committee of registrants board of directors (or persons performing the
                    equivalent function):
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  |  | a. | all
significant deficiencies in the design or operation of internal controls
                    which could adversely affect the registrants ability to record,
process,                     summarize and report financial data and have identified for
the                     registrants auditors any material weaknesses in internal
controls; and
| |  |  |  | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  |  | b. | any
fraud, whether or not material, that involves management or other employees
                    who have a significant role in the registrants internal
controls; and
| |  |  |  | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|6. |  | The registrants other certifying officer and I have indicated in this
                    annual report whether or not there were significant changes in internal controls
                    or in other factors that could significantly affect internal controls subsequent
                    to the date of our most recent evaluation, including any corrective actions with
                    regard to significant deficiencies and material weaknesses.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                           | 
|------------------------------------------------------------------------------------------ | 
|Date: March 31, 2003/S/  GAGE PARRISHGage ParrishVice President andChief Financial Officer | 

|40


Index to Financial
Statements


COAST HOTELS AND
CASINOS, INC.
|-------------------------------------------------------------------

|                                                                                                                          |  | PAGE
|------------------------------------------------------------------------------------------------------------------------- |  | ----
|Report of Independent Accountants                                                                                         |  | F-2 
|Balance Sheets of Coast Hotels and Casinos, Inc. as of December 31, 2001 and 2002                                         |  | F-3 
|Statements of Operations of Coast Hotels and Casinos, Inc. for the years ended  December 31, 2000, 2001 and 2002          |  | F-4 
|Statements of Stockholder's Equity of Coast Hotels and Casinos, Inc.for the years ended  December 31, 2000, 2001 and 2002 |  | F-5 
|Statements of Cash Flows of Coast Hotels and Casinos, Inc. for the years ended  December 31, 2000, 2001 and 2002          |  | F-6 
|Notes to Financial Statements                                                                                             |  | F-7 

|F-1


REPORT OF INDEPENDENT
ACCOUNTANTS


To the Directors and Stockholder of
Coast Hotels and Casinos, Inc.


In our opinion, the accompanying
balance sheets and the related statements of operations, stockholders equity and
cash flows present fairly, in all material respects, the financial position of Coast
Hotels and Casinos, Inc. (a wholly owned subsidiary of Coast Casinos, Inc.) (the
Company) as of December 31, 2001 and 2002, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 2002, in
conformity with accounting principles generally accepted in the United States of America.
These financial statements are the responsibility of the Companys management; our
responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.


PricewaterhouseCoopers LLP


Las Vegas, Nevada
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|January |  | 27, 2003, except for the last paragraph of Note 6,  as to which the date is March 28, 2003
|------- |  | ------------------------------------------------------------------------------------------

|F-2


COAST HOTELS AND CASINOS, INC.(A Wholly Owned Subsidiary of Coast Casinos, Inc.)
BALANCE SHEETSDecember 31, 2001 and 2002
(dollars in thousands, except share data)
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                 | 2001 | 2002
|------------------------------------------------ | ---- | ----
|
|
|CURRENT ASSETS:                                  |     
|Cash and cash equivalents                        |      |     
|Accounts receivable, less allowance for doubtful |      |     
|accounts $873 (2001) and $414 (2002)             |      |     
|Inventories                                      |      |     
|Due from Coast Casinos                           |      |     
|Prepaid expenses                                 |      |     
|Other current assets                             |      |     
|                                                 |      |     
|TOTAL CURRENT ASSETS                             |      |     
|PROPERTY AND EQUIPMENT, net                      |      |     
|OTHER ASSETS                                     |      |     
|                                                 |      |     
|                                                 |      |     
|                                                 |      |     

|LIABILITIES ANDSTOCKHOLDER'S EQUITY  |  | 
|------------------------------------ |  | 
|CURRENT LIABILITIES:                
|Accounts payable                     |  | 
|Accrued liabilities                  |  | 
|Construction accounts payable        |  | 
|Current portion of long-term debt    |  | 
|                                     |  | 
|TOTAL CURRENT LIABILITIES            |  | 
|LONG-TERM DEBT, less current portion |  | 
|DEFERRED INCOME TAXES                |  | 
|DEFERRED RENT                        |  | 
|                                     |  | 
|TOTAL LIABILITIES                    |  | 
|                                     |  | 

|                                                         |  | 
|-------------------------------------------------------- |  | 
|Common stock, $1.00 par value, 25,000 shares authorized, |  | 
|1,000 shares issued and outstanding                      |  | 
|Additional paid-in capital                               |  | 
|Retained earnings                                        |  | 
|                                                         |  | 
|TOTAL STOCKHOLDER'S EQUITY                               |  | 
|                                                         |  | 
|                                                         |  | 
|                                                         |  | 

|_________________


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


F-3


COAST HOTELS AND CASINOS, INC.(A Wholly Owned Subsidiary of Coast Casinos, Inc.)
STATEMENTS OF OPERATIONSFor the Years Ended December 31, 2000, 2001 and 2002
(dollars in thousands, except share data)
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                              | 2000 |  | 2001 |         | 2002 |  
|----------------------------- | ---- |  | ---- | ------- | ---- | -
|
|OPERATING REVENUES:           |      |  |      |         |      |  
|Casino                        |      |  | $    | 298,421 |      | $
|Food and beverage             |      |  |      | 84,752  |      |  
|Hotel                         |      |  |      | 33,711  |      |  
|Other                         |      |  |      | 31,183  |      |  
|                              |      |  |      |         |      |  
|GROSS OPERATING REVENUES      |      |  |      | 448,067 |      |  
|Less: promotional allowances  |      |  |      | (39,142 | )    |  
|                              |      |  |      |         |      |  
|NET OPERATING REVENUES        |      |  |      | 408,925 |      |  
|                              |      |  |      |         |      |  
|OPERATING EXPENSES:           |      | 
|Casino                        |      |  |      | 137,195 |      |  
|Food and beverage             |      |  |      | 62,063  |      |  
|Hotel                         |      |  |      | 13,788  |      |  
|Other                         |      |  |      | 24,750  |      |  
|General and administrative    |      |  |      | 69,408  |      |  
|Pre-opening expenses          |      |  |      | 6,161   |      |  
|Land leases                   |      |  |      | 3,396   |      |  
|Deferred rent                 |      |  |      | 2,538   |      |  
|Depreciation and amortization |      |  |      | 25,375  |      |  
|                              |      |  |      |         |      |  
|TOTAL OPERATING EXPENSES      |      |  |      | 344,674 |      |  
|                              |      |  |      |         |      |  
|OPERATING INCOME              |      |  |      | 64,251  |      |  
|                              |      |  |      |         |      |  
|OTHER INCOME (EXPENSES):      |      | 
|Interest expense              |      |  |      | (27,954 | )    |  
|Interest income               |      |  |      | 470     |      |  
|Interest capitalized          |      |  |      | 4,511   |      |  
|Other income (expense)        |      |  |      | (60     | )    |  
|                              |      |  |      |         |      |  
|TOTAL OTHER INCOME (EXPENSES) |      |  |      | (23,033 | )    |  
|                              |      |  |      |         |      |  
|INCOME BEFORE INCOME TAXES    |      |  |      | 41,218  |      |  
|PROVISION FOR INCOME TAXES    |      |  |      | 14,268  |      |  
|                              |      |  |      |         |      |  
|NET INCOME                    |      |  | $    | 26,950  |      | $
|                              |      |  |      |         |      |  

|_________________


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


F-4


COAST HOTELS AND CASINOS, INC.(A Wholly Owned Subsidiary of Coast Casinos, Inc.)
STATEMENTS OF STOCKHOLDERS EQUITYFor the Years Ended December 31, 2000, 2001 and 2002
(dollars in thousands, except share data)
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                              | Common Stock |  | AdditionalPaid-In |       | Retained |   |    | 
|----------------------------- | ------------ |  | ----------------- | ----- | -------- | - | -- | 
|
|                              |              |  |                   |       |          |   |    | 
|Balances at December 31, 1999 |              |  |                   | 1,000 |          | $ | 1  | 
|Net income                    |              |  |                   | --    |          |   | -- | 
|                              |              |  |                   |       |          |   |    | 
|Balances at December 31, 2000 |              |  |                   | 1,000 |          |   | 1  | 
|Net income                    |              |  |                   | --    |          |   | -- | 
|                              |              |  |                   |       |          |   |    | 
|Balances at December 31, 2001 |              |  |                   | 1,000 |          |   | 1  | 
|Net income                    |              |  |                   | --    |          |   | -- | 
|                              |              |  |                   |       |          |   |    | 
|Balances at December 31, 2002 |              |  |                   | 1,000 |          | $ | 1  | 
|                              |              |  |                   |       |          |   |    | 

|_________________



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


F-5


COAST HOTELS AND CASINOS, INC.(A Wholly Owned Subsidiary of Coast Casinos, Inc.)
STATEMENTS OF CASH FLOWSFor the Years Ended December 31, 2000, 2001 and 2002
(dollars in thousands, except share data)
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                     | 2000 | 2001 | 2002
|---------------------------------------------------- | ---- | ---- | ----
|                                                     |      |      |     
|CASH FLOWS FROM OPERATING ACTIVITIES:                |      |      |     
|Net income                                           |      |      | $   
|                                                     |      |      |     
|ADJUSTMENTS TO RECONCILE NET INCOME TO               |      |     
|NET CASH PROVIDED BY OPERATING ACTIVITIES:           |      |     
|Depreciation and amortization                        |      |      |     
|Provision for bad debts                              |      |      |     
|Loss on disposal of assets                           |      |      |     
|Deferred rent                                        |      |      |     
|Deferred income taxes                                |      |      |     
|Net amortization of debt offering costs              |      |     
|and original issue premium                           |      |      |     
|(Increase) decrease in operating assets:             |      |     
|Accounts receivable                                  |      |      |     
|Inventories                                          |      |      |     
|Prepaid expenses and other assets                    |      |      |     
|Increase (decrease) in operating liabilities:        |      |     
|Accounts payable                                     |      |      |     
|Accrued liabilities                                  |      |      |     
|                                                     |      |      |     
|TOTAL ADJUSTMENTS                                    |      |      |     
|                                                     |      |      |     
|NET CASH PROVIDED BY OPERATING ACTIVITIES            |      |      |     
|                                                     |      |      |     
|CASH FLOWS FROM INVESTING ACTIVITIES:                |      |     
|Capital expenditures, net of amounts in construction |      |     
|accounts payable                                     |      |      |     
|Proceeds from sale of assets                         |      |      |     
|                                                     |      |      |     
|NET CASH USED IN INVESTING ACTIVITIES                |      |      |     
|                                                     |      |      |     
|CASH FLOWS FROM FINANCING ACTIVITIES:                |      |     
|Proceeds from issuance of long-term debt, including  |      |     
|original issue premium, net of financing costs       |      |      |     
|Principal payments on long-term debt                 |      |      |     
|Proceeds from borrowings under bank line of credit   |      |      |     
|Repayments of borrowings under bank line of          |      |      |     
|credit                                               |      |     
|Payments from (advances to) Coast Casinos            |      |      |     
|                                                     |      |      |     
|NET CASH PROVIDED BY FINANCING ACTIVITIES            |      |      |     
|                                                     |      |      |     
|NET INCREASE (DECREASE) IN CASH AND CASH             |      |     
|EQUIVALENTS                                          |      |      |     
|CASH AND CASH EQUIVALENTS, at beginning of year      |      |      |     
|                                                     |      |      |     
|CASH AND CASH EQUIVALENTS, at end of year            |      |      | $   
|                                                     |      |      |     

|_________________


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


F-6


COAST HOTELS AND CASINOS, INC.(A Wholly Owned Subsidiary of Coast Casinos, Inc.)
NOTES TO FINANCIAL STATEMENTS


NOTE 1  Background
Information


Background Information


Coast
Hotels and Casinos, Inc. (the Company or Coast Hotels) is a Nevada
corporation and a wholly owned subsidiary of Coast Casinos, Inc. (Coast
Casinos), which is also a Nevada corporation. Coast Casinos changed its name from
Coast Resorts, Inc. on July 2, 2002. Coast Hotels was formed in September 1995 and owns
and operates the following hotel-casinos in Las Vegas, Nevada:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | The
Orleans Hotel and Casino opened in 1996, and is located approximately one mile west of
the Las Vegas Strip on Tropicana Avenue.
| | - | -----------------------------------------------------------------------------------------------------------------------------------

| | o | Gold
Coast Hotel and Casino opened in 1986, and is located approximately one mile west of the
Las Vegas Strip on Flamingo Road.
| | - | -------------------------------------------------------------------------------------------------------------------------------

| | o | The
Suncoast Hotel and Casino opened in 2000, and is located in the western Las Vegas valley.
| | - | ---------------------------------------------------------------------------------------------

| | o | Barbary
Coast Hotel and Casino opened in 1979, and is located on the Las Vegas Strip.
| | - | -------------------------------------------------------------------------------------

|NOTE 2  Summary of
Significant Accounting Policies


Inventories


Inventories,
which consist primarily of food and beverage, liquor store, and gift shop merchandise, are
valued at the lower of cost or market value (which is determined using the first-in,
first-out and the average cost methods) except for the base stocks of bar glassware and
restaurant china which are stated at original cost with subsequent replacements charged to
expense.


Original Issue Premium
and Debt Issue Costs


Original
issue premium is amortized over the life of the related indebtedness using the effective
interest method. Costs associated with the issuance of debt are deferred and amortized
over the life of the related indebtedness also using the effective interest method.


Accounts Receivable


Accounts
receivable are due within one year and recorded net of amounts estimated to be
uncollectible.


F-7


COAST HOTELS AND CASINOS, INC.(A Wholly Owned Subsidiary of Coast Casinos, Inc.)
NOTES TO FINANCIAL STATEMENTS


NOTE 2  Summary of
Significant Accounting Policies (continued)



Property, Equipment and
Depreciation


Property
and equipment are stated at cost. Expenditures for additions, renewals and betterments are
capitalized, and expenditures for maintenance and repairs are charged to expense as
incurred. Upon retirement or disposal of assets, the cost and accumulated depreciation are
eliminated from the accounts and the resulting gain or loss is included in income.
Depreciation is computed by the straight-line method over the estimated useful lives of
property and equipment, which range from 5 to 15 years for equipment and 25 to 40 years
for buildings and improvements.


During
construction, Coast Hotels capitalizes interest and other direct and indirect development
costs. Interest is capitalized monthly by applying the effective interest rate on certain
borrowings to the average balance of expenditures. The interest that was capitalized was
$4.5 million (2000), $1.0 million (2001) and $3.0 million (2002).



Pre-opening and Related
Promotional Expense


Pre-opening
costs are expensed as incurred. Pre-opening costs of $6,161,000 were expensed during the
year ended December 31, 2000 in connection with the development of the Suncoast. There
were no pre-opening costs during the years ended December 31, 2001 and 2002.


Impairment of Long-Lived
Assets


Long-lived
assets and certain identifiable intangibles held and used by Coast Hotels are reviewed for
impairment whenever events or changes in circumstances warrant such a review. The carrying
value of a long-lived or intangible asset is considered impaired when the anticipated
undiscounted cash flow from such asset is separately identifiable and is less than its
carrying value. In that event, a loss is recognized based on the amount by which the
carrying value exceeds the fair value of the asset. Fair value is determined primarily
using the anticipated cash flows discounted at a rate commensurate with the risk involved.
Losses on long-lived assets to be disposed of are determined in a similar manner, except
that fair values are reduced for the cost to dispose.


Effective
January 1, 2002 the Company adopted Statement of Financial Accounting Standards No. 144
(SFAS 144), Accounting for the Impairment or Disposal of Long-Lived
Assets. This statement retains the prior requirements of SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of to recognize impairments on property, plant and equipment. The adoption
of SFAS 144 had no impact on the Companys financial position, results of operations
or cash flows.


F-8


COAST HOTELS AND CASINOS, INC.(A Wholly Owned Subsidiary of Coast Casinos, Inc.)
NOTES TO FINANCIAL STATEMENTS


NOTE 2  Summary of
Significant Accounting Policies (continued)


Advertising Costs


Costs
for advertising are expensed as incurred, except costs for direct-response advertising,
which are capitalized and amortized over the period of the related program, which normally
does not exceed two to three months. Direct-response advertising costs consist primarily
of mailing costs associated with direct mail programs. Capitalized advertising costs were
immaterial at December 31, 2000, 2001 and 2002. Advertising expense was approximately $6.5
million, $8.3 million and $7.3 million for the years ended December 31, 2000, 2001 and
2002, respectively.


Revenue Recognition


In
accordance with common industry practice, the Company recognizes as casino revenue the net
win from gaming activities, which is the difference between amounts wagered and amounts
paid to winning patrons. Additionally, the Company recognizes revenue upon the occupancy
of its hotel rooms, upon the delivery of food, beverage and other services, and upon
performance for entertainment revenue. Wagers received on all sporting events are recorded
as a liability until the final outcome of the event when the payoffs, if any, can be
determined.


Deferred Revenue


Wagers
received on all sporting events are recorded as a liability until the final outcome of the
event when the payoffs, if any, can be determined.


Progressive Jackpot
Payouts


Coast
Hotels has a number of progressive slot machines, progressive poker games and a
progressive keno game. As coins are played on the progressive slot machines, the amount
available to win increases, to be paid out when the appropriate jackpot is hit. The keno
game and poker game payouts also increase with the amount of play, to be paid out when
hit. In accordance with common industry practice, Coast Hotels has recorded the
progressive jackpot as a liability with a corresponding charge against casino revenue.


F-9


COAST HOTELS AND CASINOS, INC.(A Wholly Owned Subsidiary of Coast Casinos, Inc.)
NOTES TO FINANCIAL STATEMENTS


NOTE 2  Summary of
Significant Accounting Policies (continued)


Promotional Allowances


The
retail value of hotel accommodations and food and beverage items provided to customers
without charge is included in gross revenues and then deducted as promotional allowances,
to arrive at net revenues. The following is a breakdown of these complimentary revenues
for the years ended December 31, 2000, 2001 and 2002:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | December 31,            | 
| | ----------------------- | 
|
|
| |                         | 
| | (in thousands)          | 
| | Complimentary revenues: | 
| | Food and beverage       | 
| | Hotel                   | 
| | Other                   | 
| |                         | 
| | Promotional allowances  | 
| |                         | 

|The
estimated cost of providing these complimentary services is as follows for the years ended
December 31, 2000, 2001 and 2002:
|--------------------------------------------------------------------------------------------------------------------------------

| | December 31,      | 
| | ----------------- | 
|
|
| |                   | 
| | (in thousands)    | 
| |                   | 
| | Food and beverage | 
| | Hotel             | 
| |                   | 
| |                   | 
| |                   | 

|The
cost of promotional allowances has been allocated to expense as follows for the years
ended December 31, 2000, 2001 and 2002:
|---------------------------------------------------------------------------------------------------------------------------------

| | December 31,   | 
| | -------------- | 
|
|
| |                | 
| | (in thousands) | 
| |                | 
| | Casino         | 
| | Other          | 
| |                | 
| |                | 
| |                | 

|Slot Club Promotion


Coast
Hotels has established promotional clubs to encourage repeat business from frequent and
active slot machine customers. Members in the clubs earn points based on slot activity
accumulated in the members account. Points can be redeemed for cash, food and
beverage, retail items and services in our hotel-casinos. Coast Hotels accrues, as a
reduction to revenue, for slot club points expected to be redeemed in the future.


F-10


COAST HOTELS AND CASINOS, INC.(A Wholly Owned Subsidiary of Coast Casinos, Inc.)
NOTES TO FINANCIAL STATEMENTS



NOTE 2  Summary of
Significant Accounting Policies (continued)


Income Taxes


Coast
Hotels is included in the consolidated federal income tax return filed by Coast Casinos.
Coast Hotels tax allocation is based on the amount of tax it would incur if it filed
a separate return. Coast Casinos will pay Coast Hotels an amount equal to the tax benefit
arising from the utilization of net operating losses of Coast Hotels to the extent that
such losses result in a reduction in the amount of tax payable by Coast Casinos.


Coast
Hotels accounts for income taxes in accordance with Statement of Financial Accounting
Standards No. 109 Accounting for Income Taxes (SFAS 109). Under
SFAS 109 deferred tax assets and liabilities are recognized for the expected future tax
consequences attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be recovered or settled.
Under SFAS 109, the effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.


Cash and Cash Equivalents


Coast
Hotels considers all highly liquid investments with a remaining maturity at acquisition of
three months or less to be cash equivalents. Cash in excess of daily requirements is
typically invested in U.S. Government-backed repurchase agreements with maturities of 30
days or less. Such investments are generally made with major financial institutions having
a high credit rating. At times, cash deposited in financial institutions may be in excess
of federally insured limits. These instruments are stated at cost, which approximates fair
value because of their short maturity.


Short-term Investments


Short-term
investments purchased with an original maturity of over three months but less than one
year are stated at cost, which approximates fair value because of their short maturity.
There were no short-term investments at December 31, 2001 or 2002.


Concentration of Credit
Risk


The
Company extends credit to patrons after background checks and investigations of
creditworthiness and does not require collateral. Coast Hotels has a concentration of
credit risk in Southern Nevada. The Company records provisions for potential credit losses
and such losses have been within managements expectations. Management believes that
as of December 31, 2002, no significant concentration of credit risk exists for which an
allowance has not already been determined and recorded.


F-11


COAST HOTELS AND CASINOS, INC.(A Wholly Owned Subsidiary of Coast Casinos, Inc.)
NOTES TO FINANCIAL STATEMENTS


NOTE 2  Summary of
Significant Accounting Policies (continued)


Use of Estimates in the
Preparation of Financial Statements


The
preparation of financial statements in conformity with generally accepted accounting
principles requires the Companys management to make estimates and judgments that
affect the reported amounts of assets and liabilities, revenues and expenses, and related
disclosures of contingent assets and liabilities. On an on-going basis, management
evaluates those estimates, including those related to asset impairment, accruals for slot
marketing points, self-insurance, compensation and related benefits, revenue recognition,
allowance for doubtful accounts, contingencies, and litigation. The Company bases its
estimates on historical experience and on various other assumptions that are believed to
be reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates under
different assumptions or conditions.


Stock Options


The
Financial Accounting Standards Board has issued Statement No. 123, Accounting for
Stock-Based Compensation (SFAS 123). This Statement defines a fair value
based method of accounting for an employee stock option in which companies account for
stock options by recognizing, as compensation expense in the statement of operations, the
fair value of stock options granted over the vesting period of the option. The statement
also permits companies to continue accounting for stock options under Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees
(APB No. 25). Coast Hotels has elected to account for stock options under APB
No. 25 and to disclose the pro forma impact on net income as if Coast Hotels had used the
fair value method recommended by SFAS 123, as amended by Statement No. 148,
Accounting for Stock-Based Compensation  Transition and Disclosure  an
amendment of FAS 123. The following table illustrates the effect on net income if
the Company had applied the fair value recognition principles of SFAS 123 to stock-based
compensation:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Year Ended December 31,                                                                                                                          | 
| | ------------------------------------------------------------------------------------------------------------------------------------------------ | 
|
|
|
|
| | Net income, as reported                                                                                                                          | 
| | Deduct: Total stock-based employee
  compensation expense determined under the  minimum value method for all awards,  net of related tax effects | 
| |                                                                                                                                                  | 
| | Pro forma net income                                                                                                                             | 
| |                                                                                                                                                  | 

|The
fair value for the options was estimated at the date of grant to be $20.90 using the
minimum value method (which is appropriate for valuing options of companies without
publicly traded stock) with the following weighted-average assumptions: risk-free rate of
return of approximately 5.0%, expected life of the options of five years and a 0% dividend
yield. For purposes of pro forma disclosures, the estimated fair value of the options is
amortized over the respective vesting periods of the options.


F-12


COAST HOTELS AND CASINOS, INC.(A Wholly Owned Subsidiary of Coast Casinos, Inc.)
NOTES TO FINANCIAL STATEMENTS


NOTE 2  Summary of
Significant Accounting Policies (continued)


Accounting for Derivative
Instruments and Hedging Activity


In
June 1998, the Financial Accounting Standards Board adopted Statement of Financial
Accounting Standards No. 133 (SFAS 133) entitled Accounting for
Derivative Instruments and Hedging Activities, which establishes accounting and
reporting standards for derivative instruments and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the statement
of financial position and measure those instruments at fair value. If specific conditions
are met, a derivative may be specifically designated as a hedge of specific financial
exposures. The accounting for changes in the fair value of a derivative depends on the
intended use of the derivative and, if used in hedging activities, its effective use as a
hedge. SFAS 133, as amended, is effective for all fiscal quarters of fiscal years
beginning after December 31, 2000. SFAS 133 is not applied retroactively to financial
statements for prior periods. The Company adopted SFAS 133 on January 1, 2001 as required.


New Accounting
Pronouncements


In
August 2001, the Financial Accounting Standards Board issued Statement No. 143 (SFAS
143), Accounting for Obligations Associated with the Retirement of Long-Lived
Assets. The objectives of SFAS 143 are to establish accounting standards for the
recognition and measurement of an asset retirement obligation and its associated asset
retirement cost. SFAS 143 is effective for fiscal years beginning after June 15, 2002.


In
April 2002, the Financial Accounting Standards Board issued Statement No. 145 (SFAS
145) Rescission of FASB Statements Nos. 4, 44 and 64 and Amendment of FASB
Statement No. 13. SFAS 145 addresses the presentation for losses on early
retirements of debt in the statement of operations. Upon adoption of SFAS 145, the Company
might not be allowed to present losses on early retirements of debt as an extraordinary
item. Additionally, prior period extraordinary losses may be required to be reclassified
to conform to this new presentation.


In
June 2002, the Financial Accounting Standards Board issued Statement No. 146 (SFAS
146) Accounting for Costs Associated with Exit or Disposal Activities.
The provisions of SFAS 146 become effective for exit or disposal activities commenced
subsequent to December 31, 2002.


The
Company does not expect that the adoptions of SFAS 143, 145 and 146 will have a material
impact on its financial position, results of operations or cash flows.


In
December 2002, the Financial Accounting Standards Board issued Statement No. 148
(SFAS 148) Accounting for Stock-Based Compensation  Transition and
Disclosure  an amendment of FAS 123. The provisions of SFAS 148 became
effective December 15, 2002. The Company adopted the disclosure requirements of SFAS 148,
and there was no impact on its financial position, results of operations or cash flows.


F-13


COAST HOTELS AND CASINOS, INC.(A Wholly Owned Subsidiary of Coast Casinos, Inc.)
NOTES TO FINANCIAL STATEMENTS


NOTE 2  Summary of
Significant Accounting Policies (continued)


New Accounting
Pronouncements (continued)


In
November 2002, the Financial Accounting Standards Board issued FASB Interpretation No. 45
(FIN 45), Guarantors Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others. This
interpretation elaborates on the disclosures to be made by a guarantor in its interim and
annual financial statements about its obligations under certain guarantees that it has
issued. It also clarifies (for guarantees issued after January 1, 2003) that a guarantor
is required to recognize, at the inception of a guarantee, a liability for the fair value
of the obligations undertaken in issuing the guarantee. At December 31, 2002, the Company
does not have any outstanding guarantees and accordingly does not expect the adoption of
FIN 45 to have a material impact on its financial position, results of operations or cash
flows.


In
January 2003, the Financial Accounting Standards Board issued FASB Interpretation No. 46
(FIN 46), Consolidation of Variable Interest Entities. This
interpretation addresses the requirements for business enterprises to consolidate related
entities in which they are determined to be the primary economic beneficiary as a result
of their variable economic interests. The interpretation is intended to provide guidance
in judging multiple economic interests in an entity and in determining the primary
beneficiary. The interpretation outlines disclosure requirements for VIEs created after
January 31, 2003. The Company has reviewed its major relationships and its overall
economic interests with other companies consisting of related parties, companies in which
it has an equity position, and other suppliers to determine the extent of its variable
economic interest in these parties. The Company believes it has appropriately reported the
economic impact and its share of risks of its commercial relationships.


Reclassifications


Certain
amounts in the 2000 and 2001 financial statements have been reclassified to conform to the
2002 presentation.


F-14


COAST HOTELS AND CASINOS, INC.(A Wholly Owned Subsidiary of Coast Casinos, Inc.)
NOTES TO FINANCIAL STATEMENTS


NOTE 3  Property
and Equipment


Major
classes of property and equipment consist of the following as of December 31, 2001 and
2002:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | December 31,                  | 
| | ----------------------------- | 
|
|
|
|
| | Building                      | 
| | Furniture and fixtures        | 
| |                               | 
| |                               | 
| | Less accumulated depreciation | 
| |                               | 
| |                               | 
| | Land                          | 
| | Construction in progress      | 
| |                               | 
| | Net property and equipment    | 
| |                               | 

|In
June 2002, the Company purchased a 1996 Bombardier CRJ200 jet aircraft for $17.8 million,
including the trade-in of its 1980 Hawker-Siddely jet aircraft with a net book value of
$2.0 million. On January 17, 2003, the Company purchased approximately 2.5 acres of real
property adjacent to the Barbary Coast for $18.1 million. The Company uses the land for
valet parking and as an employee parking lot.


NOTE 4  Leases


The
Barbary Coast occupies approximately 1.8 acres at the intersection of Flamingo Road and
the Strip that we lease pursuant to a lease dated May 1, 1993. The lease provides for
rental payments of $175,000 per year during the initial term of the lease that expires on
May 1, 2003. Coast Hotels has exercised the first of two 30-year options, with rental
payments increasing to $190,000 per year during the first ten years of the renewal period.
Coast Hotels has an option to purchase the leased property at any time during the six
month period prior to the expiration of the initial term of the lease, provided that
certain conditions are met, at a purchase price equal to the greater of $3.5 million or
the then appraised value of the real property. Should the landlord desire to sell the real
property during the initial term of the lease, Coast Hotels has a right of first refusal.


The
Orleans occupies a portion of an approximately 80-acre site on West Tropicana Avenue that
is leased under a ground lease entered into by Coast Hotels and the Tiberti Company, a
Nevada general partnership of which J. Tito Tiberti, a director of both Coast Casinos and
Coast Hotels, is managing partner. The lease had an effective commencement date of October
1, 1995, an initial term of 50 years, and includes an option, exercisable by the Company,
to extend the initial term for an additional 25 years. The lease provides for monthly
rental payments of $200,000 per month through February 2002, $225,000 per month during the
48-month period thereafter, and $250,000 per month during the 60-month period thereafter.
In March 2011, annual rental payments will increase on a compounding basis at a rate of
3.0% per annum. In addition, the Company has an option to purchase the real property
during the two-year period commencing in February 2016. The lease provides that the
purchase price will be the fair market value of the real property at the time of exercise,
provided that the purchase price will not be less than 10 times, nor more than 12 times,
annual rent at such time.


F-15


COAST HOTELS AND CASINOS, INC.(A Wholly Owned Subsidiary of Coast Casinos, Inc.)
NOTES TO FINANCIAL STATEMENTS


NOTE 4Leases
(continued)


The
Suncoast occupies an approximately 50-acre site that is leased pursuant to an agreement
dated as of October 28, 1994. The initial term of the lease expires on December 31, 2055.
The lease contains three options, exercisable by Coast Hotels, to extend the term of the
lease for 10 years each. The lease provided for monthly rental payments of $166,667 for
the year ended December 31, 1995. Thereafter, the monthly rent increases by the amount of
$5,000 in January of each year. The landlord has the option to require the Company to
purchase the property at the end of 2014, 2015, 2016, 2017 and 2018, at the fair market
value of the real property at the time the landlord exercises the option, provided that
the purchase price will not be less than 10 times nor more than 15 times the annual rent
at such time. Based on the terms of the lease, the potential purchase price commitment
ranges from approximately $31.0 million to approximately $51.0 million in the years 2014
through 2018. Coast Hotels has a right of first refusal in the event the landlord desires
to sell the property at any time during the lease term.


Future Minimum Lease
Payments


The
following is an annual schedule of future minimum cash lease payments required under
operating leases that have initial or remaining noncancelable terms in excess of one year
as of December 31, 2002:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Operating Leases |                             
|---------------- | ----------------------------
|
|
|
|                 | 2003                        
|                 | 2004                        
|                 | 2005                        
|                 | 2006                        
|                 | 2007                        
|                 | Later years                 
|                 |                             
|                 | Total minimum lease payments
|                 |                             

|Rent Expense


Rent
expense for the years ended December 31, 2000, 2001 and 2002 is as follows:
|-----------------------------------------------------------------------------------------------

|                  | December 31, | 
|----------------- | ------------ | 
|
|
|                  |              | 
|
|Occupancy rentals |              | 
|Other equipment   |              | 
|                  |              | 
|                  |              | 
|                  |              | 

|F-16


COAST HOTELS AND CASINOS, INC.(A Wholly Owned Subsidiary of Coast Casinos, Inc.)
NOTES TO FINANCIAL STATEMENTS



NOTE 5  Accrued
Liabilities


Major
classes of accrued liabilities consist of the following as of December 31, 2001 and 2002:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | December 31,                         | 
| | ------------------------------------ | 
|
|
| |                                      | 
|
| | Slot club liability                  | 
| | Compensation and benefits            | 
| | Progressive jackpot payouts          | 
| | Customer deposits and unpaid winners | 
| | Deferred sports book revenue         | 
| | Taxes                                | 
| | Accrued interest expense             | 
| | Outstanding chip and token liability | 
| | Other                                | 
| |                                      | 
| |                                      | 
| |                                      | 

|NOTE 6  Long-Term
Debt


Long-term
debt consists of the following as of December 31, 2001 and 2002:
|----------------------------------------------------------------------------------------------------

|                                                                     | December 31, | 
|-------------------------------------------------------------------- | ------------ | 
|
|
|                                                                     |              | 
|
|9.5% senior subordinated notes due April 2009, with interest payable |              | 
|semiannually on April 1 and  October 1, including unamortized        |              | 
|original issue premium of $4,412 in 2002 and $0 in 2001              |              | 
|Senior secured credit facility due September  2004, collateralized   |              | 
|by substantially all of the assets of Coast Hotels and Casinos, Inc. |              | 
|Other notes payable                                                  |              | 
|                                                                     |              | 
|                                                                     |              | 
|Less: current portion                                                |              | 
|                                                                     |              | 
|                                                                     |              | 
|                                                                     |              | 

|F-17


COAST HOTELS AND CASINOS, INC.(A Wholly Owned Subsidiary of Coast Casinos, Inc.)
NOTES TO FINANCIAL STATEMENTS


NOTE 6  Long-Term
Debt (continued)


In
March 1999, the Company issued $175.0 million principal amount of 9.5% senior subordinated
notes with interest payable on April 1 and October 1 beginning October 1, 1999 and entered
into a $75.0 million senior secured credit facility due 2004 to facilitate a refinancing.
Availability under the credit facility was increased to $200.0 million in September 1999.
Coast Casinos is a guarantor of the indebtedness under both of these debt agreements.
Borrowings under the credit facility bear interest, selected monthly at the Companys
option, at a premium over the one-, two-, three- or six-month London Interbank Offered
Rate (LIBOR). The premium varies depending on a certain financial ratio and
can vary between 125 and 250 basis points. As of December 31, 2002, the premium over LIBOR
was 2.0% (200 basis points) and the interest rate was 3.40%. For the year ended December
31, 2002, the weighted average interest rate for the senior secured credit facility was
3.63%. The Company incurs a commitment fee, payable quarterly in arrears, on the unused
portion of the credit facility. This variable fee is currently at the maximum rate of 0.5%
per annum times the average unused portion of the facility.


In
accordance with the terms of the senior secured credit facility, the availability under
the facility has been reduced quarterly since September 30, 2001. Through December 31,
2002, total availability has been reduced to $159.0 million with additional quarterly
reductions in availability of $8.5 million on each of March 31, 2003 and June 30, 2003 and
of $11.5 million on each of September 30, 2003, December 31, 2003, March 31, 2004 and June
30, 2004. Advances under the facility may be used for working capital, general corporate
purposes, and certain improvements to existing properties. As of December 31, 2002, there
was $136.0 million outstanding under the senior secured credit facility with $23.0 million
of availability remaining.


On
February 2, 2001, the Company issued $50.0 million additional principal amount of senior
subordinated notes. The net proceeds of approximately $49.1 million were used to reduce
borrowings under its senior secured credit facility. On March 19, 2002 the Company issued
$100.0 million additional principal amount of senior subordinated notes. The notes were
issued at a $5.0 million premium to par value and the net proceeds of approximately $103.2
million were used to reduce borrowings under the senior secured credit facility. The notes
that were issued in 2001 and 2002 were issued under the same indenture and have the same
terms, interest rate and maturity date as the $175.0 million principal amount of senior
subordinated notes issued in 1999.


The
loan agreement governing the senior secured credit facility contains covenants that, among
other things, limit the ability of the Company to pay dividends or make advances to Coast
Casinos, to make certain capital expenditures, to repay certain existing indebtedness, to
incur additional indebtedness or to sell material assets of the Company. Additionally, the
loan agreement requires that the Company maintain certain financial ratios with respect to
its leverage and fixed charge coverage. The agreement was amended in December 2001, March
2002, January 2003 and February 2003 to increase the limitations of the Company to make
certain capital expenditures and to allow for additional secured indebtedness. The Company
is also subject to certain covenants associated with the indenture governing the senior
subordinated notes, including, in part, limitations on certain restricted payments, the
incurrence of additional indebtedness and asset sales. Management believes that, at
December 31, 2002, the Company was in compliance with all covenants and required ratios.
Management anticipates that it will amend or replace the senior secured credit facility in
2003.


F-18


COAST HOTELS AND CASINOS, INC.(A Wholly Owned Subsidiary of Coast Casinos, Inc.)
NOTES TO FINANCIAL STATEMENTS


NOTE 6  Long-Term
Debt (continued)


On
April 2, 2002, the Company entered into an interest rate swap agreement with a member of
the Companys bank group wherein $100.0 million notional amount of the Companys
fixed rate debt was converted to a floating rate. The fixed rate paid to the Company was
5.77% and the floating rate paid to the bank was based on six-month LIBOR and set at 2.33%
for the six months ended September 30, 2002. On July 16, 2002, the Company terminated the
swap agreement and received $3.75 million, comprised of $1.0 million of accrued interest
receivable and a gain of $2.7 million, which was recorded in the second quarter.


Maturities
on long-term debt are as follows:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Year Ending December 31, |  | Maturities |  
| | ------------------------ |  | ---------- | -
| |                          |  |           
|
| | 2003                     |  |            | $
| | 2004                     |  |            |  
| | 2005                     |  |            |  
| | 2006                     |  |            |  
| | 2007                     |  |            |  
| | Thereafter               |  |            |  
| |                          | 
| |                          |  |            | $
| |                          | 

|In
February 2003, the Company borrowed $18.0 million under a secured loan agreement,
collateralized by a Company-owned aircraft. The proceeds were used to reduce borrowings
under the senior secured credit facility. The loan bears interest at a premium of 2.25%
over the 30-day LIBOR rate, which is adjusted monthly. Payments of interest only are
required during the first twelve months. Commencing on March 28, 2004, the Company will be
required to make monthly payments of principal of $120,000 plus interest on the unpaid
balance. A balloon payment of the remaining principal balance is due in February 2009.


On
March 28, 2003, the Company entered into an unsecured $20.0 million revolving bridge line
of credit (bridge facility) with a participant in its senior secured credit
facility. Borrowings under the bridge facility bear interest at a premium of 3.5% over
one-, two-, three-week or one month LIBOR. The bridge facility expires on June 26, 2003.
As of March 28, 2003, the Company had $134.0 million outstanding under the senior secured
credit facility and no outstanding borrowings under the bridge facility.


F-19


COAST HOTELS AND CASINOS, INC.(A Wholly Owned Subsidiary of Coast Casinos, Inc.)
NOTES TO FINANCIAL STATEMENTS


NOTE 7  Income
Taxes


The
components of the income tax provision for the years ended December 31, 2000, 2001 and
2002 were as follows:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | December 31, | 
| | ------------ | 
|
|
| |              | 
|
| | Federal:     | 
| | Current      | 
| | Deferred     | 
| |              | 
| |              | 
| |              | 

|The
income tax provision for the years ended December 31, 2000, 2001 and 2002 differs from
that computed at the federal statutory corporate tax rate as follows:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------

| | December 31,           | 
| | ---------------------- | 
|
|
| |                        | 
| |                        | 
| | Federal statutory rate | 
| | Other                  | 
| |                        | 
| |                        | 
| |                        | 

|The
tax effects of significant temporary differences representing net deferred tax assets and
liabilities at December 31, 2001 and 2002 are as follows:
|-------------------------------------------------------------------------------------------------------------------------------------------------------

| | December 31,                       | 
| | ---------------------------------- | 
|
|
| |                                    | 
|
| | Deferred tax assets:               | 
| | Current:                           | 
| | Accrued vacation                   | 
| | Allowance for doubtful accounts    | 
| | Accrued slot club points           | 
| | Progressive liabilities            | 
| | Accrued medical and other benefits | 
| |                                    | 
| | Total current                      | 
| |                                    | 
| | Non-current:                       | 
| | Deferred rent                      | 
| |                                    | 
| | Total non-current                  | 
| |                                    | 
| | Total deferred tax assets          | 
| |                                    | 
| | Deferred tax liabilities:          | 
| | Non-current:                       | 
| | Property, plant and equipment      | 
| |                                    | 
| | Total deferred tax liabilities     | 
| |                                    | 
| | Net deferred tax liability         | 
| |                                    | 

|F-20


COAST HOTELS AND CASINOS, INC.(A Wholly Owned Subsidiary of Coast Casinos, Inc.)
NOTES TO FINANCIAL STATEMENTS


NOTE 8  Fair Value
of Financial Instruments


The
following estimated fair values of the Companys financial instruments have been
determined by the Company using available market information and appropriate valuation
methodologies. The carrying amounts of cash and cash equivalents, accounts receivable, and
accounts payable approximate fair values due to the short-term maturities of these
instruments. The carrying amounts and estimated fair values of the Companys other
financial instruments at December 31, 2001 and 2002 are as follows:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                  | December 31, | 
|--------------------------------- | ------------ | 
|
|
|
|
|                                  |              | 
|
|Liabilities:                      |              | 
|Current portion of long-term debt |              | 
|                                  |              | 
|Senior secured credit facility    |              | 
|                                  |              | 
|9.5% senior subordinated notes    |              | 
|                                  |              | 
|Other long-term debt              |              | 
|                                  |              | 

|For
the current portion of long-term debt, the carrying amount approximates fair value due to
the short-term nature of such debt. The carrying amount on the senior secured credit
facility is a reasonable estimate of fair value because this debt is carried with a
floating interest rate. The fair value of the 9.5% senior subordinated notes was
determined based upon market quotes. For all other long-term debt, the fair value is
estimated using a discounted cash flow analysis, based on the incremental borrowing rates
currently available to the Company for debt with similar terms and maturity.


NOTE 9  Commitments
and Contingencies


Coast
Hotels is involved in various legal actions arising in the ordinary course of business. In
the opinion of management, the ultimate disposition of these matters will not have a
material adverse effect on the financial position, results of operations or cash flows of
Coast Hotels.


F-21


COAST HOTELS AND CASINOS, INC.(A Wholly Owned Subsidiary of Coast Casinos, Inc.)
NOTES TO FINANCIAL STATEMENTS


NOTE 10  Related
Party Transactions


Amounts
due from Coast Casinos primarily represent refundable advances for the payment of income
taxes and the purchase of treasury stock.


Coast
Hotels maintains numerous racetrack dissemination contracts with Las Vegas Dissemination
Company, Inc. (LVDC). Michael J. Gaughans son, John Gaughan, is the
president and sole stockholder of LVDC. LVDC has been granted a license by the Nevada
Gaming Authorities to disseminate live racing for those events and tracks for which it
enters contracts and has been granted the exclusive right to disseminate all pari-mutuel
services and race wire services to Nevada casinos. Under these dissemination contracts,
the Company pays to LVDC between 3% and 5% of the wagers it accepts for races held at the
racetracks covered by the respective contracts. The Company also pays to LVDC a monthly
fee for race wire services. Additionally, the Company has an agreement with LVDC to rent
software and monitors to enable race book patrons to access information from their seating
area. For the fiscal years ended December 31, 2000, 2001 and 2002, the Company incurred
expenses to LVDC of approximately $1.6 million, $1.4 million and $947,000, respectively.
The terms on which the dissemination services are provided are regulated by the Nevada
Gaming Authorities.


J.A.
Tiberti Construction Company (Tiberti Construction) served as the
          general contractor for the expansion of the Gold Coast and The Orleans and
          miscellaneous construction projects at the Suncoast.  J. Tito Tiberti is a
          stockholder and director of Coast Casinos, and is a director and Secretary of
          Coast Hotels and Coast Casinos. Mr. Tiberti is the president, a director and
          stockholder of, and together with his immediate family members, controls
Tiberti           Construction.


For
the fiscal years ended December 31, 2000, 2001 and 2002, the Company incurred expenses to
Tiberti Construction of approximately $108.5 million, $63.4 million and $120.8 million,
respectively. At December 31, 2001 and 2002, it owed construction accounts payable to
Tiberti Construction of approximately $34.1 million and $12.1 million, respectively.


In
1995, Coast Hotels entered into a long-term ground lease with the Tiberti Company, a
Nevada general partnership, with respect to the real property on which The Orleans is
located. Mr. Tiberti, a director of Coast Hotels and a director and stockholder of Coast
Casinos, is the managing partner of the Tiberti Company. The Company incurred rental
expenses of $4.5 million for each of the years ended December 31, 2000, 2001 and 2002. The
Company paid the Tiberti Company $2.4 million, $2.4 million and $2.7 million in the years
ended December 31, 2000, 2001 and 2002, respectively. Deferred rent payable to the Tiberti
Company was $13.6 million and $15.4 million as of December 31, 2001 and 2002,
respectively.


Until
October 2002, Michael J. Gaughan and Franklin Toti (along with the Leo Lewis Trust) were
owners of LGT Advertising, which served as the Companys advertising agency.
Effective November 1, 2002, the Company purchased the partnership interests of LGT
Advertising from Messrs. Gaughan, Toti and the Leo Lewis Trust, for the sum of $1,000.
Prior to the November 2002 acquisition, LGT Advertising provided advertising design
services and purchased advertising for the Companys casinos from third parties and
passed any discounts directly through to the Company. LGT Advertising received no
compensation or profit for such activities, and invoiced the Company for actual costs
incurred. LGT Advertising used the Companys facilities and employees in rendering
its services, but did not pay any compensation to the Company for such use. Messrs.
Gaughan and Toti received no compensation from LGT Advertising. For the fiscal years ended December 31, 2000,
2001 and 2002, advertising expenses to LGT Advertising were approximately $6.5 million,
$8.3 million and $5.9 million, respectively.


F-22


COAST HOTELS AND CASINOS, INC.(A Wholly Owned Subsidiary of Coast Casinos, Inc.)
NOTES TO FINANCIAL STATEMENTS


NOTE 10  Related
Party Transactions (continued)


LGT
Advertising provides advertising and design services to Casino Queen, Inc., which operates
the Casino Queen riverboat casino and hotel facility in East St. Louis, Illinois. Michael
Gaughan owns 15% and Frank Toti owns 5% percent of the shares of stock in Casino Queen,
Inc. Mr. Gaughan also serves as a director for Casino Queen, Inc. LGT renders its services
to Casino Queen, Inc. on the same terms as would be offered to an unaffiliated third
party. In November and December 2002, the Company received $13,000 in payments from Casino
Queen, Inc.


Coast
Hotels has purchased certain of the Companys equipment for its operations from RJ
& S Inc., a Nevada corporation (RJS) that is owned by Michael J.
Gaughans father, Jackie Gaughan, and Steven Delmont, the Companys manager of
food operations. Pursuant to the terms of its agreement with RJS, RJS purchases certain
restaurant equipment and supplies and invoices the Company only for the actual amounts
billed to RJS, plus applicable sales tax. Provisions of the agreement prohibit RJS
employees, officers and shareholders from receiving any discounts, rebates, payments or
gifts with respect to the equipment and supplies. For the fiscal years ended December 31,
2000, 2001 and 2002, the Company made purchases from RJS totaling approximately $6.5
million, $2.7 million and $2.2 million, respectively.


Michael
J. Gaughan is the majority partner of Nevada Wallboards, a Nevada general partnership
(Nevada Wallboards), which prints wallboards and parlay cards for use in the
Companys race and sports books. For the fiscal years ended December 31, 2000, 2001
and 2002, Coast Hotels incurred expenses to Nevada Wallboards of approximately $192,000,
$252,000 and $272,000, respectively.


Charles
Silverman, a director of Coast Hotels and Coast Casinos, is the president of
Yates-Silverman, Inc., which served as the designer of The Orleans, the Suncoast and
various expansion projects at The Orleans, the Suncoast and the Gold Coast during 2001 and
2002. For the fiscal years ended December 31, 2000, 2001 and 2002, the Company incurred
expenses to Yates-Silverman of $548,000, $947,000 and $440,000, respectively.


Coast
Hotels promotes The Orleans by advertising on NASCAR vehicles operated by Orleans Motor
Sports, Inc. In 2002, the Company entered into an agreement with Orleans Motor Sports,
Inc. to place the logo of The Orleans on a truck racing in NASCARs Craftsman Truck
Series, on transportation vehicles utilized by Orleans Motor Sports, Inc. and on any other
vehicles raced by Orleans Motor Sports, Inc. in NASCAR races. Michael J. Gaughan is the
sole owner of Orleans Motorsports, Inc. Brendan Gaughan, the main driver employed by
Orleans Motor Sports, is the son of Michael J. Gaughan. For the fiscal years ended
December 31, 2000, 2001 and 2002, the Company paid $180,000, $332,000 and $480,000,
respectively, to Orleans Motor Sports, Inc. The Board of Directors has approved spending
$600,000 for sponsorship rights in 2003.


F-23


COAST HOTELS AND CASINOS, INC.(A Wholly Owned Subsidiary of Coast Casinos, Inc.)
NOTES TO FINANCIAL STATEMENTS



NOTE 10  Related
Party Transactions (continued)


Michael
J. Gaughan, Jr., the son of Michael J. Gaughan, and David Ross, the general manager of the
Suncoast, are owners of Coast Vacations, Inc., a travel agency operating under the name
Las Vegas Vacations (LVV) that markets the Companys hotel-casino
properties to residents of Vancouver, Canada. Coast Hotels has agreed to pay LVV
approximately $10,000 per month to promote its hotel-casinos subject to certain conditions
designed to assure that LVV is utilizing such funds in a productive manner and for
purposes that benefit the Company. During the fiscal years ended December 31, 2000, 2001
and 2002, the Company paid $115,000, $91,000 and $120,000, respectively, to LVV.


Michael
J. Gaughan,  Jr. is the general  manager of the Barbary  Coast.  For the fiscal years
ended December 31, 2000, 2001 and 2002,  Michael J.  Gaughan,  Jr.  received  total
 salaries  and bonuses in the amounts of $97,000,  $135,000  and $162,000, respectively.


Coast
Hotels operates a satellite sports book at the Plaza Hotel and Casino (Plaza),
a hotel-casino in Las Vegas that is primarily owned by Jackie Gaughan, Michael J.
Gaughans father. The Company combines the sports book wagers generated at the Plaza
with wagers accepted at its other sports books. The Plaza is allocated a pro-rata share of
the net sports book winnings or losses, based on the percentage of wagers placed at the
Plaza compared to the combined wagers placed at all its sports books. Such winnings or
losses are netted against the direct and indirect costs of operating the sports book at
the Plaza including, but not limited to, labor costs, advertising costs, printing costs
and state and federal taxes. The Plaza keeps its winnings and reimburses the Company for
the above noted costs. For the fiscal years ended December 31, 2000, 2001 and 2002, the
Company received $311,000, $557,000 and $979,000, respectively, in reimbursements from the
Plaza.


NOTE 11  Benefit
Plans


401(k) Plans


The
Company offers separate defined contribution 401(k) plans for eligible employees. All
employees of the Gold Coast, The Orleans and the Suncoast, and all employees of the
Barbary Coast not covered by a collective bargaining agreement, are eligible to
participate. The employees may elect to defer up to 15% of their yearly compensation,
subject to statutory limits. The Company makes matching contributions of varying levels
based on the employees levels of contributions. Contribution expense was $1.6
million, $1.7 million and $3.2 million for the years ended December 31, 2000, 2001 and
2002, respectively.


Defined Benefit Plan


Certain
employees at the Barbary Coast are covered by a union-sponsored, collectively bargained,
multi-employer defined benefit pension plan. The Barbary Coast contributed $309,000,
$303,000 and $317,000 during the years ended December 31, 2000, 2001 and 2002,
respectively, to the plan. These contributions are determined in accordance with the
provisions of negotiated labor contracts and generally are based on the number of hours
worked.


F-24


COAST HOTELS AND CASINOS, INC.(A Wholly Owned Subsidiary of Coast Casinos, Inc.)
NOTES TO FINANCIAL STATEMENTS


NOTE 11  Benefit
Plans (continued)


Stock Incentive Plan


In
December 1996, the Board of Directors of Coast Casinos adopted the 1996 Stock Incentive
Plan (the Plan) which authorizes the issuance of (i) shares of Coast Casinos
Common Stock or any other class of security of Coast Casinos which is convertible into
shares of Coast Casinos Common Stock or (ii) a right or interest with an exercise or
conversion privilege at a price related to Coast Casinos Common Stock or with a value
derived from the value of such common stock. Awards under the Plan are not restricted to
any specified form or structure and may include, without limitation, sales or bonuses of
stock, restricted stock, stock options, reload stock options, stock purchase warrants,
other rights to acquire stock, securities convertible into or redeemable for stock, stock
appreciation rights, limited stock appreciation rights, phantom stock, dividend
equivalents, performance units or performance shares. Officers, key employees, directors
(whether employee directors or non-employee directors) and consultants of Coast Casinos
and its subsidiary are eligible to participate in the Plan.


Under
the terms of the Plan, the aggregate number of shares issued and issuable pursuant to all
awards (including all incentive stock options) granted under the Plan shall not exceed
220,000 at any time. In addition, the aggregate number of shares subject to awards granted
during any calendar year to any one eligible person (including the number of shares
involved in awards having a value derived from the value of shares) shall not exceed
40,000.


No
awards may be made under the Plan after the tenth anniversary of the adoption of the Plan.
Although shares may be issued after the tenth anniversary of the adoption of the Plan
pursuant to awards made prior to such date, no shares may be issued under the Plan after
the twentieth anniversary of adoption of the Plan.


Effective
January 1, 1999, Coast Casinos issued options to purchase 30,415 shares of its common
stock to its chief operating officer, who is also the chief operating officer of the
Company. The options were fully vested at December 31, 2001 and expire on December 31,
2008. Effective June 14, 1999, Coast Casinos issued options to purchase 5,000 shares of
its common stock to its chief financial officer, who is also the chief financial officer
of the Company. The options were fully vested on June 14, 2001 and expire on June 13,
2009. The exercise price on the options is at $100 per share, which is equivalent to the
estimated fair value of Coast Casinos common stock at the grant date, as estimated
by Coast Casinos from recent sales of common stock between shareholders.


As
previously described in Note 2, the Company accounts for the Plan under the recognition
and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations.


F-25


COAST HOTELS AND CASINOS, INC.(A Wholly Owned Subsidiary of Coast Casinos, Inc.)
NOTES TO FINANCIAL STATEMENTS


NOTE 12 Supplemental
Cash Flows Information


For
the years ended December 31, 2000, 2001 and 2002 supplemental cash flows information
amounts are as follows:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                   | December 31, | 
|-------------------------------------------------- | ------------ | 
|
|
|
|
|Interest paid                                      |              | 
|                                                   |              | 
|Income taxes paid                                  |              | 
|                                                   |              | 
|Supplemental schedule of non-cash investing        |              | 
|and financing activities:                          |              | 
|Property and equipment acquisitions included in    |              | 
|accounts payable or financed through notes payable |              | 
|                                                   |              | 
|Net trade-in value  utilized for property          |              | 
|and equipment acquisitions                         |              | 
|                                                   |              | 

|NOTE 13  Regulation
of Gaming Operations


The
gaming operations of the Company are subject to the licensing and regulatory control of
the Nevada Gaming Commission (the Nevada Commission), the Nevada State Gaming Control
Board (the Nevada Control Board) and the Clark County Liquor and Gaming Board (the Clark
County Board) (collectively, the Nevada Gaming Authorities). These agencies
issue gaming licenses based upon, among other considerations, evidence that the character
and reputation of principal owners, officers, directors, and certain other key employees
are consistent with regulatory goals. The necessary licenses have been secured by the
Company. The licenses are not transferable and must be renewed periodically upon the
payment of appropriate taxes and license fees. The Nevada Gaming Authorities have broad
discretion with regard to the renewal of the licenses and may at any time revoke, suspend,
condition, limit or restrict a license for any cause deemed reasonable by the issuing
agency. Officers, directors, and key employees of the Company must be approved by the
Nevada Control Board and licensed by the Nevada Commission and Clark County Board.


F-26


REPORT
OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE


To the Directors of Coast Hotels and
Casinos, Inc.


Our audits of the financial
statements referred to in our opinion dated January 27, 2003, except for the last
paragraph of Note 6 as to which the date is March 28, 2003, appearing in this Annual
Report on Form 10-K of Coast Hotels and Casinos, Inc. also included an audit of the
financial statement schedule listed in Item 15(a)(2) of this Form 10-K. In our opinion,
this financial statement schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related financial
statements.


PricewaterhouseCoopers LLP


Las Vegas, Nevada
January 27, 2003


F-27


SCHEDULE I


COAST HOTELS AND
CASINOS, INC.(A Wholly Owned Subsidiary of Coast Casinos, Inc.)VALUATION AND
QUALIFYING ACCOUNTSFor the Years Ended December 31, 2000, 2001 and 2002(dollars in thousands)
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|DESCRIPTION                     | BALANCE ATBEGINNINGOF YEAR | ADDITIONSCHARGED TOCOSTS ANDEXPENSES | ADDITIONSCHARGED TOOTHERACCOUNTS | DEDUCTIONS | BALANCE ATEND OFYEAR
|------------------------------- | -------------------------- | ------------------------------------ | -------------------------------- | ---------- | --------------------
|
|Allowance for doubtful accounts |                            |                                      |                                  |            |                     
|(casino receivables):           |                            |                                     
|Year ended December 31, 2000    |                            |                                      | $                                | 842        |                     
|                                |                            |                                      |                                  |            |                     
|Year ended December 31, 2001    |                            |                                      | $                                | 713        |                     
|                                |                            |                                      |                                  |            |                     
|Year ended December 31, 2002    |                            |                                      | $                                | 873        |                     
|                                |                            |                                      |                                  |            |                     

F-28